All Forum Posts by: Michael Magnell

Hey BP community! In the middle of a cash-out refi with Bank of the West and got some disappointing news today. Purchased an 8plex in Grandview, MO in early 2019 for $280k (all 1beds). Increased rents, introduced new revenue streams and drove NOI up materially by renovating/refreshing units. Appraisal came back at $400k today, but underwriter only approved $250k (62.5% LTV) loan because they are getting more conservative on cash-out levels. Credit score great, W2 income great, property is a cash flow machine.

Anyone have lender recommendations for Kansas City? Would love to shop my appraisal and get it reassigned to a lender who will underwrite more rationally.

Any viewpoints on Wyandotte County for cash flow?

Great thread so far. Quick follow-up question for the experts out there....do lenders let you use the credits as equitable collateral against a loan when funding the purchase of a historic build that qualifies? i.e. buyer brings less cash to the table at close.

@Charlie Anne 8plex investment has turned out quite well. Since it was my first purchase in KC, I didn't feel comfortable running a true BRRRR. The game plan was to fund with a commercial loan upfront, and reinvest all of the initial cash flow back into the property so that I could ultimately pull my capital out. Essentially this would be a dragged out BRRRR.

I evicted the one bad tenant a few months after purchase and rehabbed that unit. From there, I played Tetris and moved tenants around as annual leases came up. One tenant moved into the newly rehabbed unit, leaving their older unit ready for rehab. Rinse and repeat.

Overall rents were ~$375-400 at acquisition. I gave tenants a few options, with the goal of trying to keep my game of Tetris moving forward: 1. Move to the newly rehabbed unit for $500 or 2. stay in your current un-rehabbed unit for $550. Basically I was trying to incentivize them to move to the upgraded unit so I could get my rehab team in the old unit ASAP.

I was in the middle of the last unit rehab when COVID hit, so the cash-out refi has been delayed a few months. Hoping the market hangs in there enough for me to complete the full cycle sometime in the Fall.

Lastly, this property cash flows amazingly given the under-market purchase price and material increases in rents I’ve been able to push through. Tenants have been paying during all of the recent craziness (fingers crossed that doesn’t change). So this deal doesn’t need to have a cash-out to be successful in my mind. Sustainable cash flow was the real goal here for my first deal in KC, so getting my cash back would be icing on the cake.

@Nate Morris hey Nate, would love to discuss your thoughts on Historic NE. I live in San Francisco and started buying property in KC last yr. Currently have a big MF in Scarritt set to close next month. I think we also know a lot of the same people in KC since I keep hearing your name pop up!

@Art Perkitny Hi Art, can you please share where this data is sourced from and what ultimately leads to red vs yellow? Also, how exactly should I define the color scheme?

Thanks everyone! Very informative and helpful!

@Michelle Lutz is great with KC MF and very knowledgeable

Put an EMD lien on the property. They won't be able to sell it with an active lien in place.

Do banks typically require the sponsor to have a certain equity ownership in the deal? A partner and I are trying to do our first true syndicated deal and the lender wants us both to have at least 20% of the equity ownership meaning we need to each put down 20% of the total capital needed (this is a value-add rehab MF apartment). We plan on being in both the sponsor class and investment class running an 8% pref with clean 70/30 waterfall thereafter.

After recent inspections, we have modeled a more granular rehab budget that is increasing the amount of capital needed. In an ideal world, my partner and I would be putting 15% of the total cash needed into the deal and raising the rest from our limited investor base. Will I have challenges with this? Maybe it’s just this one lender, but will others have a similar 20% threshold?