All Forum Posts by: Mike D'Arrigo

@Jon Kruse glad to see that you're no longer just a lurker! I think you'll find this is a great place to get advice and share ideas. I like the 5-20 unit criteria you mentioned. It's a real sweet spot. My partner and I have a lot of experience in that particular range in the Quad Cities, primarily Davenport, IA which has been a great market. I'll be happy to chat with you and share our experiences if you're interested. 

@Robert Gibbons Welcome to BP. MF is a good way to generate csh flow quickly. Do you have a criteria for your MF's? Are you looking for duplexs. 4 plexes. small apartments etc? Keep in mind that anything over 4 units will require either commercial lending or DSCR. Operating expenses will usually be a lot different than SFR. As you start to evalaute numbers, make sure you know if the utilities are metered seperatly and whether the landlord or tenant pays utilities. Also, be sure you know the neighborhood well. MF's are often located in rougher neighborhoods. Do your due diligence well.

@Karen Molnar do you have a particular market that you are interested in? Whateveer market you choose, here are some questions to ask and things to avoid:

*Don't accurately represent the neighborhood/property classification. Property classifications are subjective and one turn key providers B class property or neighborhood is anothers C class. Buying in the wrong neighborhood is the biggest mistake investors often make. Remember, you can't move s house if it's in a bad neighborhood.

*Are not realistic with their pro forma projections.
     Are their vacancy and maintenance projections unrealistically low? Can           they explain how they calculate their vacancy rates? Are their rent                   estimates realistic etc?

*Don't allow financing or a finance contingency. They require you to make up the difference if the property doesn’t fully appraise. This is often an indication that they are selling above market value. 

*Don't allow for your own independent property inspection

*Require you to pay for any renovation upfront unless there is a value add opportunity. 

*Sell only cheap, low priced properties in rougher areas.

*Are not consistent with the areas in which they sell. Do they seem to sell in just any neighborhood or do they have a specific criteria for what class of neighborhoods in which they sell?

*Don't have consistent rehab standards for all properties

*Don't provide a scope of work for the renovation that they have done.

*Are they a turn-key company or are they a promoter? If they are a promoter, how many turn key providers do they work with and how do they vet them?

*How many markets do they operate in and why did they choose the markets that they are in?

*How do they evaluate markets and choose the ones in which they operate?

*Seem more interested in just selling you a property than the success of your investment

*Can't provide references of repeat investors who have had positive results.

These are some of the major things to look for. in a turn key company. Hope it helps. 

@Pramod Prasad I wouldn't say that your lender is taking you for a ride at all. That does sound high for 25% down however. Points can lower your interest rate quite a bit unless you plan to keep the loan long term, they might not be worth it. I would recommend seeing if the seller would give a credit towards points to buy the rate down. 

@Jasmine White most of the suburban areas on the outskirts are good rental areas without high crime rates. We've been active in Kansas City for about 10 years and foocus on the areas like Raytown, Independence, South Kansas City down to Grandview east of the 435 loop. The areas to really avoid are the inner city areas between 435 on the east and Troost on the west. I'd be happy to help and share my insight and experience if you'd like to connect.

@Abir Stolov Indianapolis is a great investment market however, you really have to know the neighboorhoods. Indy can vary from block to block and even street to street. One of the biggest mistakes out of state or foreign investors make is buying in bad neighborhoods. I recommend sticking to C class or better neighborhoods. That's generally going to be in the $140K price range and above and renting for somewhere around $1200 on a 3Br SFR. Be very careful of MF units. The majority are in older, rough inner city areas that do not draw quality tenants. We've been active in Indy for over 10 years. I'd be happy to help you and share my insights and expeerience if you'd like. Feel free to reach out.

@Michael Dardaris you wouldn't really be selling it out from under the tenants. Any buyer will have to honor the lease. Hvaing said that, they would be free to evict the tenants once the lease term is up but if they are great tenants, they wouldn't have reason to if they are buying for investment. Are the tenants paying market rent?

@Vince Biegel Are you looking in FL only or are you open to other markets? Insurance rates are pretty high in FL, especially on MF which nagatively impacts cash flow. We're active in the Quad Cities, namely Davenport IA with small and medium sized apartments and have had a lot of success there. Feel free to reach out if you'd like some insight on the market.

@Ben Capone Check with the county to see if it is considered legal non-conforming. Often times older multi family properties were conforming at the time and are grandfathered in. You should be able to find that out through the county.

 Jared, keep in mind that wealth is built over time with real estate. I think if you compare the income and equity returns in year 10 the first year, you'll find it is staggering. By looking at just year 1 cash flow which is a common mistake, you're not getting the real picture. Think of real estate as a 4 legged stool where returns consist of cash flow, equity through mortgage paydown, appreciation and depreciation write off. Cash flow makes up only about 1/3 of total returns on a typical rental property.