All Forum Posts by: Mitch Messer

@Ngoc Vo Welcome to BiggerPockets!

The good news is that the financial metrics you've read about are universal and not at all country specific.

The bad news is that Germany may just not be a good cash-flow market, compared to the U.S.

But then, few markets are.

That's why you find so many Germans and Australians and Spaniards and others trying so hard to find great deals in the U.S.

And, even in the States, there are plenty of sub-markets where properties routinely fail the so-called "1% rule."

My advice is to keep searching, see the whole gameboard, and let the financials be your guide to great opportunities!

They are definitely out there!

Hey Gino, I reached out to you on LinkedIn. Can't DM here.

Hey @Jerry Zhang, congrats on finding an interesting deal!

I recommend you check your numbers: If current NOI is $37K and they're asking $500K cash, your cash-on-cash return at time of closing can't be more than 7.4%, and that's assuming an all-cash purchase, ZERO CapEx, ZERO renovations and ZERO closing costs. All very unlikely.

Also, I'd be highly concerned about that 18% vacancy rate you'd be buying into! That's NOT my definition of "turnkey!" Be sure understand the reason for it, so you're not digging yourself into a deep hole here.

Lastly, remember that cap rate is a measure of the local market. Without knowing the cap rates of other MFHs nearby, there's not much objective insight to be gained there.

Good luck!

That's a fair question, so I went back and checked. The PoA designates our company as AIF.

Now, it's possible that back during the original closing we had the borrower sign TWO PoAs: One designating our company, the other designating an individual representing the company.

Our original PoA was prepared in consultation with an attorney, but that was done well over a decade ago!

That said, the PoAs we have used, and this is across several dozen sub2 deals, has been with the company as AIF.

Never had a problem getting a lender check to clear in over 20 years.

@Jaime Powell Can you walk us through the pricing philosophy here?

For example, 107 Ellis Street will deliver about $20K in Gross Income once stabilized. After Operating Expenses are deducted, we're looking at about $13K in NOI.

Purchased for cash at the full asking price of $244,900, and assuming NO CapEx or renovations, that's about a 5.3% Cash-on-Cash return.

What am I missing?

Hi @Michael Morrongiello!

As you've seen, you're not going to get the lender to change their policy.

Fortunately, you don't need to!

If you have a properly written power-of-attorney (POA) authorizing you to manage on behalf of the borrower, then you should be fine.

Here's what we've done:

1. Have the lender issue the escrow refund check in the name of the borrower. (We would have previously updated the mailing address for the loan so the check comes to us, not the borrower!)

2. Take the check to OUR company's bank and show them the POA and any other supporting documentation.

3. Endorse the check as follows: "<Borrower_Name> by virtue of Power of Attorney and Attorney-In-Fact by <Company_Name>"

4. Deposit the check

Sometimes the banker will want a copy of the POA for their records, which we'll gladly provide. (It also helps if the banker knows you, knows what your business does, and you have positive bank account history.)

Hope this helps!

Hey @Dani Beit-Or, as a straight rental the cash flow in this deal isn't just "tight" — it's non-existent!

And that's even using the high rent estimate, a low vacancy rate (8% would be more realistic), and a very low property management expense (10% of rents is pretty standard), just for starters.

If you personally were going to live in this property, it would likely be a slam-dunk...

... but, as an investment, it's a money-loser!

@Ivana Ivanovic I would say 8% is low to cover both vacancy AND repairs.

If you expect to incur just one month of rent lost every 12 months, you'd be looking at an 8.33% (1/12 of gross annual income) vacancy rate.

And, even for a brand-new build, you're going to have some repair/maintenance costs as long as you've got human tenants. Things will inevitably break, jam, clog, drain, build up, wear down, etc. over the course of a year. For that alone, you're probably looking at 5-7% for repairs.   

We used to have a similar philosophy ... and then we went to live in Clovis, New Mexico for a few years! 😂

Plenty of lovely folks there, plus it's where Cannon Air Force Base is located, but we soon discovered that just having a base nearby didn't necessarily make for a lively real estate market.

Shortly after that, we adopted our MUCHAS criteria:

M - Near a military base

U - Has at least one college or university

C - Has a Costco or equivalent

H - Has a hospital ranked at least as a Level II Trauma Center

A - Has a commercial airport

S - Has a Sprouts (organic grocery) or equivalent

This has led us to look at often-overlooked markets like Lubbock, Texas and Augusta, Georgia.

May be worth a look for you as well!

Welcome, Shane!

What specific markets are you considering?