All Forum Posts by: Account Closed

I would choose the second option and be direct. That way you would not waste any time and later on not seem to be disingenuous. If he is truly interested in selling he will listen to you at the very least. If he is not, then you will know that his motivation is zero. If he is not interested, this may be a good time to play the mentor me card. First, you might actually learn something. Second, you might get on the top of the waiting list when he does decide to sell. Remember that there are creative ways to structure the deal that make it winwin for both sides. It doesn't always have to be a traditional sale.

I wouldn't be too concerned about the financing piece.  That seems reasonable.  I looked at a LIHTC deal and the debt is something I'm not sure they can get out of.  If he is going to give you a seller loan to cover the difference, I see nothing wrong with that.  The only risk factor would be if there is a balloon after 2 years on the agency debt, you may need to refinance the whole thing and there could be risk there.  I would be more worried about the fundamentals.  The best course of action is to take your property manager to evaluate the deal if you are using one.  They can give you a pretty good idea of any BS.

Have you accounted for capex reserves?  That may swing your decision.  Also, property taxes likely to go up if you are paying higher than what the tax valuation of the property.  It depends on the county you are buying.  I don't see property management fees so I assume you are managing this yourself.  Six vacancies are a lot for a 29 unit especially for low-income housing.  I would say that there are a lot more questions.  However, if you can get this on a 10% cash on cash as is with upside potential, I might take the deal.

You will need to put the down payment if you go through a bank.

The LOI is really not binding. You should have the key deal points negotiated in the LOI. If you are comfortable with the LOI, the contract is what is used to get all the details down and your attorney will help you with that. If you think you know what you are doing due diligence wise then, it should be pretty straight forward. No real value add to having a buyer broker in my opinion.

If you are buying for cash flow. It doesn't matter if there is a crash. You will still be getting your cash every year from the property assuming the rents don't crash.

When I started, I looked for areas that were close by within a 3 to 4 hour driving distance. I did this primarily to keep any travel costs low and convenience for my lifestyle. I then selected the markets that had the highest available jobs to unemployment ratio. At the end of the day, its all about new jobs and job growth for the rental market. This narrowed the list down. I tried to stay away from really small markets. Then I looked at what the average cap rate properties were selling for and chose the top 5 attractive markets from my remaining list. Looking back, I should have narrowed it down to 2 or 3 because it is a lot of work to develop more. Within the two or three markets, I looked on loopnet and started developing relationships with the key apartment brokers in the areas. This took the longest time. This all resulted in 3 multifamily deals under contract. It took me about a year.

Build a strong relationship with several multifamily brokers in your area.  Try to get on their list for their pocket listings.  If you are very specific about your criteria, you should be able to get a couple of pocket listings if you have a strong relationship.

Hi,

I am looking to purchase a large multifamily property (60+) in the Jacksonville area.  Are there any good property managers that you would recommend?  Any input would be greatly appreciated.

Thanks,

Luke

So I wanted to close the loop on this.  After taking your advice and doing some more research, it looks like my county revalues property for tax purposes every 4 years.  The last valuation was in 2013 so 2017 will have new valuations.  I also found that they value based on sales comps of similar properties in the area during the 4 year period.  Thus, if I acquire at a higher price, my purchase price would raise the average but the impact would be smaller than if they were using my purchase price as the valuation.  Given that multifamily has been hot lately, I do expect valuations to go up.  There was also a great presentation that they had online that I thought was helpful in understanding this.  Link is below in case any of you want to flip through it.  Thanks for your help and happy investing.

https://www.co.forsyth.nc.us/Tax/assets/documents/2013%20Reappraisal.pdf