All Forum Posts by: Michael Orlando

@Duke Giordano no problem! If you’d like to go through a sample deal, I’m happy to show you a deal we’re closing at the end of January and walk you through things to look for as a passive investor. Let me know if that’s be helpful!

Originally posted by @Duke Giordano:

Hello All,

I was curious if there are target metrics specifically in respect to the following from the [perspective of Risk/Target profile of deal:

1. Purchase price per unit: is there a target range for this price per unit based on deal cost?  How much of this changes based on asset class (A,B,C) vs Deal location or are some of these numbers universal?

2. Average Rent Per Sq Feet: When looking at a multifamily property is there an average Rent per Sq Ft?  Obviously this would be. number derived from Average Sq feet of units to average rent.  I am guessing this is somewhat market dependant but not sure if there is a rule of thumb?

3. Average Rent per unit compared with average income in the area: is there a specific range/metric that is targeted or does this not really come into play?

4. Renovation/Cap Ex cost in relation to total Purchase price: Is there a target that is looked at in relation to this percentage?

5. Bedroom Diversity/Breakdown: When looking at a Multi-Family Deal is there a target Bedroom Diversity: for example, how many of the total units are 1 bedrooms, 2 Beds, 3 Beds etc?  Does this number effect risk profile/target of deal?

Thanks in advance for your thoughts/input,

Duke

Hey Duke! I might not be as expert as some of the responses already laid out, but here's my thoughts: 

1. This is VERY dependent on the market you're in and the asset class as you said. Get an idea of what various properties are trading on a per door basis in your market as well as going cap rates for certain areas and that should at least give you an idea of what makes sense. In addition, it will be dependent on the condition of the property. Even if the property is in a B class area, if it's a huge lift, your per door price should reflect that somewhat. 

2. This will need to be analyzed base on your proforma. What rents do you need to hit to make the deal make sense at the PP? Are these rents achievable based on rental comps in the area?

3. You'll really need to look at comps to see what the rents in the area are like. You can use zillow, rentometer, apartments.com, etc.. to at least get an idea for an initial analysis. You can talk to PM's if they'll give you the time or brokers to also back up your projections. If your rent projections make sense with the market, the income wouldn't necessarily matter that much. However, if you check income and there are some red flags i.e. very low income in a higher income area, you'll want to make sure that the specific neighborhood isn't dramatically different than the immediate area. This will take knowledge of the market and doing your research. 

4. This is very deal dependent and based on property condition. There isn't necessarily a quick rule of thumb based on purchase price that I'm aware of. In terms of capex reserves annually, a lot of investors will use at least 250 / door. 

5. Again, what type of market are you in? Is there a lot of families? Or college students? Or a mix? That will help make this determination. Many investors like a healthy mix of 2 to 1 bed units with 2's being a little higher in regards to the ratio. I think it's important to look at the historical occupancy of the property and see which units have historically been vacant though to see if the market likes the current unit mix. 

Hope this helps!

Thanks for the tips! I'll consult with our attorney 

I'm very curious about this post. What aspects attract you to want to invest in the Phillipines?

Could definitely be a few things! Maybe the deal just really doesn't work at what they're asking (not uncommon right now..). Or, maybe something in your UW is off - check your expenses, make sure if it's an annual input, you're not using monthly numbers, etc.. How far off have you been with all the deals you analyze?

Usually we will do 1 or 2 years of I/O depending on the project, and then refinance year 3-4 has been where we've been landing at for a lot of our deals. Then longer term debt from there.. Or, if you're doing a 5-7 year hold, you'd probably be looking at 1-2 yrs I/O and sale in year 5-7. The loan product you choose and various interest rates / PPP will depend on your strategy though. 

@Reed Kelly Usually you're dealing with more sophisticated investors when you call on decent size apartments. So it's a bit more "tense" sometimes I'd say than calling small multis that are mostly owned by mom and pops. Definitely gotta know the market you're calling (what cap rates on acquisitions are looking like, price per door, etc..) and how to sort of ease any tension. Usually they won't give much time or thought to someone who they can't feel is a serious buyer. 

I would make sure you have an idea of the property characteristics and the market around the property when it comes to metrics so if they hit you with "how much do you think it's worth" or something along those lines, you can give an educated guess as to the range it would trade for. Also, I would get to the point pretty quickly and not try to small talk too much. Usually they get a good amount of calls from people trying to undercut them and you don't want them to think you're doing the same and that you're serious and to the point. Hope that helps!

Hey all! We're raising capital for a couple killer deals here in Cleveland. We've done some JV's but are syndicating these deals and doing a 506(b). I have a pretty straightforward question.. if we have a personal relationship with an investor and they mention they have someone who'd probably be interested and is accredited, do we still need a relationship with the accredited investor? Or since they're accredited, do we not need that same relationship?

I don't know Mark's program well, but I'm in Jake and Gino and I definitely recommend it! Tons of content, resources, experienced community members, and you get your own "coach". Really set me on the right track to getting my first deal done and has significantly decreased the learning curve for me. If you're already starting with a good amount of knowledge, I could still see it being beneficial due to the level of expertise in the community and continuous content they put out. 

Once you establish a track record and reputation, you may have deals "coming to you". However, that will probably require you to actively go out and get them for a while! Also, network with agents and wholesales and let them know what you're doing and make them believe if they bring a deal to you, it's going to close. 

You could also do some marketing to source your own deals i.e. cold calling (you can actually hire someone to do this if you don't want to), direct mail, hand written letters, etc.. 

For what it's worth, I still make my own cold calls to apartment owners and have gotten some of my best leads that way. I'm not pro, but if you have any specific questions I'd be happy to offer my insights!