All Forum Posts by: Shane Crockett

6 unit MF unit in desirable area

$1.5M asking price

4% Cap

35% Opex

Estimating 10-15% rehab costs

Estimating rent increase 30-45% after rehab

2% YoY rent increase

Low vacancy

4.5-5% CoCR

All cash syndication purchase

Rents should increase more than 2% once we’re fully back from pandemic impacts. Feels like a good deal but what am I missing?

@Taylor L. These are going to be vacation rentals too so the benefit is a longer term play, I won't have a ton of immediate equity to refinance out of the I/O loan to pay off investors after construction is completed.

@Taylor L. The Liquid capital needed is within my means, and my hard money lender is easier to work with than the handful of investors I have access to at this point. What am I risking with this approach and what should I be thinking about?

I’ve got disposable liquid cash I want to invest and have identified land I want to build vacation rentals on. Does it make sense to inject my cash into this kind of project if the intent is to refinance and pull it back out once construction has completed, or should I be thinking of OPM strategies from the get go? Using my own cash gives me agility and requires fewer partners, but it also ties up my capital until I refinance it back out so curious how the guru’s approach these situations.

@Jeremiah Schwersenska makes sense. What is your fixed annual rate that investors are getting? Preferred returns factored in to chop up any additional profits or is that all gravy for you?

@Jeremiah Schwersenska has the interest only with investors approach been able to produce better cash flow vs taking out a low interest mortgage and buying them out?

I'm looking at a short term (2-3 year hold) MF (6 unit) deal and hoping to keep the investment logistics simple. I've already created an LLC, will be putting up some of my own money, and ultimately just asking my close friends and family to passively invest in the deal.

In this scenario should I be using flat ARR and equity or get into a preferred return structure for GPs and LPs? My goal is to keep it simple for them while still providing competitive ROI based on a well run deal that hits desired performance goals within the stated timeframe.

@Conor Freeman can you pull a list of banks finding MF deals in any city? 🙂

@Jeffery Wilen thank you this is very helpful and appreciated. Any other tips along the lines of finding MF deals, improving NOI, etc?

@Greg Scott thank you I appreciate this. Too add context, my cash in for value add would all be geared towards increasing NOI.

But if I buy something for $1M based on 4% cap and $40k NOI, inject $100k and improve NOI by 20% to $50K but only find a buyer willing to negotiate $1M sale price based on 5% cap, in theory I've done all that work for nothing.

Maybe this is unreasonable based on the fact I improved the NOI and thus the cap rate would move down if anything, but not up. Any additional feedback is helpful and very much appreciated.