All Forum Posts by: Stephen Brown

Howdy,

I am looking for what the title says. I would like a referral for an attorney who is good at tenant collections, forever till collected, in the Baltimore Maryland Area. Most of my rentals are in Baltimore County.

I had a name but lost it because I didn't need it at the time.

Thanks in Advance.

Steve

I have to take a look at that @Enrique Huerta

@Enrique Huerta thank you for you advice. I really appreciate it. My goal is to create a calendar in Excel that after I enter the main dates, it will calculate deadlines. then I can go in and change deadlines and have it recalculate. Etc. But that process is taking a back seat to underwriting deals...so it's taking longer to complete. 

Thanks for the advice. It wasn't so much that we were pressed time without enough days. It just felt like we didn't have a clear path of an order and deadlines, if that makes any sense.

I will review what went right and wrong to help flesh it out.

Hi all,

We recently settled on a 101 multifamily property in Ohio. Throughout the process things were a little bumpy.

One thing I found was we didn't seem to have a timeline process. We had a very extensive due diligence checklist as well as a checklist of of things to do to get to closing.

It all got done but I hope for our next deal that it would go smoother.

What I would like to find out if any of you can share a timeline for your due diligence item groups as well as timeline of things to be done to get to closing.

I hope that if I have a better clue as to when things should be done that things can go smoother next time.

Any help would be appreciated.

Thanks.

Hey @Davey Davanoski it depends.

I do my own property management for my local single family rentals, sort of.  I take the phone calls. If they need repair they call my maintenance man directly, who I found on Craigslist. I have someone working from home to keep my books. I go on vacations and if  get a call that my guy can't handle, I call someone to take care of it.

I do not do my own property management for Multifamily units. But you need to manage the management company. Know what reports you need to see, and keep them accountable.

Congratulations @Derek Gibbs. It takes tenacity. It took us about 10 months to get our first one (101 unit in Ohio). Keep Pushing Forward.

When using any rule of thumbs, realize they are just that. A guide. I suspect you are looking for a 5 unit or greater, that's where the rules come in.  Most of the deals you come across are not good deals, so don't think you are doing something wrong. The sellers want too much money. If the 50% rule you are using is half the gross income divided by the cap rate, it's a good rule of thumb. Hold the line. Obviouly don't use it as your final underwriting but it will weed out the bad ones. If expenses are too high, can you lower them to get to 50%? Is income too low, can you raise it to get to 50%? BUT you should offer on actuals, not proforma.

@Christian B., you are receiving good advice here. If you're credit is fair to good, and you have 20% plus closing then buying a fourplex is a great way to go. Remember that the fourplex will be appraised by comparables. This is considered a residential loan. Make sure that the rent of the other three units covers the entire PITI (principal, interest, real estate taxes, property insurance) - if not, can you handle the extra amount. You should actually try to get more since you should set aside 5-10% of rent for each: Capital Expenses (roof, water heater), Vacancy, Maintenance. Again if the rents don't cover that, make sure you can. Have the property professionally inspected, and go back to the owner for every little thing they point out - then decide what has to be done or you walk away. DON'T FALL IN LOVE WITH THE PROPERTY. Interview 4 or 5 agents, tell them you a new, ask them how many quads they sold last year. Make friends of real estate investors and ask them to review your deal.

Oh, one more thing, GO FOR IT. You can't get too hurt with a fourplex, particularly if you are going to live there.

@Mike Gehard You are getting great advice here. As a sponsor I don't want you all to feel I have ulterior motives with my comments. 

When we present a project we try to be conservative, but not all sponsors are - particularly now when deals are harder to find and returns are trimming off a bit. They are good deals, but not 20% IRR, maybe not even 15% IRR.

I echo what other investors say. These comments are from the sponsor viewpoint. 

When a project is presented - 

Are the market rents listed really the market rents for the area?
Is the deal recession proof?
Are there more than a couple of industries employing people, more than a half dozen employers?
Is population declining? (Run away unless there is a compelling reason to expect improvement)
Is income steady to rising, and sufficient to pay the rent? 
How low can the occupancy go below it no longer breaks even?
Will the sponsor need your money longer than you want to give it up? 
If they can't refinance, are you OK with that?
If the value add are renovations, do the numbers look reasonable? Sometimes the scale brings the cost down a bit so that it looks unreasonably low. Is there timeline reasonable for renovation?
Is the management company good at what they do, for this type of property?

I want to piggy back on @Sam Grooms comment about population growth, income growth for a 2-3 year flip. It is vital that it be in place to make sure you will be able to find a buyer when you want to flip. Plus is there any meat on the bone when it is time to flip so someone else can see the value. We don't always sell to REIT's.

Going the a well known sponsor is not always the a safe move. I know of one fairly well known sponsor and have been told be investors that the numbers don't look like they will prove out. That being said, I don't think you should do a 100 unit apartment with someone with no experience. On our first deal we partnered with experience. You need experience in the stable.

Putting the project together is the job of the sponsor. You need to dissect it till you are comfortable. Though you may never be 100% comfortable. For most people, if they don't jump past their fear, they never jump in. That being said, there is a difference with feeling uncomfortable with a deal and fearing the deal might not work out. If you are comfortable that things look good, that's when you push past the fear. Risk/Reward quotient.

I concur with @Ben Leybovich what really is most important is the quality of the market, sub-market, and the deal. Deals are running longer. Though I am not sure there will be a 2007 downturn in the CRE market, there will be something. It could be a regional economic drop.

You may not fully break out everything in the project package and do a full underwriting, but you need to trust the numbers.

Trust is a big factor. Do you trust the sponsor?

Transparency is critical for our company. Any question asked, gets answered fully. But also just as important is
Is This Project Right For Your Objectives?
If I have a project that I expect to double the investors money in 7 years, but it turns out I can do it in 4 years - are you ok with that? Or would you prefer that we wait till year 7 to sell and try to get more than double. Some would be good with doubling, some would feel we didn't maximize returns.

That's enough from me for now. Hope it helped.