All Forum Posts by: Giovanni Isaksen

@Dennis Lanni Sam's last name is Zell and he runs Equity Group. He actually started out doing the opposite of red lining by buying in war zones and turning the properties around. He also sold his Equity Office REIT at the very peak of the market in 2007 to Blackstone for $39B. His is a pretty good story and if you're looking for a mentor, he'd be a much better choice than some late bootcamp 'guru'. Forbes did a lengthy piece on him here:

http://www.forbes.com/sites/morganbrennan/2013/09/18/the-zen-of-sam-zell-inside-the-grave-dancers-4-billion-business-empire/

Good hunting-

Welcome @Mike Andes. I'm just down the road in Bham, happy to talk RE anytime.

Thanks @Account Closed, agree with you about Tyler but I think he made some good points in that particular piece, especially when it comes to battling my own biases.

Sorry about the double posting, BP kind of weirded out on me when I was trying to post.

One thing to consider is that while we're almost hard wired to believe that rates must be going up at some point, we could actually be turning Japanese with the Fed caught in a liquidity trap that keeps rates chained near the zero lower bound for an extended period. Japan's Ushinawareta J?nen (Lost Decade) is getting to be two and a half and some observers believe the US has been heading the same direction since the turn of the century.

Since the dot com implosion in 2000 every time the Fed has tried to tighten it has caused a recession and they're forced to backtrack. If you are like me you've grown up in a time when inflation was the big concern. I (and maybe you too) have a hair trigger sensitivity to anything that smells like inflation but now the fight seems to be against deflation.

Historically this makes sense as well because as Reinhart and Rogoff pointed out in , recovering from a debt bubble involves lower spending as debt is paid down and savings built up. The real danger when this happens is that it becomes a spiral of less spending that reduces the economy which leads to more savings, rinse and repeat.

Net net, while my most innate instincts are to lock up the longest fixed rate debt possible the urgency may be more about my biases then the economic reality we confront. If the Fed is trapped at the ZLB investors who went with the lower rate short fixed term financing may do better.

For more on the Liquidity Trap and turning Japanese (not the song) see this by Tyler Durden at Zero Hedge and more recently this from Joe Calhoun over at Alhambra Investment Partners.

Good hunting-

One thing to consider is that while we're almost hard wired to believe that rates must be going up at some point, we could actually be turning Japanese with the Fed caught in a liquidity trap that keeps rates chained near the zero lower bound for an extended period. Japan's Ushinawareta J?nen (Lost Decade) is getting to be two and a half and some observers believe the US has been heading the same direction since the turn of the century.

Since the dot com implosion in 2000 easing ahead of the Y2K 'bug' every time the Fed has tried to tighten it has caused a recession and they're forced to backtrack. If you are like me you've grown up in a time when inflation was the big concern. I (and maybe you too) have a hair trigger sensitivity to anything that smells like inflation but now the fight seems to be against deflation.

Historically this makes sense as well because as Reinhart and Rogoff pointed out in , recovering from a debt bubble involves lower spending as debt is paid down and savings built up. The real danger is that it becomes a spiral of less spending that reduces the economy which leads to more savings which further reduces spending, rinse and repeat.

Net net, while my most innate instincts are to lock up the longest fixed rate debt possible the urgency may be more about my biases then the economic reality we confront. If the Fed is trapped at the ZLB investors who went with the lower rate short fixed term financing may do better.

For more on the Liquidity Trap and turning Japanese (not the song) see this by Tyler Durden at Zero Hedge and more recently this from Joe Calhoun over at Alhambra Investment Partners.

Good hunting-

@Andrew Kniffin

1. Yes, I was talking about total invested.

2. Yes, if you can find a deal good enough and raise F&F money to acquire it you could jump start the size of your investments towards your goal. If there's no F&F money to be had then starting with a fourplex is a great fallback.

@Andrew Kniffin I agree with @Brie Schmidt that you should start small but not necessarily with a 4plex. Consider that most LPs want the sponsor to have skin in the game, +/-10% is a number you see regularly, and figure that the amount of your own money that you want to risk on your own first deal is equal to about 10% of the total cost of your first property including organizational costs, acquisition costs and reserves.

As an example let's say that you're willing to put 100k in which implies a $1M deal size, could you find nine other friends and family with the same amount if the deal was good enough? Establishing how much money you could raise given the type of property you're targeting will determine what size of deal to start with.

Maybe they'd only be willing to put up 50k, then you need to find 18 f&f investors or maybe you have to start with a 550k deal. Maybe you having 20% skin makes them comfortable coming in with you.

In any case, your first deal will probably be smaller than 100 units (especially if it's in western Washington) but you will have a track record with an investor funded deal and if you preform, your first set of evangelists for your second one.

Good hunting-

Hello @Avery Gilmer Congrats on getting a good response rate. What markets are you prospecting in? What size properties are most of the responses?

Hello @Brent C. welcome to BP. There is a lot of great information on this site as others have mentioned but be aware that while the industry definition of multifamily is five or more units/suites/flats many posters on here consider duplexes, triplexes and fourplexes to be multifamily. It is an important distinction because there is a substantial difference in how 5+ unit properties are priced and financed versus the 'plexes' which are much more similar to single family residential (sfr).

Happy to discuss and go into as much detail as you need on multifamily (5+ units) being an apartment guy at heart.

Good hunting-

@Barima Opong-Owusu We usually run maintenance costs at 10% and in older buildings they're often higher so that expense item looks a little light. Also I would want to see what capital repairs have been done recently. One issue that comes up is that as building owners grow tired over the length of their hold deferred maintenance begins to build up. Since the seller is willing right out of the box to finance the purchase I suspect this seller may be getting worn out and may be sitting on some major repairs or replacements they're hoping you don't spot. I would spend the money to have an engineer do a complete inspection and have them include the expected remaining life of all the major systems, roof, HVAC, etc. in their report.

Another area to look closely at is the commercial leases. Are they gross or triple net or somewhere in between? How much time remains on them? Do they have renewal options? Percentage rent? Understanding and negotiating commercial leases is a whole separate body of knowledge to acquire or hire.

Depending on the terms of the commercial leases and the local apartment market I would build in a vacancy factor to the NOI. The commercial spaces once vacant could stay that way for a long time before a replacement tenant is found, builds out their space and begins paying rent. The seller will claim that the rents are the rents but if you were to finance this property with a commercial lender they would underwrite with a vacancy factor and so you should too.

Good hunting-