All Forum Posts by: Ken Gee

Are you investing as the operator or a passive investor?

The Property Manager is an agent of the owner.  By definition, an agent is NOT responsible for the debts of the Owner just like the agent is NOT entitled to income that should belong to the Owner.  You can't have it one way and not the other.

Under no circumstances should the agent ever take a loss that is the result of an item of income or expense of the underlying property.  To allow this would allow the owner to be unjustly enriched at the expense of his agent.

This is one reason property management is so extremely difficult.  Mitigating risk as a PM is extremely critical.

Hope this helps.

Ken

@Patrick Flanagan

If we are talking about multifamily, here's what you need in order for a market to be attractive (to us).

Demand side of the equation:

1.  Population growth

2.  Diverse employment growth

3.  Median income that can support your projected rents (min. 3 times the projected rent)

Supply side - Assuming you are looking at B/C class assets, then:

1.  They aren't building any new assets in that class (only new properties which do not compete).

Result - Increasing demand.  Stable supply.  The laws of economics means that is a bull market.

This defines most markets in Florida.

Your comment about being hit during a recession is true, well, kind of.  The recent pandemic is a perfect example of what I am going to say.

Buy next to Disney or the beaches or there touristy areas - yep, you're going to get into trouble.  It's always about the sub-market.

That's not what we do.  Florida is growing very rapidly through healthy diverse employment growth.  Properties are performing extremely well because of that growth and I don't see any of the underlying fundamentals changing anytime soon.

I could go on and on, but I hope this helps a little.

Warm Regards,

Ken

All great comments.  Couldn't agree more that passively investing is an excellent way to build wealth.  Don't sweat the tax issue.  The deal should make sense without the tax issues.  Remember, the economics of the deal matter most - it has to make money!

Most people have a career and are looking for a place to put their money and investing in a top notch multifamily investment firm is a very smart way to go.  Just be sure to vet them.

Ken

Central and northern Florida.  Specifically:

Tampa/Clearwater/St. Pete.

Orlando

Jacksonville

Basically, the I-4 corridor and up I-95 to Jax.

Those markets are growing like crazy and people are making a ton of money!

That's where we invest.

Good luck!

Ken

My advice:

1.  Find one or two mentors who can advise you.

2.  Learn as much as you can about the numbers.

3.  Look at as many deals as possible and go through the process of underwriting them.  Even if th==you won't be buying them.  That's how you learn.. You can't be too knowledgeable.

4.  Find a partner if necessary.  I started with a family member 23 years ago.  I even borrowed my equity investment.

Hope this helps!

Ken  

There are a lot of PM's out there doing what you describe.  Find a new one.  Find one who is more professional and up to the task of handling your money like a fiduciary/management agent should.  AJ's comments above are dead on.

By the way, any savings for major repairs should always be held by you, not the PM (except for a short period).  No reason for a PM to be holding a lot of your money.  Too dangerous.

Unfortunately, the PM hasn't changed, but your requirements have, so time to find one who can meet your current requirements.

Good luck.

Ken

Investment Info:

Large multi-family (5+ units) other investment in Jacksonville.

Purchase price: $7,600,000
Cash invested: $3,700,000
Sale price: $13,130,000

This property was built in 1990 and consists of 104 units in thirteen walk up, garden style two story buildings each with its own patio or balcony.

The plan with this property was to make some significant common area improvements (roofs, exterior paint, resurface the pool, add an outdoor kitchen, outdoor TV, redecorate the clubhouse, completely renovate the fitness center, and upgrade the landscaping. All in, the renovation budget topped $850K. There is a generous mix of one and two bedroom units, many overlooking a beautiful pond. Each unit is equipped with a washer & dryer and hardwood floors. We have been able to raise rents by approx. $150 per unit per month since we acquired the property, which is better than our initial projections.

What made you interested in investing in this type of deal?

Great neighborhood, in need of a lot of TLC. Tons of character.

How did you find this deal and how did you negotiate it?

Through our deep broker network.

How did you finance this deal?

We assumed the CMBS loan that was in place.

How did you add value to the deal?

We renovated the exterior of the property. We spent approx. $850,000 on new roofs, painted all the buildings, new landscaping and lighting throughout and upgraded the units. completely renovated the amenity package including the pool, pavers, outdoor kitchen, outdoor TV, fitness center. We also implemented our "best practices" management processes.

Lessons learned? Challenges?

Too many to count. Always learn a lot when you do a project of this scope and size. Lots of renovation challenges and of course, there was the pandemic!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Mike Regan, Cliff Taylor and Joe Ayers of CBRE. Amazing guys!

Investment Info:

Large multi-family (5+ units) other investment in Winter Haven.

Purchase price: $7,425,000
Cash invested: $2,200,000

This walk-up, garden style property was built in 2001 and is comprised of 90 units in Winter Haven, Florida. It was purchased from the original builder as a stand alone deal.

The plan with this property was to make some common area improvements to the amenity package and update the units as they turn. There is a generous mix of 1, 2 and 3 bedroom units. The floorplans are very large and well appointed. There are full size washers & dryers in every unit. Property amenities include pool, outdoor kitchen, outdoor TV, basketball court, playground, business center, car wash, clubhouse, and fitness center. The average rent has increased approx. $265 per unit per month since we acquired it, easily beating our initial projections.

The property is financed with a Fannie Mae loan and we have completed one supplemental loan since acquisition to return a significant amount of our partners' capital.

We continue to hold the property in our portfolio.

What made you interested in investing in this type of deal?

We loved the growth the area is experiencing - it is off the charts! We really like the floorpans and amenity package which we were able to significantly enhance.

How did you find this deal and how did you negotiate it?

We found this deal through our deeply connected broker network. We had to work hard to make sure the seller knew we would deliver on our promise and we made the deal painless for both the broker and the seller. Two things that are key to success!

How did you finance this deal?

Fannie agency loan. 

How did you add value to the deal?

Focused on the amenity package. Completely renovated the pool area, added an outdoor kitchen, outdoor TV, wifi, and all new landscaping.

What was the outcome?

Average rents are now up much more than $200 per month and still rising!

Lessons learned? Challenges?

Make sure you understand your market. Most buyers wanted to ignore this small market because it is small. This area is growing like crazy and has been one of our best performers. Just because it seems like a small market doesn't mean you can't make incredible investments in that market.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

We worked with Nick Meoli and Mike Donaldson on this deal (currently with Cushman & Wakefield). Top notch brokers!

For what it's worth, I agree with @Erik W.  Nothing wrong with being a lender or investor, but if your true goal is to learn, then you would want to be more involved.  @Justin G is also correct.  Learn as much as possible through books, seminars and BP.  Then see how all that really works in the real world on a deal that you have some involvement with (and hopefully, paired up with a competent PM).

Once you spend all that time learning, you will be much more confident in your decision to pursue a deal.

Knowledge always builds confidence.

Good luck!

Ken