All Forum Posts by: Jeromy Jordan

Hey BP Community,

Question for the commercial multifamily investors out there. What type of insurance coverage are you using to protect your asset? What should I be looking for in a good insurance policy for a small commercial multifamily property? What are the "must haves" that should be included in a policy and the extra protection coverage that would be a nicety but not necessity?

Thanks in advance!

Hey @Pat Heidingsfelder thanks for the info! We arrive in October so I will for sure reach out to you when we are about 2-3 months out. 

Hey BP,

I'm moving to Biloxi, Mississippi and want to plant my roots out there in the real estate market. I'm in the process of learning the demographics, avg rental rates, and best locations. Trying to get as much of a feel for the market as I can before I get out there. I'm military so this place kind of chose me so I want to make the best of any opportunity available while there. I would like to house hack but looks like its not a lot of small multifamily out there and/or the areas with multi are not suitable for my families comfort. So now the play is to just buy my primary residence and perhaps BRRRR a SFR as a well if the opportunity presents itself.

Seeking advice or pointers from anyone who either have or currently invest in that market on what's the best investing strategy that fits the market (appreciation vs cashflow market/BRRRR vs flip etc.).

Thanks!

@Courtney Bass

I appreciate that point as well. I guess im trying to keep my emotions in check at the same time. For example how do you come to that conclusion that FOMO(fear of missing out) is blurring the lines in your analytical decision making. I can afford to wait for the right deal but I can't afford the expense and headache of a bad deal

@Luciano A.

Sir I agree with every word you said. And I appreciate the encouraging words! I have to start checking out HAR.com. The 2 deals that I did capitalize on in Houston so far was just by word of mouth. Family bird dogs and such. They haven't come from a wholesaler so far. The agent that pretty much talked to me like I didn't know what I was doing didn't realize I just bought a property in the same area as the one his wholesaler brought me. So I knew the numbers and what works in that area. It seems like he just got irritated with me because I didn't give his wholesaler a full price offer for what they wanted. I understand that it's a business and everyone involved has to make a profit but at the end of the day I don't want to put myself in a financial hardship. I'll definitely reach out if something on MLS peaks my interest and maybe your son can represent me. Thanks!

 Thanks for the response. You broke that down really good! I think I heard a mic drop from here :)

so I think I should be looking at this different. I should be considering how these cost will effect me overtime and determine can I stomach those cost for a period of time based off my personal financial situations. And should be comparing these deals based on how long it will take me to reach a profitable state when considering if it's a good deal or not, basically the CoC return should be most important variable. So it seems like my problem is I'm measuring these deals too independently rather than comparing them to avg CoC returns of like kind properties in specific markets determined by market conditions.

Would you say that is a more appropriate way to answer the question of "overpaying" and what deal is worth really pursuing?

Sir so what I am gathering from your comment is that I shouldn't really worry about cost as much because rent increases will always outpace the avg cost increase of most expenses?  What % profit margin do you normally feel comfortable with in your investment properties? I know its market dependent and this is kind of vague but would you say you bake in a certain profit margin so if expenses rise x amount percent you would be able to absorb that? The issue I am having with one of my properties is that the expenses went up but I am already at my ceiling for market rent so my profit has diminished. I'm still ok but that's because the deal worked out to be good enough for me to absorb those expenses(not by me telling the future, just luckily). What I am gathering in today's market is appreciation ramped up soo much that to even be competitive to get a property you have to chase the new market values/expectations. But how I feel is that this appreciation is not the norm and I will be getting something today that will bite me in the butt later. If I can find something a little bit below the median, I figure that will be a safer investment. Do you think my focus is on the wrong thing? I'm genuinely asking your perspective as a seasoned investor.

So Sir are you saying that you would consider appreciation over time a more important determinate on what you are willing to pay today more than cashflow? Due to asset values rising over time no matter what they are doing in the short run, you would pay what the market demands today? Would you consider inflation and other cost variables in your decision to purchase in today's market. For example how material cost have risen over 30% which also makes insurance premiums higher because now the cost to rebuild is much higher. I'm not challenging, I'm genuinely asking so I can understand from a more experienced person that's done this for a long time and been through various market conditions. 

So that's the thing, I'm not actually even running numbers based off any standard % rule. I just run them based off of actual fixed/variable cost for the area and tenant demographic. insurance premiums, county property taxes, variable cost such as vacancy, mx, cap ex etc. I'm not looking for $500 cash flow but I also don't want super thin margins either. One of my property insurance premiums went up the next yr to paying an extra $100 a month. Don't sound like much but when your cashflow is $300, that stings a little bit. 

Would you overpay for a deal? Most offers I put in for a deal(on market and off market) does not get accepted and that is ok with me. The first thing an Agent or wholesaler tells me is "You don't know the market" "its a sellers market" "the 75% rule or 80% rule for BRRRRs don't work anymore" My answer to that is "so what". I understand its a sellers market and there are bidding wars on everything and things are "not like they used to be". And I also know that insurance premiums are steadily going up, property taxes are high, and the cost for goods and services(contractors/materials/specialty techs etc) have gone up as well...The numbers are the numbers and if they don't work out, why would I overpay for something. I can afford to wait and be patient to find the right property with the right circumstances. For example, in the market I invest in, I found a deal for 30k less than what the avg fixer upper is selling for. I was in the right place right time, in the right situation with a motivated seller and got the deal. It obviously was a little luck involved in finding/getting this deal as well. I feel like if you be patient and continue to hunt for deals something will come along. Also I am still young in my investing career(only 4 properties so far) so my risk tolerance may be different than a more experienced investor. But I feel like some agents/wholesalers are reluctant to work with me or insult me by saying "I don't know the market" just because I'm not offering what everyone else is offering.

I would really like to hear experienced investors and beginner investors opinion on this. Am I doing something wrong? Running my numbers too conservatively? Should I pay what the current market is demanding?