All Forum Posts by: Tom Lafferty

I wouldn't say mine is large. Larger than a fourplex, but small as far as apartments go. Its 32 units. I have no experience whatsoever! The lender initially said they wanted a "consulting agreement" with a PM company since I was going to self-manage. Word is that the loan commitment is coming tomorrow, and they have not required anything as of yet. So I would say it probably depends on the lender regarding experience. I think it actually might be easier to buy 60+ unit properties, as you can use professional 3rd party management at that point. The problem is that is what EVERYONE wants, and prices are ridiculous unless you have a relationship in the industry that allows you to get access to deals prior to going on the market. I do have the benefit of working with a group that the lender/broker/and seller all know, so it gave me some credibility I guess. I know experience DOES matter to the lender if you're trying to buy something that needs a lot of work. They tend to get nervous if an apartment newbie is looking at something over $4-5K/door in rehab.

Good advice @John Chapman , I appreciate it. This was not a decision I made lightly. Believe me, I wanted to stick to the search for a 100 unit property, but for a lot of reasons this one makes sense. As I mentioned, I've spent a LOT of time talking to others who are running similar properties, and am confident it is worth pursuing. I also did not want a fully rehabbed property, which this one is, or mostly anyway. Again, in talking with experienced owners who have started with small properties and moved up, a big rehab would be too much to take on.

As far as sticking to my original goal, its very likely that without getting a track record going, it wasn't going to be too likely. With all the competition here, it is very difficult to compete with cash buyers, or highly experienced buyers who get the good deals.

Remember that my schedule is such that I have a great deal of free time, and flexibility, which I'm sure I will need! The other great thing is the team of investors that want to join me. A few of them are very eager to help and live near the property, as do I. I know there will be many frustrations, but I'm confident that the purchase is a smart move.

Thanks @Thierry Van Roy . Its not as if this deal won't work with a PM co. Its just that my investors and I are looking for around a 100% total return over 5 years, and with a 5% fee which is around $1000 a month, it doesn't do that. It would still make money, but not near the returns we're looking for.

As I mentioned, we are budgeting for part time on-site personnel, just not an asset manager. I know many property owners around DFW doing the same thing, and they've all had a great deal of success using the same model.

I just don't see too much excitement, selling, or promoting of the podcast. Having Ken on is a BIG deal as far as multifamily goes. I don't think the guru label fits him either. He's simply a very well respected, successful guy in the industry who built a company from the ground up. Maybe it's just me, but be excited and promote away guys!

I've been looking for a 60+ unit apartment complex that would afford 3rd party management in the DFW area for several months without much luck. I've recently had a 32 unit deal basically fall in my lap and I've decided to move on it. It is a solid deal if self-managed, but the returns just aren't where I (and my investors) would like them to be with a PM company involved. I also like the idea of truly learning the business from the bottom up before moving onto bigger properties where I'd be using a PM co. The Ken McElroy podcast reinforced my thinking when Ken said he puts his new people at a property to learn the basics.
I'm looking for input from those of you who have owned/operated similar properties, and how you did it. I know many other owners of these smaller properties and have discussed resident managers, part-time professional staff, partnering with owners of nearby properties and sharing staff, etc. Our budget includes payroll for a PT maintenance person and PT mngr.
All of these have pros and cons, but this is a huge step for me, and I guess I'm just looking for reassurance that others out there are successfully doing this. I've got a great deal of support locally from experienced people, but BP was much to valuable a resource to ignore...

@Bill Gulley , I can only guess that the op has been changed already, because it doesn't sound bad now?

If you hear the show, there is ZERO sensationalism.

oh I definitely have done that and it's made me pass on several deals. Good advice that I have to think some are not following.

Half a point is what I've been using, just concerned that's not conservative enough given what people are paying around here. On the other hand, I know of some very experienced people paying top dollar, so who am I to say its too much? I know were one of the top areas in the country for population growth and jobs, but I sure don't see how some of these deals will be successful given what they paid.

I have an offer out on a 60 unit MF property and would like to hear what others are using for their analysis and projections. I'm in DFW, looking at c class properties. If I'm buying at an 8 or 8.5 cap, wouldn't it be smart to increase it for projecting a cap rate when selling in 4-5 years? My thinking is that interest rates almost certainly will be higher at that point, so cap rates will not be able to stay as low as they are now. I'm seeing a lot of projections that use a 7.5 cap in 5 years and I can't imagine that is likely.

I'll work on that. I don't know why I'm continuing this, but I felt compelled to ask. You said that if there had been a big yellow disclosure banner you would not have read my post? If you were interested enough in the original post to click on it, why on earth would you not want to hear the experiences of people actually involved with the company to get another viewpoint? Obviously you don't have to answer, but it seemed awfully close-minded?

So sorry @James Mudd , I really was trying to help you out! For the record, I have absolutely no regard for whether someone joins LU or not, I have nothing to gain from it. You asked if anyone had experience with the company, so I thought you'd like the account of someone who's actually dealt with them.