All Forum Posts by: David S.

@Chris Ebert

can you elaborate on your criteria for the following?

-the infrastructure (water/sewer provider, metering of utilities, water pipe material, etc.)...would you want this to be managed by the authorities/utilities?

-# of park-owned homes vs. tenant-owned homes....my guess is more tenant homes is better to avoid the capex?

I have been thinking of investing in multi-family syndications as a way of moving away from active direct investments into more passive investments to simplify life.

I found this article in the link below very interesting.....I especially like the last line.... "We can't pencil in anything over 17 [IRR]," Rivas said. "Unless we are drinking a lot of Kool-Aid, then it's a 25."

However, most syndications i have looked at seem to promote their skill in re-positioning to raise rents and adding value...and I am seeing plenty of sponsors promoting IRRs in the 20 ballpark...Maybe the big syndicators haven't caught on yet?

What say you?  is it better to wait until the risks of increasing supply and economic slowdown subside? 

https://www.bisnow.com/dallas-ft-worth/news/capita...

@Jack B.@Bjorn Ahlblad. @Edward Seid. Thanks!

A nice building in the armpit of SeaTac with rents dropping and lots of rental incentives in Seattle....hmmm...could be tough to raise rents and therefore appreciation in this scenario.

@Ian Ippolito. "So I require skin in the game (average is 5% to 15%) to offset this.". Just to clarify, we are talking about the sponsors putting 5%-15%  cash upfront into their deal. Is this correct? And then we should check the documentation to ensure the investors get out before they do I guess.  Great primer on how assess a syndication.

Thanks to all who have commented so far!

@Lane Kawaoka. Not sure about your comment re reversion cap rate. can you please elaborate?

@Reed Kelly. I also thought SeaTac had a reputation as being "blue collarish" but it reportedly is right in the middle of Seattle and Tacoma offering great path to progress and easy commute to Seattle (via rapid transit)....Alaska Air's HQ is right next to property and there are massive expansion plans, which looks to be a plus...On the other hand, I cannot help wondereing how many potential tenants want to  next to an airline construction activity and a casino. Yet, 10% of the units have already been remodeled and they are reportedly getting the rents.

@Alina Trigub. Thanks for the tip on rentometer. Have you ever come across a syndication where projections are conservative in nature?

I am thinking of investing in a syndication that is buying a 157 unit apartment project located at 3117 S 192nd St. in SeaTac, WA 98188.

It appears the property last sold in 2015 for $1.8Mn….the syndicators now plan to buy this property at a price that is about 60% higher and around 10.8X trailing 12 months gross rental income or 9.7X gross income projected over the next 12 months.

They plan to renovate the units and increase gross rental income by 11-13% in each of the next two years and then level off at 3% annual rental growth thereafter. There does not appear to be room for reduction in operating expenses.

I am doing my own due diligence but would also like feedback from others in the local area as to what they think of the location, the property and prospects continued growth in the area and for increasing rents. Do you think the local market can support $1100 for a studio, $1500 for one bedroom, and $1775 for 2 bedroom units?

Also, what would be a reasonable expense ratio (operating expenses/total revenue) and cap rate be?

Thanks in advance for your input.

I am thinking of investing in a syndication that is buying a 157 unit apartment project located at 3117 S 192nd St. in SeaTac, WA 98188.

It appears the property last sold in 2015 for $1.8Mn….the syndicators now plan to buy this property at a price that is about 60% higher and around 10.8X trailing 12 months gross rental income or 9.7X gross income projected over the next 12 months.

They plan to renovate the units and increase gross rental income by 11-13% in each of the next two years and then level off at 3% annual rental growth thereafter. There does not appear to be room for reduction in operating expenses.

I am doing my own due diligence but would also like feedback from others in the local area as to what they think of the location, the property and prospects continued growth in the area and for increasing rents. Do you think the local market can support $1100 for a studio, $1500 for one bedroom, and $1775 for 2 bedroom units?

Also, what would be a reasonable expense ratio (operating expenses/total revenue) and cap rate be?

Thanks in advance for your input.

Curious as to what is the PM charging for leasing and management?

I would have declined the applications based on the info you saw. Did the PM have any mitigating reasons as to why he approved the ones he did?

Good property managers for class C properties are probably hard to find.

As many have suggested, lower the rents to attract more applicants. Then you can choose the one you want.

Once you get the right tenant profile, you may even be able to manage the property yourself, even if you are 2 hours away.

Apologies for wandering off the topic of this thread but..

@Andrew Jones, I completely agree with your thinking above...If you were looking for 5+ units in Sacramento, what neighborhoods would you be focusing on?

Have you got a pulse on what is going on regarding the current attempt to repeal Costa Hawkins which if successful would open up the door for Sacramento to legislate rent controls. Can you see rent controls happening if continued migration from SF Bay area to Sacramento makes rents too unaffordable for Sacramento tenants?

@Mike Dymski

Got it. Thanks. I also believe BP to be the best social media site for learning about REI...I was just curious as to what else was out there as I wasn't aware of anything else like BP.

I agree with the view that there is not too much difference in owning/managing a 2-4 unit property vs. a small 5+ unit property (say up to 10 units). That said, I also think that, especially in our markets on the west coast, the ability to get financing for 2-4 units at essentially residential mortgage rates, (vs commercial rates that are higher), is another driving factor behind prices. In our markets, you are looking at about 50% downpayment for 5+ units in order to meet the lenders UW criteria re DSC etc wheras you can get up to 75% conventional financing on a 4 plex if your combined personal income (from job and the property) meets minimum debt/income ratios.

@Michael Swan Not to swerve too far from the point of your post.... but I have never experienced a lender requiring annual DSC confirmation….Is it because you are re-positioning your properties so that the rental income is variable as your renovate units?...And the lender wants to make sure the property can continue to service the debt as it gets re-positioned?….What’s the lender going to do if you fall below the minimum DSC one year, call for a principle reduction?

I admire your success and and am giving serious consideration to diversifying out of west coast for more cash flow. Earlier in this thread, you suggested you got burned in a couple of your earlier multi-family investments….Can you provide more detail on how this happened and what to watch out for? ....Maybe in a separate post or blog item?