All Forum Posts by: Pat G.

Great relay @Jason Munger - I would seek the help of a good asset attorney. If you are financing the purchase through a bank you are going to have to show the bank the Trust Agreement documents for underwriting. You can't be getting the loan on the property and then be the benefactor of the Trust or a member of the LLC that owns the property or will own the property after closing. I would ask a Real Estate Attorney on how to structure it to be safe.

I agree with @Brian Metz and he has some great advice. In most cases if the "deal" is truly a DEAL raising the money will not be that hard. Where people trip up is that when doing the due diligence they over look something big, or not doing the due diligence at all. You have to run the numbers and you have to them sell the story of why people need to invest with you - But again make sure that the numbers support what you are saying. 

Follow the Holy Trinity:

Cash on Cash - 11%

Debt Coverage Ratio: 1.25+

Cap Rate: 6.5% to 7% and by end of year 1 8%+

Good luck and keep us posted 

First off congrats for wanting to get into this game. Sounds like you have a financial background, before you take a syndication boot camp what part of this business do you like or are you learning towards. What I mean is do you like running the numbers or doing due diligence on deals or do you like talking to people and raising money. Those are two separate skill sets. Figure that out first, then contact any of the people you listed above to see if you can assist them in any way. 

Good luck and keep us posted. 

I would check to see with your SD401K administator, but you can't invest in your own deals using your SD401K. I am not a broker, lawyer or not giving legal advise - just years of experience. And you wife can't invest in that deal either - Family line thing. Anyway check with a pro. 

How many units is the apartment building? Use some of your own money then go raise the rest from others. That way you can do more deals by putting in a smaller amount of your money. 

Also, if you withdrawal money from your 401K plan the plan admin will keep a portion of the proceeds for tax purposes, it is always better to roll your 401K into a Self Direct 401K and invest in other peoples deals first. If you are going to take the tax hit you should figure that into the returns of the apartment building.

Good luck and keep us posted. 

@David Ronka All great advice and don't know if I can add any value here. You stated that he is a non-profit, make sure you go down at the assessors office and get what the taxes will jump to for a new owner. Because if he is a true non-profit he hasn't paid taxes or is "tax-exempt" status with that property. 

I agree with the other on the not listing with broker, my guess is that he had a few brokers tell him what everybody here is telling you and now he is trying something else. It has been my experience that this may be the case.

I would look at the cost to scrap the land and then look into selling to gas stations, Walgreen, etc. But first find out if this property is the path of growth. When you state that this property is 15 minutes from the action - that is either really scary or that means that you are in the path of growth. My guess is that your not in the path of growth because banks, like retail stores have to have large numbers of people through their doors to make their numbers work. Especially banks have to open a number of new accounts per month/quarter to stay liquid and the only thing that drives that is population. 

Most important question is - Why is he selling? 

Good Luck

@Chris Lawrence Great question and great advice. It is cool that you are jumping right in, but a little knowledge can help. Here is a little formula to use for multifamily:

GPRI (Gross Potential Rental Income)

- Vacancy (5%) -minimum bank is going to use -depends on market area may be higher.

- Concessions (what you have to give away to get people to move in, or loss to market rents)

= Total rental Income

+ Other income

= Effective Gross Income

- Expenses - (50% at the least for Apartments)

= Net Operating Income (NOI)

Then take your NOI and divide it by your CAP rate to get a rough value of the property.

Then you add in your debt service costs to get cash flow.

Hope it was not too long winded. 

Good Luck

Congrats and good Job making the jump.

@Denis Ganev I would check out what bestplaces.net has to say about that zip code. 

https://www.bestplaces.net/zip-code/new_jersey/jer... Not the bible, but a good place to start. You have a high barrier to entry with the average home price of $523,500. Just to note, this 3-family is residential not commercial so comps will come into play as to what the value will be now and in the future. 

Good luck

@Chad Bellanger First I would call the zoning department and see if the land is zoned to be a mobile home park. If it is then I would take about 40% (maybe less in this case) for expenses off the income to get to your NOI. Expenses such as grass cutting, road repair, maintenance, etc.

I would watch raising rents that much out of the gate. Check to see what the competition is charging in a 5 mile radius from this park. Also, is there a Walmart within 5 miles of this park? if not, it may not be a good choice. Your customers shop at Walmart.

When you say "renters" do you mean that the mobile home is owned by the person living in the home? OR are they truly renting the mobile home from the park owner? Typically if they own the home they are called Tenant owned homes (TOHs) and the ones that are rented are called Park Owned homes (POHs). 

Another FYI for you - if these mobile homes are Park Owned (rentals) the banks and appraisers don't take in account the income from the rentals - they in turn assign a value to the mobile home itself based on it's age, e.i. 1970's mobile home maybe only worth $5,500 and they use that $5,500 only not the rental income that the unit creates. So the older the home, the less it is worth - if Park Owned.

If you want to PM me for follow up please do. There is a little more to Mobile Home Parks than most think. 

Glad to help

Pat Gage

I would look at the cash-on-cash return more than the cap rate. The CoC is going to drive whether you get investors to invest with you - if you are using private money. If you are not using private money, you still want to have a good CoC for your self.

Good Luck