All Forum Posts by: Zoran M.

Thanks, @Jay Hinrichs!

I agree - huge risk in closing without the land entitled.  As it relates to our typical offers, we request  180 day DD and then 3x 90 day extensions.  The deposits for both the initial and extension periods are always refundable. 

For this project, we have had several discussions with the city and are confident they will grand our rezoning request. Alternatively, I can put up a NNN dollar store with the current zoning; allowed by zoning, but terrible as part of the city's master plan given this projects location relative to their quaint downtown area.

As it relates to the competition, there is very limited new product in this market.  The one newer product that delivered in 2016 is lackluster, has limited amenities and doesn't even offer furnished washer/dryers.  We're targeting rents about $100-150 above that deal, so feel good about our pro forma. 

And yes, I am very fortunate to have great partners on this project! It takes a long time to build up trust with people, but once you do things move quickly.   

Post #2

The purchase and sale agreement (PSA) was signed last week.  My partners and I just wired the earnest money deposit to the title company.  The sellers attorney has instructed the title company to provide us with a title report and survey.  

The salient deal points are as follows:

Purchase Price: About $14,500 per unit. We try to buy land for less than $15,000 per door.  In other markets, like Charlotte, it could be $30,000/unit.  It's very market/deal specific. 

Due Diligence Period: Through 12/31/2021.  We typically shoot for 180 days plus 3x 90-day extensions, but the seller will be doing a 1031 and has asked that we close by the end of the year.  There is some risk in that we will be closing on the land before it is rezoned, but we've already met with the city and feel confident that we'll get our project approved. 

We'll use this time to conduct DD (Phase I, Phase II, etc) and work with the city on getting the land rezoned / entitled. 

We're meeting with our architect this Thursday to discuss the site plan and building design.  The  suburbs of Cleveland don't see much by the way of new development, so we're looking for a unique product that offers residents attractive rents and a comprehensive amenity package.  I will provide a more detailed update on the results of our design meeting later this week! 

DM me with your info and we can connect.  

TLDR: Follow along as my partners and I build a 117-unit, 4-story multifamily community for $22 million in Cleveland, Ohio. 

The commercial real estate industry has no shortage of mentors, especially those who sell their "mastermind" classes online. While I appreciate their hustle and many are successful real estate entrepreneurs in their own right, I've never been one to gravitate towards such programs. But I've always believed in the value of a mentor - someone experienced in the industry from whom you can learn through osmosis.

Having the benefit of working in this industry professionally, I've participated in the acquisition/disposition of over $1.0B+ of commercial assets - multifamily, retail, industrial and land. Every transaction was a learning experience; a chance to benefit from the collective experience of bankers, lawyers, property professionals and principals. Each transaction was a learning experience.

Recently, I expressed an interest in ground-up development to a friend and colleague that owns/manages over 8,000 apartment homes. He's a seasoned professional and an even better person. His response: "Great, find some land and lets build one. I have a great builder I'm working with on a few projects."

I'll share the why ground-up in another post - and there will be many - because this will be a diary of a ground-up development. My first deal, which I'm doing alongside of a group whose built 20,000+ units, will be thoroughly documented over the course of this 3+ year project.

Patience. Deals will fall apart. Now, I'm not used to that - in my world (acquisitions), you identify a property, complete due diligence, arrange debt/equity and 60-90 days later the asset is yours. Ground up development takes years. I never fully appreciated that (and still don't), but here's the tentative timeline for the project that I will cover in this series:

• February 2021: Message from a local RE professional: "Hey, I got a lead on some land. It would be perfect for you. Call me to discuss."
• March 2021: Introduced to land owner at local county club. Discuss project over drinks and review material he shared.
• May 2021: LOI submitted / negotiated (14 days totals)
• July 2021: PSA executed after 40 days of back-and-forth
• August - December: 3rd party reports, meetings with city, meetings with builder/partner, architectural drawings, pro forma revisions, etc
• Q1 '22: Lineup debt/equity
• June'22 - Ground breaking, with construction expected to last 16 months.
• September '23: Begin lease-up.
• At 15/units per month, lease-up will take approximately 8 months.
• Summer 2024: Stabilization. Refi or sell.

The next few years will be interesting - like drinking through a firehose, for sure. In any event, I couldn't do it without partners and, more specifically, partners whom I can learn from. So find one, don't pay for one. Find a local owner/operator and do a deal with them. Giving up equity is worth the lessons you will learn and the relationship you will build in that time.

Stay tuned.

You're correct about the 45 days. However, our seller wanted to actually identify the property prior to closing - they had extension rights in their contract.  This was for a $15m+ commercial transaction. 

It means that you, as the purchaser, cannot close on the purchase of the property until (subject to the terms of the contract) the seller identifies a new asset to acquire with the proceeds of the sale. 

I just closed on such a deal where I was the purchaser.  It took over 145 days, even though I was ready to close on day 60. 

Hi all,

For those with experience in cleveland, I am under contract on a ~80 unit building in the far eastern suburbs of Cleveland (Lake County) and am in need a property management firm. We’re buying from a long-term owner and he self manages.

We’re buying at a 9% cap and probably $10,000/unit below where it would sell if fully marketed, so we’re excited to move forward with this. Plenty of upside from energy efficient improvements and modest renovations.

Any insights are appreciated!

I also like Madison, Wi.