All Forum Posts by: Mike Montana

@Sam Mathew Congratulations on your success thus far in REI. It sounds like you are on a great track building cash flow and equity through buying and holding SF rentals. Certainly real estate syndication can be a great way to share risk, pool equity and acquire larger assets but as @Jay Hinrichs noted if you chose that path you enter into a new world of regulatory scrutiny.  We have put together syndications to buy multi-family assets and have also participated in syndications sponsored by other investors as a passive investor. There are pros and cons to both it really depends on what you're trying to accomplish. Happy to share more about our experiences if you let me know what specifically you want to know.

Happy investing- Mike

@Ki Lee  It is always a challenge weighing the cost-benefit of flooring.  No matter what you chose some tenet will find a way to tear it up.  In 20+ years of owning and operating C and B class multifamily properties we have found the LVP click together free-floating product seems to be the best overall investment.  Like anything they are not all created equal, the key is a good durable wear layer and to pick color and pattern that doesn't show scratches yet also timeless in style.  We are currently using Shaw Impact installed around the $3.50-$4.00 price range.  You ought to be able to find products in the range of $2.25 or less and install no more than $2.25 all in (including standard floor prep and 1/4 round installation).  You mentioned Columbus is that OH?  If so DM me I may have an installer in that area.

Happy Investing!   

@Alex Jamael. First of all congratulations on making the step to scale your portfolio. That’s a great jump 8 to 36!

if you acquire the property at $1.7 you will need roughly $340k for 20% in addition your closing cost will run between 1.5-3% of PP or $25-50k. This will depend on what structure you use Joint venture, simple partnership or syndication. In addition lenders, both community banks and Fanny/Freddie, will require you to have 9-12month of mortgage reserves in cash. This is equivalent to about 10-14% of the loan balance so between $135-175. I am hearing talks that lenders are increasing those reserve requirements to 12-18 months equivalent. All in you’ll need between $500-600k to close. If you do intend to use traditional debt bank/Fanny,Freddie it will be nearly impossible to bring the “equity stack” $500K in form of other or subordinate debt even if it is from private Investors. They will all want to see that money in the form of true at risk equity whether that be through syndication or through partnerships.

The next question would be what does your investor? If you and one or two partners could bring the four equity stacked to the deal it might be best to go in as a partnership or JV. These type of arrangements are much less costly due to the legal work required. However if you intend to acquire that equity stack from more than three or four people a syndication will likely be your best method. Any more cooks in the kitchen and that it gets pretty messy from an operational standpoint. We recently closed a similar size deal with Fanny that through a 506b syndication. I'd be happy to share the process with you and walk through the numbers if it's helpful to you. Just send me a DM.

Happy investing,

Mike

@Michael Daharsh

Paul’s book is a great read. In general I tend to agree with most of his concepts and philosophy. However I would have to disagree with the concept that buying anything less than 100 doors is a fools errand. First you have to ask yourself what is your end goal? Secondly what are your resources? Do you have loads of excess cash or do you have more time to invest than money? Do you want to be actively involved in real estate or do you just want to passively invest?

I know many people who have created significant wealth investing in single-family homes, small apartment buildings and other real estate assets. We personally were where you are 20 years ago and started with a duplex. We scaled into 15 and 30 unit assets to grow a very, very minimal initial into significant equity and cash flow over that period. We learned the business on a small scale that was manageable to us at the time.  That Initial duplex gave us the confidence to go out and acquire a fourplex. Which in turn gave us the confidence to acquire a 15 unit and so on. I don’t believe there is a right or wrong way to go about it. Bottom line what is your goal and what is your comfort level or risk tolerance? 

Happy investing,

Mike

@Spencer Gray Looking forward to your updates. I’ll be watching your site for the next few days. Enjoy

@Justin Elliott a lot of good insight provided so far. I tend to agree with @Brian Burke with the "let us know when you're ready" or "we will keep you updated on our next offering". I also agree with @Spencer Gray, likely a lack of education either about investing in CRE all together or specifically about the particular offer. As @Jonathan Greene mentioned it can be that the relationship is not well enough developed, however I've pitched opportunities to some of my closest friends who have given similar objections simply because all they've ever Interested in are common stocks, REITs, and mutual funds. Sometimes you just have to take the approach that "some will, some won't, so what". Continue to educate people and realize some folks take a little longer to get it and some just never will.... Happy Investing-

If you own a SFR without debt and REFI the property to cash out the equity then use the cash to invest in a syndication or buy another rental, is the interest on the loan collateralized by the SFR a tax-deductable expense? Does it matter if the SFR is individually owned and titled or heald in an LLC?

@Frances Buerkens It is definitely important to find the right PM. We have been working with a group called Alltrade in KY and Southern IN. They have walked a number of properties with us even prior to LOI to assist us with expectations around CapX and management. In fact they just competed the physical DD, lease audit and Financial Pro-forma on a 30 unit deal we are buying in southern IN last week. They have the capacity to do and or manage the full rehab and turn including major renovations. They scoped out and quoted the addition of two units to the property we're acquiring. They can do small off site as well as site management. If you'd like to discuss further or contact information for them just PM me. Happy investing- Mike

@Gino Barbaro congratulations! What a great story and very inspirational. I’ve enjoyed your podcast content very much as well as your book. Thanks for sharing. I actually toured that property while I was in Louisville for a friend of mine who is now one of your LP’s. It’s a nice asset. In fact we are in the process of a deal just a couple miles away from this property. Maybe we’ll be neighbors soon so to speak. Well done!

@Ryan Hamaker as a general rule you should expect about 50% expense to gross ratio. At 25% it seems there is something missing. Potentially the property is self managed maybe there’s a lack of maintenance expense accounted for.... Definitely take a serious look into the financials.