All Forum Posts by: Jeff Greenberg

In general CRE investors look in specific markets that have positive indicators such as job growth and good demographics. Although our focus is Texas, we have been approached to partner in deals in colorado, oklahoma, ect. We will do research on the market and decide if it is one we want to be in. Others may stay close to specific markets.

I live in SCal but can't find the investment returns out here, so we look elsewhere.

Jeff

Again it comes back to what are you looking for. At $175k with the current numbers you would get a 10% coc return, I assume that is where uwe came up with the 175K. At that price it could be a good deal with a decent return and a potential better return if the tenant pays the utilities.

You also have the potential of a lower than 50% expenses on these smaller properties.

Joan, rule of thumb on multiunit properties is expense at 50% of gross rents. Smaller properties such as these could go down to 35-40% such as property 1 adding to the value.

- Houses can be bought at wholesale & sold at retail. Apartments are much harder to pick up at a discount since they're traded between investors.

Granted there are less Apartments (MF)out there, but there are many in distress that be purchased under valued and sold at market

- Apartments have the added management burden of common area maintenance. Houses rentals can often be structures so that the tenant is responsible for most everything except major repairs.

Yes there is the burden of the common areas, but the increase in cashflow covers that

- Apartments have more disputes between tenants, causing you to have to play referee.

No argument here, the tenent base may be lower, but being able to afford professional management takes the problem away from you.

- Tenant quality is lower. They're mostly short term occupants, and less respectful of their homes.

Again no argument and the turnover is expected to be higher.

- Operating expenses are higher due to the higher vacancy factor.

Here is where I disagree with you. How much does one vacancy cost you? You are down 100%. what about the reserves needed to cover a couple of months of vacancy. What about the hold time while a damaged unit is being repaired. On one 20 unit property we were down 6 units and we were still paying the bills. Our vacancy factor is 5% what are you putting in for your sfh?

- Apartment owners have less control of individual rental pricing, since tenants are in similar units and can/will talk to each other about what they pay.

I don't see the difference here. Sfh still have to deal with market rates. Your sfh tenants may not have neighbors to talk to but the can see what is in the market

Who agrees/disagrees?

Now here are a few other items that were left out. You have many more options as to adding value to a property when you are dealing with MF. When we look at a MF property we always look at the value plays. These could include decreasing vacancy, increasing rents, charging utilities to tenants, laundry services, vending machines, adding storage units for rent, fixing up the units for higher rents, charging for garages instead of open parking, etc.

[b]Now you may think that this may only slightly increas the cashflow and that may be correct, but the difference between the way sfh and mf are valued is the key. The value of sfh is based on local comps. Increased rent may up the value some, but not much.

Let's say you can increase the occupancy in your mf by 1 unit for the full year. Let's say the rent is $750 or $9000 per year. Assuming no significant increase expenses and you are in an 8 Cap market you have increase the sale value by ($9000/.08=$112,500)$112,500. Now where I live in California besides the rent being higher the Caps are lower. Let's use the same $9000 on a 5 Cap market.($9000/.05=$180,000). All that for keeping one more unit occupied. This is also why you see a lot more mf properties being held for 5-10 years and the next property being purchased. The increase in the value gives a great kick when it is sold.

Now the big negative on MF is the high price. This is why we partner with other investors to get more bang for the buck.

I would prefer a 50 unit mf with professional managemnt, over 50 sfh and the management that goes with it.

Jeff

Hi Roselynn,

First you need to clarify what you mean by potential partners. Let's assume you are talking about partners that will have equal control over the project. If that is the case then the pitch would be what you can bring to the table and what you are looking for in a partner. RE transactions need four main pieces. Someone with knowledge and experience, someone with time, someone with money, and usually someone with credit. If you are missing any of these, that is what you should be looking for.

If you are looking for equity partners that will have little or no say so as to the conduct of the project, and are just bringing in money, then you need to take a step back. If their money is protected by a first or second deed then you should be OK with the General solicitation. If you are planning on pooling funds then you are treading in SEC waters and need to know the restrictions as to what you can and cannot say in a group that you do not have a significant relationship with. Do a google search on Reg D exemptions if pooling funds is your plan.

Jeff

John,

In property 1 does the tenant pay oil and electric? I would agree with Uwe that your returns should be higher. There are passive investments you can get into for a 7% return. Is this in your local market? I assume you are planning to manage it yourself. You didn't say anything about the mortgage or your exit strat. Is this a full am loan that you plan on paying down and having a paid off property. If not you will be taking on a new job instead of putting your money to work for you.

Property 2 I ran the numbers and even if the tenants paid the oil and electric you still would have a meager return certainly below minimum wage. The debt service is also high. If this is a 30 yr am it looks like 5.8%. You should be able to do better than that. He would have to come way down and the market needs to be having the tenants paying utilities before this comes close to being a deal.

Don't sell yourself short. How much is your time worth??

Good luck

Jeff

Ned, I am very curious where you found the 5-15% success rate for Guru's. I do agree that Lindahl gives a lot of good information, but if it was as easy as most Guru's make it out to be, there would be a lot more wealthy RE investors. I think Lindahl is one of the best, but my guess on the seminar success rate most Gurus’ would be more down in the 1-2% range.

Now how do you make sure that you are the successful 1-2%. You are careful about which seminars you go to. You read books and magazines, and online social media such as BiggerPockets. Go to RE clubs that are not trying to sell you something. Ones that have real people that are interested in helping you along, and remember when they were in your spot. Talk to successful peoples, learn and absorb.

You find the niche that you are interested in and focus on it. Find a mentor, or partner that has what you need, experience. As I said before, find a way to help them, so you can learn from them.

Beyond anything else sit down and look around and decide what your "why" is. Why do I want to do this? Why should I give up a lot of my TV/Movie/Video Game/Partying time. When all of these different temptations are pulling you away from your business focus, your "why" needs to be strong.

Gary Johnston (Financial Freedom Seminars) stated "We all will make sacrifices in life. Most of us get to chose if it is now or later. It is up to you.

To your success,

Jeff

You could also look on linkedin.com which is another business centric social media site. There are many forums there where you can connect with professions that are buying and selling CRE and syndicating deals. Use caution to always check out who you are really dealing with.

I have to agree with Bryan and David, the best way to learn is to find someone that is doing what you want to do and find a way to help them. If you provide a service to them, then they will be more inclined to spend time with you. On the other hand, the more knowledge you have the more valuable you are to them. As far a bootcamps go, ask for recomendations from successful investors. Who were their mentors?

As far as Dave Lindahl, he does offer a lot of good information and he is still doing what he teaches.

I am surprised that no one has mentioned a couple of my favorites.

Quickoffice is great for opening and being able to modify, excel, word and powerpoint documents

10Bii financial calculator works better than the real calculator it emulates. Not only can you figure out loan payments but see what different interest rates and terms do to your bottom line. If your are buying notes you can't be without it. One of the best features is the easy mode. You don't even need to know how to use a calculator. You pick from several questions and fill in the information requested and you have your answer. There are other fin calc out there, but the one by INaDay dev is the best.

And lastly if you have as many login id's and passwords as I do, 1passwordpro stores your passwords in a vault that only takes one password to get into, but it is secure if you lose your phone or ipad.

Can someone sell a family owned property and use the funds to go into a TIC or joint Venture with another party and maintain the benefits of the 1031? Does it matter if the second party does not bring in funds but brought the deal to the table and will manage the deal during the hold period?