All Forum Posts by: Tom Lafferty

I may be a little late on this, as your post is a few weeks old, but I HIGHLY recommend ResMan for your software.  Very user friendly, very open to user requests (updates every month based on feedback), and best of all it's very inexpensive.  I'm paying $1/unit /month on a 32 unit, but not sure what it would be for 10.  I think it's still $1??

On your other questions, vacancy and expenses seem low to me.  Even in great areas I use total economic loss of 10%.  We stay full ALL the time, but unit turns taking longer than expected, evictions, bad debt, all creep in occasionally.  

Someone else mentioned replacement reserves.  Your lender probably doesn't require it, but you absolutely want to be setting aside for repairs.  They WILL happen.

As far as strategy, completely depends on your goals.  I thought we'd keep the 32 for five years, but just this week we decided we're looking into selling and it's only been 18 months.  It's not for negative reasons, such as too much trouble, just hit our 5 yr goals already so why not?

Hope some of that's helpful.  Definitely look at ResMan before spending hundreds on the others.

@Scott Buckner, as @Nick L. said, if you're not factoring in vacancy, maintenance, and reserves, you're going to be dramatically wrong in your calculations.  

I know of PM companies in DFW you can use for less than 7.5%, but they'll be off-site (no reason to have anyone sit there on a 17 unit).  

I've looked at a lot of on-market properties, feel free to contact me to see if I've analyzed it.   At $26k/door, I already know its either in very bad shape, or in a pretty rough area.  

Great @Juan Maldonado!  I'll send a colleague request....

Thanks @Nick B.!

yep, ALN is one of the sources I've looked at.  Went to a presentation by Greg Willett with MPF,  and he made the same comment.  I talked to him after the meeting, and SA is supposedly the slow, steady, consistent one in TX.  While none of the TX markets got crushed in the 08/09 downturn, SA really did pretty well.

Thanks @Kyle Jean, I don't know if you've been recently, but there is PLENTY of new construction.  Its doesn't appear to be as bad as DFW, where you can't look in any direction without seeing new apartments going up, but I saw a lot of new properties.

Looked at 3 properties in SA this weekend and really like the city.  I got to meet and spend time with people very connected to the RE market and economy there, and I like what they were telling me.  All the data sources say San Antonio is lagging DFW/Houston/Austin in occupancy, but in 2008/2009 they were still 91% occupied-- thats really strong.  I've also spoken with several brokers, appraisers, PM's, and investors about cap rates, and they're pretty low for a city thats "lagging."  

Anyone have long term ownership/investment in a MF there?

I've absolutely had to provide proof of funds with every offer I've submitted on multifamily properties.  I assume thats what you're talking about since this is in the MF forum.  

I haven't used hard money, so I don't know about the commitment/approval.  

We've just sent copies of bank statements from the investors (redacted of course) with the deepest pockets.  I try to show much more than the down payment just to get the sellers comfortable.  

Based on your last post, it appears you don't have a maintenance tech budgeted.  I know lots of owners (and PM's) that feel 100 is about the max for a single manager, so I think you're fine with that.  I know others disagree.  Our manager runs 106 units by herself, and its a C class with low income tenants.  It works fine.  One maintenance guy should work with a 90's complex, but again, having options for help when needed would be critical.   We have one, but also contract out a lot of make ready work.  But you WILL need at least 1 full time maintenance person, and it doesn't look like thats in there.  Some of your $60,000 R&M is probably part of it, but not sure it would cover a full salary.  

I know Brian and Ben disagree, but I think economic vacancy really depends on the area.  They have far more experience than I do, and I ONLY have knowledge of my own area, so keep that in mind.  Our c class property runs about 7% economic loss to include bad debt, loss to lease, physical vacancy, etc.  There's just such high demand that even if someone skips or gets evicted, there are people waiting to get in.  I don't project that number going forward, as things will likely change with new construction, jobs, wages, etc.  We projected 12% after stabilization, and its running 5-7%.  

On the other hand, if its currently only 86% phys occupancy, then assuming 15% is risky.  If there are other properties in the area, find out how they are doing.  If you find out that they stay full all the time, then its probably a management issue with yours and 15% may be safe.  If they only stay 86% full, then 15% is not safe.  

The MOST important thing is going to be your management company.  Make sure they have experience with the demographic you're buying, and that you're going to get the amount of attention you need being in a smaller town.  

Make sure you're budgeting for property taxes to go up based on your purchase price.

@Kevin Wood, I've heard people talk about their philosophy of just "tying up" the property with an LOI, then worry about negotiating down later. That is one way to do it, but the MF business is a small world, and your reputation is REALLY important if you want to build relationships with brokers. I personally would never sign a contract without seeing financials, but I have run into a few sellers that won't give tours without an LOI, or possibly even a contract. If that's the way they are, then you don't have a choice if you want to see the deal, but make sure there are plenty of contingencies to allow you out. In that case, they certainly couldn't hold it against you if the financials were misrepresented. Word absolutely does get around though, so if someone constantly tries to retrade on every deal, the brokers are not likely to sway the sellers towards your offers. Of course if there are things discovered in due diligence that require renegotiating, thats a different matter.

I like to only make offers with terms at which I would be absolutely confident in closing.  You asked what others are using for earnest money.  I think 1% is typical, which would be $4790 in your case rather than $479.  In a hot market they may ask for more.  Lots of popular deals require non-refundable earnest money in order to be considered. 

@Nick B., I should have been more specific on what use of property I'm talking about.  Based on your purchase price, your rehab budget, your rents, and previous conversations we've had, I assumed C class in a decent area of DFW.  Other areas and properties can obviously vary widely.  That may be the difference in the payroll numbers @Ben Leybovich used and what I use.   I have spoken to three PM companies this month regarding a 92 unit property.  One used $850/unit, and the other two are rt at $1100.  i think you and I are talking about the same type of property with the same demographic.  

I don't know where

@Brian Burke is buying, but 14-18% economic loss would make it nearly impossible to buy anything around us.  Not that conservatism is a bad thing!