All Forum Posts by: Steve Priola

Ditto on what every one else has said. My two cents: I would get online and look up your tenant landlord act and search through the documents and confirm that there is no transaction if in no money has been accepted. But like everyone else is saying, definitely worth a call to an attorney for sure. Just a suggestion, in the meantime look up with your local realtor MLS provider agency or group and see if they offer any classes in property management. When I first started in multi family housing, I attended a course, it cost 275 back in the day. It was a 56 hour course taught by really amazing professionals and covered everything from vetting a prospect to our state laws (tenant landlord act) to leasing, marketing, valuation of properties, cap rates, cash on cash return etc. As for these jokers you're dealing with, I agree probably professional renters.

It is O.K. and I learned a lot and accomplished a lot. I was unable to place an offer as a cash buyer swooped in and grabbed the deal. You just can't compete with cash unless you have more of it than the other guy!!!

Here are the accomplishments:

1. Completed a comprehensive business plan that I downloaded of the SBA.gov website. Some other pretty useful and very good information can be found there.

2. Formed an LLC, The business / tax advantages to this are amazing. We could all speak to this on a whole other thread.

3. This one is HUGE: Formed a relationship with a multifamily housing lender. Not a traditional bank. These people understand a deal like this like no one else. It is about the numbers, deal structure, the property and the people. I was very lucky to get a sit down with these guys. It was amazing to say the least.

4. Formed a relationship with a GC with multifamily construction experience. He helped me understand costs and ultimately helped me form the comprehensive upgrade plan that was included in the business plan and financing presentation package.

5. Formed relationship with multifamily housing broker. Now I have access to deals that are upcoming and I also registered on Loop.net.

6. Learned about zoning, permitting and other local gov. agencies involved in a light rehab / upgrade project.

7. Formed relationship with insurance broker.

8. Formed relationship with a designer and architect.

9. Connected with an appraiser. The finance people were also very integral in determining value as well of course.

10. Found an appliance and carpet wholesaler that priced better than the GC was able to get pricing for.

11. While I have been involved in multifamily housing property management in my area, I formed a relationship with a great company in the area that understands rehab lease up and upgrade resident retention and lease up.

Throughout this quick whirlwind process I believed that it was doable, but was realistic just the same. It was all about the exercise and if the deal ended up rolling, well, then I achieved the ultimate goal I set. I had other goals too and they are listed 1 - 10 above.

I will continue looking for deals above 4 units as the financing appears to be easier as the deal is looked at in a different manner. It seems to me that you have to go to a sort of conventional lender (the local bank) for a property that is 4 units or less and if you do not have EVERY duck in a row, it probably will not happen or you just to keep pushing on to the next lender. The bigger deals (with good numbers of course) appear to be looked at with more of a common sense approach if that makes sense.

The last thing I will say is, I learned that I don't know, what I do not know. Whenever anyone had anything to tell me, whether I thought I knew about the subject matter already or not; I listened, took notes, asked questions and was thankful and appreciative.

Anyway, that's my experience. On to the next run!!!

Yes, I am so sorry. I have been working at a fast pace trying to put this deal together.

O.K. So the property is a mix of 1, 2bdrm, apartments and then 2bdrm townhouse set up.

The rehab is light, consisting of updates in kitchen, bath and flooring and basically is intended for value enhancement. The community is 87% occupied and the idea with the rehab is to increase the rental rates as each unit is completed. The units without the updates are in pretty good condition as they sit now.

The buildings received new roofs 7 years ago and I have a contractor / builder friend running through the buildings as well and so far so good on the exteriors.

The market is strong here and while there is new construction coming on line in the area, this community is in the prime location. 10 min to downtown area and the neighborhood is a "hip and trendy" zone that has been gentrifying over the past 7 years.

I did find, thanks to Bigger Pockets, a great due diligence check list that is relevant to this type of property and that has been very helpful. After completing the due diligence checklist, I assembled a "presentation package" for the finance folks.(Another idea learned from Bigger Pockets podcast). Some of the information included was: 1. A completed business plan that I downloaded off the SBA website. 2. Cost analysis of improvements and projected revenue increase after completion over a 5 year period. 3. The communities current financials provided by listing agent. 4. Marketing plan. 5. Management company I selected and their history and track record. 6. Letters of reference from people I have done business with as a loan officer and my old business partners. 7. Upgrade construction plan. 8. Construction company information. 9. Artist renderings of possible look of unit after upgrades (idea from BP).

I listened to every podcast that was relevant to multi-family housing, took notes and implemented the concepts and ideas I learned about. Did some networking with people that I know in the industry and was able to get some good insight on valuation for an offer.

Finally, (for now) I looked to a family member in the finance industry who works in Illinois and he pointed me to a colleague of his that had moved to my area in 2003 and that is where I am at now. I am awaiting approval on the deal and if that happens, then I will make an offer.

If the deal does not transact for whatever reason....i just learned a good bit of information and also, "I don't know, what I do not know."

I'll keep you posted on progress.

Does anyone have a risk assesment / cost analysis worksheet to use for evaluating this type of deal?

I apologize i this was already stated and I just didn't see it. One piece of advice: what you have one person do, do the same thing to all. So, if your policy is to run checks on 18 and older, make sure you do that with ALL applicants the same way, same fees, same application, etc. I am not sure how federal fair housing rules apply to a section 8 scenario if your under a "3 plex", but as stated before; people are smart in the ways of using laws, rules against you. If a prospective resident has say 3 people that are going to live at your property and you run background checks and were found to have done something not the same way or just didn't run one person, etc. It could be looked at as you discriminated against whoever had the back round, fees collected, application accepted or whatever happened differently than the others. If you make changes in your application process, keep a log somewhere that denotes the date an circumstances for your process change. If you ever get a chance to take a federal fair housing class, do it. It is an eye opener and will help you with your documentation to keep you compliant and keep the scammers at bay as well.

My 2 cents. I am aware that other countries are beginning to walk away from using the Dollar as their financial instrument of choice to close deals of whatever nature. Instead of converting the transaction to US Dollars, they are closing in the currency of the originating or purchasing party. When this happens, the US Dollar will / may lose steam and inflation will come next in the US. A Google search will produce a plethora of articles talking about this very thing. I have also noticed a increase in the advertisements to invest in gold / silver, etc. as a option for investing as well. Here is a article I found interesting published by CNBC. http://www.cnbc.com/id/100461159 Raises the question of re-evaluating a purchase as far as LTV, appraised value and actual value after renovation. Should whatever rule of thumb you use for a "good deal" be adjusted on the idea of future inflation? Interesting.