All Forum Posts by: Jason Stubblefield

I've structured a deal where the seller financed 10 percentage of the down payment.  You could try to work the seller finance angle but understand that the lender will have to agree to whatever terms you come up with. Also, if you can convince a commercial lender of the future value of the property (based on cap rate and proforma), then you may be able to get them to give you larger loan proceeds.   

I advise most people getting started to take this route.  A 3.5% down payment for your residence and up to 3 rental units is a great deal.   

Good information in this thread.  We accomplish this by making the capital raisers part of the GP and giving them a perpetual role in the deal. 

All good points above.  I recommend people who are starting out to look at 2-4 units because it's an introduction into multifamily and you can get into the property for 3.5% if you will occupy one of the units.   Outside of that, I think bigger properties have way more upside.  You probably see more conversations about smaller units because of volume not because smaller properties have an inherent advantage. 

If there are numerous units with varying rental amounts then we average out the rents based on each unit type (i.e. average 2br/1ba, 2br/1.5ba etc).  Then we would do as Greg suggested and adjust the loss to lease to accurately depict the actual rents collected.  Loss to lease is based on what we determine to be market rent for the property. Hope that helps.

It seems like your investors are a bit leery because they aren't confident in the financials of the property.  I agree that having a lease option could be beneficial in determining value. Another option is to get really confident with a conservative proforma. A general rule of thumb is to estimate 45-55% for expenses.   To determine more granular estimates  here are a few steps:

1)  Call the utility company, tell them you are purchasing the building and want to get an estimate of what the utility cost will be (you can verify this once in contract)

2)  Check with the local tax assessor to estimate taxes

3) Get some insurance quotes

4) Talk with a property management company determine management fees

5) Ask a PM for rental comps and look for your own.  Call some comparable properties to see how much rents they are obtaining

6)  Determine any deferred maintenance needed and get an estimate of cost

7)  Determine how much income the property will produce at the average market vacancy rate.

8)  Estimate how much time it will take to perform the necessary repairs

You can use all this info to create a proforma to use for your bank financing and to your investors.  There is a certain amount of risk here but if you can get a good price on the deal and turn it around, it could be very profitable for you. 

I would ask about they're database and network of buyers.  A good broker should have an idea who your end buyer will be. Depending on how attractive your asset is, they may already know of a buyer for you.  You also may find multifamily buyers on this platform.  It would not hurt to put a feeler out. 

Thought leadership is a great way.  I like to look at it as fishing vs. hunting.  You want to be a fisherman.  Provide something of value that will attract the investors to you and stay consistent with it.  Meetups, blogs, podcast, book, etc are all good ideas. 

You can you use city-data.com to verify the median income and poverty levels for the specific area that you are investing in.  That will tell you a lot about the neighborhood. Talk to several property managers and ask them their thoughts about the area you are investing in.  Verify all incomes with actual bank statements.  Call the local police precinct to inquire about the crime.  Hope that helps. 

I would add surrounding yourself with people who are doing what you want to do.  You could look into joining some masterminds or coaching programs.  There are also several facebook groups where you can ask questions and network.