All Forum Posts by: Mike Montana

Great episode! Fantastic information from a guy who had done so many favors of real estate and comes around to the conclusion that multi family workforce housing just might be the “perfect investment”. I tend to agree! Brandon and David do a great job digging into the details!

Congratulations great job! Has to feel good!

@Roxie Kim We own and operate C class multi family buildings in Indianapolis and have for 18years. We also have some B and B+ buildings as well. Tenet/Landlord laws in our state are tend to be more favorable towards landlords, I say that to give you perspective on our experience. As you and @Nick Rutkowski mentioned screening is key. Over the past 18 years we have improved dramatically in that area in the beginning we made a number of poor decisions due to lack of experience. If you have good property managers with experience in this class of asset they should have well established procedures and you can avoid some of the mistakes we have made. With that said you will certainly experience turn over, more evictions and the need to provide cash for keys considerably more often in the C properties then you will in B or above. It doesn’t matter how well we screen (and we have a pretty robust process) tenets who live in that class of property by and large just have more challenges financially. As Nick mentioned do not delay in the evection process when tenets are late. It is key to get that started immediately as Time is money. The most successful process we have implemented to reduce late payments and evection‘s dramatically has been to move tenets to weekly or by weekly rent payments, which are congruent with how they are paid. We find if we get our payments when they get their check we are much more likely to be paid early and first. The additional benefit to this is it provides 13 monthly payments per year. 45% expense ratio in my experience would be a little low we would expect 50 to 55. With that said the addition of weekly/biweekly rents you can actually stabilize or improve your NOI. If you’d like to further discuss feel free to PM me or give me a call. Happy investing!

@Larry H We actually like 1 bedrooms in the market we are in which is a suburb of Indianapolis. In this particular market there is not a Lot of inventory of 1beds and this they can demand rents very near that of 2 bed 1 bath units. Form our experience in this market they have had no more turn than the 2 beds. Mind you we’re in C+\B- assets in A- neighborhoods. Certainly investigate the market, but bottom line don’t run just due to them being 1 beds you may find a real need which the property could fill.

@Alissa Engel the T12 or “Trailing 12” is The last running 12 months of income and expenses. So this shows you how the property is performing currently or how it has performed in the most recent history.

You’ll want the current rent roll, and the trailing 12 or T12. We also request past 2 years of P&L or tax returns.

When we analyze a deal we apply the vacancy to the gross potential rent then apply the 50% rule. Also we tend to see the expenses a bit higher that 50% on smaller deals. Not that said each one can be a little different, but it seems that PM fees are a little higher and without onsite maintenance those cost will end up a bit higher. As for getting the info best to ask for past 2 years of P&L’s along with the T12 and current rent roll. If they have a good PM in place this will be pretty easy to get. If it’s self managed you may have to dig through the numbers a little to find good actuals. We seldom find the Pro forma to be a real accurate picture. Hope this helps. By the way my brother and family lives in Wausau. The town seems to have a lot going on especially in the downtown area. Happy investing!

So ideally you want the past 2-3 years of P&L, the current Rent Role and or the T12 or trailing 12 month which is actually the P&L for the previous 12 month not necessarily a calendar year. With that info you should have what you need to start analyzing deals. Happy investing!

You hit the nail on the head with “no such thing as one size fits all”. For me it may be 60+ community of B or C class in B or better neighborhoods with value add such as rents 20%+ below market rates. For the next guy in MF it may be 12-20 unit buildings with no deferred maintenance, completely stabilized and for someone else it may be 2-4 unit buildings in need of a totally renovation down to the studs. Then for others if it’s not 200+ units it doesn’t even hit their radar. The good news that there is really something for everyone in real estate. Just a matter of figuring out your”Why” and go out and do it. Happy investing! Mike

Todd Moriarty As already noted in a couple of responses it certainly does depend on the asset class the neighborhood or sub market within Indianapolis and the condition of the asset. With that said I believe Josh is correct or see in between 6 - 9% cap rates and most are being offered at the lower end of that spectrum. As in other markets were also seeing a lot of product go on the market on priced now. What size and class of asset are you looking for? Do you have a specific sub market that interests you?