All Forum Posts by: Sam Applegate

@Karolina Powell

A lot of people have mentioned different aspects of this in their posts. For rental income, you can tie it to leases, which are legal documents. Therefore, the leases should be accurate. You can also ask the tenant to sign an estoppel, which essentially has them verify the rent they are paying.

As for expenses, the main areas where they can go awry include property taxes, which you can determine on your own; the mortgage, which you can also calculate; insurance, for which you’ll have a quote beforehand; and utilities, for which you can obtain the bills from the landlord. Ultimately, the most variable expenses are discretionary ones, such as repairs and maintenance. During your inspections, you can assess these expenses yourself.

It's also important to step back and evaluate expense ratios to determine if they make sense.

For smaller multifamily properties that are usually listed on the MLS, I would find a MLS agent who owns investment properties themselves, as they'll better understand the process. Many agents claim they can handle multifamily, but working with one who owns similar properties provides better confidence that they know what they are working with.

However, if you are looking for larger multifamily properties—which are not listed on the MLS—it’s essential to build relationships with those brokers, as they often don’t list these properties on central services. I would also recommend checking websites like LoopNet.

@William Coet

General partners (GPs) manage the entire investment process and are actively involved. They often pay themselves various fees, such as asset management fees and acquisition fees. Additionally, they may include a carried interest or promote structure on the back end, which serves as an incentive or commission if they exceed performance expectations.

Limited partners (LPs), on the other hand, simply invest capital and remain on the sidelines. They receive their monthly or quarterly distributions without being actively involved in the management of the investment.

@Vida Lolitaa

If you're considering an FHA loan, you'll be looking at properties with four units or fewer. Smaller multifamily properties—typically 4 to 6 units, and sometimes up to 10—are usually listed on the MLS, where two agents are typically involved. For this, you'll have to look for a good MLS agent. Personally, I would find someone who owns investment properties themselves, as they'll better understand the process. Many agents claim they can handle multifamily, but working with one who owns similar properties offers better confidence that they know what they are working with.

But if you are looking for larger multifamily properties -- which are not listed on the MLS, there’s usually just one broker managing both buyer and seller side. In this case, it’s essential to go out and build relationships with those brokers as they often times don't list these properties on central services. Although I'd check websites like LoopNet.

@John Bertolon
If your goal is to have tenants move out so you can do renovations I'd hold off on doing upgrades unless they lead to higher rents.

However, if you want to keep the tenants and the repairs are inexpensive and beneficial long-term, it’s worth doing because vacancies will cost you more.

Replacing items like appliances can be costly, so if they're working well, I wouldn't address those kinds of requests.

@Srikant Puvvada

I wish I could answer this question directly, but cap rates are highly dependent on the market and asset type. Typically, older assets have higher cap rates, while better locations and new constructions tend to have lower cap rates. Additionally, when looking at cap rates, people often compare them to interest rates.

@James McGovern

It's important to understand state laws, but the process is generally the same.
In my experience, Section 8 tenants usually pay on time because they know that getting evicted would make it difficult for them to find another property to rent.

@Victor Peng

When buying a single-family house, there are typically two agents involved: a seller’s agent and a buyer’s agent. On the other hand, when buying a 200-unit apartment complex, typically only one broker represents both sides. However, when you get to the middle ground, say five to 15 units, it can go either way.

Personally, the way I think about it is if the property is listed on the MLS, then having two agents is usually the standard. Similarly, if the agent or broker primarily operates in the residential space, they are accustomed to having two agents. So, in these cases, having two agents is normal.

Also, the purpose of an LOI is to express your intentions for the deal and how you want to structure it. Therefore, all the items you outlined in your question are things I would include, along with any other factors you consider important.

Keep in mind that LOIs are non-binding. They are simply a way for the broker to get an indication of your intentions.

@Michael Ebeling

I'd check the lease that the tenant signed to see if there is any language regarding these issues that provides grounds for eviction. If not, it would be good to incorporate such language into future leases.

However, before pursuing eviction, I think it would be helpful to talk with the tenants and explain what you are trying to accomplish.

@Marc Shin

Overall, I agree with Gino’s point about Return on Effort. However, in my opinion, since you are a new investor, completing a successful transaction and allowing yourself to gain experience by getting a win under your belt is more valuable than the Return on Effort itself.

@Ryan Leonard

It's tough to find deals in today's market, no matter what approach you're using. I personally focus most of my time on securing deals through broker relationships, though many others also focus on the areas you listed.