All Forum Posts by: Ian Ray

This is my Multifamily investing business plan, based on the Outline given by the wonderful Ryan Moeller.   I would love feedback from all of you awesome BPrs, Good, Bad, and Ugly.  I am jumping into this new industry and would love to get off on the right foot. 

1. Mission Statement – To use the vehicle of investing in multifamily properties of various sizes (minimum of 10 units) to generate wealth for myself and my investors in a stable fashion. I plan to acquire ownership or control of 7,000 units within the next 7 years through a combination of syndication, joint ventures, and personal acquisitions.
2. Strategy – My strategy it to acquire moderately sized (50 to 150 unit) properties in emerging markets that are currently at a C+ to B- grade, as well as acquire large multifamily (160 to 350 unit) properties in stable areas around major industry and academic institutions that are B- to A- grade. The moderate sized properties will be managed by either an in house property management group that is a General Partner, or an outside property management company contracted for service on the specific property.
3. Market – Target markets will include Charlotte, NC, Raleigh-Durham, DFW, Knoxville, Nashville, and Johnson City TN, specifically around public education institutions that have pent up demand for viable student housing.
4. Criteria – I will select properties that can be acquired with a 65% LTV with a cap rate of 5.6 to 10% (based on size of acquisition and financing in place) cash flow sufficient to generate a minimum cash on cash return of 11%. The max purchase amount will be contingent upon the specifics of the deal and the position of the market at time of evaluation. With that being said, I will aim to purchase properties at least 15% below appraisal value. I will seek to hold these properties as long as the value of the investment and the yearly cap rate stays within our models.
5. How to find deals Marketing plan – I plan to network with brokers that specialize in the inventory I seek. I also intend to dialogue with other investors in the space who may be seeing deals that I am unaware of that fit my criteria, but not theirs. I will develop relationships with commercial lenders, and private money sources that invest in my target markets to create an ecosystem for information flow.
6. Finance – Deals will be financed on a case by case basis using a blend of private capital as well as JV and equity partners to raise capital for the down payment on the property. I will seek to use either conventional financing or seller financing where it makes sense to fund the rest of the acquisition of our target properties.
7. How to do deals – How are you going to turn a purchase of a property into profit? Clearly define the steps. Repairs, rent, management, implementation of exit strategies, etc.
8. Exit strategies, Backup Plans – I plan to maintain control of all properties acquired until the opportunity to sell becomes a better proposition than holding long term. I plan to return the bulk of investor principal via cash out refinance after a 3 year period, paid out in order of agreement based upon the specific deal structure. For student housing, I plan to execute a master lease with option to purchase in order to remove investor capital but maintain control of the property. I will also evaluate seller financing options as applicable.
9. Team & Systems – I will structure my team per acquisition. Team roles will include on-site property management and maintenance from a General Partner property management firm, or a contracted firm, as well as in house CPA, Lawyer, and asset manager.

I have a question for the investor who enjoys finding value add opportunities in multifamily;  What has your biggest turnaround been for a property in regards to increased revenue?  And what strategy did you use to get there?  I am wondering what current strategies are out there being used in the real world.

@Derek Kilgo,  

I would say you absolutely have time to learn the theory of all of these things, and to begin building a mentorship/action team in the area.  If you continue to use BiggerPockets, and network, you will find a wealth of information and guidance.  People here loving sharing their information and insights.  If you really want it, and REALLY work at it, you can hit your goal.  

It isn't about having enough time, it is about making enough time. If you are willing to make it happen, it will.   

Go forth and wage war on your goals!

@Account Closed, I tried to send you a PM and colleague request, but I am unsure if it went through or not. It is saying you already have a pending request from me.  If you don't mind, could you send me your email so I can discuss further with you; or would you prefer that I call?

@Account Closed Wallace Crawford of Mathers Realty is a great one. He will go above and beyond.

@Chris Tracy Thank you for your reply. I appreciate you taking the time out.

@Chris Tracy By Eyeballing, I mean that I am staring at it with an ardent passion and desire to acquire it.  I know there is a capacity to force appreciation because of a few factors.  

First it is at 70% occupancy and the market average for comparable properties surrounding this one is a rate of 96.8% occupancy.  The reason for this is the fact that the property has gone through 10 on site managers between 3 management companies.  Also, when I went to visit under the guise of actually wanting to rent an apartment, the leasing agent I met with was not very knowledgeable ( I am fairly certain she was new), and did little to nothing to attempt to close the deal and get me to apply.  She directed me to the website to fill out at my leisure.  I had a chance to speak with a few current tenants who stated they had the same experience.  So, for one, appreciation can be forced through increasing the amount of tenants in place. 

Appreciation can also be forced by upgrading some of the amenities that are below market standard for the area, such as the toilets, sinks, and lighting, allowing rent to be raised to market level.  

Another way to force appreciation on the property is to execute the 3 letters of intent to occupy the retail spaces that have not been followed up on, and secure tenants for the other 2 that are vacant without interest.

Also, finishing the exteriors on the buildings properly would go a long way to increasing the rentability of the 2nd phase building.  There are several balconies that still have exposed steel beams meant to be wrapped in hardy plank.  It seems as if in several places money was misappropriated by the contractor after they received their draw and was not completed to specification.

The reason I know these things specifically is because upon visiting the site, I asked who the designer for the buildings were, and, having worked with that design firm while I was in the Multifamily Construction Industry as an Assistant Superintendent with State Building Group, I called a contact to see if I could peek at the plans and see what was called out in the sheets.  There were several corners cut.  But not irreparably so.  If acquired for the correct price, all of them could be easily addressed.

The brokerage firm offering the sale has all of the relevant financial documentation one needs for due diligence, and I have been analyzing it accordingly.  There is a lot there, so it is taking me some time to get through, but I am approaching it methodically.  Based on what I have seen thus far, the biggest issue is lack of marketing correctly to the desired demographic, as well as the mismanagement of the previous property managers.

Given the people I have in mind to add to my team (property management company with a strong stance on selling, General contractor specializing in Multifamily rehabs, and a marketing team), I feel like I could make this attractive for investors to buy into.

And to address the exit strategy statement, that is in reference to the investors that would work with me.  Depending on the financing structure and the terms on the loan (rate and balloon date), I believe a Cashout Refi would be an attractive option once the property was stable after a 3 year period. Which would return the principal as well as improve cash on cash return.  Or, depending on where the market is at when it comes time, we could sell at a higher price point due to the appreciation we created by stabilizing the property.

I would personally like to stabilize it, cashout refi, return my investors principle, and then hold onto it for a few years.

So, that is where I am at in the whole process.  Is there anything I did not effectively address? And if so, can you please instruct me on how to do so.

Ian 

Hello all,

So, as a Business Consultant by trade, I never really thought I would find myself asking this question, but here I am.  I am looking for advice on how to structure a Business Plan for a multifamily acquisition I am eyeballing.  It is a rather large first deal to do in Multifamily (250 units, 5 retail spaces in addition), and it is a property that has tremendous capacity for forced appreciation, as well as multiple viable exit strategies.

I have written numerous business plans for different business types, but I have never done an in depth plan for real estate to secure funding on this scale.  I am well aware that I will need to partner with a more experienced investor in this deal, but I want to make sure I have my ducks in a row before I go shopping it to people.  I realize I am a newbie in the area of acquiring something this size, but I have every desire to appear professional none the less. 

I know how to run the numbers, I know what to look for in the analysis, I am just unaware of any specific items I need to be sure to include in a business plan for something like this that, if left out, would lead to me potentially appearing amateurish (which I am), and missing funding. 

Any advice that can be given with such vague information is appreciated.  If one needs more detailed information, please private message me. I have an NDA and a Non Compete that I would like you to sign before going into more details.  Thank you for all of the help you guys are going to provide.

Bigger Pockets always comes through.

While I don't feel like it is crazy, I do feel like you don't necessarily need to inform anyone that you have surveillance on your property, as it is YOUR property.  I use cameras at times for various different tasks, and I post a general sign at the entrance to my property that surveillance is occurring.

Telling anyone that cameras are around will just ensure they are the first things disabled when someone wants to steal from your property. Contractors and information security don't go hand in hand when it comes things like this.

I would advise you make the contracts air tight as far as who is liable for what goes on while a specific contractor is "in control" of the site, and get a really good in insurance plan.

A better idea would be to use an app like taskrabbit, or WeGoLook to have inspections done, and just use the cameras to get a sense of the pace work is happening at, and if your contractors are slacking off or not.

One of the benefits that this property offers is the fact that it comes with 5 acres of land positioned between two brand new subdivisions.  So even if we acquired the property in total, subdivided the land for resale, and then either wholesaled the home, or just partnered with a more experienced rehabber, it would be of great benefit to us and our business.  I feel like this property, if done correctly, offers us a lot of learning opportunities, and a chance to grow.  We are currently evaluating multiple options. 

Oh, by the way, I am @Jasmine S.'s business partner. Hi guys!