All Forum Posts by: Joseph Cacciapaglia

There are a lot of people that use the 1% rule, but it certainly doesn't work in all markets. I would suggest putting together a pro forma/budget. Get actual mortgage and insurance quotes. Be sure to use use a property tax amount that reflects the purchase price, if the county reassesses upon sale. Talk to a few property management companies to get an idea of expenses, turnover, and vacancy rate. Using rules of thumb can really get you in trouble. They're a great way to weed out some deals, but I would never make a buying decision without having a fully vetted budget, where I had backup for every figure I included.

You should check with your lender to see what due diligence reports they are going to require. They often have approved provider lists. Depending on the size, you might need a phase one and separate structural, or they may use a combined report. You should also get your property manager involved asap. They will should review leases, and may also recommend improvements beyond the repairs that the structural report will show. You should inventory any personal property that is going to convey as well.

I've had several rentals in South Jersey in the past, probably closer to 2 hours from NYC. There are plenty of deals to be had in the Palmyra, Riverton, Cinnaminson area. I've actually sold all but one though, because I've switched to Texas. The thing I don't like about the tri-state area is the anti-landlord legal system. I didn't have many issues myself, but witnessed plenty of horror stories.

A lot of out of state investors have recently been buying here in San Antonio. I've heard that AirDNA data supports this move, but haven't looked at it myself. The city finally made an STR permit law last year that made STR a legitimate business here. There are a few parts of town that get visitors regularly throughout the year, because there is an air force training program that has a graduation every Friday basically all year. We have a number of other vacation attractions as well.

We have a lot of very small homes that are great for this sort of thing, and also plenty very large ones, depending on your strategy. There are a couple of full service managers that are doing a decent job of keeping those rented.

You need to be sure your lease allows for this. You can also run into problems if the property is in an HOA that doesn't allow it. In San Antonio, you also need a city permit to do this. Part of that application requires a signed form from the owner giving permission. I'm sure every area has different rules about this. If you talk to a good vacation rental manager in your area, they should be a wealth of info.

We're getting a ton of first time multifamily buyers coming here to San Antonio from California. I see a lot of them struggling with a few different things, depending on what size they are looking at:

If you are looking at 2-4 unit properties, one of the biggest issues is getting a good handle on the finances. A lot of these properties are owner occupied and self managed. Getting real data on lease rates and other market terms is extremely important with these properties, because you won't get real financials most of the time. You will get a copy of the leases during your option period, and that's about it.

If you are buying 5+ unit properties, then you have to be good at analyzing their financials, or work with an agent and lender that will take the time to work through those with you. Don't ever take projections in an OM at face value. You see a lot of T3 or annualized RR income with T12 expenses. This may or may not be a fair way to look at a given property. If the units aren't separately metered and there isn't a RUBS in place, then you definitely need multiple years of expenses to make an informed decision.

There is really a lot to learn about multifamily, and I would say it's more important to build a strong team than it is to learn every detail. This includes getting your property manager and lender involved early in the process. It also means working with an agent that is knowledgeable in multifamily (I'm assuming you're talking about small enough properties that there is a buyer's agent involved in the process. Once deals get bigger, those go typically go away in my market). I would start with something smaller than you can safely afford. You will learn so much going through the process.

My first investment was a duplex that I lived in. It is reasonably low risk way to start investing, and getting those owner occupied rates and terms makes it even better. I only lived in mine for a year, and then moved out and it cash flowed nicely, even with a property manager. Just be sure you have a little save to make it through any turnover, and also make sure that you actually save that $1,000 each month, don't blow it on whatever the kids are buying these days.

In my market, full service property managers get 25% or more, but your structure is what makes this an interesting question. Will your future years' income be credited against the purchase price, or the then current market value? It seems like if you're crediting against the purchase price, you could be getting a great deal. If the property is appreciating, but you're crediting your percent ownership based on the original purchase price, you're getting an out sized return in later years.

My first investment property was a duplex. I rented out one side, and rented one room on my side to a roommate. I lived there for free, but no extra cash. I moved out a year later, and had a couple hundred bucks cash flow, even paying a professional manager. At least in my market, there is no reason to buy properties that don't cash flow. They are pretty easy to find.

Greg Dickerson's advice above is right on. I used to work with a lot of hotel/golf course deals. You are lucky if the golf course is actually making a profit. Of course there are some exceptions to this, depending on the area. Also, you should definitely look at multiple years of revenue for the course. I've seen owners try to sell or refinance the year after a once in a decade event bumped their revenue.