All Forum Posts by: Robert Rixer

The way I like to underwrite these deals is if the retail part was vacant, would the property still cashflow? If the answer is no, then I'm out. My confidence in backfilling Class C retail is low, but that's also because I'm not a specialist in it. May not be the right way to look at it, but it works for me.

Talk to an experienced finance broker. They can see if your situation is well and truly a dealbreaker or not. Usually there is a lot more variation in commercial for what a lender would be willing to take on, you just need to find a lender who is more willing to take a chance on a new operator. Worst case they can give you advice on best positioning yourself to lenders on future deals.

No excuse for poor management from an experienced sponsor. Lower than 90% occupancy in multifamily means asking rent is too high or units are offline (management issue).

Crunching rough numbers you need a significant percentage of depreciation in that first year to offset not only your tax liability but also the income of the property. Look into Cost Segregation and talk to a professional. It allows you to front-load depreciation way faster than the standard 39 year straight line.

Agree with the concept of spending more time searching for deals rather than money. Too many investors these days spend 80% of their time sourcing LP's and little in the way of finding actual value. With that said, you have to have at least some track record to lean upon. Best bet starting out is to partner with a GP who can bring some experience/track record to the table.

Vacancy in multifamily is more a function of price. If you priced the units at $1/month you would be at 100% occupancy in no time. As the price rises to equilibrium, that's when occupancy could start to dwindle. Most vacancy issues in stabilized multifamily is due to a stubborn owner holding out at too high of price.

Vacancy is much more of a factor in retail and office where tenants aren't so easily or quickly replaceable.

Just remember when renting, the rent price is the maximum you will pay each month. When owning, the monthly payment will be the minimum you will pay each month. Maintenance and large capex items can often get overlooked when investors focus on monthly payment.

From my experience, since tenants typically pay electric, they would directly pay for powering the window units versus a central unit which the landlord would pay for. The market could build this in to pricing but I honestly don't see much data to clearly support that. Another consideration is if all the current window units are the same age or if they are a mix of new and old.

A 50-unit multifamily vs. 1 SFH is not an equivalent comparison. The equivalent would be a 50-unit multifamily vs. a 50 SFHs. If a furnace goes out on 1 SFH, you still have cashflow from 49 others.

Cold calling owners. Ask them if they're open to selling. If not, hang up and move on to the next one.