All Forum Posts by: Mack Benson

It's not really an exact science, especially today. You can take the recent average rent growth in the market for the asset type and class but that won't take into account the current market forces. The main force many of us are working with is the unknowns around collections due to covid. Some areas are faring better with their collections than others. In my market I am projecting a 0% rent growth in year 1 and 2% year 2 and then back to the 3% it has been. 

That is all assumptions on my part based on how I feel the market will perform. It really didn't take a huge hit in 2008 and I don't think it will this time either. Then again, in 2008 the state wasn't actively preventing entire industries from working so I'm not sure if it's an apples to apples comparison.

Basically I am taking it conservatively for years 1 and 2 and back to market average after that. Another wrinkle is what to do if the property is under market rent and I need to reposition it but that is another conversation entirely. 

Edit: A good resource to find the historic rent growth is your property manager or other property managers in the market. They need to have a handle on the trends so they can effectively manage.

An option may be to work with a local bank or a partner. Some of these properties may be in an opportunity zone which may entice some investors or lenders. If you are looking to do it yourself you might look into hard money but it's probably going to be very cost prohibitive.

@Jake Ernst has a great point about networking. 

I'll add that being in the military I think you can target your networking effort more than just in your area. There are a number of active duty military investor groups on Facebook that you could look into. If you haven't checked out the Military Investing forum it could be a good place to find other investors who are in a very similar situation as you. https://www.biggerpockets.com/...

Working with a local bank you can probably do it all under one note, it would complicate things if you want to sell less pieces later on but it is likely possible. You should talk to your lender.

As far a redrawing property lines that could be from easy to an absolute nightmare. It would depend on your municipality/county and the bureaucracy involved. Rezoning will likely need to go before the zoning commission so you should reach out to the government offices in your area. I've never heard of being able to redraw property lines or merge parcels through a quit claim, so again, you'll likely need to talk to your city.

Save more money or invest in yourself. $10k isn't much, especially in LA. Is there something you can do to turn that $10k into $20k? You can network, it is cheap or free and most meetups have moved online. 

Many people will say you can wholesale but I'm not sold on that idea unless it is something you REALLY want to do. It seems like a shiny object trap that a lot of newbies get drawn to because it can be done with little capital. 

What are your goals and what do you want this real estate endeavor to amount to? Take those goals and map out a path that includes your existing $10k on your roadmap. If you want to get into flipping maybe you can use your capital to partner with someone who is flipping. If you want to get into notes, maybe that is enough to get a start. 

Without knowing your goals it is impossible to suggest what you can/should do with what you already have. You can do what you can do and at this point it seems that working on your education and finding a way to save more capital may be your best bets.

Are you looking at a multifamily as in 2-4 units or 5+ units because the answer can vary based on the financing you have in the first place? 

There are a couple books that come to mind that they talk about the refi and roll strategy you are touching on, Rich Dad, Poor Dad, and Wheelbarrow Profits. If you are using FHA or conventional financing on a 2-4 unit you may need to wait for a 6 month seasoning period, you mortgage broker can help with the specifics. If you are talking a 5+ unit you will probably be financed with a local bank and they would make their own terms.

As far as how soon you should, I would say as soon as it makes sense. I wouldn't do it too soon before the property is stabilized because you could leave too much on the table.

@James Taylor I think more details are needed for this. You mention seller financing and then ask about syndication. Is a lender involved so the seller is financing the down payment? I'm a bit confused. It could be that you aren't using the correct terms so clarification may help. When most of us read syndication we go right to private placements under a 506(b) or 506(c) exemption. I'm not 100% sure that is what you are talking about. 

Can you let us know what the debt structure the seller is proposing? That may help

I think as long as you have reasonable connectivity you should be fine. Always be networking, @Jordan Moorhead pointed out lenders and agents but also handymen and other vendors so when a problem arises and you are out of town it can easily be resolved. Always be networking and always be learning. If you have a travel heavy schedule that can be great for consuming books and podcasts. My last flight to Orlando allowed me to finish the last 10 or so chapters from The Best Ever Apartment Syndication Book.

@Abraham Arechiga, you may want to check out the book, Wheelbarrow Profits, by Jake and Gino. It's a quick read and high level but discusses some going points that you may find valuable. The apartment flipping strategy is similar to SFR flipping but at a larger scale and all about the data rather than what looks pretty. Because the value of the property is based solely on the performance of the business you need to weigh the cost vs. the reward even more than in SFR flips.

In a SFR you can have a formula for what drives the value of a property based on the comps in the market but that same logic doesn't follow into the commercial space. In multifamily, it may make the property prettier but the value it brings is directly tied to the increase in rent you can obtain. The goal is to increase the rent and decrease the expenses. In the end the strategy will depend on the property, you can basically BRRRR or stabilize and dispose.

I know of a handful of investors who have been quite successful with seller financing. Having a seller carry the entire down payment may be a stretch though. I think most banks would want to see you have some skin in the game, probably at least 10% of the down payment but that may depend on the purchase price and the DCSR. However, the bank would be in first position on the note so that may make them feel more secure, I'd run all contingencies past your loan officer with your bank.

I don't think getting seller financing should be your first goal though, it can make a buyer look desperate and, from a sellers point of view, unlikely to close. The seller financing topic should come up during the conversation with the seller based on their situation and the property and finally your situation.

Rather than going in with the seller financing guns blazing, do you have an opportunity to partner with anybody for the down payment?