All Forum Posts by: Khizar Hanif

Hey everyone, 

MF acquisition here in Houston. Very hard to find something these days without having to overpay. I am a syndicator, but this particular deal is just for myself and a partner 50/50.

It's a 16 unit in a decent area that is worth considering. Curious to know your thoughts. 

• Asking price 1.1M
• 16 Units
• 6.49 cap (according to their expenses, which are low. They are showing 28% but I am underwriting at 40%, will be managing on our own).
• Occupancy 93%
• 6/16 units rehabbed
• Entire exterior of building refaced/upgraded

Current owners are investors, they bought the property 6 months ago from mom and pop (which is what I would have wanted to do). So they are capitalizing on the value add appreciation, which kind of burns me to even consider this deal. BUT, it is in a decent area, monorail right next to complex which tenants use, would be a stable property. Some new construction homes right behind the property, school right across the street, land value increasing in the area, etc. 

There is some potential for us to increase rents $50 and rehab the remaining 10 units. Might be solid for a buy and hold. Some specifics...

• Average rents currently $573
• Income $9175/month and 110,100/year
• Taking 10% vacancy loss brings income to $99,090
• Expenses stated at $28,000
• NOI $71,000
• 6.49 cap asking 1.1M
• Underwriting at expenses being 40%:
• NOI $59,454
• Cap rate 6.49
• Valuation $916,086

Some upside if we rehab units and raise rents...

Thinking about an offer of 950k with a 985 ceiling. Should be a 9-10% cash on cash with DSCR above 1.3...

Any thoughts on this would be appreciated!

Start with a solid business plan and find a niche. Build a list of investors in your personal network who may trust you as a person (if you don't have the track record). It doesn't always require experience, it varies from person to person but I find that if people know you as an honest and trustworthy person and you are a hustler, it can work. First deal may not be a huge deal. Let your investors know what you want to do and what kind of deal you are looking for. Have the capital in place before finding the deal, that way you are ready to execute when the right opportunity presents itself. Don't wait until you find the deal to start raising capital. 

There are deals out there, but they are not all deals to everyone. A good deal for you may not be the right deal for me, which is why you need to know what you're looking for and have a solid business plan. Network with brokers and get to know people in the game. Having a particular niche and knowing what you are looking for will show people that you're serious. Don't just say "I'm looking for MF". Tell them how many units you are looking for and in what market, and whether you're looking for something that's stabilized or has some value add/improvement potential. Get to know them and get on their mailing list. You will underwrite 100 deals to find the 1 that works, don't get emotional. Stay positive. 

There are many ways to be compensated as a syndicator but don't get greedy, this should not be your initial focus. Keep your investors happy and when you build your foundation for your syndication business you can start becoming more aggressive with your syndication structures. You want to eventually get to a point where you don't have to raise capital and people are asking you to take their money because they have built a relationship of trust in you and have had a positive experience. In some cases, you may even have to give away most of the deal to just get started. 

Consult SEC attorney to make sure you follow the guidelines for raising capital. After the first successful deal using OPM you can start to raise capital from those outside your personal network using your previous deal and track record. 

I raised 950k for my first syndication (3.5MM new development) from investors in my personal network. No syndication experience prior to, and my terms were pretty aggressive. However, I was only able to do that because I put in 30% equity myself. I also took a developer's fee and had a waterfall split 70/30 after a 12% preferred. This is a build and sell play (townhomes). Be ready to answer the question "what's your skin in the game?" It's a lot of work and raising capital is probably the most nerve wracking thing I've done but it's worth it. You should constantly be reading books and listening to podcasts.

There are tons of resources out there for raising capital and finding deals from great people like @Matt Faircloth. Read his book "Raising Private Capital". Read Joe Fairless' book "Best Ever Apartment Syndication Book". Listen to @Michael Blank podcasts and purchase his Syndication Deal Analyzer to start underwriting deals and get familiar with the process. Fall in love with the process. 

My apologies for recurring use of word "deals" but that's what this is all about, right? 

Hey everyone, 

If you didn't register in time to make it to the welcome party on Sunday evening, I am getting a group together to meet/network and essentially have our own separate "welcome party". We have about 10 people interested so far. 

If you would like to join, please send me your email and I will add you to the list. I'll send out a group email Sunday afternoon. We can meet at the hotel lobby and head out from there. I'll get some options together as far as venues go. If anyone is familiar with the city, recommendations are welcome.

Hey all, 

I think it would be a good idea for us late registration folks who didn't make it to the welcome party list Sunday evening to get together and network/hang out. Looking at the schedule, it doesn't seem like there is anything else planned for the evening. We're all taking time away from work/life so lets make use of our time and not let an entire evening go to waste.

For those of you interested, please reply with your emails so that I can get a list together and I'll send out an email the night before.

Send over your emails! If we can get 15-20 people this would be great!

For those of us who didn't make it in time to register for the party Sunday evening- lets get a group together and form a networking/happy hour gathering of our own instead of wasting an entire evening. If we have enough interest I can seek out a spot offsite (in the city). 

Any interest?

Hey all. 

My dream has always been to get into commercial development and recently, I have found a developer/mentor whom I am doing my first multifamily deal with. The developer is giving me an opportunity to partner with them since I have a solid network of high net-worth individuals who I will be raising capital from. This will be a great opportunity for me to team up with a seasoned developer and learn the business from the ground up (literally) while bringing value in terms of equity partners. That being said, since I am starting a new endeavor which I wish to grow in and eventually be able to do on my own, I need to ask the right questions and make sure this is the right deal for me to begin with. On the other hand, it is very crucial for me to build a solid relationship with my investors right from the get-go. 

What are some questions and points to hit on when partnering up with a developer? These guys know what they are doing and are giving me the opportunity to join them, but I am also bringing in my own equity along with equity from my network, so I believe I am entitled to ask questions even though it may seem like I am interviewing them. 

Class B multifamily (garden style)

1 BR-90

2 BR-70

3 BR-5

Total units 165

Land: 6 acres @ $8/ft

Land cost: $2,090,880

Construction cost $115/ft (could be as low as $105, but we will use $115 to be conservative) = $14,875,250

Club house/gym/swimming pool = $375,000

Soft costs = $1,000,000

Developer fee = $1,800,000 (split 50/50 between developer and myself)

Total development cost = $20,141,130

Revenue

(90% occupancy) monthly = $182,750

Extras = $8,250

Total revenue = $191,000/month

Expenses

Interest (5.5%) = $64,500 

Taxes and Insurance = $45,000

"Extras" = $30,000

Total expenses = $139,500

"Monthly profit" = $51,500 

"Yearly profit" = $618,000

ROI 12%

After Construction loan is paid off and we move to a bank loan we start paying P&I--->

Expenses

Principle + Interest (5.5%) = $86,500

Taxes and Insurance = $45,000

"Extras" = $30,000

Total expenses = $161,500

"Monthly profit = $29,500

"Yearly profit = $354,000

ROI 7%

Capital raise of $5,035,283

Bank loan of $15,105,848

My questions/concerns:

We have only met once to discuss the deal and I was given the basic numbers. We haven't gone into much detail yet, but I have a few things to point out before even asking for advice from you guys. 

1. I would expect a proper excel model with line items broken down instead of just saying vaguely for example, "extras" on the expense category. But I am just assuming these guys are old fashioned and haven't brought on any partners as developers before so they are fine with a simple model that meets their needs.

2. Where is PM, utilities, payroll, leasing commissions, landscaping and upkeep, repairs, capEX, vacancies, and marketing?

When I asked them about that, they said all the above are included in "extras". Is it possible to have all of those expenses covered with $30,000? 

Here is what they broke down for me:

PM (4%) roughly $8,000

Payroll including leasing commissions (5%) roughly $10,000

Utilities, Landscaping, upkeep, and marketing is covered by the remainder of the $30,000

Since its a brand new development, they haven't allocated reserves to Repairs and CapEX. Which I don't agree with. We plan to hold and refinance, so for the long term I believe those reserves should be created.

3. Is the 5.5% interest on construction loan possible? I was told it should be closer to 8% on a construction, interest only loan. 

4. Overall I need to ask them for a detailed breakdown of the line items. 

What are some other questions for me to ask?

Hey everyone, 

Im looking for a local bookkeeper in Houston who can help me get set up (and caught up) with my books on my flip business. I'd like to actually sit down with someone and get this going. Anyone out there?

Thanks!

Can anyone suggest resources to set up and learn quickbooks for flipping?

I would like to work on my books myself because I feel it would keep me engaged and thinking about my numbers on a daily basis instead of just looking at them every once in a while. 

I just don't know how to set up accounts and which accounts to set up, and what goes where....

Opening separate accounts and having debit cards for each project seems a bit unnecessary. I like the idea of using the same bank account if all projects are under a single entity and using QuickBooks to do the rest of the dirty work. I’ve used QuickBooks but have only touched the surface. Do you guys have any resources for tutorials that may be helpful?