All Forum Posts by: Jerry Jones

It looks like you have quite large equity in each of your property. Why not take a home equity loan to pay off the IRS and high interest $20K?
Some bank can even offer you equity loan for your investment property.

Fellow Phoenix investors,

I would really appreciate referrals for an accountable, honest maintenance guy.
We have tried out a few handymen from craiglist, but they either don't even answer their phone or don't show up on appointment. Some were excellent for the first couple of jobs but then later turned out to be alcoholic?
Our properties are 4plexes and small apartment building(<20 units),spread in North and Central phoenix, Glendale and Sunnyslope area.

I also want to know what's the hourly pay in phoenix market for a partime maintenance guy. Right now, I am paying handymans by job. But I think it might make more financial sense for me to pay them by hour?

Thanks a lot!

Brian, what an inspiring story! I also loved your interview on the pot cast3 and recommended it to many of my friends.

I am curious if you buy brand new or used appliances and HVACs for flipping those units? Where do your company usually buy those appliances from? I would assume you will get a big wholesale discount?

You must have hired a great property manager to improve the vacancy rate from 50% to 97% within 22 month while increased the rent by 16%, especially considering that you are in CA while the property is in Austin TX.

How did you find such great people to work with, From my experience, it's hard to find a great deal. And it's even harder to find the right persons to work with. This deal is definitely a great execution carried out by a great team!

Thanks a lot for your explanation, Brian!

Steve, I am not assuming interest only but based on 5 or 7 year ARM with like 25 year amortization. My assumption is the interest portion is always highest in the early years and gradually reduces to 0. With a short mortgage term, I will have to get a new mortgage every 5 years. So I am always paying the higher interest with less equity building up.

Brian,
Thanks for answering my questions. And congrats on those fantastic deals you have done. Very cool!

I guess I should really ask what's the typical cap rate you are buying at, since it will take the finance cost out.

From your assumption for 5 year hold, it looks like you plan to hold the properties for a short term? This is one of my other questions regarding the larger scale apt investing: with the short mortgage term, is multifamily apt a good investment for buy and hold investor whose goal is long term stable cash flow?

Now with super low mortgage interest rate, the cash flow may be very good. But what happens if the rate shoots sky high after 5 year mortgage term? What possible exit strategy do I have for such case?

Also with the short mortgage term amortized into 25 or shorter years, most of the mortgage payment goes to the interest with little equity build up, I suspect it would take much longer time to pay off the loan than conventional residential loan?

Regarding it's easier to get larger size loan, my broker told me exactly the same thing. He even mentioned that Fannie Mae could even offer similar 30 year fixed mortgage for apt building if I can afford the top dollar appraisal fee, which is in 10K~30K range to evaluate if the property is qualified for such program. Have you ever applied for such loan?

Brian and Jason, may I ask what's the ROI you are seeing on your multifamily apartment? And how much do you pay for the third party property management company?
My loan broker told me that many lenders exit from the apt lending with loan amount lower than half or one Million. Is that true? How you guys finance your properties?

I am a buy and hold investor. In the past couple of years, I have bought some SFR and 4plexes in phoenix with 30 years fixed rate residential loan. With the leverage, I am able to get ~15% cash-on-cash return. Now I want to get into the larger scale multifamily apartments. I have a few fundamental questions:
1. Financing and risk
After talking to a loan broker and us bank, it look like I can only get 5 or 7 year fixed rate commercial loan for multifamily apartments. While the rate is super low now, it's going to be reset after 5 years, to a higher (more likely higher) or lower rate. This uncertainty definitely presents huge risk with a big loan amount. It's possible that the future mortgage rate will eat up big portion of the return. How to reduce such risk?
2. Equity build up
With a 5 or 7 year ARM, most of my mortgage payment will go to interest with little equity build up. Then after 5 years, I repeat this process with a new loan again. Intuitively, it will take much longer to pay off the loan compared to a 30 years fixed conventional loan. So is buy and hold a good strategy for multifamily apartment investing? If not, what's the best strategy.
3. price/unit and ROI
I looked into MFA in the phoenix market. The price/unit is much higher for buildings with more than 4 units (>$40K/unit),compared to 4plex buildings(~$30K/unit). I just couldn't figure out why is that. We all know that costco has a better unit price that target! And I would expect a lower wholesale price for bigger buildings! Is this the case for other markets? With this high price per unit and generally higher interest rate of commercial loan, I would expect the apartments will offer a lower ROI compared to 4plexes. So what's the common ROI for multifamily apts those days?

Thanks in advantage for all your inputs!

John,
What's the general price for foundation repairs in Dallas? Do they always come with warranty? If then, for how long?

Thanks, Ned and Jerry K for your reply.
I would like to be a passive investor for the Roth IRA since it provides me good tax advantage already and I don't want the hassal to buy and hold or whole saling with such small amount of fund of $50K through third party (IRA custodian).
So buying note, hard money lending and tax lien seem to be the best options. Do you guys have any idea what's the average return on those and where to find the deal?