All Forum Posts by: Elvon Bowman

@Elvon Bowman, both Charles and Joshua provide sound advice.  Doing a 100+ unit deal is totally doable as your first transaction.  At the end of the day, 99% of sellers and brokers only care about your surety to close (I leave out 1% that might care about HOW you operate your deals, regardless of price paid).

The fact that you have never closed a large transaction AND are not providing all your proof of funds up front and/or talking with brokers about where the money is coming from, will give them some trepidation.  To put a relatively extreme scenario out there, if you offer 3% more than the next guy in cash (no bank debt) and provided a copy of a brokerage account statement showing the cash was available, I am certain you would get the deal.

To echo Joshua's comments: how you are planning on financing the deal is hugely contingent on being awarded deals. As noted above, a cash deal with all capital liquid in an account today is going to be taken much more seriously than a financed deal or a syndicated deal. 10% EM hard at contract signing and a 45 day close with no extensions will be taken more seriously than 3% EM hard after 30 days, with a 60 day close and 2x 30 day extensions. A 40-50% LTV deal will be taken more seriously than an 80% LTV deal. And a PM that manages 10k units as part of the GP entity, with equity invested, will be taken more seriously than a XYZ property management (who manages 200 units total) has said they are open to managing the property when I close.

Lastly, even in the "easier" market timing of the early and mid 2010's, most people when they get started are looking at deals for about 18 months before the first one is awarded and closes. 

@Elvon Bowman, Congratulations on taking such a jump.  

I agree with @Charles Seaman and I'll add a bit.

1. You didn't say whether you're doing this on your own, with partners, or as a syndication.  Advice will be different on each path.

2. Are there going to be banks involved, creative seller financing or all cash?  That makes a big difference in the answer to what Charles eloquently referenced regarding confidence in your ability to close.  Sellers and Brokers need to know you can close.  They often refer to it as 'certainty of close' when reviewing offers.

3. Bigger deals can be a good angle to attack AND that being said there is a greater deal of risk involved.  Especially with newer investors.  You don't know what you don't know.  Trustin your PM partner is important and they will follow your lead, so don't expect them to provide you with your business plan.  PM's are there to follow YOUR plan.  You need to know what to look for, what to address, and have solid buisiness acumen to run a MF operation of that magnitude. Smaller deals may sound "small" and yet they can provide a great deal of experience.

4. If there are banks involved on a multi-million dollar deal, you will need a partner with experience for the banks to consider it.  Unless you're working with Private Money that is going to carry the risk of your lack of experience, banks want to see experience, Net Worth and liquidity after close to consider the terms.

I started with single family, four plexes, and remodel flips for a lot of years before getting into larger deals. Our first accepted offer was a 320 unit deal that we contracted, put up non-refundable (yeah, I know) earnest money, and thought we had our financing and money in place to do the deal. 2 weeks before closing a major (several million) partner pulled out leaving us short of the funds needed to close. We lost multiple 6 figures in EMD$. It hurt, a lot. It was like paying for multiple Master's degrees to get our "real world" experience.

I backed up, regrouped and went smaller to gain more experience.  Today we have 540 units in a few states and things are not without challenges.  We've had a lot of good experiences and some not so good ones.  Each deal comes with a different set of surprises even for the most experienced operators.

Take your time and don't rush it.  Your best teacher will be experience and that can't come from books and formulas.  You get out there and put deals together with your eyes wide open to avoid as much as you can.  Also be open to knowing that you are acquiring a series of problems.

You're in the solution business.  The seller is selling because of problems they may be facing.  You're inheriting those (some known and some unknown).  Your PM will create new challenges for you that you will have to face.  Your contractors, staff, and the financial markets will create challenges.  You'll have tenants that don't pay, damages made, and potentially other disasterous situations occur on your properties.  (I'm currently dealing with a lawsuit for wrongful death on one of my properties - fun right?)

The point is that most of the books and gurus out there will sell you the dream and get you hooked on buying into their programs without giving you all the nitty gritty details.

You're running a business and must treat it that way.  If you think you'll hand it off to your PM to run and take the great amount of passive income as your great reward, there is so much more to it.  

Caution.  Slow down to go faster.

Many blessings to you!  Happy New Year.

@Elvon Bowman Thinking big is important, but it's also helpful to take a practical approach.  My replies to your questions are below.

1.  Aiming for larger properties on your first deal (100+ units) is definitely very ambitious.  It's certainly not impossible, but it's probably going to take you more time and more deals to win one.

Like you, this was my goal when I first started out.  I looked at somewhere between 150 and 200 deals before getting my first deal and that was at a time when market conditions weren't as tough as they are now.  Ultimately, I wound up doing a 92-unit deal my first time around and realized that part of the reason I was struggling to win deals was simply because I lacked the credibility to be do so.  I then decided to modify my criteria to look for deals that were 50+ units and found that I had much more success in that space because most credible bigger buyers aren't looking at deals that are smaller than 100 units.  While I didn't want to stay there permanently, it was a stepping stone to build my track record.  You may want to consider a similar approach.

While having an experienced PM and knowledge is beneficial for you, it means very little to a broker or seller.  Your ability to close means almost everything and you'll need to make them feel confident in your ability to do so if you target bigger deals right out of the gate.

2.  Certainty of a buyer's ability to close is always important, but it's even more important right now due to the market conditions.  A higher offer from a buyer without a track record is often considered a worthless offer by many brokers and sellers.  The only way they would seriously consider a higher offer from an unqualified buyer is if they have no offers from better qualified buyers and their back is against a wall.  Submitting real offers that you feel confident actually closing on and having a strong sponsor to work with that has a track record will go much further towards you winning deals.

In short, you can pursue larger deals right out of the gate if you want to, but generally expect that it'll take you longer to win one and make sure you have the right players on your team so that you're prepared to win them and to close them once you do.

Sorry that I don't have anything to contribute to this thread, but I wanted to ask - how do you find these deals? For example, 50+ units

Hey @Elvon Bowman, welcome to the BP Forum! What type of properties are you looking to acquire to scale your portfolio? SF, 2-4 MF, or 5+ MF? And what is your price point and are you looking for turn-key properties or something along the lines of a "fixer upper"?

Hi @Elvon Bowman

Love the Goals and ambition! While I don't actively work with commercial deals I work with our commercial broker in our office to connect my clients. I can connect you if you'd like!

I'll send you a connection request 

 I love it! Are you focusing on any specific industry withing CRI?

What kind of partnerships are you looking for? I'd love to connect.

Kristin