All Forum Posts by: Rich Jordan

@Kristine Jefferson nice find! Thomasville, NC I assume? I'm currently hunting for apartment deals in the Winston-Salem/Greensboro/High Point MSA as well for my next deal. Love that area. Congrats on the acquisition.

Would love to connect some time!

Financial Intelligence for Entrepreneurs: What You Really Need to Know About the Numbers by Karen Berman and Joe Knight (published by Harvard Business Press) is a good read that can really illuminate business financials for anyone wanting to scale and get taken seriously.

I enjoyed David Greene's Long Distance Real Estate Investing. His writing on investing out-of-state and how to build and leverage a team on the ground gave me the confidence to do my first deal 4.5hrs away from my home (successfully, at that!).

@Dean Hunter, unfortunately I won't be able to make this one. Hopefully see you at the next one!

Figured y'all would appreciate this. 

Asset: 18-unit C-Class apartment building; Purchase Price: 500k

Following acquisition, I initially created a quite a bit of equity through the restructuring of the management, some simple expense-saving measures, incrementally bringing units to market rate, and filling excessive vacancies w/ market-rate tenants. This was all I had planned as far as adding value.

But I almost missed an easy win:

I was paying for cable TV for the entire building (amenity inherited from previous owner). This was my largest expense outside of management: $532/mo on a building grossing $8200/mo in income at the time.

In discussions with my cable provider (who also provides internet to the bldg), I realized that my tenants were paying anywhere from $55-125/mo for internet on top of the provided cable TV. I also came to find that I could get a bulk deal of premium cable and internet for $38/door.

So after running some numbers, I notified the tenants that we'd be consolidating the Cable and Internet under ownership and providing the better bundled package for $45/mo - saving my most frugal tenants $10/mo and my more frivolous tenants up to $80/mo. The change was well-received.

So now, instead of having an expense of -$532/mo, I have an income gain of +$126/mo.

This change increased my projected annual NOI by +$7,896, adding ~$105,280 in equity at a 7.5% cap rate!

On top of this, the provider is paying me $100/door upon signing the contract.

Chris, I paid $47 for the paperback version. Definitely not cheap.

I went straight to mutifamily. My first deal was an 18-unit. Noticed the seller had some significant inefficiencies in his management structure that were suppressing his NOI. After making some changes immediately after acquisition, boosted the value of the property by +70% and increased my equity by almost 4x within 3 months.

Love multifamily due to the ability to capitalize on those gaps. 

Have to second @Jeff Greenberg's recommendation to listen to the Old Capital Podcast - great stuff there that will help immerse you in the multifamily space and allow you to speak the language. For something to read, I think you'll find "Crushing It in Apartments and Commercial Real Estate" by Brian Murray to be very accessible and informative.

Particularly with regard to Multifamily/Apartments. One reason I love this asset class is the opportunity for forced appreciation through building income and/or lowering operating expenses.

One factor out of an investor's hands - it seems - is the market cap rate, which will ultimately decide the asset's value at sale.

My question is: how volatile are are these cap rates? It seems like the highest they've been in recent memory is 8.5-9% back in early 2000s, generally have been floating in the 7's, and in super hot markets have gotten into the 5's.

If I'm attempting to forecast my apartment building's value at sale in few years (3/5/10yrs), can I be reasonably confident that the cap rate will remain within +/- 1.0% in my local area? It appears so unless I'm missing something.

Thoughts?

*Moving post to this sub-forum to hopefully get some more traction*

I'm currently under contract for a 18-unit multifamily in NC. The seller has an on-site property manager in place receiving free rent for one unit + $1000/mo salary + another unit as an office. I have hired a 3rd party PM company and plan to reclaim the on-site PM's unit and office as two units for lease. This change alone stands to gain me ~$150k+ in equity due to the increase in NOI.

My concern is that firing this PM may prove complicated due to his status as a tenant. The fair thing to do would be to first give him the opportunity to start paying rent and remain in place - and I will do that, as long as he meets my tenant criteria following a -$1000/mo blow to his income. If he refuses, could this quickly devolve into an eviction? Any recommendations on how to approach this? Anyone navigated a similar transition?

I've inquired about any in-place contract between current owner and the on-site PM. Waiting to hear back from listing agent.

@Joshua Meade I got a lot out of watching Spencer Burton build CRE financial models on youtube, specifically his "Watch Me Build a Multifamily Real Estate Model" video and a couple others. A little dry, but talks through many of the metrics that lenders/banks care about when analyzing your deal from their end.

Building my models to mirror his and presenting them to my bank had them very impressed. Loan officer said to me, "Hey I might put my name on this and present it to the committee. I might get a promotion!" Not a bad way to open lending negotiations (and that deal did get funded with favorable terms).

Good luck!