All Forum Posts by: Joseph Bramante

@David Thompson great article, though i do have a few comments in regards to some of your items:

3) When will I get my original investment back and what is the holding period? We typically return our investors their investment after 2-3 years via a Cash Out Refinance. We try not to sell any of our assets. I know several other syndicators who are this way and think investors should target this approach vs seling to save on taxes. You address it in comment 13, but don't mention that all proceeds from this new supplemental or new debt is tax free. 

7) When will I get paid? We also do monthly direct deposit, though I am finding we are a rarity. Most syndicators I know are on a quarterly distro. It is easier for quarterly so you may see that more often as an investor. 

 8) How will you communicate with me? We also provide a weekly report.  

10) What is the process / timeline? Just a comment on 60 day first distro. We typically see first distro going out at 90-120 days.  We find 60 days is too short of a period to really know whats what. 

17) What happens if we have a hardship and want to get out before we sell the property? Most LP agreements have a process for selling shares. The shares are first presented to the members to buy back and then if nobody wants them, they are offered to individuals outside the llc, but ultimately need to be approved by members. Takes 60-90 days to process but at the end of it, they get there money back plus any appreciation. Since this is a sale, they are responsible for capital gains tax. 

Great article though. I know you were painting with broad strokes for the general audience. I think each of those items you posted has 1 or 2 additional levels of detail we could go into but would be too much info for the casual investor. 

@Chris Jensen I'm just going to jump straight to your last bullet. If you are keeping a full time job, you almost have to use a syndicator. If you don't, and you are successful in buying a property, how long do you think you will keep your job after repeated time off manage your property. The answer is not long, maybe 6 months. And then you have a single property which isn't enough to pay your bills and no job. I have been there, actually worse since my property was negative cash flowing at the time, and i promise you it is not a fun place to be. 

As I mentioned earlier, most newer syndicators will have lower minimums so you can invest with them. And just because they are new, doesn't mean they are inexperienced. When we started, we were new, but two of our partners had 25 years each of property management experience. So look for stuff like that. 

@William Vanhoorik, i believe on BP there is a spot to find local real estate meet up in your area. I would recommend you go to those meetups first. Find a few syndicators and take it from there. Actually, i just found it, Download the App, and its the 4th option on the drop down, "Local Forums" . Try that. Otherwise, go to "Meet up.com" and you can find some local real estate meet ups. You have to read the discriptions carefully though since most re meetups are for SF. 

Or just talk with @Bruce Runn. He can probably provide more guidance for your market. 

@David K. Sorry to hear you aren't having much luck over there. Might be time to look into another market. 

@Meredith L. I love the energy. I will caution you though, we have a running joke at our office and when touring properties that are very mismanaged. They tend to be out of state owners we are buying them from. When i got started in the industry, I purchased my first multi while still living in Papua New Guinea and working for Exxon. I had just as much enthusiam as it sound like you do. And of course we applied all of the project management processes and procedures we learned from work, but in the end, i almost lost the property and almost went bankrupt. Luckily, Exxon fired me which forced me to come home and focus on my property and save it. The moral of the story is, i have never seen out of state operations work that well and i would hate for you to lose money that you have worked a long time to earn. 

You have a lot of things working against you, and I'm just going to be frank with you since I think you will appreciate it more. 1) your a newbie which means you don't know what your talking about. This is one of those industries where you just have to put in the time. You can learn the basics via books and blogs, but the brokers and everyone else wont take you seriously for several years. Its a big distraction every time a seller tours a property with a potential buyer. If they back out because of inexperience, it delays the seller a few months and the broker. Brokers and sellers like certainty of execution. Plus its not good for a property to sit in libo.  2) Target 1 city. Lets keep it simple at first. find a city, and go for that one. 3) a Seller carry back is one of things that your read about in books but in practice, rarely ever happens. I think it happens in single family more often. It is something you need to be aware of and try to negotiate if you can, but I wouldn't base my underwriting on it. 

My advice, find you ONE market, find a syndicator there, and maybe offer him a slightly higher fee to open his books more to you and teach you. I hope I did not offend you. 

@Todd Dexheimer, 100k/unit!! Thats crazy. Our brokers are pushing B&C properties north of 75k/dr but our average is around 40-50, if I had to guess. What kind of cap rates are you guys seeing? 

Ryan White at 150 units and assuming 40k/unit, the lender would require a net worth of $6m and liquidity of 600k, that's after the Downpayment. For your first deal, you are looking at 70% leverage (30%down). You might find some lenders go to 75, but I would underwrite at 70. For me, I did my first deal at 65%, full recourse on 26 units. If you buy by the end of the year, they prorate the depreciation. It would only be a few months and you would probably show a positive agi. It takes us 6-9 months to find and close on a property. It's a long journey. I recommend you find a syndicator in your market for your first deal. Let them show you the ropes. Maybe you are the only investor in the deal and can negotiate better compensation terms. The difference in return that you make as a passive vs a sponsor is maybe 3-5% on cashflow and only 2-4% on IRR. HOWEVER, the security and risk mitigation you receive is priceless. There are just as many sharks in multifamily as there are in single family except they bite harder in multifamily. You risk losing a lot more money if you don't know what you are doing in multifamily vs single family.

Great article @Carlos Flores. Looks like you guys will continue to stay in our rear view mirror over the next 25 years. Dallas, aka North Houston,  is riding a nice wave of growth right now, but Houston is already showing signs of resurgence.

It will be interested to see how the bullet train project from Houston to Dallas will affect things. I imagine our two cities will only get closer over the years.   

Good Luck guys. There should be tons of flooded houses to buy soon. 

@Account Closed welcome to BP. I am also rather new to BP, in my 3rd week but investing in strictly MF since 2010. great questions. I remember the year i switched from my corporate job at Exxon to being a "real estate professional" i wrote off over $100k in AGI in rental losses and depreciation.I got a huge tax refund that year and it was awesome! The 750 hours is easy to hit. There are several "either or" criteria you can hit to meet the requirement. I met by hours and also by "directly managing the investment". Talk with a CPA but if this is your property, then I have no doubt you will qualify as a RE Pro

In regards to Cost Segregation, this applies to your "non structural" items like carpets, appliances, floors, hardware packages, etc. They need to all be newly installed by you since in order to apply for this, you need to have ever invoice for your cost to install it. We do this a lot. The general scenario is, we buy a property, spend 5-10k per unit renovating it, provide all of our invoices for the interior work to a special firm that specializes in Cost segs. They then sum all of our Soft Cost from the rehab and depreciate all of it over 5 years. So you get accelerate depreciation for most of your interior rehab. This is one of the ways we keep our AGI so low. But, it requires that we continually buy properties so that we can continually renovate and do cost segs otherwise, at the end of 5 years, the deprecation write off drops and our AGI goes back up. 

Also, one tip, try to buy a 150 unit. 50 is too small and hard to manage. Believe it or not, the bigger the property, the easier it is, until you get over 400 units. 

Hope this helps. 

How do investors switch from single family to multifamily? What is the Investment Career Path like?

Hello BP members!! QUESTION: What is stopping you from investing in multifamily properties? What questions and/or concerns do you have about multifamily investing? I joined BP about 3 weeks ago and have been blown away by the amount of collaboration and support within this community. Hats off to the team at BP for moderating these forums strictly to prevent spamming, a common issue with other RE forums. I just wish BP was around when I got started in multifamily 7 years ago. I have personally purchased 4 complexes, 3 through syndications, and done renovations ranging from $$8k/unit to $30m/unit) with returns ranging from 80-207%. My company also manages 6 other properties for other owners. I say this not to impress you but to impress upon you that I have the experience to answer most of your questions. There are also much more experienced guys on here in multifamily who I am hoping will also chime in. My objective with this post is to change to conversation on BP to include more multifamily and show many of your SF investors how you to can invest in MF. Let's start by answering the most common question, " I need several hundred thousand dollars to purchase a multifamily?" Rarely do multifamily properties have a single owner. They are usually a partnership or syndication of several investors. Sometimes up to 35 investors. When I first started, our investors were able to join our syndications with a minimum investment of $10,000! That has since increases to 100k, but you should certainly be able to find newbie syndicators in your market for 10-20k minimums. Next question?

Michelle R. Great question, one that we see often, especially from our CALIFORNIA investors. Man that market is tough! As many have already stated, multifamily is your answer. Take a few months to research everything you can find on multifamily. Read a few books off Amazon. Just be careful not to get suckered into paying for some ridiculously expensive class on how to invest in multifamily real estate where they just repackage all the free info that is already out there. Single family houses are not something you want to mess with. Once you do your research you will understand why. They are a great stepping stone but where you want to be is in multifamily. It's a game changer for wealth creation and preservation. Next, you need to identify a market. Check Forbes list of fastest growing cities. Check employments. Check absorption and housing supply. The later might be a little difficult to check without a subscription to a costar or some other reporting agency. But if you contact a broker in the market, they should provide it to you for free. Give Texas a good hard look. DISCLAIMER: I'm based in Texas. Dallas is hot right now but buying in a hot market can be like buying a stock when it's high. Proceed with caution and make sure you partner with somebody who lives in the market and is intimately aware of good and bad areas. Houston got depressed after oil tanked but now it's coming back and then we just had the natural disaster that flooded 185k homes and an equally large amount of apartments. Some of those will be coming to market for a discount in a few months. Might be worth taking a look Once you identify a market, find you a reputable multifamily syndicator in that market. Not somebody who lives somewhere else but buys in that market, or grew up in that market. Somebody who actively lives in the market and has their finger on the pulse of the city. Make sure these guys are buying big properties, minimum of 150 units. They need to be investing their own capital with yours. They need experience doing the type of investment you want ( minor value add, aggressive value add, yield play, etc) especially when it comes to aggressive value add, because one miscalculation or oversight and your property will likely negative cash flow for a few years. Make sure their fees are market rate. There are many variations of compensation structures. One model we like is the "hurdle rate" model which is based on an IRR rate ( usually 8-12%). When your investment achieves the agreed irr rate, the gp then shares in the profits at 20-30%. This usually means you get 100% of every dollar for the first few years until a refi or sale occurs, then the project surpasses the hurdle rate and the gp can share in profits. Next you need to get added to their mailing list so they can email you deals. It is important that you know your risk tolerance and your objective. If you are just trying to preserve what you have with moderate growth, then look for deals with small rehab budgets, $3k unit or less, and conservative proforma rents, maybe only $30 higher than current rent. If a property with those parameters should produce 6-8% returns with gradual increases as the market rises. You can refi in 6-8 years and get most of your money out to reinvest in something else while keeping your original invest, though now at a lower return of 6-8% again. If you can tolerate more risk, a more aggressive value add property is something you may be interested in. Look for 5-10k/unit in rehab (I have done as large as 30k/unit in rehab but we doubled the rent. Extremely risky but paid over 200% return. ), and increases in rent of $50/unit or more. Those properties should refi in 2-3 years and should allow you to cash out 100% or more of your investment while keeping the property. Hope this helps. Best of luck to you.