All Forum Posts by: Ben Leybovich

The hurdle has to do with payroll. Institutional property management ecosystem includes at least 2 employees on-site, the manager in the office and a maintenance supervisor. The number of units it takes to generate revenue in the amount that can handle $130,000-$140,000 payroll load varies with asset class and rents. If your average rents are $800, you are looking at 100 unit. If your average rents are $1,200 you could likely do 85 units. And so on. The reason these PMs charge 3%-5% is because all it covers is the overhead and profit, whole the payroll, repairs, and all the rest are passed along to the owner. And, these companies won't take your business if they know that the asset is too small to support payroll - they don't want to rediscover the wheel every time, hence, institutional.

Now, if the property is small and cannot reasonably support institutional style of management, then you are left with the same people that manage single-family. Pricing is very individualized in this space and so are the operations. Do your research!

From one immigrant to another - good for you!

To answer your question, as someone who's transacted $200M of multifamily real estate, the answer is simple - buy a duplex, then a triplex, then a 4-plex, then a 6-plex, then a 10-unit, then 100-unit... It's not more complicated than that :)

Now, if the highest and best use of your time is to do something else, then you can be passive and invest with guys like me. But, what is the highest and best use of your time is not something I or anyone else can comment on.

I have my thoughts, but I do not feel qualified to comment. Rent control is not something I've ever bought into. I feel that I know enough to inform myself that I don't want to know more... I feel inadequately equipped to offer perspective. Good luck!

You are using so many assumptions that it's hard to offer any legitimate advice. I will say this - for $25,000 per unit (i.e. $400,000 total), someone could buy a 16-unit building for $5.46M and renovate to be all in for under $6M with finishing surfaces close to what you are proposing for your new construction.

Now, if this allows them to achieve the same rents as what you are proposing, then you can clearly see the problem - their valuation, all things equal will be same as yours. With a lot less risk and a much lower basis. 

But, let's say they will not be able to hit your numbers. Let's say they do 50% and add about $70,000 to their income, for a total of $320,000. At 3.66 cap their valuation will still be almost $7M: $320,000x.8/cap rate of 3.66

Brand new product is special, no question. But, where is that line in the sand? How much will someone pay extr4a for something that's new? Specifically, on a risk-adjusted basis...

To build on @Jonathan Twombly answer, the firm I think you are most likely to succeed with s Marcus & Millichap. They seem to allocate attention to smaller size commercial and entry-level commercial investors. Good luck!

You don't have to estimate. The IREM report tracks every line item, for every asset class, every vintage, every mechanical set-up, in every location in the US. Get a subscription and use those averages.

Now, those are averages. They take vintage into consideration, but not necessary condition or CapEx. For instance, if you are going to buy and hold and 1970es asset without doing major renovations your CapEx reserve requirements will look very different from a 1998 property that you are spending $25,000 per unit to modernize. The same can be said for your R&M and turn costs. So, once you start with the averages, you amend the numbers to reflect your business plan.

I am not an avid podcast listener. I know all of these guys and I like all of them well enough. But, you need to understand that the primary purpose for all of these podcasts is to serve as a marketing platform. There is so much information presented that your predictable reaction is that of being overwhelmed and, if you have any money, simply deciding to invest in syndication with these guys, which is the end goal of a marketing podcast. This may very well be the highest and best use for some of their listeners, but is it for you?

Believe me - no one has ever learned real estate investing from a podcast. Some make so much money doing what they do that handing some of it over to good operators is exactly the right thing to do. But, is that you? 

Get out there and do something.

PS: Sam and I recorded a couple of seasons of podcast entitled Multifamily Syndication Unscripted. It's very technical and I am concerned it may confuse you even more, and we only did 2 seasons 2 years ago and stopped. But I'd like to think there is a lot of good content there.

Jon, listen to podcast 383. It deals with partnerships.

Jon, interestingly, I never thought I'd have a partner. I am a pretty difficult person to get along with. I h=tend to have a lot of edge in my communications. I am not proud of it, but I can't be bothered to fix it either - not normally. My partner, @Sam Grooms, is the one and only partner aside from my wife that I'd ever had. And, I can tell you why very easily - both cause me to want to be the best version of myself that I can be, even if it means swallowing my out-of-control ego and changing certain things about myself. Both bring so much value to my life that it's a no-brainer.

Jon, I wasn't looking for my wife, nor was I looking for Sam. But, I somehow attracted both. I am very different in predisposition and skillset from both, but it works.

So, based on this, I'd tell you - stop looking for a partner. It'll happen when you are ready.

 Listen to this podcast

Well, it occurred to me that we hadn't acknowledged the sale of this property. @Sam Grooms - jump in if I omit something. and, feel free to reach out with questions and comments, folks.

Haven on Peoria was sold on 4/22/21. This was a 22-month hold. Som bullet-points below:

• Acquisition Price: $19,750,000
• Sale Price: $28,700,00
• Unit Count: 164
• Hold Period: 22 months
• Starting Revenue: $121,000
• Ending Revenue: $179,000
• Renovations Completed: 80 units + Office, Gym, Pool, Playground, Bark Park
• Return to Partners: 1.5x; 25% IRR

There was clearly more value-add left in the deal, but we'd hit our hurdles and thought it'd be better to move the equity into a property with more meat on the bone. One thing we never want to do is trade the market. In this case, as you can see in the image below, we'd reached an inflection point whereby the reward of finishing the repositioning wasn't enough to counter the risk of staying in longer. The remaining growth would have been much more linear. This is a very similar situation to Haven at South Mountain, which was discussed in this thread.

This was a great project for WhiteHaven but it was time to move on.