All Forum Posts by: Emily Edgar

I'm looking into a 11-play commercial property. Agent who is selling property says the industry average is running at 98-99% of the list to sale price for multifamily properties. Is this correct? Property is old, 1907-ish, not rehabbed at all only minimal repairs done. Cash flows are borderline at asking price so I was hoping to negotiate a bit on price but he seems to think it's not possible. Any insight would be helpful! Thank you!!

Also... any thoughts on this - 

Is the industry average really running at 98-99% of the list to sale price for multifamily properties??

Thank you!

Originally posted by @Peter Fennig:

That would make a really cool first investment purchase! Are the units in rentable condition  right off the back  or would they require any major attention before being able to rent? Also curious if you've already had a title company run a check on the place?

 Also Peter... as a contractor - how much of a headache is it to do renos with the risk of asbestos and lead panit?

Originally posted by @Chris C.:

Originally posted by @Emily Edgar:

Originally posted by @Brandon Abbott:

@Emily Edgar Congrats on getting into the game and going for it right away. That is awesome. The following are some  things to be careful of and are not intended to discourage you in any way from a property you feel confident in. That being said, any time you are interested in a property built prior to 1980 you need to be very mindful of asbestos and lead contamination. This could be a costly hidden item should it come up. How are you financing the deal? With a occupancy rate that low you will have trouble with a loan unless you do a bridge loan to make up the reserve off the bat. If you are looking for a cash flowing property for personal investment then I would recommend looking at something post 1980 with less unknowns. That is unless you have extensive construction and property management knowledge to take this one down.  Either way good luck and keep up the good work. 

 Thanks Brandon! I had thought about lead + asbestos but I'd assumed just not much in the way of getting around it in an older building... I'll keep in mind putting extra $$ aside to deal if the issue should arise. 

I'm planning to financing through a local bank, I've spoken to the team and they seemed to be fine with approving the financing for it. I might've mis-stated the vacancy... typically the occupancy of the building is pretty high, at the end of Aug it'll be at the lowest its been in a while. so it seems that is a one off occurrence.

I definitely am looking for a cash flowing opportunity... all the rehab work that the building would need has been my only hang up from pushing the deal all the way through. Thinking I might just go through with the LOI/negotiations just to gain some experience. I definitely don't have extensive construction/ prop mgmt knowledge.

THank you for all the insight... I appreciate it!

 That's one of the reasons why I never buy older than 1980, I'm not sure where you're buying at but I know some states (I want to say DC and PA) have laws about renting to family/people with children if there's a possibility of lead

 Hi Chris!... yes living in NYC we always had these notices coming in from building older than 80s. And since I don't know much about rehab w asbestos/lead issues... any idea how much of a headache it would be?

Originally posted by @Maxwell Manatt:

Hello Emily,

An 11 unit as a first property is a great start!

What you want from the Title company is a "Preliminary Title Report." Basically this will show you the tax records of the property, plus any liens, Easements or any other title issue. Also good to make sure you have a valid contract with everyone who is on the deed (or the correct entity.)

You may have already done this but I would highly suggest recruiting a team to help you evaluate this opportunity. Local Multifamily Brokers, Attorneys, Lenders and Property Managers. Of course you need to preform your own due diligence but it can be extremely valuable  to get second and third opinions.

Also make sure to be very diligent in how you finance this property. Talk to at least 4-5 local banks. Present them your financial projections and collect term sheets from them. Once you have the term sheets go back and see if they can sweeten the deal. Not necessarily on interest rate, but on other factors like interest only period, Prepayment penalty and floating rate versus balloon payment. You will be surprised with all the different offers you get and the degree to which they will negotiate if you make it clear you are looking for the best terms.

Also for an older building like that be extremely conservative with the expense projections. Use AT LEAST  50% of the gross income. And have a property manager help you create a line by line budget for the property. Once you have your expense budget Shop the other buildings near the one you are purchasing. What rents are they charging? What kind of Renters are they attracting (are they getting students like you hope to)? Do they pay for utilities? Or Bill Back to Tenants? What kind of amenities to the nearby complexes offer? What does their occupancy look like? What does their turnover look like? From that info you should have a solid idea of what kind of rent and renters your building will attract. If you find that rents are well higher than what the building is currently achieving and that the tenant base around your potential building is higher that its current tenants it might be a great return to do major renovations.

To much to include on a BP post but you are on the right track to go after something big. I have a decent list of multifamily resources (Books, podcasts ECT) PM me if you are interested. Our group is Currently searching for bigger deals in Little Rock AR and Memphis TN.

Best of luck

 Hi Maxwell, Thank you for all the insight... I'll be sure to get a Prelim Title Report asap. 
I've got an attorney and lenders on board so far but the broker is, himself, the seller soooo not sure how typical that is. If I plan to manage the property, still a good idea to get a prop manager on board? I'm still looking to connect with the greater team of people here in town as this is the first go around.

I hadn't thought about bank shopping... when I spoke with the lenders the agent had recommended they seemed pretty clear cut about what they could offer. I wasn't aware I could negotiate a lower interest rate but added to these other factors you've mentioned- are great to know as well. I'll be sure to reach out for the various term sheets. I'll now be  on the hunt for the best terms on financing... thank you!

Definitely a lot to look into regarding the tenants and surrounding area. It's a bit challenging bc this property is rather unusual for the area, there are many similar properties. There is one 30 unit selling for 1.6 mill a couple streets over, similar property type but CLEARLY has been well kept by precious owners. Otherwise there are a lot of pseudo 'luxury' complex going up in the area directly aimed at college students. This property would sort of offer them a little gem of a find, inexpensive and close to campus.... that is if I could get it cleaned up. From my research, rents seem to be a bit lower than market values but due to the low quality of the building that makes sense to me. My plan was to do some minimal yet cosmetic upgrades to push rent a bit higher.

Will be sure to shoot you a PM... Thanks again for all the great insight!

Originally posted by @Brandon Abbott:

@Emily Edgar Congrats on getting into the game and going for it right away. That is awesome. The following are some  things to be careful of and are not intended to discourage you in any way from a property you feel confident in. That being said, any time you are interested in a property built prior to 1980 you need to be very mindful of asbestos and lead contamination. This could be a costly hidden item should it come up. How are you financing the deal? With a occupancy rate that low you will have trouble with a loan unless you do a bridge loan to make up the reserve off the bat. If you are looking for a cash flowing property for personal investment then I would recommend looking at something post 1980 with less unknowns. That is unless you have extensive construction and property management knowledge to take this one down.  Either way good luck and keep up the good work. 

 Thanks Brandon! I had thought about lead + asbestos but I'd assumed just not much in the way of getting around it in an older building... I'll keep in mind putting extra $$ aside to deal if the issue should arise. 

I'm planning to financing through a local bank, I've spoken to the team and they seemed to be fine with approving the financing for it. I might've mis-stated the vacancy... typically the occupancy of the building is pretty high, at the end of Aug it'll be at the lowest its been in a while. so it seems that is a one off occurrence.

I definitely am looking for a cash flowing opportunity... all the rehab work that the building would need has been my only hang up from pushing the deal all the way through. Thinking I might just go through with the LOI/negotiations just to gain some experience. I definitely don't have extensive construction/ prop mgmt knowledge.

THank you for all the insight... I appreciate it!

Yes, there are 7 small one bedroom units and 4 effencey/studio units. All are rentable at the moment with about a 30-40% vacancey. Looks like 5 apts will be open at the end of August but agent has said the leasing office is still working on filling them. 

I haven't had anyone run any checks on the property yet.... as this is my first time around things are moving rather slowly. I intend to have a structural engineer out to inspect the place as well as other various professionals to ensure the building is in decent shape. I didn't realize a title company could run a 'check' on the property. Would it be intelligent of me to secure a title company of my own choosing?

Thank you for the insight Peter!

Hello All, 

First time posting and looking forward to any insight you guys might have.
I've found a property, looks interesting... have ran numbers and cash flows make sense. Located in a good area, nearby downtown and close to two big colleges so hoping to rent out to college students who might not want to pay insane rents for the newer buildings popping up around the area. But I have some potential hang ups - 

Building is OLD, 1900s-1920s ish, agent/landlord has ownded for past 10 yrs and has done minimal upkeep. If I purchase, it'll definitely require some work but I'm willing to input the sweat equity to make it useful. Buliding smells, everything is dated from applicances to the layout to the paint. 

Is it crazy for me to purchase this building, even though cash flow checks out, due to the level of maintenance/upkeep/rehab that will be needed? This will be my first purchase but I've done a lot of research and believe I'm moderately well prepared as a newbie. 

Thank you in advance for any insight you can offer! :) All the best!!