All Forum Posts by: Andrew Schena

@Danny N. most local banks in the Houston area would be interested If the numbers shake out. It's not so big that you need to go FNMA, and a local bank would also know the area very well. Make a couple of phone calls to local bank commercial departments tomorrow. That or find a referral like above. That's where I would start. 

@Danny N. Michael is right. Your profile seems to be fine and the commercial bank will not look at those. What theyvwill look at is the property's income stream and if you've got enough experience to manage the property yourself going After closing. 

You say the property Gross's 15K/mo, but you should verify that and the expenses first in your due dilligence. Then you can determine the NOI and see if the property is actually worth the $1.3M they are asking. That's what the bank will do. If the property covers the 1.2 DSCR you then have to evaluate what the ROI Is and if it meets your personal investing criteria. Best of luck!

@Alexander Zurn I would contact a local Bristol agent for comps, and speak to your lender regarding their specific rental income provisions and see how they are going to work the rental income. 

Hey @Greg C....all great questions. I'm certainly not as seasoned as the other guys you mentioned, but I'll throw in my two cents. 

As a syndication investor you need to make sure that a passive investment strategy is right for you and your real estate investment goals, as syndication investment as an equity contributor, for the most part, is simply another form of passive investing. You can certainly achieve many of your investment objectives w/syndication investing, such as diversification, risk mitigation, tax planning, etc. 

To speak directly to your K1 question, the K1 is a report of your income gain or loss in direct correlation of your equity share percentage of the corporation invested in. All net operating expenses, gains and losses are assessed to the corporation yiu invested into first, and then is broken down to each equity investor based on their net equity percentage of ownership of that investment. 

Investing with a HELOC is doable, but may not be advisable. Again, it all depends on your personal risk appetite. Sure you can create a net gain on the cash flow, but consider the alternative if the investment goes south. Are you willing and able to pay that HELOC if you in fact do lose money, or don't make as much as the projections say? Again, that's for you to answer.

When sizing up an investment it's been my experience to discuss IRR over COC. It's a better representation of performance over an investments duration. But the COC is not something to ignore, as it is also a valuable measurement of investment return, but IRR to me is the primary driver.

There is a lot to evaluate in a syndication, and investment performance is certainly a key metric, but don't ignore the operators experience in that particular asset class, their performance history, and referrals. And again, make certain that your primary investment goals are met with the right operator in the right asset. Hope that helps a little. 

Brian Adams that would be awesome. I'm one who is starting to pivot their business from residential multi-family buy/hold & fix/flip to larger multi-unit asset assets, and any checklist/info you would provide would be a great learning tool as I search out mentors and education channels. Thanks.

Hi @Wendy Forbes,

Currently we run Quickbooks and keep every property under its own individual QBW file. Each of our properties are their own LLC, like you are setting up. It's important to keep the properties accounting separate as we have different investors in different projects. Your situation may be different, but cumbersome is certainly an appropriate description.

You are going to be filing an individual tax return for each LLC, so keeping individual accounting for each property will be necessary and at the end of the day. Unfortunately, cumbersome makes it easier come tax time. No one has ever pointed out to me a better way, so I'd be interested to see what others have to say. Welcome to the world of inter-company ledgers!

@Jerry Shen I took a securities class last fall held by Taylor, Trowbridge and Sidoti, who were excellent by the way, and I believe it has to do with the structure of the offering. It was touched on briefly last fall, but a syndicator would have to set up a TEnnant In Common (TIC) agreement for a 1031 Exchange to invest into an individual structure and have an entire separate management agreement to guide the relationship with the TIC. I would email Jillian Sidoti or a good Securities attorney to find out more info.

@Cheng Bin Zhang the best I know of is Chris Sower from Colliers.  I've spoken to him a few times but have never purchased anything.  I always get his marketing across my desk. 

@Joe Rinella congrats on taking some smart steps to researching your markets, but don't be blinded by the difference in Central/Western MA comparisons to Boston Metro. 

The cash flow returns will be greater out there than in towards the center of Boston. You can certainly find great areas with lower crime rates.  Look for communities with good school systems close to employment hubs. Try the metro Worcester market. 

Your price range will determine your locale, so start working with a local realtor that knows that area and they'll start to help you narrow your focus. Just because it's a lower price range doesn't always mean crime and bad tenants. 

 Best of luck. 

@Sabi Const I would want to know the size of the building before I estimated construction costs. As a general rule of thumb, you can't use the livable sq footage to base construction costs on, but the Gross Square Footage (GSF) of the entire structure.

For example, if you are using 15 units at 1000 sq ft each and factoring $200/sq ft to build (that's a Boston estimate on a larger building of that size, your price may vary by location) that's a $3,000,000 build cost.  That's not including soft costs such as carry, architectural, structural and utility engineering, etc.   but that's not entirely my point...

Regarding the size of the building...If you have 15,000 sq ft of livable sq footage, I would have to assume there would be upwards of 20% added onto that number for common hallways, lobby, etc.  So you'd most likely be looking at adding up to 3000 sq ft onto the build cost, which would be an additional $600,000.  That's not a small oversight when budgeting, so be sure to get the build costs to be accurate to the structure.

Based on your example of 15 units, using 18,000 sq ft of GSF and a $1,000,000 estimate to build, you'd be looking at $56/sq ft to build.  I don't think that's possible in any marketplace, even using formica counters let alone granite!  

Your management numbers being high is ok bc it's good to be conservative, but your expenses definitely seem to be on the low side, and I agree with @Robbie Ruetzel and @Andy Shornack say.  Not knowing the area you are building in, I'd say you should start with $100/sq for GSF on the build and work up from there.  Call around to a few GCs out there that handle that sized work and just ask them for an idea of where they start on a build/sq ft price.