All Forum Posts by: Sam Applegate

@Connor McGinnis
Consider evaluating the pro forma rents from two perspectives -
determine the maximum amount you can increase the rents without making any renovations and then figure out how much more you can raise them with renovations. These will help you understand how aggressively you can push for rent increases.

For tenants you want to keep, I'd push the rents to an amount that both parties are comfortable with, so they stay in-place and you don't have to spend on turnover and renovations. For tenants that you don't want to keep, I would raise rents to renovated market. If they sign the lease then great, you hit your pro forma rent without spending on renovations. If they move out, then you can spend the money to renovate the unit.
Lastly, be sure abide by any discrimination laws to prevent potential lawsuits.

@Peter Trifan
I agree with @Gino Barbaro, the more insurance contacts you have, the better.
Last time I got insurance quotes, I reached out to the main brokers in the area and the local lenders to see who they recommended. Oftentimes, there's overlap between the two recommendations, but you also get a mix of different options.
Also, to shed a little light on the insurance industry, premiums have increased significantly year over year across the entire country.

@Shane Burke
I agree that this is a good lesson learned. I wouldn’t pursue it further, but be more careful in the future about how you phrase utility billing in leases. Next time, consider implementing a RUBS system to prevent this issue from happening again.

@Karolina Powell, I agree with @Evan Polaski's analysis. A 6 cap feels thin for a small market. Especially when factoring in commercial spaces.

One aspect of the deal I'd consider, is whether you can individually parcel the commercial spaces and sell them to the businesses. This allows you to own/operate the multifamily (assuming you don't want to own the commercial) while potentially creating some value in the sale.

I have the same question as @Charles Carillo and agree with his point. To also phrase his respond a little differently, why do you need a commercial lender if the seller is carrying the note? 

What interest rate is the seller offering? Considering their LTV is at market or debatably below market (depending on the asset), if the interest rate or loan terms aren't advantageous, I'd also suggest getting quotes from other lenders.

Since you are located in upstate NY, I'd look for local banks. If you don't have any leads or don't know where to start here are a couple suggestions: ask brokers who people use for debt, find a mortgage broker as they have access to different buckets of capital, use a website like CoStar to look at closed transaction over the last 12 months and see who they used for debt.

@Nick M.

It sounds like your goal is cash flow, especially since you’re looking to use the property as your retirement plan. If you sold the property and bought another one, could you generate more cash flow? If the answer is yes, then selling it might be worth considering. Look at it from both a pure cash flow perspective (since you'll be realizing your gain) and a return on equity perspective.

@Gino Barbaro This is a really interesting question! In my opinion, it boils down to two main things:

1. Your investing goals. If real estate is just a side gig and finding deals is tough right now, it might make sense to hold onto cash and wait for a better buying opportunities.

2. Interest rates. If you think rates will stay high, you might wait for asset values to drop. But if you believe rates will go down, it’s a good time to find deals and refinance later at a lower rate.

As for me personally, I’m also reevaluating the market to figure out the best investment strategy. I've primarily focused on west coast markets in 2024 and have found it difficult to make deals pencil. Excited to see what others think!

I wish I could give you a definite answer, but it really comes down to is the lifestyle you want to live and how you want to handle your investments. A riskier area might offer better cash flow, but it usually comes with more work and headaches. If you’re ready to get your hands dirty and put in the effort, this could be a solid choice. On the other hand, a nicer neighborhood might be easier to manage if you’re looking for a more straightforward investment. I’d also think about whether there are other ways to find good deals in the nicer area that might still offer better returns.

@Jorge Abreu
Do you encounter sellers who are hesitant of carrying paper because they don't know the buyers, or are the 30% who agree mainly focused on the increased price? If so, how do you reassure sellers and make them comfortable with carrying a note for someone they don't know?

@Zaid Mahmood

I agree with all the comments above. Although this isn't a material to study, another thing to think about before you become a GP is building a track record, if you haven't done so already. If you put yourself in an LP’s position—they’ll likely want to see your experience and past successes before investing their money.