All Forum Posts by: Ki Lee

Hello BP. 

I'm a "green investor" from Orange County CA and I'm looking to do a 1031 exchange for my 3plex in Chicago for a property that can cash flow better.   I'm doing research on different MSA to narrow down to 1 or 2 areas to focus on. I've been looking at net migration/job growth/unemployment/job diversity/vacancy rates, etc.  

I've considered LA/OC/IE, but the cap rates are so low and it's very hard to find any property that will cash flow in my price range that's not in D/F class neighborhoods.  I'm not really ready to take on war zones. Plus the negative net migration and unfavorable landlord environment in CA is not very attractive.

My goal is to buy a C class value-add building in B-/C+ neighborhood that has 8% cap rate for $1M-$1.5M with 25% down.  I want to purchase for cash flow, and not for appreciation potential.  The main goal is forced appreciation rather than market appreciation.  

Is this at all feasible in this hot market without stepping into a war zone?  Where do I have the best chance of accomplishing this?  

I would appreciate any suggestions.

@Ronald Rohde Illinois. I think rather than doing a BRRRR I want to do a 1031 exchange for a small APT unit.

What are some of your favorite areas for B-/C+ neighborhood C class buildings with 10-30 units?  

@Geordy Rostad and @Greg Dickerson Thank you.  I just ordered "Best ever Apartment syndication book."  Looking forward to learning a lot.  

@Trey Golston

As someone new to commercial properties and commercial loans, where do I start?  I have heard that commercial loans are dependent on deals more than the individuals, but I want to have an idea as to what kind of loan terms that I'll be looking at - 

I'm looking for10-30 units Class C apartment buildings in class B/C neighborhoods with cap rate of 8-10%.

Price range $500k-$1MM, $280K down.

excellent credit.  

Only experience is SFR rental and triplex, both which I have owned for 10 years.

Is it possible to discuss possible terms without a specific property on hand?  I want to see what I can qualify for, what terms to expect, and this will help me better evaluate deals(knowing my debt servicing cost)

@Geordy Rostad I did. It turns out that the rent and the property value will not increase by much to make the project worth it. According to the listing agent I talked to, we estimated about $200k in rehabs to convert the 3 unit to modern, open concept units with 2 bath instead of 1, and having in-unit laundry hook-ups, but it's questionable if it will raise the ARV by $200,000. This is not even taking into account lost rent during the 4 months and other holding costs during the construction. The total rent in 3 units will be increased to about $2000/month.

I have fairly limited experience in RE investing. I do have 2 rental properties (1 SFR and 1 triplex) that I have owned for the past 10 years, but I didn't really manage the PM for the most part, and it's not until recently that I decided to get a little more serious about REI. Even though both properties are being run sub-optimally, they have appreciated in value where I'm considering doing 1031 exchange for both. I was thinking about doing another 3-4 units, but several experienced members suggested going the small apartment route for the available capital that I have. Some of the challenges I face are - how to find the deals/how to analyze and evaluate the deals, and qualifying for a commercial loan. I'm thinking of doing 10-30 unit apartment in class B-/C+ neighborhoods in class C buildings.

What is the best way to learn how to find and analyze the deals?  Any books/videos/podcast/articles? Also, where are some of the markets that you guys like for this type of properties? Any recommendations for a solid Commercial broker and lender would be appreciated.  

Hello BP,

Can you guys recommend where I can learn some of the the basics and also advanced strategies for evaluating, buying, and managing a small apartment complex(10-30 units)?  Podcasts/videos/articles/books?  Thanks.  

Hello BP, 

Quick question, especially for those of you in Chicago-

If you list your property near the holidays(~early November) in your experience, how much does that affect the ARV? Would you say that it has minimal effect or a significant effect for a higher end SFR in the $700k range in Irving park?

Thanks

@Scott Trench Thank you so much for the insight.  Then what's the bottom line during this hot market where everything has appreciated so much?  Settle for lower or zero cash flow? Or look for less desirable areas with lower prices with higher cash flow potential? If you were to look at an area that has good cash flow for 3-4 unit priced $500-$650K, where would you pick?

I was reading @David Greene book, "Long Distance Real Estate Investing" where he advocates taking profits from properties that went up in an appreciating market and buying in areas that have depreciated.  It sounds easy in theory - but when I tried to look at the least appreciated areas in the past 5-10 years, these are all very undesirable areas with unfavorable population/job trends.  So it seems like pretty much any city with favorable population/job trends appreciated a lot and most cities with lower price history have very unfavorable population/job trends.  So how would you balance between not going to areas of decreasing job/population but still not buying in "hot" areas where the prices appreciated so much that you can't cash flow?  David, where would you look to buy and hold 3-4 unit multi-family property between $500-$650K today?

Thank you in advance.

Thanks you for the responses.

@Justin Hammond @Jeremy Miller @Blair Poelman what is your current strategy for buy-and-hold then with all the property prices inflated?  Is it to look in other markets? If so, where? Or Settle for less rent than what will cashflow? Look for other avenues besides 3-4 plex?