All Forum Posts by: Spencer Gray

I agree with @Patrice Penda . 

How many GC's have you gotten quotes from?

There's no reason to give up your profits to a GC just because they know construction or they are your brother in law. I mean, they better know construction (that's what you are hiring them for and it's their job)! If you get to a point where you are confident managing contractors then you can become the GC and sub everything out, but until then what you pay a GC for is to understand the construction process and to hire the appropriate and qualified subs - that is the job you pay them to do, not extra. If they bring more to the deal (guarantee debt, found the deal, fund the deal, provide his time/services at cost etc) then you could give them something (5-30%). 50% is more like you put up the money and he does ALL the work, or visa-versa. There are much better ways to incentivize (bonuses for on time completion, penalties for not hitting deadlines).

If your brother in-law is the GC at full cost and he takes 50% of sale proceeds he is taking advantage of your inexperience. Save your equity for investors and yourself, tell your brother in law to find his own deals!

Also make sure you are using a different LLC for each project.

Bitcoin is up 615% over a 12 mo period so have some perspective. All investment involves a degree of speculation, different strokes for different folks. Don't get me wrong I'm heavily weighted towards cash flowing hard assets, but that doesn't mean other types of assets are bad and only real estate is good. 

The 10 year treasury just hit 2.86%, compared to around 2.36% in July of 2017 and the yearly low of 2% in September 2017. With a healthy jobs report and reports of inflation steadily picking up, specifically wage inflation, the Fed will start worrying about the economy overheating and is expected to continue their process of normalization by liquidating their balance sheet and moving towards "normal" rates. Most expect the Fed to raise the federal funds rate 3-4x this year. That way when we do enter a recession the Fed will have greater ability to stimulate the economy by lowering rates back down...

Side note - Everyone expected rates to raise last year also and they actually fell a bit, so who really knows? I'll be looking for strong cashflow that will weather just about any storm/rate environment. 

Let's looks at this question another way. How many people on BP who started with SFH, have over 100+ units and have NOT gotten into multifamily? Any at 200+? Why?

It's rough now but is just about as close to downtown as Fountain Square is. When the GM stamping plant gets developed by Ambrose it will change the entire area west of the river. Would probably be very management intensive at first but could be a great long term hold if you can wait 5-15+ years. 

I'm in the same boat as @Lane Kawaoka , we participate in some deals an LP and some as a GP/sponsor depending on the deal and the co-sponsor/operator. Both have their advantages; an LP can be totally passive while being a GP usually has more upside potential but carries more potential risk as well. 

@Rick S. 12% cash on cash isn't unrealistic but hard to do in the first first or second year. I like to see at least 8% cash on cash in a B class MF deal of 200+ units and would expect higher if there is a interest only period of more than 6 months. If there is a major value add I would like to see the property cash flowing in the double digits by year 3-4. 

As far as a market downturn it depends on your specific market and where/how the asset is positioned in the market in terms of location, quality, target demo, and the type of debt that is in place. A property with strong cash flow, positioned in an area with expanding demographics, can weather most storms (especially with low interest fixed debt).

A lot of good advice already. The key question I would be asking is what can you do to increase NOI (value add, reduce expenses, etc) to hit your yield objective. If you hit your yield then the going in CAP rate doesn't matter as much.

I have seen some small community gardens at at a few multifamily properties that look great and give the property a really nice sense of community. It's also a way to "move them in" while showing units. "Here is a plot with your name on it, do you like fresh herbs and veggies?"

Raised beds are cheap and easy to build, it may take a little maintenance/weeding if residents let it get overgrown.

Maybe not a big deal for cities like NYC, but it would absolutely change Indianapolis and similarly sized metros.  

Hi Milos,

I used to live down the street from the property you are looking at. The neighborhood gets better north of 46th, not as great as you get closer to the state fairground (directly south). That whole section of 46th st looks pretty tired with a lot of vacant retail. I would say it's a solid C neighborhood, you've got to go a little further North into SoBro before getting into the more B- and B blocks and there are some C- sections for sure. The area is quickly improving with plenty of flips already completed or underway. Also you're right down the street from the Monon Trail (most popular walking trail in central Indiana).

Elon Musks brother is opening a new resturaunt right down the street at 46th and College which has gotten some people excited and the new Red Line is being put in through College which should marginally improve public transit in the area.