All Forum Posts by: David S.

@Tony Kim

I definitely agree with you on this..."one should either start to pump the brakes on new syndicated investments or truly ramp up their due diligence with high levels of skepticism and standards".

You also mentioned that "IRR of a fourplex I bought last year in South Los Angeles is over 25%...but CoC is just under 8%." This return sounds great...Can you share more details? Was the IRR and COC due to value add on your part? Which neighborhoods of LA are you focusing on?

@Diane G....

https://www.zillow.com/homes/1...

I guess my point to show that with limited capital ($75K in my purchase), you can get a good investment in San Francisco, right off MLS......

You just need to have a criteria, be watching MSL every day..... Easy as that....

Why fly 5000 miles to get a property that gives you $100/month profit?

Wow!...I think you nabbed a great property!...was there much competition for this property?

Whatever little negative cashflow you might experience will quickly disappear if the googlelite tenant moves out and you can lift rent to market....by the way, am i correct in thinking that because it is one unit, it is not subject to rent control so you can raise rents however you want?

You make it sound as simple as setting up some criteria on Zillow and letting them feed you the listings...At this stage of the cycle, I agree it would be more prudent to stay in areas you know best...I am thinking of adopting this strategy...any other advice you willing to share?

@Ellen Diamond I essentially found that as i was looking for MF in the 5-10 unit range several months ago, while sales price and rents were lower, cap rates were more or less the same (4-5%) than what could be found in the San Fran Bay area. My search has not been active recently but lately have been thinking of areas like San Leandro, Newark and Fremont since they still offer better housing value than say San Jose for Silicon Valley workers....I imagined you are looking at Sacramento because you decided Oakland is too expensive but curious if you considered those other nearby areas at all. 

I would be skeptical of the tenant’s claim too if there were pictures, especially pictures that are dated right before the tenant move in.

Why did you replace the previous property manager?

How did the previous property manager respond to the tenant’s claim that he “was told to wait and until he is transitioned to the new property manager and then work directly with the new property manager.” If the previous PM denies this and puts it in writing, you have a strong case that the tenants are taking advantage of the situation.

How long has the tenant been there? I could believe the tenant’s story if they just moved in recently, say about a month ago and the old PM knew that the new PM was coming in in a month, but I would be more skeptical if they have been there a few months. You say the tenant is a family with children. What else about the tenant’s profile might suggest whether they are being truthful or not?

If you want to keep them as tenants because it may take awhile to find a suitable replacement, you could bite the bullet and then have them sign a current unit condition property form.

If you think that the tenants are taking advantage of the situation, you do not trust them going forward and you would not be sorry to see them go, charge them for the fix or replacement (less depreciated value) and see what happens.

BTW, how does the new PM suggest you handle this situation? what are their recommendations? just curious as a good PM is suppose to help make out of state investing passive but I have hear this is often not the case.

Hmmm.. @Alina Trigub suggested that a pref is not always cumulative....does that mean for example if given an 8% pref, if the deal returns only 6% in year one, the 2% shortfall does not get accrued to be paid out in subsequent years before the sponsor gets their cut?...in which case one must read the PPM/LP Agreement carefully.

@Brian Burke. Thanks for sharing your views on why you prefer to use floating rate debt. If I understand correctly, the primary benefit is the flexibility it provides in allowing the sponsor to sell when they want to and thereby avoid the large prepayment penalties that would be involved if long term fixed rate debt was used.

I presume there is no such thing as long term fixed rate debt that is assumable so that pre-payment penalties can be avoided?

In regards to your use of floating rate debt, how high do you set the rate cap, say above current rates? How much is the cost of the rate cap? If at a future date, the rate cap is triggered, this would result in the property's net income available being lowered by the increase in additional debt service. In addition, cap rates would probably have increased resulting in lower property valuation and perhaps not a good time to sell?

I guess the key is to use floating rate debt if you expect that rates will not increase over your intended holding period.

@Omar Khan. Came across this post and found it a most interesting read.

Can you please share why that large investor walked?

It looks like you ended up taking up a new Co-GP that also expanded your investor base?

Are there any lessons you can share in regards to how the property's operations have gone since closing? Despite walking the property and verifying lease income (which I expect you would have done), are unexpected things you discovered after the close that you would caution investors to look for during underwriting, property due diligence and post closing process?

@Alina Trigub. Thanks. I am pretty comfortable at looking at Exec summaries (pitch decks)....I latched on to the works "syndication documentation" above and thought going over a PPM which would have been great...My mistake.

@Alina Trigub. I'd love to get pdf copy of whatever is presented. would this be possible?

@Kelly Pierce. I just found this post and wanted to check in on your further thoughts and plans regarding your property since the lease is coming up...I have eye-balling small multi-res in the Sacramento-San Francisco corridor and also up to Chico...cap rates (5% or so vs 4%-3% in SF) have kept me from pulling the trigger.

I see you have/had an interest in moving into multi-family and would like to know if you plan on going out of state or staying in California.

@Jim Watson like you approach with refying...what states are you targeting?