All Forum Posts by: Maxwell Manatt

@Brian Garlington

Rockridge

Looking at a project in Oakland in a very good area. Its a Duplex of about 2000 sq ft in the Front with a cottage around 1000 sq ft in the back with a big lot.

 In this neighborhood (very high end) seems like the best potential return would be to re purpose the duplex in front and sell it as a large single family house with a cottage in back.

Does anybody have experience with a project like this? 

Will the city cause problems to us for turning two units into one?

Zoning of the property is RM-1, here is the definition of that use code per the city website:

RM-1 Mixed Housing Type Residential - 1 Zone. The intent of the RM-1 Zone is to create, maintain, and enhance residential areas characterized by a mix of single family homes and duplexes, and neighborhood businesses where appropriate.

Thank you

Hey @Albert L.

I am a Realtor and our team has done 4+ transactions in the Concord/Pleasant Hill/Walnut Creek area so far this year. 

Two questions:

How are you and your wife planning to finance the purchase? (Conventional 20%, FHA, VA, All cash etc).

Are you and your wife willing to purchase a property that has moderate to significant repairs/upgrades needed?

-It is a good area but my crystal ball is very broken for any short time frame. I could see property values down or up 15% within the next 12 months. 5-10 yrs I remain bullish on All of the Bay area counties due to fundamental lack of supply.

-To break even or come close in that area is possible if you can buy at a 15-25% discount of top market value with conservative leverage. That is possible if you and your wife have a least a 20-30% down payment with extra cash for repair/renovation.

Higher leverage could work.. but of course the numbers would be tighter and it would be harder to get a transaction closed on a deal that needs work in the first place. Also repairs would likely need to be done over time and you would need some luck in the values and rents appreciating in the next 5 years

One of our clients recently purchase a home for 490k in a good area of Concord 3+2 typical rancher, after renovation we are closing escrow on the resale today for 680k.

So as a Retail buyer lets say you could buy that property for 510-520k (not all cash, more contingencies, no "inside tips") and put in the work (70-90k in renovation) to make it worth 650-680k. That renovated property would rent for around $3000 per month an your payment (assuming 400k borrowed) would be about $25-2600. You would be just barely breaking even with reserves for maintenance and any future property management.

ADU could definitely be icing on the cake. But would impact the rent of the main home. Someone who is willing to pay top market rent will likely not want an occupied ADU in the backyard. Additional income from the ADU would likely offset the difference.

Would love to discuss further if you have any other questions :-)

Cheers

@Amit M.

Our team does sales and property Management in the Bay Area. Showings are nearly impossible right now, You need highly motivated Tenants to view.

Do you have any vacant rentals?

Are you seeing any activity?

Hey @Jim Froehlich

Generate your list from the tax assessor website were possible. Then basically googling the LLC's and finding the operating partners. Often you can find office numbers and even Cell numbers by googling these folks as they are in business and want to (or are open to) being found.

I second hiring a VA and training with a screen grab when the scale makes sense (in the process of doing this. My property list is about 150 and should be able to push it close to 500 soon)

Smaller properties (depends on the market but less than 150+ units) often will have less sophisticated and smaller ownership groups. Finding phone numbers for these folks is excellent because you are calling the decision maker directly. Have had success in my market using this method.

Here is the script I use when calling owners:

Hello! My name is …. With "GROUP NAME" (wait for response)

Are you the owner of (property name or address) (wait for response)

(If no)

Is it possible for me to speak for the owner regarding our potential purchase of the property?

(If wrong number) Sorry for my mistake, Have a great day!

(If Yes)

Excellent!

The Reason for my call is that our group owns/is looking to purchase apartment communities in (city property is located) and your property fits the parameters of what we are looking for 50-150 units in (sub market). Are you opposed to ever selling your property?

(yes)

Would you be against getting an idea of what your property is worth from a us?

How long to you plan to hold this asset/property?

What events might occur that would cause you to consider selling?

That sounds reasonable, would you be against us staying in touch? (wait for response)

Perhaps we can help each other with vendor referrals and strategies to keep our buildings performing.

Do you own any other properties that you are considering selling?

(no)

-What is motivating you to consider selling?

(Objection, are you a Broker? I don't want to list my property! I don't trust you, do not want to send financials)

We are not brokers, we are serious buyers with the cash to close. Would you like me to send you our groups credibility packet and proof of funds? It has more information about our partners and strategy. Also I am willing to send you a signed non disclosure agreement so that any conversation you and I have or financial data you send me will remain private.

What is the best email for me to send you that information?

(What kind of price terms? How should we proceed? that sounds interesting.)

I am not prepared to make an offer today. But if you can send me the current rent roll, YTD operating statement, T12-36 Operating statement and answer a few basic questions we can set up a walk through of your property. After the walk through we can have an LOI to you within 48 hours. This will allow our group to make an accurate offer up front and will make it less likely that we have to renegotiate down the line. Would you be opposed to that?

Excellent! Would you object to answering a few questions to help make our offer more accurate?

-How much do you owe on this property?

-How much do you need to sell this property for?

-What are you planning to do with the proceeds from the sale? (if response is Why?: sometimes we can structure the purchase creatively to better meet your needs, closing faster of sooner. Getting all the cash now or spreading it out over a few years to provide you ongoing cash flow and reduce taxes)

-When do you need the sale completed?

-Do you have any other properties you are considering selling?

Follow up Email (if no connection):

Hello “”,

NAME with GROUP NAME here. We buy B and C class apartments. Our partnership is based here in Location and we have local partners in (location) as well.

Just called your office/cell and left a Voicemail.

Our group is looking to purchase apartment communities in (location). Your property, (name of complex), fits the parameters (50-150 units in ((location))) of what we are looking for. Are you opposed to ever selling your property?

We are not brokers, we are serious buyers with the cash to close. Our groups credibility packet is attached. It has more information about our partners and strategy. Also we can send you a signed non disclosure agreement so that any conversation you and I have or financial data you send me will remain private.

Would you be against speaking on the phone for 5 minutes to discuss?

In general I have found these conversations to be much easier than calling residential home owners. And I almost always learn valuable market info.

Best of Luck

Very curious about this as well. Just signed and LOI directly with the owner of a 118 unit and they suggested a potential LLC sale rather than a deed transfer. Cited avoiding title costs, transfer taxes and tax assessments. Seems to good to be true...but I dont know. Awaiting some clarification from our lawyer.

@Wayne Brooks

Thank you for the insight. Do you have any links or resources where I can read more about this topic?

Down payment varies. Depends on the cash flow of the property. Generally you will not be able to put down any less than 20%. Generally your net worth has to be greater to or equal to the loan amount. Very common for people to group together to meet all the requirements.

If you PM me I can send you a list of resources (books, podcasts, white papers ect) that have been useful to me in learning about the apartment business.

Cheers

Probably the best way to structure that would be you to use the 100k as the down payment and or rehab money for a value add deal. Your colleague gets a second lien on the property as security and gets cashed out when you sell or re finance. You would negotiate and acceptable interest rate and potentially and up front fee as well. 

I have lent money to friends before for their projects and have charged 10-11% and 3% up front. The note was interest only and had a balloon payment after 3 years.

You need to incorporate these debt payments into your numbers and still have a deal with acceptable returns.

But more importantly you should get as educated as possible and put together a package for potential private investors. This colleague of yours may just write you a check without doing any background check or research but that would certainly not be the norm. Also you need to ask yourself are you comfortable taking this person's money if they are not asking tough questions and understanding the risks? What if things go wrong and the deal loses money? What if you cannot make the agreed upon payments?

Not trying to discourage you just putting some questions out there for consideration.

Cheers

Hello @Annie Dickerson,

Congrats on the upcoming closing!

Really depends on your loan picture. How much are you planning to borrow and will the new actual income adequately service that debt. Basically is the needed DCR still reached at the current economic occupancy?

There are definitely creative things you can do to get those occupied units back if you need them. Basically you delay closing and get a written agreement with the seller on tenant screening procedures.

Our group is actually working on a deal currently that is pretty broken from a vacancy stand point and the owner is going to let our property management take over at the execution of the contract and then we dont close until an agreed upon economic occupancy hurdle is met.

Can send you some high priced lawyer language from our contract if you want lol, hope you do not have to do anything that complex in this scenario.

Cheers

Hello @Kyle Ransom,

No question Master lease options can work in any market. Especially for properties that will have trouble qualifying for any bank, agency or bridge financing.

You should check out Peter Harris's information on Master Leases:

website,

https://www.commercialpropertyadvisors.com/peter-h...

Youtube,

https://www.youtube.com/watch?v=yLgtOk48vkQ

Attended a seminar by him earlier this year and it was spectacular!