All Forum Posts by: Siraj Alsafar

Have you obtained legal advice from an attorney specializing in securities law whether your offering constitutes a securities offering? About 15 years ago the SEC clarified that both debt and real estate offering fell into the realm of securities offerings and if not exempted need to comply with the major securities acts (1934, 1938, etc.). Based on your solicitation of partners (investors) on a public forum I would venture that you may be engaging in activity subject to such regulation.

To be clear by example; you and two friends decide to buy an investment property, hire a manger and share the workload and profits. All of you have a part in deciding major decisions. This is clearly a joint venture, and NOT a securities offering. On the other hand, you and your friends find and decide to buy a larger property, requiring more capital. So you begin talking with and presenting your idea to other investors, who tell their contacts, and you end up with 10 investors contributing the investment capital. You can’t have 10 people make every decision, so the q0 investors understand that they’re PASSIVE and that they on;y get to vote on major decisions, like selling the property. Well, you’ve just crossed the line into a securities offering!

EVERY securities offering in the U.S. MUST be registered as an offering with the SEC (costs start at $150,000) UNLESS the offering is “exempt”. The major exemptions are private placements and intra state offerings. Private placements can utilize either the general exemption for private placements or more beneficially, Reg D 504, 505, or 506 b or c.

Thank you for the details, and to be more clear I am indeed seeking a joint venture and what I was describing was more of a personal buy box.

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Quote from @Minnina Smith:

When you are just starting out with purchasing properties to turn into rentals. Where should I start? What are the basic steps? Is there a beginners guide I can reference? What is the ideal credit score lenders are looking for? What education should i gain before purchasing my first rental property?

I think the first thing to do is explore commerical real estate vs residential. The loan options and underwriting will differ depending on which path you choose. I'm working on closing a 28 unit mixed use property in WA State using seller financing once we get the additional capital required by the seller. I'd be happy to connect and answer all your questions

1 Vote

Columbia, South Carolina

Quote from @Ryan Ramsay:

Hello, Im 19 yrs old. I was someone lucky enough to receive a trust fund from my parents after they pasted away. I don't want to be an idiot and spend it all away. Ive been looking into housing/duplexes among other things and was hoping to get someone more expiernced to give me some advice on what would we be a good route to take or if I should wait. Thank you

I'd love to talk and answer all your questions. I sent you a connection request.

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Hey everyone! I am a Commercial and Residential Realtor from South Florida who has moved to the beautiful Pacific North West aka PNW.
I have been obsessed with real estate for numerous years I've also spent some time working a couple different areas of Commercial real estate including working on loans/underwriting.

I'm looking to start a portfolio of mid-sized multifamily properties in high rental demand areas that are also in or around ecotourism destinations. We will use local professional highly rated property managers or self manage depending on the deal and it's location. We will "walk" or inspect properties multiple times a year regardless of it's self managed or third party managed.

We will invest in Commercial Real Estate such as mixed use or multifamily buildings, I already have a 28 unit building with owner financing being offered but they want an additional 10% down which is roughly 200k before we can close that deal.

Our strategy is more of a buy and hold, refinance long-term but we will consider 1031 in select situations. We will add value by doing flat-rate utility billbacks where possible, being on top of capex so we can drive rents to a safe but profitable level. In select situations we can consider doing some limited Airbnb to further drive revenue, although most loan companies will not consider that short term income and will choose to ignore it entirely or to underwrite it using the long term lease value.

We're choosing commercial because we can force appreciation through the profitability and income of the property. Where as if you are to buy residential properties i.e. SFH or a 4plex it is valued using a comparable sales approach as in what did the neighbors house sell for? In commercial real estate values are more based on the amount of income the property is generating which is not a factor to consider in residential at all. This means we can potentially scale and refinance easier using CRE if we are able to add value through the income approach.

I'd be happy to discuss what I'm currently working on, to give advice to other people who are getting started in their journey. Let's get this journey started! What's holding you back from getting started if anything?

1 Vote

Quote from @Nail Almukhambetov:

Interested in ground-up and value-add developments (vacation rentals, hotels, CRE, multifamily).

Hey let's connect! I was just about to make a thread about this and I'm looking for a partner. We have a couple different options to work on and I'd be happy to discuss.

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Quote from @Zach Pendry:

I currently have a small portfolio of single family houses but am looking to expand into multifamily. An opportunity has come up to purchase a 16 unit apartment. With this being my first apartment deal I am more unsure about underwriting this type of deal and was hoping to get somebody who is more experience in multifamily to look at the proforma, T12 profit and loss, and rent roll to tell me if I'm missing something or to let me know of things that I should be looking out for.

hey super exciting! I would say you definitely need to add a vacancy cost I would also look more seriously at repairs/ capital expenditures for starters. I'm sure we could refine your model even more but that's what I saw after looking at your model for two seconds.

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You've gotten some great responses here. I'm a licensed commercial and residential agent and looking to acquire 28 units though owner financing.

someone knocked it out of the park when they said your return is theoretically higher if you use financing vs cash.

The second best comment which I also love to make but someone else beat me to it is how an appraiser values the property which is comparable sales in residential vs the income approach in CRE.

I love Ben and his family so I'm glad you're watching his content. I almost sold a hotel for him haha. Anyway I would definitely consider using 30 percent down for two properties

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Los Angeles County, California

Quote from @Kristian Orphe:

Quote from @Rick Albert:

Hey Kristian,

I am a Realtor who is on his second house hack here in Los Angeles. I'm a case study in the House Hacking Strategy. I also manage a Facebook Group with roughly 1300 landlords, mostly here in So Cal. I also own properties in three other states.

Unfortunately what you are looking for is far from a needle in a haystack. There are many 3-4 unit properties out there for sale but most are tenant occupied and most are paying below market rents. The numbers won't work. The second hurdle is if you do an FHA loan with 3.5% down, then there is a self sufficiency test, which basically means the lender takes 75% of the total rents (including what your unit would rent for) and it needs to cover the PITI (payments, interest, taxes, and insurance). The numbers don't work here. If you think about it, if the numbers work at 3.5% down, then why wouldn't an investor putting 20%-30% down buy it? There is the 5% down option that doesn't require a self sufficiency test, but the numbers still wouldn't be where you want them.

If you are looking at a house with an ADU, those are starting at around $900K and go up from there unless you are in C or lower class neighborhoods.

You could look into the FHA 203(k) loan for construction, but you run into the same concerns. It is the loan program that I did on my second house hack. Now if I wanted to I could live for free with major sacrifice (roommates, etc.) but that took time with appreciation and I had refinanced. I've owned it for 5 years now.

I'm not trying to be a negative person, I'm trying to be realistic. There may be some opportunities out there where you have to get extra creative, like creating extra rooms, etc. For example maybe buying in areas like Pacoima where having multiple rooms is common. I would just hate for you to go down this route with an agent who claims it can be done just for you to be in a bad spot.

I'm happy to talk to you more about it.

Thank you for your very quick, honest and detailed reply.
This information is incredibly helpful!

So about the self-sufficiency test, lets say I didnt want to live for completely free and my wife and I are willing to contribute a significant amount to the mortgage (between $2000-$3000).

Would this seem more realistic if I find a property with a vacant unit to live in?

Hey! I'm shocked that no one has asked you what price points and how much you have to work with. Not annual income but actually saved. My best advice given the lack of additional information would be to either look in other states or partner up with people who are in close states who are looking for additional capital. I'm one of those people, I'm also a commercial and residential agent. I'm in WA State and looking to close a deal for 28 units. You should also consider that a duplex or triplex are also harder to force appreciate without cosmetic upgrades where as commercial real estate that are larger can be valued using the income approach which is not a metric used for smaller residential properties. If you own commercial real estate and you increase the income of the property it's theoretically worth more where as if you increase the income of a 4plex it's still valued using more of a comparable sale approach.

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Los Angeles County, California

Quote from @Imani Naomi:

Hello Everyone,

I am looking to start a rental portfolio and need some advice on where to begin. I have managed 180 unit buildings and currently oversee a student hosing building for 201 students. I want to start building my personal rental portfolio, but I need a little advice. Do you think it is better to start with single family units or multi-family units?

During my journey to obtaining my degree in real estate financing, I have found that single family homes cause a great financial burned if the tenant decides not to pay their rent. I have noticed much of that financial burned is mitgaged if you own a multi-family unit. Yes, I do understand their are ways mitgate risk through renting to tenants through housing programs, but my interest relies in buildings with more tenants. Considering that I have work in the property management field for the last few years, I am very familiar with what it takes to keep a multi-family property up and running.

I would love to know how some of you started building your portfolio and what your thoughts are on starting with a portfolio with a higher number of units. I am really trying to unleash my inner Cody Davis energy lol.

Hey there! Awesome that you have tons of management experience! I have experience as a commercial and residential real estate agent.

and I'm working on acquiring a 28 unit mixed use building through owner financing, we just need some additional capital for the down payment.

here's my advice for you and starting a portfolio. As you and others stated it's easier to get started in residential but I'll tell you why I choose to focus on commercial. It's two words forced appreciation.

basically you need to pretend you're an appraiser. A house is always valued and appraised using residential practices which uses comparable sales. In short it doesn't matter if you increase how much income a residential home is leased out for that will never improve your property value it's always based on how much homes in that area sell for.

commercial real estate on the other hand has a few other ways properties are valued including the income approach. So if you buy and rent out a retail center or an apartment building or increase the existing income the property is going to be worth more and can be refinanced easier.

It would also make 1031 tax deferred exchange a more viable approach and tool you can use. While I'm not a lawyer and I would always encourage you to speak to one I believe you can 1031 homes but I would say it's much more powerful as you scale with commercial.

So personally if I were you depending on how much I had to work with I would seriously consider commercial.

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Minneapolis, Minnesota

Quote from @Jay Ben:

What would you do, assuming you didn't have the experience you might have today and wanted to get into multi family with $250,000?

Time to partner up? Bring 500k to the table together and we can lock down some owner financing deals!

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All Forum Posts by: Siraj Alsafar

Siraj Alsafar has started 3 posts and replied 41 times.

Post: Looking for partners for Commercial Real Estate

Post: Just Starting Out & Have Questions

Post: Purchasing a rental property

Post: Looking for partners for Commercial Real Estate

Post: Looking for real estate projects to invest in!

Post: Multifamily Underwriting Help

Post: Buying with cash vs financing

Post: Looking For Multi-Family Investment Agent

Post: Where to start - Multi-Family or Single Family Homes?

Post: Ideas on how to get started in multi family with $250,000