All Forum Posts by: Matt Heath

Hello All, 

I am wondering if anyone has completed a cost segregation study for an apartment building and if there is any company you could recommend? 

Have you found a lot of value in completing this study? 

What are the typical costs? 

Thank you! 

Hi @Matthew Watson, where did you get the list to cold call and did you know how many units or type of property it was before you called? 

I have considered this strategy, but am not sure how to start. Can you walk me through  your process? 

@Matthew Watson

@John Cohen - It has been awhile for sure!! Great to see you are still crushing it! Did you guys have to restructure or adjust how you operate your properties due to covid? Do you source most of your deals through brokers or do you do direct marketing? I have seen that a lot of the deals I have received through brokers have very unrealistic pro formas and are selling based off where the market value is for rents even though the rents could be $150 below market. Is this typical in the apartment space? Do you negotiate around this or do you just find distressed deals and try to get them 65-70% below market? 

Thanks for the insight on touring the properties that the managers run, I will for sure consider that! 

@Taylor L. Thank you! I will take a look at this post! 

@Gino Barbaro- Wanted to provide an update since it has been several years. I have continued to invest by myself with no partner. I have grown to 24 units and am looking to purchase a 24-32 unit apartment Jan/February 2022. It has been frustrating as I would like to grow quicker, but have been using my own capital. I have realized that larger apartment deals make more sense to invest in because when you an increase NOI, you can substantially increase the value and grow quicker. Do you have any tips on trying to find off market pocket listings and negotiating them to get them below market? I have a couple of broker relationships, but I feel I have not gotten a solid deal as every deal i have seen from a broker the seller wants top market. I have also noticed that brokers are very unrealistic with their pro formas and they evaluate a deal based off where the market rent is and not what it is currently bringing in. Do you have any suggestions on how to negotiate through this?

@Joe Fairless - What has been your strategy to grow your portfolio in the multifamily space? Also you mentioned using the 1031 to grow. When do you know is the right time to either cash out refinance or to sell? I have not sold any property as It take so much work to buy and they still cash flow. I have gone the cash out refi route as my exit to buy however. I am concerned with the rising interest rates and if i refi i will be below the DCR threshold needed to be able to continue to refi once my ARM loan is due. Are there ways you use around this?

@Jonathan Twombly - Wanted to circle back with you as it has been a few years. I have continued to use my personal financial statement to grow as you have mentioned. I am looking specifically in the Wisconsin market, but am getting to the point where I want to substantially grow my portfolio. I do not have a mentor, but would love to connect to hear about your story. Would love to hear your strategies on negotiation for deals, underwriting, and growing a business. My dream would be to quit my job to start a business to buy apartments full time. 

@John Cohen - Would love to see where you are at with your current portfolio and how you go about finding your deals. Also, for property management, I currently pay 8%. How does the breakdown typically work for PM as you scale? Also, how do you go about finding quality PM companies? 

@Rick Martin Thank you! I have heard the .5% increase in CAP rate on the exit from some other investors. Is that a fairly conservative approach? Also, is there a correlation between the prevailing CAP rates and mortgage interest rates? Thank you for the information on how to find the current market CAP rate! I will make sure to look those up!

Hi All,

I would like to hear from some investors about how you underwrite/forecast the exit on apartment deals within a rising interest rate environment. Specifically speaking about value add/micro reposition deals. 

Unless you go agency money, you are typically stuck with 5 YR ARM loans and from my understanding when interest rates rise, this can increase CAP rates on the exit when selling.

How do you ensure you are able to cash out refinance all your money, continue to grow your portfolio, but also without going under the 1.25 DCR on a deal? Would love to hear all strategies or thoughts on this.

Thank you! 

@Matthew Wright: Evan is right on with requirements. I just had a conversation with a broker and have found that it makes more sense to scale up with a local lender and once you get to a larger number of units where scalability sets in to switch over to agency money. The reason I say to use local lenders to scale is because if you are looking to buy value add apartments a local lender may waive the prepayment fee if you cash out refinance with them as long as you continue to hold everything with them. 

In the beginning every penny has to be utilized to scale and with agency money there are a lot of fees associated that can really cripple your efforts to move up. If you are using syndication, then agency money all day as it is non recourse. 

Overall, it is going to depend on what your investment strategy is to determine which route to go. 

I would then buy a property with cash (20 percent under market) fix it up and flip it. Continue this until you have enough to buy small multifamily. 

I would do a FHA 3.5 percent down loan on a 4 unit property and live In it for a year and then move out and rent it out. You will gain great experience while getting your feet wet. You will not even come close to using your 50k since you can use the security deposit as a form of down payment so you will have most of your 50k left after the purchase while living for free. I would then use the money you save up to buy another small multifamily deal.