All Forum Posts by: Matthew Baltzell

@Marie-therese Tai If they tenants were to leave the property, how quick could you put in a new tenant? It all depends on what you really want to do.

It sounds like, if you were to get new tenants this problem would most likely to still occur. 

You need to  look at how much time you're putting into this property. See at how many hours you're putting in managing the property and chasing down the rents. If you're taking several weeks to chase down a couple hundred dollar's it might not be worth your time.

You might want to look into selling the property and freeing yourself from the headache. 

However,

If you think that you could get better tenants and it'll get better in the future then maybe hold onto the property.

You'll want to avoid evictions and they can be costly to you. 

An idea, could be to offer the tenant money to move out. Offer to pay them $350 +/- to move out by the 'said month'. Make sure you get it into writing. Odds are they'll love that you're offering them free money. 

You now have avoided the extra litigation and have saved yourself some money. Now you can go and get better tenant's.

This is just a suggestion that could be helpful. 

I hope it all works out for you:)

@Jason Rosenbaum there are bunch of different variables in play here, but I'll just throw somethings out there that might help you:)

1. This is 8 units and will be considered a commercial property and need a commercial loan (5+ units is commercial). The bank will probably want 25-30% down and will look to see how much the properties financials are. If the property is only at 50% occupancy the bank will see that. You'll need to present the rent roll if you are wanting to get approved for a loan.

2. If you don't know what the market rents go to rentometer.com or go to zillow.com and look at rents in the surrounding area which are comparable to the property you plan to buy. 

3. Banks like to lend on properties usually with a Debt Service Ratio 1.25 or higher. This means that for every dollar of debt the property has in generates $1.25. DSCR= Net Operating Income/ Annual Debt Service.

4. Also you will need to have a better estimate of what the property is really worth and how much value you would want to add. I would hire an appraiser to get a better idea of what the value is worth. Once you know, you'll be able to use the information for the bank as well. But, I would not pay on a ProForma valuation of a property. I would buy it based on the actual numbers that it's currently at (the bank will as well).

5. Figure out how much you would want to put into each unit. Maybe add another 5-10k per unit. Contact 2 or 3 contractors  and start getting quotes. See what they offer. It can't hurt. but, I'm not sure of what the actual property needs. However, I would try and figure out the bottom line of the property (break even point). If the property is at 50% occupancy are you still cash flow positive? What if the occupancy drops to 30%, are you still at a profit? These are questions that you should know and be able to answer. You don't want to take on a value add property and run out of funding.

6. Look into an exit strategy. I know that you stated you want to buy and hold which is good, but everyone has a number. Maybe you will hold for 15 years and then sell or cash out refi after 5 years. Whatever you decide, you should keep an end goal really in mind.

Hopefully this helps. 

Best of luck:)

@Ashley A. first off congrats on the $200k, that's awesome. As stated earlier, in RE you will want to use a lot of leverage. Example: If you own one share of Facebook (FB) today it's worth $187. You'll pay $187 and get a share. Now, RE is a little different. Let's say that you want to buy a 8 unit apartment complex for a million dollars ($125,000/unit) at a 6 CAP. If you purchase the property with all cash you would be getting back 6% ($60,000 per year). Your COC (cash-on-cash return) would be 6% (annual return/initial investment. $60,000/$1,000,000).

Now, let's say that you decide to put down 25% ($250,000) as a payment. Your debt service would be about $45,000 a year. So $60,000-$45,000= $15,000 BTCF (Before Tax Cash Flow). Then you would take $15,000/$250,000 = .06% COC Return.

For $250,000 you own a million dollar asset. 

If you are to pay all cash for a RE property it is very similar to a stock in the sense you're fully invested for one home/share. You won't be leveraging your money which is what RE is really all about.

This is just an example of using your money in RE. 

I know that you were stating that you wanted to do fix and flip. 

Look into the BRRRR strategy. A lot of people have had success in that regard or partner with someone who has had some more experience.

What ever you decide, I'm sure it will be the right choice for you. 

Best of luck:)

It's always good to think of an exit strategy. Even if you want to hold onto it, you should still think about how long and at what price you are willing to sell. I would look into keeping the property and doing a cash out refi to purchase another property. 

@Edward Shafidiya I just sent you a DM.

James,

It all depends on how you underwrite the deal. Example 1.) The seller could have the mortgage completely paid off. If he sells the whole thing he'll be hit with capital gains tax. Say that he wants 25% down. You offer a solution to his capital gains problem. You could take out a 75% conventional loan for the property. Then see if the seller is open to carrying a second mortgage of say "10% down (interest only/5 years)". This delays some of his taxes and he doesn't have to pay as much in taxes. You defer paying that extra 10% and tell him you will have it paid off in 5 years.

This could be good for both parties. He still has money coming in for another 5 years and you down have to put as much money down which should increase your COC return.

But, all of this depends on you exit strategy and how you manage the deal. 

This is just one example of the owner carrying the lease.

It all depends on how flexible the seller is and what you are trying to accomplish. Ask the broker "other then price, what motivates the seller?" Maybe he wants a quick close and is doing a 1031 exchange or is an absentee owner and is fed up with the property. Regardless of the answer it will give you more info on where the owner stands on selling.

Overall, I would always ask to see if a seller is open to carrying the lease. It couldn't hurt to ask. 

@Wayne Brooks Thanks for the reply Wayne. I guess I should have been more specific. I was referring to in terms of CRE (Multi-Family to be exact).

Hello Everyone,

As an investor I hear about 'traffic count' by the property. I understand the concept, but what separates a 'good traffic count' from a 'bad traffic count'? Is there a way to verify these numbers? Also, does anyone use these numbers in determining wether to buy or not? If anyone could share their thoughts, experience and/opinion on the matter I would greatly appreciate it. 

Best,

Matthew Baltzell

Patrick,

That's great that you're beginning to start you CRE journey. I'm a beginner in the industry as well. Right now I want to buy a property of 16+ unites by the end of this year and expand also expand my network.

Here are some helpful sources that I have used to help find me get started.

Websites:

1. Loopnet.com (CRE Listings)

2. Zillow.com

3. Rentometer.com (Avg price of a unit around a certain area0

Youtube

1. Real Estate Investing Made Simple with Grant Cardone

Podcasts

1. Best Real Estate Investing Advice Ever with Joe Fairless

2. Apartment Building Investing with Michael Blank

3. Multi-Family Investing with Corey Peterson

Books

1. Crushing It by Brian Murray

2. How to Read a Rent Roll by John Willhoit

3. The Secret of Raising Money by Michael LeBlanc.

4. Muti-Family Millions by David Lindahl

5. Commercial Real Estate Investing 101 by David Lindahl

Hope this help's. Let me know if you need anything else I would be happy to help. 

Also, I was born and raised in Lakewood, Colorado. It's a really nice are. I currently live in Chiang Mai, Thailand and will be returning in 2019. If you would like to chat via Skype about CRE I would be happy to meet you.

All the best,

Matthew R. Baltzell

@Neil Schoepp Sounds good, I'll be sure to check it out. Thanks.