All Forum Posts by: Account Closed

@Pat G. there are some very important tax issues that you will want to make sure your foreign investors are aware of  and that you're planning for before proceeding.  If your investor is not a US resident and does not file taxes in the US you may be forced to withhold up to 30% on distributions:  "A nonresident who fails to submit a timely filed income tax return loses the ability to claim deductions against the rental income, causing the gross rents to be subject to the 30 percent tax." (https://www.irs.gov/individuals/international-taxpayers/foreign-persons-receiving-rental-income-from-us-real-property).

You will want to make sure that you speak with a CPA & Attorney that have experience working with foreign investors.   

Good Luck!

@Brian Orr @Tyler Watts

I'll be back in Charlotte and Gastonia the first week of November.  Would love to host a get together at our property, see a real live case study of Gastonia.   Or we could just meet up for drinks, happy to do either :)

Hi Josh,

I can only offer my perspective from a multi-family standpoint since that's what we currently have in Gastonia.

We're in the process of turning our tenant base because the previous owners of the property we acquired basically took anyone who had a heartbeat.   As you can imagine that meant that we had a lot of trouble makers and a generally undesirable tenant base.  About 50% of our tenants were also Section 8.  Luckily the vast majority of tenants were on MTM.

The first thing we did when we took over was to hire off-duty police officers to patrol the property 24/7.  That alone drove away any criminal elements that were lurking around.  After that we went after anyone who had a balance, we had about 10 of those the first month, the process was very easy and was done in 30 days from start to finish.  Compare that to NY where you can easily spend anywhere from 6-12 months trying to get someone out, it's a nightmare here!

We didn't have anyone trash the apartments but many left their belongings behind.  When that happens we have to hold their belonging in the apartment or a storage unit for a few days, if they don't pick up their stuff then we dump it.  I would say that's been the biggest nuisance.

After the evictions we started to selectively offer lease renewals or 30 day notices to vacate.  We'll keep that process going until we've rehabbed all of our units.

In terms of attracting a better tenant base, we actually have a waiting list of approved applicants.  We approve 1 out of every 4 applications so we've raised the bar quite a bit, along with our rent roll.

It's going to take another year before the property is 100% solid.  The biggest issue we have is in changing the public's perception of a historically troubled property.  We're doing a lot to change the curve appeal of the property, the whole re-positioning process takes time but as the perception changes so does your pricing power.

I'll be in Gastonia next month, maybe I'll host a get together at the property for those who want to see what re-positioning a property and tenant base looks like....

@Johnny Situ, We bought a 76-unit complex in Gastonia back in June, that was our first investment property in NC.  We're now in the process of re-positioning the property by renovating units and taking care of deferred maintenance.  While it hasn't been a walk in the park we're already starting to see results and our rents per sqf are climbing month over month.  We're at a point where there's a wait list for units at our property, and indication that we still have pricing power and that demand is outstripping supply overall.

The two things that have been surprising to me since we've acquired are property are; (1) we've seen tons of people coming to us from Charlotte.  There's an affordability crisis going on in Charlotte right now.   And while there's an argument to be made about the strength of the local job market in Gastonia there are people tons of people working in Charlotte that are leaving in search of more affordable housing.  (2)  There's a significant migration into the city from the Northeast and not everyone is going to Charlotte.   l've personally met quite a number of folks who are recent transplants to Gastonia.  I am always surprised to meet another New Yorker in town but it's becoming more common. 

Given my experience above I can see why Gastonia has the fastest growing rents in the region:  https://www.charlotteagenda.com/85324/states-faste...

In any case, I don't regret investing in Gastonia and if we could pick up more assets there I would.  Like any thing else, you have to know your pockets.   It's also a very local market so it pays to invest in building your network there.   

@Ritch Bonisa

I'll also be in Charlotte the week of June 5th, closing a MF acquisition in Gastonia. Would love to setup a small meetup since my team is also doing SFH Flips in the Charlotte and Gastonia areas and we're always looking to make new connections.

Any interest in setting something up?  

Hey @Scott Schreiber,  I hope to meet you in person at the next meetup in May.  

In regards to ETPA, unless a tenant moves out you're stuck with the current rent, even if the Section 8 Fair Market Rate is higher.  Also keep in mind that the 20% allowable increase would only be for units where the vacating tenant has been in place for over four years.  You can find the full details here:  http://www.nyshcr.org/Rent/Rent-Increases-PR1-2015....  

I recommend you attend the next meeting of the Yonkers Owners Association.  I'll PM you the details.   There you can connect with other property managers, owners and L&T attorneys that would be happy to provide you with the finer details.

In regards to the current owner, my personal recommendation is to take back the apartment, renovate it, increase the legal rent and rent it out. You will gain much more value that way than by providing free rent for a lower purchase price. Remember that the value of commercial property is driven by the Net Operating Income (NOI). Increase the NOI, increase the value of the property. Do that across the board and in a few years you should be able to recapture some or all of your initial equity via a Refi while keeping the building for long term cash flow.

Also I really don't want the previous owner colluding with tenants.  Just a personal preference.

@Diego Torres doing business with family and friends can be tricky but I wouldn't shy away from it.  It's very difficult, if not impossible, to get strangers to invest with you if you've never done a deal and have no record to speak of.   My investor network is where it is today because of all the referrals and introductions that were made by that initial group of friends.  

Just make sure to get everything in writing.  Spending good money on an attorney early on will save much more later down the line.    

@Diego Torres you'll need to start small and start with friends and family.  My first deal was a duplex, fixer upper, all the capital came in from friends who we brought in as investors and a couple as private lenders.  You need to find a deal where the economics make sense and then sell your investors on why it makes sense for them to invest in that property with you.   Once you do the first one the second one will be a bit easier, so forth and so forth.   As you build your reputation your investor network will grow.    Don't get too bogged down thinking about syndications at this point.  Get your first deal under wraps first, learn from doing, and then you can think about raising big money from investors. 

Best of Luck!

@Chris Grenzig IRR is not easy to explain but you nailed it on the head! Nice!

@Ben F. The general rule is that the riskier the project the higher your IRR requirement should be. Think of it as a simple rate of return. Your money in savings account is earning a ridiculously low interest rate because that's a "safe" place to park your money. However if you took that money and invested in the stock market you'd expect to earn significantly more than just leaving your money in the bank account because of the risk component.

In similar fashion, if you invest in Class A apartment buildings chances are you'll see single digit IRR because there technically is not much more upside in that investment. However a Class C building that's going to be re positioned will most likely offer an IRR in the double digit teens because of the upside that will be created. The latter is much more riskier though.

The above is how I interpret IRR. I use that as one of the many metrics I look at when considering an investment. I am sure others will have their own input in regards to how they use IRR though.

IRR of 26% and Cash on Cash of 14%, that seems pretty rich! Are those project level or investor level returns? Best case or worst case?

I would spend most of my time figuring out what's behind those projections.  What assumptions have to come true in order for the sponsor to hit those numbers?  If you still feel comfortable with those assumptions then the question becomes how comfortable do you feel that the sponsor is experienced and skilled enough to make those assumptions come true.

In general you want someone who's going to be conservative with their numbers, someone who is going to under promise and over deliver.