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All Forum Posts by: Joseph Bramante

Joseph Bramante has started 11 posts and replied 152 times.

Post: What is stopping you from investing in multifamily?

Joseph BramantePosted
  • Developer
  • Houston, TX
  • Posts 157
  • Votes 132
Originally posted by @Ed Lara:

Have actually been doing a lot of research in NJ multifamilies. Tough market for cash slow, but appreciation good in certain towns including mine---high costs, though. That said, have made one offer (turned down, but stayed disciplined based on pro forma from  BP rent calculator and didn't try to match other offer), and am making offer on another two properties this week. Biggest think stopping me frankly is thinking of all the potential hassle. But my wife and I have found a great agent who also is an investor and has provided a lot of great advice. 

This one multifamily property we are seriously considering has strong GRM, subpar on 2% rule, not really great from a cash flow standpoint (less than $200/month) and only looking at 2% valuation ,but is in a great neighborhood, very well maintained property. I want to pull the trigger anyway since it looks like a good first investment. Appreciate any thoughts on this---I just want to be in this for real now after more than a year of BP blogs and reading up, and this looks like a good way to start, even if under my appreciation targets. Just need to start!

Thanks. 

 Ed,

At no time should you ever feel any pressure to start. Jumping into a deal because of artificial pressure you are applying to your self is a bad idea. Also, all it takes is 1 bad deal. Just 1 and you are done. well, most people are done, i don't know your financial situation. Regardless, it is a life altering event to have a deal go bad. So rushing into it is a bad idea. Take your time. Don't let the brokers rush you. That is there job. If you make money or lose everything, they do not care. They just want to close and collect their fee. So relax. 

$200/month sounds like a very small property. Maybe 5 units. You mentioned the biggest thing stopping you is all of the potential hassle. Well I can promise you with a 5 unit property, you will have lots of hassle because that property is too small to support a full time property manager. Most properties cant afford a manager until you get to 35 units or more. 

Another reason why most passives prefer syndications is because of the freedom. After they make there investment, they don't have to lift a finger, except to sign for there distribution checks. 

Post: What is stopping you from investing in multifamily?

Joseph BramantePosted
  • Developer
  • Houston, TX
  • Posts 157
  • Votes 132
Originally posted by @James Stansberry:

Thank you for broaching the subject Joseph. I hear much talk on the BP podcasts that the multifamily market is overpriced in many markets and perhaps on the cusp of a cycle. My question is how would you quantify that and what is your opinion of the current deals in MF?

I can only speak for Houston since we don't look outside of our backyard. 

Look at the number of transactions. This year, MF sales are way down in Houston. Sellers aren't selling because the market is suppressed. Cap rates are expanding, jobs are down, lots of vacancy in the Class A market. If you look specificly at a markets Class A vacancy, it can be used as a barometer to see how the market is doing with employment. Also, lots of vacancy on Class A applies downward pressure on Class B & C. When Class A is strong, and the gap in Avg rent is big, Class B & C thrive. 

My opinion of the Houston market is that we are set to make a comeback in the next 1-2 years. We lost lots of houses and we have had a very strong 12 months of employment. The exact figures are escaping me but i recall it was very good.  

Post: What is stopping you from investing in multifamily?

Joseph BramantePosted
  • Developer
  • Houston, TX
  • Posts 157
  • Votes 132
Originally posted by @Will G.:

To answer the op's question....and please anyone jump on this if i am wrong;

The country is yeild starved, bonds, besides junk, pay very little, treasuries are a joke, savings rates, crap, very old bull market is tempering new money, retail and associated brick and morter are under attack by a new paridigm and will probably see a large percentage of existing sf go unneeded, industrial space, unsure, so multifamily is the only pond with some fish left! Cap rates have compressed and will hurt some who have paid too much.

I am funded, financing waiting, but current sellers are just fishing for idiots, mistating expenses, overpricing, etc.

Maybe there are reasonable owners out there, i just have yet to find any!

 Will,

I agree with 90% of what you said there. One of my mentors is a big industrial single tenant guy in houston and he thinks industrial will be coming back. Also, Office in Houston is starting to boom. Lots of transactions this year so far. Neither of those are my specialty so I am just relating info. Could be wrong. 

Interest rates "were" rising though they didn't increase again this quarter by the 0.25% forecasted so I suspect the economy isn't has good as they are claiming. As interest rates climb, cap rates also climb. The higher interest rate means property property prices have to come down in order to preserve owners return. The cap rate, for those who don't know, is the expected return on a property if you were to buy it all cash. But rarely do people buy properties all cash. As the cap rate rises, the value drops since the value is calculated by the NOI divided by the cap rate. Bigger Cap rate, lower value. Lower cap rate, higher value.

Yes, most sellers are still living in 2015 when the sky was the limit. Now that the cap rates have expanded, many have seen their values decrease and so there payday isn't as good. We are seeing a lot of recently purchased properties, 2015-2016, being sold because of fear that the NOI growth will not keep up with the cap rate expansion. Basically they will be working their butts off to grow the NOI and the value will stay the same because the cap rate increased by 0.5-1%.

Good luck finding your next deal. 

Post: What is stopping you from investing in multifamily?

Joseph BramantePosted
  • Developer
  • Houston, TX
  • Posts 157
  • Votes 132
Originally posted by @Anthony Gayden:

Do not let anyone here convince you that the best way to get into multi family is through syndications.

I love multi family investing. I am pushing to get my first 5+ unit deal.

 Anthony,

I respectfully disagree. You are just starting in the industry and I wish you all the best, but i know that you will very soon discover just how challenging and risky MF investing can be. It sounds like you are doing it the right way and buying that first deal with your own capital. Once you are successful with this property and have honed your skills, you will start getting into properties of 50 units or more which is where the real challenges start. 

Also, it sounds like you may be in a position to focus a large % of your time on MF investing which isn't the case for most passives. Many passives work 9-5 and don't have the flexibility to do everything that is required to purchase and operate a MF property. Also, many passives may not have the capital to fund a deal by themselves. 

Best of luck and if I can be a resource for you, let me know. Happy to help. 

Post: What is stopping you from investing in multifamily?

Joseph BramantePosted
  • Developer
  • Houston, TX
  • Posts 157
  • Votes 132
Originally posted by @Wade G.:

My biggest concern is investing money with a group of people that I don't really know and especially with a lead investor that I will have just recently met. Even if the lead has a proven track record I still have no way of evaluating that persons historical moral code. People sometimes tend to make odd decisions when large sums of money are involved. Personally I can't imagine being a lead because of the huge responsibility of managing other peoples money. If I lost their money I don't know how I would handle it. This topic is very timely for me because I have just recently given myself about six months to decide whether I want to buy more SFH or place the funds into a syndication.

 Wade,

I'm sure those are concerns that many passives share. Giving your hard earned money to basically a stranger and trusting them to take care of it. 

So the question is, how do you make them not a stranger? This is why i recommend investing passively in your own market if that is a concern for you. That way you can physically meet your syndicator. You can physically see and touch the property you are investing in (regularity). Also, track record is huge in this industry. Ask to see there last few deals. Did they do what they told investors they would do in the beginning. If not, why. As syndicators, we tend to paint a picture of how a property is and operates based on the data we are provided but until we physically take over, we really don't know. Its like when you go in for surgery and they take all of your vitals, but until they cut you open, they really don't know.

Also, ask to speak to some of their passives. Better yet, request a copy of their "Schedule A" (a roster of the investors on a deal) and you pick the investors you want to speak with. Some may not live in the country, like in my case, but at least you are choosing at random and not being fed their best investors. Every syndicator has them. Me included. On the same deal, I have some who sing my praises and others that would rate me as average. Its in my best interest to refer you to the ones who sing my praises than any who may speak negative of me.  You can't make everyone happy as they say. 

Yes it is a huge responsibility as a sponsor., which when not handled well ends up in court. As a passive, you want somebody dedicating 100% of their time to safeguarding your investment. If they have a day job, just realize that will mean less time focused on your investment, however minute, and be comfortable with that decision.  

Post: What is stopping you from investing in multifamily?

Joseph BramantePosted
  • Developer
  • Houston, TX
  • Posts 157
  • Votes 132
Originally posted by @Jeff Greenberg:

@Joseph Bramante I agree with most of your posts, but I do disagree with a new syndicator thinking that they could jump into doing a blind pool.  Raising funds through a syndication takes significant credibility which is difficult to do if you cannot raise the equity.  So here is the catch 22.  Raising money on a business plan and no visible deal will have a slim chance of success.  

I suggest that new be syndicators find someone that is successfully doing it and find a way to be of service to them.  It may even mean coming in as a passive investor.  Listen to my pb podcast to see how being a passive investor helped me get started.  In the meantime, you network like crazy and tell everyone what your plan is.  Keep a list of potential investors.

Once you have some credibility on the coattails of a successful syndicator, you should be ready to do your own deal. Always be looking for a good deal and always be looking for potential investor.  If is a good deal and you are having trouble with the raise, there will always be other syndicators who will partner with you for a piece of the deal.  How large of a piece may depend on what you bring to the table.

Jeff,

I agree with you 100%. You can absolutely "try" to form a blind pool syndication with no experience, but your chances of actually raising any capital, finding a deal and closing on it are very low. 

Another source of credibility is training. I always advise our passive investors who are interested in doing their own deals to get CCIM certified. Its a 1-3 yr process and gives you some credibility from the start. You can do your training while also investing passively with other sponsors. By the time you graduate, you should have 1-2 deals done as a passive and ready to try it yourself. Plus the mentoring your would gain hopefully from the syndicator. 

Post: What is stopping you from investing in multifamily?

Joseph BramantePosted
  • Developer
  • Houston, TX
  • Posts 157
  • Votes 132
Originally posted by @Nicolas Conca:

Hey love the post subject. I am currently residing in NY. Although multi family homes are relatively high in price for the type of capital I can put down. I'm looking at New Jersey. For 2 reasons, one the market is more inexpensive. NJ has prices a little lower than NY. Also I understand NJ is a landlord friendly state. Meaning a landlord can evict a tenant within 2 weeks. Where as in NY it takes 6 months of you sitting on your hands meanwhile the tenant is living there rent free until the court case. (Not to mention damaging the apt).

This is what I know as of now. I am looking for multifamily in Jersey for house hacking opportunities. This would be my first investment. Glad to hear everyone's thoughts and advice.

Sincerely

Nico

 Nicolas,

You touched on a VERY IMPORTANT topic for out of state buyers, specifically syndicators to be aware of. You know to be versed in the Landlord-Tenant Laws in the state you are planning on investing. Some states, CA and NY come to mind, have very Pro Tenant laws which make it very difficult to get them out of your unit if they stop paying. My home state of Louisiana is like that, which is why I do not invest there.

I am told there are some contractual things you can do with your leases to mitigate that, but for me, the risk is too great. Even in Texas, a very Pro Landlord state, we have properties that are in very liberal jurisdictions and the judges delayed granting our evictions to give residents more time to pay their balance. But at most, they lived for 3 months for free. And its a rarity. So even in a Pro Tenant state, do a quick check on the district the property sits and the judges that serve it, since they will be the ones granting your evictions. Many people don't know this, but Houston as a city is very liberal. Not to get political, but liberal judges tend not to grant evictions quickly. 

As you stated, You could potentially have somebody living in your unit for 6 months or longer rent free. Plus they tend to be very rough on the units which causes you a lot of money to turn it for the next resident. 

I am guessing this has something to do with the very high rent in those states. 

Post: What is stopping you from investing in multifamily?

Joseph BramantePosted
  • Developer
  • Houston, TX
  • Posts 157
  • Votes 132
Originally posted by @Brandon Raeburn:
With so many partners in a syndication, would the roi be of marginal success?

 If you own 1% or 99%, your return on investment would be exactly the same. :)

Post: What is stopping you from investing in multifamily?

Joseph BramantePosted
  • Developer
  • Houston, TX
  • Posts 157
  • Votes 132
Originally posted by @Brady Carpenter:

Thank you for posting this! I've been very interested in multi family being a lazy person haha. I think rehabbing would be cool to try at some point but I want to go more passive in the beginning. I've never done a deal sadly but I mostly think about multifamily. I'm just nervous about the path to take. I think I'd much rather purchase 60+ units but as a newbie I'm not sure how good of an idea that is. A fourplex to house hack seems like the best start but the high number unit deals seem so much more interesting. What method would you recommend for a new investor?

 Brady,

Everybody's situation is unique. It really just depends on how much money you have to invest. For a value add 60 unit in Houston, you would be paying 50k/unit to purchase plus another 10k/unit in rehab, so $3.6M all in. That would get financed with a local bank at 70% leverage (since you are a newbie), and full recourse. So you would need to bring $1M to the closing table. You could syndicate it, but with no experience, it would be challenging. Unless you have $1M to invest personally, I would recommend you do atleast 1 deal passively, Learn the ropes. 

If this is something you are really interested in pursuing , I would recommend you get your CCIM designation at www.ccim.com. It takes 1-3 years to graduate, but you will have instant credibility once you do. I took several of there courses when I started and have decided to finish my degree next year. 

Post: What is stopping you from investing in multifamily?

Joseph BramantePosted
  • Developer
  • Houston, TX
  • Posts 157
  • Votes 132
Originally posted by @Rudy Hernandez:

Joseph Bramante

I would say finding the right partnership as well as benefits of sf is what stopping me. I like sf because they are easier to sell and manage. I like to invest in B and above class areas. I may lose in profit (due to higher purchase price) but I get the type of renters I can rely on to pay on time and take care of the property. By sell, you cannot sell a unit or two from a multifamily that is not performing but you can sell a sf or two that are not performing much easier. Yes there is the economies of scale with multifamily but who will you sell to when you want to sell? Only investors. Although sf has more competition you also have more buyers to sell too. Multifamily has the advantage of having the value or appraisal increase with the add ons you put and rental value but sf (depending on what class of area you are buying) is normally near good schools, which means higher rental occupancy.

 Rudy,

Lots of good comments. I will start by stating I have only ever purchased 1 SF rental in my life and that was for a friend who needed a long term rental. Once they moved out, I sold it. Kind of a unique situation. So I am naturally biased towards MF since that is all I know. 

The concept of "bad performing units" in a MF property isn't really valid. You might have some units that are more renovated than others, but units by themselves don't perform "bad" or worse than others. You might have an area on your property or unit that always backs up due to a sewer issue. But don't think of each unit as you would a SF house. Everything is in regards to the entire property. 

Unless you are the sole investor on a MF property, you will own shares in the LLC, and those shares will have a value. I recently saw a listing on loopnet for a great property but the property wasn't for sale. One investor was selling his 0.245% ownership in the deal for like $300k. So you have options to get out. If you know you might want to exit an investment before it is sold, be sure to review the syndications operating agreement and make sure there is a section on selling your shares. There should be.

I hope I answered your question!