All Forum Posts by: Leo Poon

@Pete Meadowssmith Sorry to hear that, maybe you can consider installing security camera outside the house and in the basement where all the stuff needs maintenance with, so you can check if the grass were needed to be cut or not and if the sewer was acutally fixed. 

Other option is to sell the property if your actually losing money from it. 

@Shimon P. does each bedroom apartment has it owns bathroom and kitchen? Or the students have to share bathroom and kitchen? You would want to find out if the property was set up legally to do 12 bedroom. 

@Salvatore Lentini Hi Salvatore, does your lender finance properties out of PA area or they are only financing locally?

Originally posted by @Shimon P.:

Hi I am closing this week on a multifamily student rentals.

Any tips?

What should I look out for?

Thanks

 Hi Shimon, congratulation on the purchase. Is it a student housing where students have their own bedroom but share the bathroom and kitchen? I would want to ask the seller if there's a permit for rooming housing. If the seller doesn't have it, then there's probably a law that limits how many unrelated adults can live in a unit. Talk to an attorney regarding this, because if the building department later finds a violation of the occupancy, the fines would be more expensive than talking to an attorney.

Originally posted by @Todd Willhoite:

You may be able to see a value add opportunity where you can change operations, or upgrade units, or cut expenses and get the Net Operating Income to increase more on one deal than another.  As stated before, Cap rate tells you what happened in last 12 months, not what is going to happen in the future, or can happen if you have a plan.  But without making any changes and if the properties will perform the same over the next 12 months as they performed over last 12 months, then in theory the 8 cap rate produces more than 5 cap.  

Yes, I agree cap rate is always changing depending on a lot of factors such as tax rate increases, longer vacancy rate, or higher rent. But I think what most people refer to when talking about cap rate is can the 5% cap rate "report card" for the last 12months beat the 8% cap rate "report card". If we are truly considering the future value of a property, then I think using IRR is the better method than cap rate. So Ithe question is are just comparing report cards or are we comparing potential here.

@Russell Brazil  

@Bjorn Ahlblad

I am confused. The question was if a 5% cap rate cash flow better than 8% cap rate. And to my understanding, the calculation for cap rate is NOI / Asset Price. For example $5k NOI / $100k house price, which is 5%. So how can a $100K property with $8k NOI not producing cash flow if you have taken all the expense into the calculation already?

Originally posted by @Jim Growfer:

Can a 5% cap rate multi family Cash Flow better than an 8% Cap rate ? 

 No, cap rate already meant the net cash flow you get after deducting all the expenses. Therefore, 8% cap rate is always higher than a 5% cap rate cash flow considering your talking about the same deal. If your comparing a $100million 5% cap rate deal to a $1million 8% cap rate deal, then the cash flow you receive from the $100million deal is definitely gonna be bigger than the 8% deal because of the principal you invested. It's the same as getting 8% return is higher than 5%.  

@Kerry Baird Thanks, I will look into

@Account Closed I found some non-QM lenders who can do 80% ARV after 90 days but with a higher interest. It seems to me this is the better way to go. As you said, I think I can get pretty busy in 90 days. Thanks

@Greg Lovern Start looking for hard money lender. You might want to pay off the mortgage to the bank with hard money and then hoping to sell it and pay off the hard money lender. This will only work if it has enough equity in the property.

Originally posted by @Jorge Ruiz:

@Leo Poon

Have the LLC give one of you a personal loan to purchase the property all cash. Use terms that just about any bank can beat. File deed in the county the property is in. Then refi that loan with a new mortgage. Not a cash out refi. Then new bank will then pay off the old loan. Hope this helps.

Does it matter if I own the LLC, or it has to be someone else who owns the LLC? It seems to me it is the same as refinance out of hard money loan. The hard money lender file deed and the investor find a mortgage lender to refinance, but the problem is most lender has a seasoning period which beats the whole point of this.