All Forum Posts by: Kyle A.

If you don't have all the capital yourself to fund the investment you'll need to bring in equity partners. If you can do the deal sourcing, underwriting, contract work and due diligence yourself, as well as put up your own capital for EMD and DD expenses, it should help with bringing in partners to fund the rest of the deal.

In markets like this I've found it useful to project very low organic rent growth. It's best to find underperforming properties where you can force value, bring rents up to market rate, and have it performing well even without the organic growth factored in. If you're relying on back end proceeds, just be careful with projected cap rate. Be overly conservative in areas that have flat growth and know your lowest possible number you'd need to sell at to make it a worthwhile investment. Underwrite it from the buyers perspective on the back end too and see if it's something you'd purchase yourself. 

When you say "no rehab," are you saying you're not planning to rehab at all? It sounds like your plan is to just go in and raise rents on tenants, so I'm assuming you already have legal/marketing reserves as well and conservative vacancy projections. What's your going in dscr and your projected dscr 12 months from closing? Careful using too much leverage in a short time span right now. 

Propstream isn't really catered towards CRE, but can be useful for gaining insights such as loan/transaction records, liens against properties, linked properties, etc. that can help you identify owner motives and other opportunities. Just have to filter down to the specific type of multifamily you're looking for. For commercial multifamily, go under Filter>Property Classifications, check residential>Property Type(s), check all types of buildings you're looking for.

Quote from @Sam Yin:

Quote from @Kyle A.:

I'm looking at a deal thats current gross income is <110k with poor management, kind of run down, but in a good area. They have an asking price of 2.1m that's based off a gross income of 432k. After speaking with local PMs in the area, the property could be stabilized in current condition to have a potential gross income of around 150k, however after rehab (with ~4-500k+ capex budget) could stabilize rents closer to 400k+, and potentially appraise for 2.5-2.7m.

After falling out of contract, seller is willing to negotiate with seller financing terms of 1.5m, 5% i/o until jan. 2025, with interest going up to 10% after that, or satisfying balance at that time. I'm trying to get into this deal with minimal cash out of pocket so was thinking about financing the capex budget and down payment (or as much of it as possible). Main problem I'm seeing is getting a second position loan on a property that will appraise low in current condition.

I'm still not very savvy with the debt/equity side aspect of deals so if anyone has any helpful insight, I'm all ears! Already submitted LOI so trying to figure this out sooner rather than later.

Based on your post, I will jump to the conclusion that it is not a good deal. You are trying to get into this with minimal money, but that Seller financing term is not good, considering the description. You are going in at $500K with a very short seller financing term, in a down trending market condition, and rising future rates. On top of that, where will you find the money for CapEx to make the place more attractive and valuable? How fast can you raise rents to get to that magical $400K+ Gross? how long will evicitons take if you need to evict? how much rehab does the inside of each unit need?

There is often a good reason for low rents... its the questions I just asked above. The turn around time will be difficult if you do not have at least $200K in reserves after COE. At the end of the day, factoring in CapEx, time, and the likely hood of another 2% hike on rates by the time you are ready to refi, will the resulting value still be $2.5M or will the new rates eat up the value for a potential exit or refi on your part? Finally, do not always believe what a PM company tells you about potential rents.

This is just my opinion. I am not super familiar with the Vegas market??? But I have been looking to invest in the area over the last 2 years and made several offers after underwriting about 100 properties of various sizes.

Definitely valid concerns...I've plugged in many different potentials and modeled out worst case scenarios etc. I'm flexible with how much equity I bring in, returns just look much better with leveraging capex budget. Updates & lease up would be done within 12-18 mos (current owner has been using an extended stay model so most tenants are month to month). I'm not basing numbers off of what PM companies have told me, I've done probably a couple hundred hours of my own research.

Rents are low because because of poor management, and neglect. Also wouldn't be relying on a refi. Numbers still work with sellers extended financing terms @ 10% i/o (although I think I'll be able to find better terms in 2 yrs). Plan is solid, but thank you for the input! I'm mainly looking to hear how people have created a pitch that could make lender comfortable being in second position, or maybe another way around this? Maybe something I can negotiate with seller that I'm not thinking of..

I'm looking at a deal thats current gross income is <110k with poor management, kind of run down, but in a good area. They have an asking price of 2.1m that's based off a gross income of 432k. After speaking with local PMs in the area, the property could be stabilized in current condition to have a potential gross income of around 150k, however after rehab (with ~4-500k+ capex budget) could stabilize rents closer to 400k+, and potentially appraise for 2.5-2.7m.

After falling out of contract, seller is willing to negotiate with seller financing terms of 1.5m, 5% i/o until jan. 2025, with interest going up to 10% after that, or satisfying balance at that time. I'm trying to get into this deal with minimal cash out of pocket so was thinking about financing the capex budget and down payment (or as much of it as possible). Main problem I'm seeing is getting a second position loan on a property that will appraise low in current condition.

I'm still not very savvy with the debt/equity side aspect of deals so if anyone has any helpful insight, I'm all ears! Already submitted LOI so trying to figure this out sooner rather than later.

Quote from @Dan H.:

I have not seen the Redfin data that you quote and would appreciate a link.  What I do know is that one year does not make a trend.  In fact, KC was one of the few markets that Redfin in May 2022 (published June 2022) showed as having negative rent growth for the previous year.  Indianapolis is not listed in the top 10 increasing rents in the Redfin May 2022 data.

Rental Market Tracker: Typical U.S. Asking Rent Surpassed $2,000 (redfin.com)

I would not use anything less than 5 years (and prefer to use at least 10 years) to determine rent trends.  Looking at the May 2022 Redfin data for 1 year would lead you to believe KC has terrible rent growth.  Does it?  I cannot tell from 1 year look. 

KC and Indy may both be great markets, but I would not judge them (or any other market) on a single year of rent growth.\

Good luck

Would definitely look at a longer trend than just 1 yr, as well as any other potential growth drivers looking forward. These are both great markets though. More stable than big coastal cities, and have great long term rent growth. KC avg 6%+/yr since 2014, and Indi avg 10%+ 

Quote from @Dan Garrigus:

Quote from @Kenny Simpson:

Hi Kyle,

San Diego is a great spot, there is great spots ALL over the country as well to invest.  Everywhere has it Pros and Cons, you can do really well in San Diego from equity, cashflow, rent raises and etc.  San Diego is very slow to build and the city is behind the ball and will probably always be behind the ball.  I have been investing in San Diego so 14 + years, my wife and I used to manage about 1500 units and we work with tons of real estate investors that just focus on San Diego that have done really well.  Yes there is much more oversight with rent control and you have to know what you are doing.  Get a great team around you and that will help you have lots of success here.  Be careful of people that have NEVER owned, operate and had lots success in San Diego to take advice from.  I am surround by hundreds and hundreds of clients that have been winning in SD for 19 years that I have been in the RE game that are very active RE investors.  

If I can help, let me know :)

 @Kyle A., @Kenny Simpson couldn't be more spot on! Those who are actively investing in the SD market have the best insight as to whether or not it is a place you should invest in. If someone hasn't, then it's all speculation. I personally know Kenny and he has seen and done A LOT and has a very good pulse on the market as he studies the data. Reach out to him if you're interested, Kenny will be happy to chat.

I currently don't live in SD but lived there for 20+ years so I know the areas very well. I also know people that have done very well there. Good to know though, I might be reaching out. Thanks! 

Thank you guys, very helpful! I'll be reaching out 

Quote from @Jack Mawer:

SD is fantastic area and it will continue to be a popular place of growth in the near future - it sounds like you are looking to rent as an LTR which is good due to STR permits being hard to come by

Ya I know SD has been great for STRs so far, but the constantly changing laws with all that makes it too risky for me. I'd maybe model out a possibility of having a few units as STRs that can easily convert to LTRs, but wouldn't rely on it.