All Forum Posts by: Hubert Washington

@Tristan S.

Are you willing to pay the appraised value? If not, then it really doesn't matter what it appraised for. If the seller wants more money, I would ask him to help you understand why you're numbers are incorrect and what you may have missed. That way you are not combative but you reinforce to him that you are only going to pay what the numbers warrant. The only way your offer changes is if the numbers change.

Think about multifamily / apartments like buying a business instead of buying a property. If you were buying my widget business, the operations of the business would determine how much it is worth. Not how much I feel like it is worth. You are buying income generated by the business. Same thing with apartments. And just like a business, you are buying it because you believe you can run it better than the current owner and increase the income making it worth more. In other words buying an apartment IS buying a business more than it is buying an investment. And my favorite part is you can pay someone else to run it so that you can go find another business to buy!

@Tristan S.

Yes, your offer should be based upon what it will cost YOU to run the property, not what it cost him. That is the purpose of your process for valuating the property. "Based upon it costing x dollars to run the apartment the first year and the cap rates for the area, I am willing to pay x dollars for the property. Then I will do abc to the property which will allow me to raise rents to x dollars increasing the value of the property to x dollars." You should know the your entire process from buying to exiting before you close on the property and once you own the apartment you should just be executing your strategy.

@Scott Trench

I agree 100% with @Gino Barbaro. I think it is just human nature to think small. Nothing against anyone who starts in SF or plans on staying in SF but I think it is 100% up to the individual. If you truly believe you can start in apartments straight our the gate, then go do it and don't listen to anyone who says you can't. If you don't believe you can do it, then you're right - you can't. I believe every person is endowed with the ability to go BIG but some of us just don't THINK we can do it. 

Personally I have REALLY BIG goals and so unfortunately I don't have time to take the slow and steady path to reach them. That is why I am going straight into apartments with basically no REI experience. And I can tell you that two months ago when I started, that scared the crap out of me. But today I am more excited than I have ever been in my life (except for the birth of my two kids!) and I owe a lot of that to some great books I have read and some incredible people I have met (thanks to BP!).

I'm no different than anyone else out there but I KNOW I can do this. I think if more people "knew" they could do it, they would be doing it too.

THINK BIG...THINK BIGGER...THINK MASSIVELY!

@Tristan S.

Your valuation should be based upon the actual numbers for the property. I think that's why it is important to get realistic numbers from professionals since you don't have actual expense. When you are presenting your offer to the seller, you can explain why you are willing to pay what you are based upon the numbers you have collected. If you are not able to buy based upon informed numbers that you put together, then you probably shouldn't buy the property. Any experienced investor would be buying the same way so the seller will come to the realization sooner or later.

@Tristan S.

I would recommend calling property managers in the area to get an idea of what those expenses may run for the area. For the cap rate, you could call multifamily brokers in the area. They will know the cap rate. Or you can go online to loopnet and see what cap rates are for current listings in the area.

Good Luck!

@Dwayne George

As @Mindy Jensen mentioned, apartments are a completely different ballgame. They are financed differently and also evaluated differently. First I would recommend connecting with someone who has experience investing in apartments and/or educate yourself more about how it works. Second, you will need to request financial information from the seller to determine if the property is even worth your time. If the numbers make sense and meet your investment criteria, you will want to submit a Letter of Intent to the seller to begin the negotiation process. Once you sign the purchase and sale, you will begin your due diligence.

There is a very systematic approach to purchasing an apartment complex. It is your best interest to make sure you truly understand this and keep yourself from getting into trouble. PM if you need additional assistance.

Good Luck!

@Ned Carey

You are right. It is a daily choice. I have this printed out and I read it DAILY just to make sure I never forget.

This type of mindset is vital as an investor and in life. Whether you wholesale, flip, rehab, buy and hold, invest in single family, multifamily, apartments, commercial buildings, notes, or tax liens. Whether you are just starting out or an old pro, just setting your goals or already living your dreams, you can do more, be more, live bigger and dream bigger. It is completely up to you and completely within your control.

If your dreams don't make you nervous, scare you and seem impossible - you are not thinking big enough. I have to admit my dreams scare the crap out of me! :)

You can tell the size of a man by the size of his dreams.

I wrote this for my son and daughter to read when they are older but wanted to share it here as well.

You have the DNA of ultimate power. Written in that DNA is the mandate to dominate, not people, but the world around you and create from it. You are pre-programmed and hard-wired to be the master of your universe. There is nothing in this world that is too big, too hard, too strong, too far, or too complex for you. You have the ability to overcome anything and succeed at everything. You are great. You have power and control over everything around you. There is nothing that can stop you. You can be whoever and do whatever you want. Only one thing can hold you back. There is only one thing that can stop you. That is your thinking. As a man thinks, so he is. You are an unlimited being with only one limitation - the one that you place on yourself. You are an unstoppable force and at the same time you are the only one who can stop you. You are who and where you are because it is impossible to exist beyond the limitations you place on yourself. You will never make a liar of yourself. The only difference between you and anyone else is the level of your limitations. As a man thinks, so he is. Could you imagine what your life would be like if you took those limitations off? The weird part about humans is you would just automatically put new limitations up. But what if you took those off? What if you kept taking the limitations off your entire life? How big would you think? How big would you dream? What would you accomplish? What would be the culmination of a life lived without limits?

Imagine yourself being that person. Imagine that version of you. What would you look like? What would your life look like? What would you do? How would you spend your time? What would make you happy? Who would you love? HOW WOULD YOU CHANGE THE WORLD?

Now take the limitations off! Even that version of yourself that you just saw had the limitations of your thinking placed on it. Do you see how this works? How many times could you go back and answer those questions by taking the limitations off your previous answers?

So this begs the question: Why in the world would you ever want to limit yourself? Why would YOU choose to get anything less than the maximum out of YOUR life?

Your life is a book. The pages are empty and the pen is in your hand. What are you going to write in it? How great will the story be? Pathetic? Incredible? Disappointing? Full of love and happiness or hurt and pain?

Imagine your life is an elevator. But this elevator goes up for eternity and you are the only one on it. Which floor are you going to get off on? 10th floor? 100th? 1,000th? You're the only one that can push a button - otherwise you will keep going up forever. Hopefully you will vow never to push a button and keep riding the elevator of life as high as it will take you.

As a man thinks, so he is. THINK BIGGER!

So I was telling a friend of mine that I am investing in multifamily / apartments and he asked me to analyze the two apartment buildings that he owns to get an idea of what he may be able to sell them for. However it appears to be a unique situation so I thought I'd reach out to the BP for some feedback.

Background:

My friend manages his father's trust in which the two properties are held. Currently all of the tenants are family members so the rents are WAY below market. I believe the area is also under rent control. So if the property is sold, I'm not sure if a new owner can even raise the rents to market immediately. Is this accurate?

• Avg rent is $1065/mo
• Market rent appears to be around $2580/mo
• Expenses for 2015 were $35,835
• NOI = $40,845

Berkeley CA - 5 units (one 3/1 house and four 1/1 apts)

• Rent for 3/1 house is $1200/mo
• Market rent for 3/1 appears to be around $2390
• Avg rent for 1/1 apts is $470
• Market rent for 1/1 apts appears to be around $1470
• Expenses for 2015 were $19,110
• NOI = $17,850

My friend says that the properties are in good condition, but I'm sure they would have to be updated to get to market rents since the family members have lived in them for years. I believe CAP rates for the areas are somewhere are 5-6%. I know smart investors base their valuations on actual numbers but with such a large difference between actual rents and market rents how would you value these properties if you were looking to buy? Obviously there is HUGE upside for getting these rents to market. And is it realistic that my friend should expect to sell these properties for significantly more than the actual numbers warrant? As the trustee, he believes that he is responsible for selling the property at the highest amount possible.

As always, thanks for your input and I look forward to your feedback!

@Jamie Carter

I agree with @Liz Brumer-Smith. Each area of REI is different and takes different skill sets. In essence they are each a different type of business. Determine your long term goals, risk tolerance, financial situation, and your own personal strengths. Do what's comfortable for you (or feel free to step outside of your comfort zone) but mostly do what makes sense in your situation. You may even utilize different strategies to reach your goals or maybe just to diversify your real estate investments as you build wealth. I chose to go into apartment investing for several reasons but one of the biggest was because it fits the type of person I am and what I am good at. I may not make the best landlord, wholesaler or flipper but my success investing in apartments is because of how my skill sets align with the way that business functions. (The bigger paydays don't hurt either!)

Best of luck on your journey!