All Forum Posts by: Enrique Huerta

My background is in financial analysis for real estate investment firms, so I have a collection of financial models from various sources and I've built my own over the years.

You can find some free or low costs ones online on various websites: AdventuresinCRE, AStudentoftheRealEstateGame, GetREFM.

RE: SFR V. MFH, it's up to your long-term goals.

I don't think that's unrealistic for the market, but you'll probably be in the Glendale area for higher COC returns.

The more deals you analyze, the better of a feel you get for what is realistic in a market. Talk to more brokers, and keep a database of analyzed deals so you can see trends.

Are you looking for SFR or Multi-housing?

@Tou Fang, @Greg Dickerson hit the nail on the head. Join the commercial brokerage and learn the ins and outs of the business, meet the players, and make the fees to invest. Then with the right knowledge, you can sell your residential holdings and flip into multi-housing.

Best of luck!

@Samuel Hunker

There's no reason to move. You can invest out of state or even in Phoenix, Glendale, etc. There are cash-flow opportunities in Arizona.

And if you prefer Atlanta, GA, you don't have to move there to invest there. Maybe you'd feel more secure being close by? If that's the case, then make Phoenix and the surrounding areas your target for now. Don't limit yourself and best of luck!

@Josh Jacobson

@Brandon Sturgill brought up a valuable question: Are you attempting to leverage the inspection findings to get remedy or lower purchase price?

If not, you should consider bringing the findings to the attention of the seller and requesting a price reduction. If the deferred maintenance was significant or not disclosed, often times the seller will agree to covering all or part of it. Not always, but its worth a shot. Brandon also mentioned this just comes with the territory. So go back and review all your canceled deals, figure out what the actual vs. underwritten costs were, and start using a figure closer to the actual costs.

You may be too aggressive upfront in order to make the deal work. Then reality hits and the deal doesn't work anymore.

Welcome!

Phoenix is great for B&H. Many people I know have been successful in buying houses, townhomes, apartments in Phoenix, and continue to buy today. It really boils down to what returns you're looking for. That will dictate location.

So, what is your return expectation on your buy and holds?

@Mike Goldenthal,

@Michael Ealy hit the nail on the head. I will elaborate further for your knowledge.

From 1-4 units, you qualify for residential financing. This means you can often purchase a property for as little as 3% down but they qualify you based on your personal income, personal credit, and the sales value of the property. Additionally, 1-4 unit deals are valued based on the sales comparable approach and NOT on the income approach. Thus, even if your 4-plex has higher rents than your neighbors 4-plex, you can only see at the comparable appraised value.

5+ units qualify for commercial financing. That means, the lender is usually more income focused, asset focused, and can grant exceptions for somethings you may not qualify for: net worth, liquidity, etc. You will, however, need 25-30% down payment for these assets. The upside is that it doesn't have to come all from you. You can form a JV or other partnership structure and put as much or as little as you want into the deal (TBD based on the operating agreement).

Regarding your specific example, 6-12 isn't that much larger than 4 units. The expenses will still be pretty high, and while you will benefit from commercial financing, being able to increase income, etc. you will have to bring a higher down payment to the table. Taxes will be higher (based on higher purchase price) and insurance and maintenance will increase relative to the size of the asset. Assuming you use $350/Unit for Insurance and $800/Unit for Maintenance (just an example) then you just multiple that figure by unit count so it's the same, but larger due to a relative size increase. I hope that is clear.

To Michael's point, larger assets can justify the hiring of a Property manager and thus allow you to be more high-level in your operations. This is often better, unless you enjoy property management.

If your constraints are purely financial, aka you an qualify up to 6-12 units on your own. I would buy the largest deal possible that meets your investment criteria at the terms you can afford. If you're going to bring partners into the deal, then the only limit is the limit to your resourcefulness.

Hi @Michael Skvorak ,

My thoughts are below in bold:

I am at a point in my life where I want to start investing in Real Estate to reach financial freedom. 

Congratulations! I once read that financial freedom is as simple a decision as deciding which brand of milk to buy at the grocery store. It sounds simplistic, but when you truly decide, you take immediate action and start taking action toward that decision. So kudos to you on making that decision and joining BP to kick it off!

I want to ask you all what is the best way to get started?

There is no best way. You're going to get a lot of responses and stories from different people based on their experiences, knowledge, biases, etc. Ultimately, you'll have your own path and story, but I'm happy to share mine! I started off as a real estate agent in college, then I worked for various investment firms (still work for one) and hammered together enough knowledge and relationships to begin investing in multifamily apartments with a syndicate of partners in my network. I've never flipped a house or owned a single-family rental. I've brokered single-family transactions but all of my investment experience is in the multifamily space. I never had to "flip to get cash" because I was blessed to be able to connect with investors and have the acquisitions knowledge to put deals together. I learned on the job and from various online resources like The Michael Blank and Joe Fairless. The thing that will separate you from the 99% and allow you to get to 500 units is ACTION. The knowledge is out there, but what you do with the knowledge is what counts.

You're already a property manager so that will be a solid operational background for you. I would leverage your current job by learning as much as possible, asking to be involved with more projects and seeing how you can maximize the value of each asset your work on. By doing so, owners will take notice and may want to bring you in-house as an asset manager or operations manager, etc. There's endless ways your life can go, and ultimately you will choose and have some luck direct your path in serendipitous ways. Either way, welcome to BP and have fun learning. Feel free to PM me if you have any specific questions or if I can help in any way. I'm always happy to provide further information.

Realtors often pass through expenses like Transaction Coordination fees, Disclosure fees, Administrative fees, etc. They are the "cost of doing business" at certain brokerages. She made the change to a new brokerage, hence she should pay the fee. It wasn't your decision to increase her overhead, it was hers.

I would push back, especially if you do provide multiple deals a year to her. 

Just my 2 cents.