All Forum Posts by: James Kojo

@Marjorie Josaphat : Speaking strictly from a financing view, getting a loan for 2 4-plexes may be easier than getting a loan for a single 8-plex. And then again, maybe not. :) Confused? let me break it down.

1-4 units: this falls under traditional "residential" financing, that you may already be familiar with from single-family. Any mortgage residential mortgage broker you find online can do these. You will get very similar product offerings (30 year fixed, 5-10 year arms, no pre-payment, LTV, etc.) They are very easy to find and to shop. Their loans are based on your personal credit, DTI and ability to pay, etc.

Above 5 units is considered "commercial." Here you need to find more specialized lenders/brokers. You will see a very wide range of product offerings in terms of loan-term, amortization, recourse, interest rates, LTV, interest-only periods, and pre-payment penalties. So, you are able to select loan products that are a closer fit to your individual needs, but they may be a little harder to find, as there are few central marketplaces for them.

The gold standard for loans in the $1M-3M range (in my opinion) is the Freddie Mac SBL loan. If you're in that range, then I would encourage you to ask around your network for brokers who work in that program.

Hope that helps!

James Kojo

@Jenna Wright

If the loan size is greater than $1M, then you can look at Freddie Mac Small Balance Loans. It's a very good program. Here are some highlights:

▪ $1 million - $7.5 million
▪ 5-, 7- and 10-year hybrid ARM and fixed-rate options
▪ Non-recourse
▪ Up to 80% LTV in certain markets
▪ Interest-only available
▪ 30-year amortization

One catch is that it will require a pre-payment penalty. You need to consider the timing of your exit VERY carefully and align it with the specific loan product.

Otherwise, i've had good luck with local banks with deals of that size. They are typically full-recourse with NO pre-payment, but the individual terms vary ALOT.

 You'll have to ask around to see which local banks do those kind of deals though.

Hope that helps!

James Kojo

@Jack Calhoun There are a few "rules of thumb" but ultimately, you'll need to do a full underwriting on a property before you actually put in an offer.

I would suggest finding a good property analyzer spreadsheet and getting enough practice that you can quickly do an initial analysis within 30 mins or so.

Some things to look for in a property analyzer: 

• 
  Allow for separate entry and exit cap-rate
• Min 5 year forecast
• input for rent/expense growth on each year
• includes rehab and capex costs
• includes debt service and financing costs
• includes acquisition and disposition costs
• Provided IRR for planned exit

Honestly, there's a ton more bells and whistles you could add, but I would consider that the baseline if you're talking about deals that size.

Hope that helps!

James Kojo

Hi, @Jason Malabute

You didn't include the column headers in your pic, so it's a little hard to tell specifically what you are referring to, but some general notes.

I think you are talking about the overall net-migration over 10 years vs the acceleration/deceleration in change of net migration. Both are important.

If you see a negative net migration over the last 10 years, it's probably a pass.

If you see a positive net 10-year migration, but a decelerating rate of year-over-year in recent years, that's a sign that it's a maturing community, and till probably not have the same explosive growth it had previously had.

Now, ALL that said, if you're talking about net-migration numbers in the single-digit thousands, you're probably looking at too small of a slice of the MSA. Look at the growth of the larger MSA.

Hope that helps

James Kojo

@Joe Huber

Co-star data isn't perfect, and all datasets are subject to outlier effects, so I wouldn't put too much stock in the actual 15-25% number as much as the directionality. For example, 3 consecutive  quarters of 25% would mean that it roughly doubles in 9 months, assuming those %'s aren't annualized. That might be possible in tiny sub-markets, but doesn't sound likely for a larger market like JAX.

Anyways, that's not to say inflation is not an issue. The best short position you can take against the dollar is to borrow money at a fixed interest rate, and use the money to buy income producing assets. In other words, do what you're doing. :)

Rents will likely track with overall consumer inflation, but you mortgage payments are fixed, so the more inflation, the bigger your profit margin.

Interesting times, for sure.

@Joe Joseph

I do a ton of business in Columbus, OH, so I can give a full-throated recommendation of that sub-market.

That said, you didn't mention Columbus specially.

At the state level, you're usually evaluating whether or not the statutes are landlord friendly vs tenant friendly.  Obviously, there are other considerations, but after you validate a state, you have to vet the individual sub-markets.

Before you go into ANY sub-region, do some basic demographic/economic analysis on it first. FIRST AND FOREMOST answer the simple question: are # of jobs growing or shrinking in the sub-market? If they are shrinking, I would pass. After that, look at economic sectors, unemployment rates, income levels and overall population growth.

Then drill down into specific neighborhoods and deals.

Hope that helps

James Kojo

@Diana Daniels

Hi! The two deals that you have a VERY different deals. For your Dallas deal, i would highly recommend contacting Old Capital Lending. They have offices all over TX, but are major players in the DFW area. They are an excellent educational resource as well have a great reputation for execution. Check out their podcast. It's totally amazing.

For your 4 unit deal, that still falls under your typical residential loan. I like to use zillow mortgage to find a broker that's currently hungry for deals, and use them.

Hope that helps.

James Kojo

@Edward Stephens In my response, i didn't mean to imply that you're too small to do business with. Just that each broker has a range in which they typically work in as they tend to carve out a small niche for themselves. Very few of them will actually tell you that they don't want to work with you, but if you're talking with a broker who typically does $20-100M deals, you can guess where you will be on the pecking order if there is any sort of conflict for time.

That said, there's a little bit of a weird dead spot in the 5-20 unit range. They often won't qualify for "agency" debt (Fannie/Freddie commercial), CMBS or life-cos. However, anything greater than 4 units won't qualify for residential debt, for which brokers are a dime-a-dozen (sorry, residential brokers!)

So, you're usually looking at local banks for that type of deal, and almost all of them will be looking for recourse-debt. There are no centralized repositories that I know of for finding them, so you really have to know-someone-that-knows-someone. Fortunately, it's not as hard as it sounds. Just ask every single potential trading partners you talk to (REI brokers, PMs, legal, etc) if they know which local banks are doing small commercial deals.

Hope that helps!

James Kojo

My C-class properties have seen a jump in delinquencies. those have been largely offset by the local rental assistance programs, but due to various backlogs, the pay-outs for those programs are running about 60 days behind themselves.

My A/B class properties are going gang-busters with lots of traffics, and relatively low delinquencies.

K-shaped recovery, unfortunately.

@Monica C.

I've invested in a little more than 10 separate syndications with about as many different leads.

The one thing I appreciate the most is those asset manager who are willing to send out monthly charts of actual vs pro-forma income and expenses.

That's not to say that they are always within budget, because they usually aren't, but they at least show a level of honesty and accountability as well as showing progress.

I'm invested in some deals that publish very few KPIs if any at all. One of them has never once made the pref in almost 5 years, yet in every quarterly update they are singing their own praises about how well everything is going. Hmmm. :)

Likewise, on exit, I like to see the achieved cashflow and IRR. On one deal, the exit summary just read something like: "I think everything went pretty good, so I consider this a success!"

That's a lot of homework left to the individual investors. :)

Hope that helps

James