All Forum Posts by: Anton Mattli

@Jordan Moorhead I know of many single-asset syndications as well as funds that pay distributions but have negative operational cash flow. Some of them continue to get positive reviews because investors receive their distributions like clock work. Unfortunately, unless you see the underlying financials as well as supporting data for those financials, you do not know whether there actually was cash from operations to pay your distribution or not. 

 @Scott Trench Whether you intend it or not, as soon as you have website sponsors on your site, LPs will regard those names as "vetted" and will more likely trust content or deal offerings by those sponsors. To maintain true independence, I think a strict subscription model is the better way to go. As you know, there are other communities that behave like investor clubs/networking groups that present themselves as educational platforms, yet they are either operated by deal sponsors/syndicators or have a number of deal sponsors/syndicators that sponsor the website (they may not call them sponsors but preferred vendors or similar).

 @Scott Trench Creating a website focused on passive investor education that is sponsored by deal sponsors is removing the independence of the site, IMO.

"Highly safe" and 20%+ returns are usually not going together. I have a number of friends that believed in similar "highly safe" promotions by deal sponsors and are now deeply regretting the investment.

It really depends on the size and value of the property. Up to $1 million loan amounts, you are best off to work with your existing banking relationships as well as community banks and credit unions that are local to the property. As it was already mentioned, once a property supports a $1 million loan and is stabilized, it opens the door for agency loans. They are a great alternative to a bank loan with a couple of advantages such as non-recourse, 30 year amortization, 10 years+ fixed rate, interest only periods, up to 80% leverage. One of the few disadvantages are the higher prepayment penalties. PM me if you would like to discuss in more detail.

Aside from a hard money loan, I would try community banks and credit unions that are local to the property. You will not get even close to a 90% leverage with them, though, but I also doubt that a hard money lender is willing to go in at 90% of the purchase price unless an appraisal supports an in-place value that would get you to 70-75% LTV. Even if you were able to get a hard money loan with that leverage, I would talk to a perm lender (again, for that loan size, local community banks/credit unions are your best choice) to get a sense of what they would be willing to lend once the property is stabilized.

At $14k/unit after rehab, this has to be in the middle of nowhere or is indeed in a "war zone".  I would validate your rent assumptions with true comps (not just advertised rents) and find out what the bad debt and eviction rate is at those comps. 

While not many, there are some lenders willing to finance structures like yours but every situation will be evaluated differently. PM me with more details and maybe I can guide you in the right direction.

I assume that you guys talk about single family and small, self-managed multifamily properties where you must focus on the Schedule E due to lack of other more current and detailed reports that you can trust. 

Let's say you look at a property today and get Schedules E for the past 3 years for which tax returns have been filed for (2015, 2014, 2013). Everything checks out based on all three Schedules E but you have no idea how 2016 performed. Was it equal, better or worse than the previous three years? How did they perform vs. comps in 2016? What if they did well in the first half of 2016 but somehow had problems in the second half of 2016?

Again, I am not in any way discounting the use of the Schedule E as part of the due diligence but one should recognize its limitations to evaluate a property in its current state. 

I am not saying that you should not attempt to get schedules E but they are really a look in the past while a current T12 and RR is giving you a picture of the current operations. On top of that, schedules E show annual numbers only which are fine for a high-level review of past years but not granular enough for a detailed analysis of current operations.

Regarding the accuracy of T12s and RRs, reports prepared by a reputable third-party management company are generally accurate. The highest risk of fudged T12s and RRs is with self-management - I venture to say that someone who is purposely giving a prospective buyer an inaccurate T12 and RR will also cheat on tax returns so a Schedule E in these situations will likely underreport collections and overstate expenses. In any case, the more doubts you have about the accuracy of the numbers, the more you have to dig in and ask for bank statements, invoices, leases, etc. and verify that they are accurate. Even once you were able to reasonably verify the accuracy of both collections and expenses, you still have to determine how you would be able to run the property.

@David Handmaker , I suggest that you reach out to all major brokerage firms that focus on multifamily listings in Dallas. Establishing relationships with brokers is crucial to increase your chances to be picked as a buyer, particularly in the current market environment.