All Forum Posts by: Ellis Hammond

@Ken Scarbrough three rules 

1. cash flow

2. long term debt

3. cash reserves. 

If you have long term debt on your property and strong cash flow then sit back and relax, you have done well to prepare. 

As far as market crash goes for MF, there was less than 1% default on B class large MF in 2009 (the crash). Why? bc in a downturn ppl still need affordable places to live. It's the luxury stuff that takes a hit first (ppl can do without a jacuzzi hot tub when they can't afford their groceries). 

If you are looking to get into large commercial, have you considered investing passively first? it will give you an idea of how it works plus give you some credibility with brokers/lenders when you go out to look for your own place. 

I heard @Adamadams talk about Dave Lindahl's list of emerging markets the other day and wanted to see that list to compare. 

Anyone have access to that or know where to find? He said Oklahoma City was at the #1 spot??

Thanks in advance 

@Joshua R.

what criteria do you use when looking at a market?

steady population growth, steady job growth, job diversity are a few important factors to look at if you plan to invest there for the long term. 

How often do you plan to go there? If you are going to invest there long term make it somewhere you want to go! 

I am also in CA and we are invested in the Memphis market. Reach out if I can be more help or if you want to consider investing passively. 

@Blake Crawford this may sound too simple but have you asked the seller how he/she was financing the rehab? Something to assume or work with? Be curious to know. 

There are lots of bridge loan lenders that may help you with the rehab costs. They contact me everyday on linked in. They will  want to see experience though. If the deal is as good as you say it is then ask around your network for a partner who has the experience and willing to sign on the loan with you and share % of equity. 

Best of luck to you!

First off, what's a Heloc? 

A Home Equity Line of Credit (HELOC) is a loan on your home and the amount of the loan is determined by the equity available. Its essentially like a credit card using the equity you have in your home.

I will list a few Heloc programs below (I'm not endorsing just giving you some examples). But before applying be sure to qualify the loans and make sure they aren't being sneaky with their fees. Here were my requirements and questions I asked when researching for my loan. Hope this helps!

No minimum draw fee

No lender fees

What’s the adjustment rate?

Reasonable Margin

Interest only option

No required balance

No cancellation fee

No annual fee

No inactivity fee

Periodic cap so interest can’t soar

they pay for appraisal 

Examples in San Diego

calcoastcu.org

3.98 for first 12 months

prime rate- currently at 5% cap is 12%

first 10 years interest only- draw period.

no closing cost

early closing cost- $350-$600 fee if payed off in first 36 months.

$10,000 min draw.

Mutual of Omaha

equity line- 5.75% first 6 months 2.99 FICO score better than 700

appraisal cost of $400 if you don’t bank there.

equity loan- 10 years 5 1/4 fixed

Northrop Grunham Federal credit union (directly from website)

Variable APR*4.50%Depending on the option chosen, each time an advance is taken the payment towards principal and interest (NGFCU does not offer an interest-only repayment option.) may be either amortized over 180 months or to the maturity of the HELOC.

Fixed APR*5.50% May elect the Fixed Rate on up to 60% of the approved HELOC limit. Minimum draw $10,000 per disbursement and up to 3 separate disbursements (no add-ons). Fixed rate cannot exceed maturity of the HELOC.

Cabrillo credit union

Rate can adjust monthly, but will never increase or decrease by more than 2% per year and is limited to a maximum interest rate of 10% greater than the initial rate. 

Minimum interest rate is 4.25%. Loan offers a 10 year draw period and a 15 year repayment. 

Balloon payment due on any unpaid balance at maturity date. 

80% LTV maximum.

Property must be in California and owner occupied.

@Collin Borns as you see there are many opportunities for non accredited investors to invest in bigger deals. Most syndications do allow for a set # of non-accredited investors, but you have to have prior relationship with the sponsor. So take your time getting to know good sponsors and the markets they invest in. 

Let me know how I can help. I also am a syndicator and recently closed a 144 unit deal south of Memphis and had non accredited investors invest alongside of us. 

Hope that helps!

Cheers

@Kristopher Kyzar i grew up in Moncks Corner, SC and now live here in San Diego. I have started my own syndication company investing in larger MF deals with a few trusted partners. Love to be able to resource you or bring connections your way. Let me know what you are currently looking for and lets find a way to connect. 

Cheers! thank you for you service!

Classes in my opinion are determined by class of renters, amenities afforded, and location. 

I don't think age of property should be your first criteria. As someone already mentioned, you could have an older building that has now been rehabbed to be a luxury style apartment. 

Class A apartments demand the highest rent for the market so that eliminates your section 8 tenants. The government is not putting them up in a room with their own jacuzzi tub. 

Class A apartments are normally located in area of city closest to best restaurants, shops, etc. Inside of apartments expect granite countertops, hardwood floors, new appliances. 

Class B are properties are still a great place to live and is where majority of your working class tenants are looking to live. They are slightly older in terms of remodel and amenities they provide. 

Class B are located in low to mid crime area. 

Class C apartments if you are using A-C scale would be your lowest class you would consider (there are D class and F class but for the sake of this thread I'm assuming no one is interested in that headache.)

These class apartments are normally located in medium to high crime areas. Lots of deferred maintenance. 

Don't write off these properties. They can have good cash flow and plenty of room for value add opportunities. Just be sure you have a property management company that specializes in managing these type of assets. 

Hope this helps @Peter Martin! I am working on an article describing this more in detail and the opportunities each class affords. Ill be sure to post in thread when finished. Cheers!

Last thought as a quick reference in your search

Class A- place where you hope to live

Class B- place where you would be ok living

Class C- Only living there if times were really rough

Class D- hell no, I'm sleeping in my car

Class F- i might as well be dead. 

@Mat O'Grady Buy them all, open them up for 5 straight days and host the biggest to date BP community block party. Charge $200 per person and provide free bud light. You will forever be a legend. Cheers 🍻

@Justin Hannah What market or markets are you targeting? I’d narrow your search to one maybe two max and seek to build relationships with the tips @Theo Hicks provided. It pays to be a player in the market so breaking in will cost you more at first than those who have been there before you. Simply meaning current investors in a market expect to purchase at a discount compared to new investors. I’m sure Theo could confirm that with his experience with Joe. Find a broker you Like and who is active in the market. You seem like an honest and straightforward guy and good to work with. I’m sure you will do great if you continue to put forth the effort. Best wishes to you!