All Forum Posts by: Franklin Spees

Jason, I find myself in a similar situation and in need of a loan guarantor for a light industrial development in Central CA. It's a stellar deal and we have already raised about $2.5M but the lender is requiring someone to sign the "bad boy" carve outs and construction completion guarantees. Curious to know how you ended up locating someone for your deal and would they be interested to participate in ours? It's a 506c fund, $17M project, multi-tenant light industrial. Thanks in advance.

As an owner of a medium sized management company in CA (<600 doors), April actually went pretty well regarding rent collection. That said, we took initiative to engage and inform both our owners and tenants with letters and follow up communication. I'm happy to share such correspondence if anyone is interested (ping me privately). It's May that I really have larger concerns about. With good communication, federal "stimulus" household checks, PPP loans and repayment plans...we should all be confident that we can weather this over the next 3-5 months.  Anyone agree or disagree with that from their perspective?

Thanks for asking Nancy. I’m a licensed broker & attorney and own a local PM company called Neighborhood Property Management. 

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $179,000
Cash invested: $45,000
Sale price: $179,000

Duplex in Mayfair Neighborhood of Fresno, CA. Newer roof, new windows with steady paying tenants. Minor upgrades and reports came back pretty clean. Good long term hold with strong rents.

What made you interested in investing in this type of deal?

1-4 deals are readily achievable and are to less likely require partners. Residential financing with strong rents.

How did you find this deal and how did you negotiate it?

MLS. I represented myself as the broker, offered slightly higher price and then dropped price by amount of the commission just prior to close of escrow in order to drop purchase price, reduce property taxes and still win the deal.

How did you finance this deal?

conventional loan through Quicken which was very smooth.

How did you add value to the deal?

Brokered it, I manage it and had existing vendor network make minor repairs.

What was the outcome?

Performing as expected.

Lessons learned? Challenges?

Only limitation is new rent control which will slow me getting up to FMV rents.

So this thread is a couple years old now but I still thought I would comment. I believe this a-la-carte management service will and has already become more prevalent. I own a full service residential property management company in Central CA of approximately 500+ units. In my opinion, it is very challenging to exceed that number while still preserving the high level of quality service and communications with our owners. That said, the desire to scale the business has led me to this "unbundled" or "a-la-carte" model which leverages the existing business infrastructure I have in place and also caters to the evolving consumer/investor demands which now include a more active DIY approach to real estate investing. I can offer select services remotely up and down the state for a fraction of the cost of traditional management. It boosts the investor cash flow but also allows them to excuse all the aspects of management that are less desirable for those without systems and a team in place (ie. rent collection, leasing, bookkeeping/accounting, maintenance management, 24/7 emergency services, compliance, new laws, etc.) 

Franklin
www.MyPMessentials.com
Servicing Residential Properties throughout California

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Fresno.

Purchase price: $580,000
Cash invested: $145,000

4 plex, 2005 contruction, stucco, cement driveway, good condition long term hold.

What made you interested in investing in this type of deal?

Own a property management company and property owner moving out of state so I offered to purchase...was able to broker the deal and apply the commission toward the down payment.

How did you finance this deal?

Went in with another partner and we each put 50% down.

How did you add value to the deal?

turn key and self manage

What was the outcome?

Performing as expected as a long term hold

Lessons learned? Challenges?

Hitting doubles pay off in the long run...as opposed to waiting years on the sideline trying to hit a triple or home run.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I brokered my own deal. Actually Rocket Mortgage online was best rate and pretty convenient.

So, I've owned a residential property management company since about 2000 and when I started it was literally with paper, pencil and Excel. No cell phones, no texts, no online portals and rent payments, no electronic signatures, some email, newspaper ads and a lot of door knocking (I can almost feel some of you more seasoned PM vets nodding out there).  I wrote a blog recently about some of the overall trends and gradual evolution of the PM industry primarily focused on the evolving consumer services expectations. While the end target result is primarily the same for landlords (maximize rent, reduce expenses, asset appreciation, providing safe & affordable housing, etc.), the PM's have either zealously or begrudgingly had to incorporate new mediums and technologies in order to survive and thrive in this industry.  

For example, the arm of our business today offering the full services of a management company to just under 500 doors, utilizes online management software, owner/tenant portals, online tenant screening, advertising and applications, online PDF fillable leases, electronic signatures, walk through inspection apps, online maintenance coordination, lots of texting, etc. These tools not only allow for greater tracking performance and accountability, but they lend themselves nicely to sharing with our landlords delivering an unprecedented level of transparency. 

All of that said, there are still some things that have not and will not ever change.  Trusting Relationships. Quality Communication. Business Ethics.  I'm curious to know if this been a consistent experience for other BP members our there.

Welcome to the BP community. @Brandon L. referenced some great initial links. Don't hesitate to reach out and tap the wealth of experience available. Good luck to you.

Blair, I can relate a bit to your situation. I'm a licensed attorney, broker, and owner of a property management company, here in California. Similar to your situation, early 2017 I approached a friend/colleague of mine and recommended we put together a syndication to purchase a 50 unit property in a secondary market. The plan was to raise a couple million among friends and family, locate an acquisition/rehab property, hold for 5-7 years and sell turn key. That was the initial plan anyway and then things quickly escalated from there. My partner had a lot more horsepower than I did (good partner to have right?), and we came across a three property 450 unit portfolio in surrounding counties for a total acquisition price of about $50M. We decided to make a run and it was an extremely competitive process. Long story short, we needed to raise $12M in about 60 days, with $1M going hard at day 60. We were able to raise about $8M (4 short) and long story short, ended up partnering with a national management company and an institutional investor to raise the full $12M. It was a complicated and stressful process for me with a huge learning curve. Many discussions with investors, lenders, insurance agents, contractors, etc. The model was essentially purchase 90's construction units at about $100K, putting $5K-$7K into each unit, raising rents, stabilizing expenses, and then selling at $125K per unit in 5-7 years. The properties are already outperforming expectations.  One thing for you to keep in mind would be to make sure you have the right team, investors and research any potential securities issues when you solicit passive investors. You'll need good counsel. Hope this helps to encourage you to pursue a syndication. Best of luck.

I couldn't agree with you more @Christine Kankowski. It is so critical to establish those expectations up front and even have those awkward but early conversations about the work flow of management. We find that it builds trust to communicate generally with them know what are strategies are but not that we will update them every step of the way. This is especially challenging in the early stages of establishing that trusting relationship.