All Forum Posts by: Luke Miller

@Jay Hinrichs no it did not. The last five years have really changed my mind as to who is a good dude and not. I have no qualms with Lane (i'm not an investor of his), but many in this space have lost lots of investor money. I myself am into the six figures in losses so far...

Terminal Cap rate only really matters or a disposition event. Being precise on that number is less critical if you can weather storms should cap rates spike during your hold period. Instead focusing on all-in exit price over entry is a good metric as well. If your disposition price is 50% higher than your all-in (acquisition plus value-add) price during a five year hold, I'd be weary if you don't have a really good value-add story.

@Jonathan Bell meetups are big, networking conferences are big, biggerpockets is helpful, but the most important thing to remember is that you'll want someone that is like-minded and shares your investment ethics. It's easy to find a partner, it's hard to find someone you want to spend the next five to six years with. Don't be too eager to jump into a partnership - ask the tough questions up front. I have been burned before because I didn't do that. I'm still unraveling some bad partnerships years later. 

I've tried direct to sellers before and it's never worked for me. I'm targeting much bigger properties and it just doesn't make sense to take someone's off-market offer (usually less than market price). The only real advantage you have is that they aren't liable for a broker disposition fee. You'll likely piss off a lot of brokers if you are trying to circumvent them.

That being said, I'm working on my first direct-to-seller deal right now, but it's because I knew them before this and know the history of their building. I am also accounting for a small fee that I'll pay to the broker he would have used so I can write a check and they do zero work. Win win.

@Bennet Sebastian I've used a few. IMS, Juniper Square, Syndication Pro. They all have advantages and disadvantages. I personally like Syndication Pro right now the best.

@Eli Shicker you'll want to talk to a qualified multifamily mortgage broker. You shouldn't assume I/O in every scenario. Terms can wildly change depending on loan size, location, asset, loan type (bridge/agency), partners experience, etc...

Your best bet is to spend an hour on the phone talking with a good broker who will take the time to explain it. Or you can do some background research on commercial real estate financing. If you think of the loan as another investor, it gets easier to understand. Get a really good deal in a great market with an experienced partner? Loan terms will be great. Get an okay deal in a bad market with a first-timer, terms won't be great.

@Jimmy Cantave sometimes it's not just services that can be cut. A big one for us in the bigger multifamily space is cutting water consumption. Usually, if the landlord is paying water, tenants don't care about leaky toilets, high-flow faucets, or long showers. Putting in efficient toilets and fixtures is usually a huge savings. That and everything @Jai Reddy mentioned. Except self-managing. Don't do that on large commercial properties. 

@Tyler Hallman @Michael Le is correct about your debt service, but you hit the nail on the head with regards to cap rates. They are generally pointless for "value-add" investing. If you are able to generate revenue (or decrease expenses) to a point where the deal makes sense, the cap rate doesn't really matter to you. For example, i'm okay purchasing a deal at a 4% cap rate if I know I can increase rents and decrease expenses to a point where my purchase price will actually be a 10% cap after year one. That's the beauty of value-add investing. 

If you're looking at these apartments as-is and will do no forced appreciation, you're right that deal probably won't make sense unless there's cheaper debt. 

There's also the ridiculous game of how did they come up with the cap rate? Was it using the T12, T3, T1, or a broker proforma? that's for another post though.

@Elliot Landes i've used a HELOC to invest into a syndication. I probably had a different goal than you so it made obvious sense to me. If I were of trying to create cash flow and build wealth doing that, it wouldn't work. Your net worth likely won't grow rapidly, you can't scale that beyond a certain point, and you lose control of funds that could be called due in a financial crises. I would avoid doing it unless its a short-term play.

@Jordan Becker you can really do anything you want if you work hard enough. However, taking investor money as a brand new operator is something you should really think through. I like the idea of passive investing in deals, but I doubt you'll learn much unless the sponsor is willing to share every detail with you. Many don't have the time for that. 

Your best bet would be to join a mentorship group and learn from them before doing it all on your own.