All Forum Posts by: Giovanni Isaksen

@Stacey Manley to expand on @Darrell Shepherd 's final point, there are some additional factors we look at that drive demand. The first is population growth, particularly the 18 to 34 age population growth, who represent the bulk of apartment renters. The NAHB was just out with a chart on this at the state level in an piece about the age of the housing stock:

http://eyeonhousing.org/2014/02/05/the-age-of-the-housing-stock-by-state/

Now this chart is based on Census data and uses the under 45 cohort instead of specifically the 18-34 YO group but you can clearly see where the young population is growing.

On the other hand... in another NAHB article based on research into where 18-34 YOs live

http://eyeonhousing.org/2014/02/04/young-adults-living-with-parents-up-sharply/

shows that a good sized portion of that population is still (or has returned to) living with their parents:

This trend has accelerated since the financial meltdown. The positive case says this is pent up future demand and when these young people complete school and land good jobs many will move out into apartments.

The state by state map of where the most and least 18-34 YOs are living with their parents shows three states that overlap with the first map, above, and may be good places to look for growing apartment demand; Colorado, Idaho and Wyoming:

Good hunting-

@Richard Decoste I would be less concerned with how the seller came up with a price than determining what the property is worth to you as an investor. What are the reasonably projected benefits of the property's cash flow, tax benefits, amortization of debt and appreciation? How much are you willing to pay for those benefits in terms of purchase price, acquisition costs and immediate capital improvements? How much leverage risk are you willing to take on in order to acquire the property?

I highly recommend reading Frank Gallinelli's "What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures" http://amzn.to/Zv0Zph (on Amazon) to understand how to measure and analyze the financial performance and returns of an income producing property. There are more good books on income property but I would start there.

Because it's a mixed used property with two retail spaces reading and understanding the terms of those existing commercial leases will be critical to determining the value of this property. If you are not experienced negotiating commercial leases I would definitely engage a broker who is to review that portion of the deal.

Good hunting-

@William F. While only reading books published since the credit crisis might be good if you were looking for something like How To Make A Million Dollars Overnight With No Money Down Flipping Houses* when it comes to apartment building investment there are many time tested principles which apply in any age. Your choice whether to learn these lessons first hand or by reading about others' experiences of course.

Good hunting-

*Not a real book (I hope)

Ken McElroy who was just on a BP podcast a couple weeks ago wrote a great book on property management and/or managing your property manager along with how to hire them: The ABC's of Property Management: What You Need to Know to Maximize Your Money (On Amazon http://amzn.to/1d518JK)

His other books are very good on apartment investment as well.

@Ugochukwu Opara as David and James mentioned, Frank's book on cash flow is the source for understanding income properties. You can find it on Amazon here: http://amzn.to/Zv0Zph

Frank also has another book called '10 Commandments for Real Estate Investors' that I reread every other month or so as a reminder: http://amzn.to/15ikXL0

Ken McElroy has two great books on apartment investments and one on property management:

The ABCs of Real Estate Investing: The Secrets of Finding Hidden Profits Most Investors Miss http://amzn.to/HdXVf1

The Advanced Guide to Real Estate Investing: How to Identify the Hottest Markets and Secure the Best Deals http://amzn.to/1bcWx50

The ABC's of Property Management: What You Need to Know to Maximize Your Money Now http://amzn.to/1d518JK

Also see Ken's BP interview on Podcast 052: Buying Apartment Complexes, etc. here:

http://www.biggerpockets.com/renewsblog/2014/01/09/bp-podcast-052-raising-millions-ken-mcelroy-rich-dad/

I think these are the place to start, but there's many more let me know if you'd like to see more.

The second image is too small to see what's going on but if rows and/or columns were added to a spreadsheet with fixed cell references it could affect the output. The way we dealt with that on our analysis spreadsheet (which is quite handy because it has been updated over 20 versions now) Is to name the cells which will be referenced in other calculations and refer to them by their names instead of their column and row references:

In the example above, the Expense Ratio cell (C109) is highlighted and in the box in the upper left the name OpExRatio (Industry term for Operating Expense Ratio) appears. You can see in the formula area how that number was developed because the cells in the calculation are also named.

Currently 'Letters From A Stoic' by Seneca

Recently 'The (Mis) Behavior of Markets' by Benoit Mandelbrot, 'Keynes Way To Wealth' by John Wasik, 'The Signal and The Noise' by Nate Silver.

I follow about 300 sources of news about the multifamily sector, commercial real estate, finance, the economy. For instance this piece from Hessam Nadji, head of research at Marcus & Millichap just came in:

http://www.globest.com/news/12_784/national/multifamily/MMI-Value-Add-Apts-Will-Draw-More-Interest-342176.html?ET=globest:e41861:296120a:&st=email&s=&cmp=gst:Multifamily_20140129:editorial

And of course multifamily related posts on BP.

About every other month I reread Frank Gallinelli's 'Ten Commandments For Real Estate' just as a reminder. It's a quick read but it contains the essential concepts for analyzing deals and the people you're dealing with.

@Rick L. Although the measures of performance on the single family spreadsheet are quite simplistic for measuring the returns on an apartment building, to make it work you would need to add a Unit Mix Table (see example below) to calculate the total monthly or annual potential income and plug it into the sheet you've downloaded:

@Stormy HollingsworthAs others have said becoming a real estate agent is a very good way to learn the business of real estate investment and I would go one step further and say that if you want to own commercial multifamily properties (with more than five units) focus on becoming a commercial real estate broker. That way you will be swimming in the deals you're looking for and will get to know all the players in your market.

As far as whether to go to college for real estate I would say not to unless you want to become an analyst for for a large private equity or institutional real estate company. If so you'll need a real estate MBA, preferably from an Ivy League school and it will cost $200,000 or more to become an employee at a company that expects you to work 60 hours a week (or more) on their deals and not yours.

If you go the commercial broker route I recommend pursuing your CCIM designation (http://www.ccim.com/about-ccim) which will include learning to do the same type of investment analysis as is taught in the RE MBA classes, but for a much lower cost.

Whether to go to college at all is a different question and I would answer it this way: The point of investing in income producing properties is to have the cash flow from your properties that provides your income. When you have acquired enough properties to provide the income necessary to live completely from their cash flow you have achieved your financial freedom. Once you are financially free you will have the means and the time to pursue any type of education that interests you.

Yes someone in your position could go to college and do real estate 'on the side' but the time, effort and cost of college would slow the process of becoming financially free. Imagine four years have gone by and maybe you have a small property or two but you need to get a j.o.b. to pay off college debt which would take even more time away from creating your financial freedom.

If I was in your enviable position knowing what I know now I would start by becoming a commercial real estate broker, even if that meant starting as an assistant to a more experienced broker. I would also make it a goal to acquire a small apartment building within one year of graduation. A goal with a deadline like that will motivate one to quickly learn everything they need to accomplish it with a focus on actionable knowledge instead of lofty theory. Once I had achieved my financial freedom I would continue to pursue my education by studying the subjects my interests lead me too.

Congratulations and good hunting-

You're welcome @Eddie Quispe Let us all know what you decide to do-