All Forum Posts by: Eleena de Lisser

Anatomy of an Apartment Deal: Case Study of the purchase of a 49-unit building

DATE: TUESDAY, JUNE 21

TIME: 6 PM to 8 PM 

LOCATION: London Grill, 2301 Fairmount Ave, Philadelphia, PA 19130

Matt Faircloth is the President and Co-founder of The DeRosa Group, a New Jersey-based developer and owner of commercial and residential property with a mission to “transform lives through real estate."

For this networking event, Matt will take us behind the scenes, so to speak, to learn more about one of his recent acquisitions: a 49-unit apartment complex. He will share with us how he found the property, got it under contract, raised the funds, and handled the due diligence.

Matt got started investing in real estate 12 years ago with a $30,000 loan as seed capital. Since then he has grown from nothing to a six-person company owning and managing over 100 units of residential and commercial properties throughout Central NJ and Philadelphia. DeRosa has completed over $10 million in real estate transactions involving private capital including fix and flips, single family home rentals, mixed use buildings, apartment buildings, and tax lien investments.

Matt is an active contributor to the Bigger Pockets blog and has been featured on the Bigger Pockets' podcast, along with many other podcasts and radio shows. He also runs the South Jersey Real Estate Investors (SJRIEA) chapter in Princeton, NJ.

Admission is $15, CASH ONLY. (Pay Eleena, the event organizer, at the restaurant.)

We have a private dining room reserved with a limited number of seats. Please RSVP via my Meetup page. Only RSVP if you definitely will attend. Thank you!

Topic: Why Invest in Apartments 

DATE: WED. JUNE 15

TIME: 6 PM to 8 PM

LOCATION: QDOBA restaurant, 33 E. City Ave, Bala Cynwyd, PA, 19004

Our first Meetup in Philly will be an introduction to investing in apartments. We'll discuss why multifamily properties are excellent investments for people seeking good returns, cash flow, and control over their financial destiny.

Whether you're brand new to investing in real estate or a very experienced investor, all are welcome to join. The objective of this Meetup is to provide you with a resource for education and quality networking with other people who are seriously interested in investing in apartments.

We'll get a long table or pull a bunch of tables together. Look for the red & white Meetup sign to find our table.

There's no fee to attend, but please RSVP via my Meetup page so I can get a rough headcount of how many people to expect. 

Thank you, and hope to see you there!

Topic: Let's Talk About Apartment Investing / Networking

DATE: SUNDAY, JUNE 5

TIME: 11 AM to 1 PM

LOCATION: MIGHTY QUINN'S BBQ - FINANCIAL DISTRICT (2nd-floor of Brookfield Place, 230 Vesey St, NY, NY 10281)

Our very first Meetup in NYC will be an introduction to investing in apartments. We'll discuss why multifamily properties are a great investment choice for people seeking good returns, cash flow, and control over their financial destiny.

Whether you're a real estate newbie or a seasoned investor, everyone is welcome to join us. This Meetup is solely focused on apartment investing with the ultimate goal to help you get started by providing a trusted resource for education and quality networking for all.

We'll meet at 11 a.m. at Mighty Quinn's BBQ, located on the 2nd-floor of Brookfield Place in Battery Park City. We'll get a long table or pull a bunch of tables together. Look for the red and white "Meetup" sign to find our table.

If possible, please rsvp on my Meetup page so I can get a rough headcount of how many people to expect. Thank you, and hope to see you there!

@Keith Rorer Welcome to the BP community! Congrats on inking the contract on your first deal!

@Nicholas Baxley welcome to the forum! Congrats on taking the first step and dipping your toe in the proverbial water. Is there a specific reason why you've chosen this particular property to be your first real estate investment? 

@Jerry W.

Wow. This story is terrifying. Thank god you weren't injured or worse. Thank you for sharing what happened in such detail. You've probably saved a life of someone else in the forum by sharing this story, and your ability to look for something positive out of this disaster is admirable. 

---

“The oak fought the wind and was broken. The willow bent when it must and survived.”
― Robert Jordan, The Fires of Heaven

I don't do HOAs. I can't stand them. One unexpected or arbitrary assessment and whoosh! there goes your anticipated cash flow. What about the taxes? If the townhouse is in a hot area, is it possible the property will be reassessed and the taxes will go up in the next three years? 

Do you want to be a landlord for a single townhouse? Or do you want to own a multifamily property? If what you really want is to do multifamily, then do it. Why take half measures to get there? It sounds like you're in a financial position to make that dream a reality sooner rather than later based on what you've said. I'd sell the townhouse and get the $200K so that I could be financially ready to pounce on a larger real estate investment that excited me and didn't involve a HOA.

Welcome to the BP forum, @Tim James! Do you and your wife plan to self manage your properties or hire professional property management? If you will have that much money to invest over the next five years, you may want to consider setting your sights higher and buying a larger property. (But not before getting more multifamily education first, of course!) 

Identify a few submarkets within the cities you listed and then look for property management companies that specialize in or handle C-Class apartment buildings in those areas. Get acquainted with those property management companies. You can start with a phone call or email, but you'll eventually probably have to take a trip to that city to really get their attention and show that you're serious. 

I see that you've selected cities that are all within about 3 hour drive or less of where you live, which is good. So it shouldn't be too hard to schedule a day to take the owner of a property management company out to lunch. Tell him/her what you're looking for. You may want to try the same tactic with appraisers, real estate attorneys, local commercial insurance brokers, and small town bankers who work with community banks in those local markets. 

Meet people in person. Don't rely on email to build rapport. You'll distinguish yourself from the other out-of-state investors who are calling and emailing the same list of people by actually meeting some of them in person. All of these professionals, especially the property management companies, are in a position to give you a head's up about a property whose owner might be looking to sell or is considering selling. 

Also, you should look for commercial real estate events to attend in the markets you are interested in. Great way to network and meet relevant contacts. Also, check out the local REIAs in the cities you mentioned and see if they might be worth joining and getting a membership. That would be another way to begin to infiltrate a market and build a local network of contacts that can act as your eyes and ears in different locations.

But you're looking in some hot markets like Nashville. What size property did you have in mind? A 10+ cap rate with a price tag under $500K and minimal rehab is the multifamily equivalent of a unicorn in today's market. If you're willing to cast a wide net and go prospecting in semi-rural areas or inner city areas that might be economically challenged, you might find a small multifamily (under 30 units) that fits the criteria. 

A high cap rate indicates a higher level of risk. Higher risk, higher reward. In order to get that 10+ cap rate in today's market, the property will have some major strike against it, which could be the location, the condition, or both. It's not likely that a 10+ cap rate in today's market is going to be a slightly mismanaged property that only needs a little TLC. In any case, good luck!

Paul, skepticism is good when it comes to real estate investing. However, allow me to play devil's advocate here. First things first....you assume that because someone is experienced that they have a "wide network" of potential investors. That may or may not be true. Someone could have a large network of potential investors, in theory, but the reality could be that only a small percentage of that network is both financially able and ready to invest. Don't assume that just because someone is experienced that they have a deep network of investors with funds ready to invest. You'd be surprised at how shallow the pool might be.

I invest in Texas and know several multifamily investors in the DFW market. Based on the situation you described, I think I know exactly who you're talking about. If it's the same guru, I know that he and his coaching clients have done over 21 multifamily transactions in 2015 alone. You heard about these deals in November. It is quite possible, with it being the end of the year, that these deal sponsors have already tapped out the natural resources within their current network, and need to find/develop a new pipeline of investors because their existing network is already committed to other projects and either can't or won't invest any more. 

So, does that mean the deals you saw are flawed or deficient in some way? Maybe, maybe not. You need more information to know for sure. 

Is it an automatic red flag that an experienced deal sponsor is taking longer than a week to raise millions of dollars? Maybe, maybe not. Depends on size of deal, returns of the deal, location of the deal, timing/business plan/exit strategy of the deal, and which investors are getting wind of the deal. 

Look at it from another angle - if this deal sponsor had raised the funds "immediately," would it be safe to assume that the deal was great just based solely on the speed on which the funds were raised? I don't think so.

Like I said, skepticism is good and warranted, but you also need more information to arrive at a conclusion. Continue to do your due diligence and keep asking the hard questions on everything that comes your way, but also examine your own assumptions. Good luck!