All Forum Posts by: Juan De La Garza

Firstly - thank you all for your valuable feedback on this. I found out from the broker that the owner does not her to release financials anymore until after an LOI is submitted. She also told me that the owner is from Mexico, he does not report everything and is earning more income than reported. I am not quite sure what this means yet, but I was thinking more along the lines of @Evan Polaski and pretty much treating this like it is owned by a mom and pop where good records tend to not be kept. I am working on that now and have already booked a hotel and will be meeting onsite with a property manager on Tuesday.  I am hoping the office will allow us to look at the vacant units so I can get a good idea of how much is needed in repairs.  I'll keep updating on here. Thanks again for the feedback.

juan

Thanks everyone for the feedback - my understanding is renegotiating the price again after due diligence is considered re-trading and is frowned upon - at least in Multifamily which is why I was trying to avoid it, but for this deal I’m being forced to operate that way.

Is it common for a broker to ask for an LOI before they can send you over the financials?

Hi Michelle - Lot's of great points already made here.  You can definitely do 90 units on your first deal but will need to partner with someone to borrow their credibility.  A deal that size will more than likely come from broker relationships, but again for them to take you seriously you will need to partner with someone who has a track record.  You would have to bring value to someone for them to partner with you.  You could either focus on raising money for the deal and bring that to the table or finding a deal, but that would be difficult since a deal that size is unlikely to get awarded to someone without a track record.  The deal will not just be awarded to who pays the most, but to who is likely to be able to close on it.  I would suggest one of 2 paths for you...

1. For a larger deal, find an experienced owner who owns buildings around that unit count and partner with them, your contribution would be raising money. You can find experienced owners at multifamily meet ups/REIA.

2. For a smaller deal, partner with an experienced owner in a unit count of that same range.  Your contribution would be to either raise money, or you could find the deal.  This is because lower unit count deals like 30 units or so are often owned by mom and pop owners.  Due to this, you wont have to necessarily deal with brokers and you can contact the owners directly. You can find owners lists for the area you are looking for free from the county records office or pay for a more refined list through list companies like listsource etc.  From there you may need to skip trace them to get a phone number.  Then call them/mail them etc.
 

Lastly I would suggest sticking to 1 area for now because you pretty much need to find an entire team in the area you choose.  Property manager, brokers, lenders, etc. Working more than one area will just make it much more difficult.  Of the areas you mentioned, I think they are good because cap rates in those areas are high, Fort Lauderdale's job growth is on the low side though, so you may want to take that into consideration.  That is for the metro area as a whole though and as you know real estate is always very local.

Best, 

juan

Hi Dave, with 120k cash you should be good down payment wise for a deal that is around the 6 unit range depending of course on class/location. Just need to find a lender at this point. I would recommend a broker as they have access to multiple lenders/products.  I would also suggest getting referrals for brokers from people who have actually done business with them.  This is why you want to be networking with other investors in your local area.

juan

Hey Chris - I think this is a question of learning to be an entrepreneur vs a technician.  A question you can ask yourself is - can I make a better burger than McDonald's?  Most people say yes they can.  The next question to ask yourself is can you build a better business model than McDonald's?  Most people say no.  The point is, being a good technician doesn't mean you can go out and successfully start and operate said business.  I would suggest spending your time around investing in apartments.  How to analyze deals, how to raise money etc.  You can always hire a property manager vs becoming one, you can always hire a real estate broker vs learning how to become a salesperson.  Think of the actions which yield you the most value and learn those before learning anything else.  You can do this by finding a local investor and finding a way to add value to them.  Help them find deals, help them market, help them call apartment owners, better yet, help them do whatever they don't want to do - this willbring you in proximity with someone who is doing what you want to do and proximity is power.  You will learn from being around the business owner more than you will from being around the technicians.  If you can't find said person or you don't want to go this route then I would recommend getting a paid mentorship.  What I would definitely not recommend is going at it alone.  We don't know what we don't know and that can be catastrophic.  It may have worked for some, but it's a risk you don't need to take.

juan

I agree with Kim - I had an attorney both set up my LLC and do my operating agreement which outlined how things would be split as well as contingencies etc.

juan 

From what I have seen- unless you have a sucessful track record in the business most general partners put down at least the minimum share.  Meaning if you are asking for a 100k minimum of your LP's then you are putting in at lease one 100k share yourself.  That being said, there is no rule that says you have to put in a share, it's just more difficult to raise money from LPs with both no track record and no skin in the game.

juan