All Forum Posts by: Stuart Udis

@Shiloh Lundahl What are you contributing to these partnerships to acquire 50% of the upside? Property identification, construction management/property management? Loan Guarantee? Contributing a portion of the equity? What fees are you collecting if any besides the $5k/per property? It's difficult to say if the partnership structure makes sense for all parties without knowing your exact involvement. 

Good luck, wholesalers are the least likely to follow do not call list/related legislation. Most also work off of call lists that are incredibly outdated, so anything you do today likely won't have an impact for a while....I received a call from an idiot on Tuesday wanting to know if I would sell a piece of land. It's land where I built condos and obtained a C/O March 2022. Told them to do a drive by and call me back with an offer :)

@Jose Morales Is there a reasonable expectation backed by fundamentals suggesting these properties valued at $25K will appreciate? If not, these are liabilities and wouldn't advise adding debt. It could make already risky investments even riskier. If meaningful appreciation is on the horizon, its a different story.

If you were to go the financing route, blanket loan may be your best bet through small local bank or alternative lender. Unfortunately due to the property values, the cash proceeds will be disproportionately impacted by transactional costs associated with the financing (doc prep, appraisal, recording etc.) which will also hurt the available proceeds compared to the same LTV financing of higher value real estate that can better absorb these transactional costs.

What Frank is proposing is not a small multi-family building. The fact it's a condo building only drives up costs further. Getting commercial general liability insurance coverage to build condos is difficult enough to begin with. Good luck getting CGL insurance for a condo build unless every subcontractor carries appropriate  license/insurance with GC listed as additional insured. No way you are satisfying this requirement using a bunch of  $20/hr laborers to complete MEP work. Any builder should want their subs to have appropriate insurance coverage to begin with, but with condo builds your contractor insurance audits will require this of you otherwise your coverage will not be renewed.  Next, you better be hiring subcontractors who not only offer warranties, but warranties you can rely upon (also requires using more expensive subs). 

Even Eric's small multi-family example seems risky.  Building ground up with $20/hr laborers seems like a precarious proposition. No way everyone carries appropriate insurance or offers warrantable services. What happens if issues arise?

Without social media most of these syndicators wouldn't stand a chance to raise money. Fortunately for them,  social media is an enormous and inexpensive stage to promote their nonsense. I must say, some of their Instagram pitches are entertaining. I follow a few solely for the entertainment value. One of my recent favs is someone who's Instagram profile read  something along the lines "0 to 500 units in 6 months". I can only assume they were an LP in a storage unit syndication :) Now they are raising money for a mobile park and using Instagram to reach an audience. There's tons of these lunatics out there...... LP's beware.

@Frank Pyle I am at $175/ft  on a 36,000 SF over covered parking 18 Unit condo building I am preparing to break ground on in Philadelphia. This is self performed with a 10% project management fee which is lean. I don't see how you are building anywhere in this country for $80/ft. I highly suggest you take a closer look at your numbers, particularly for a multi-family building which has added costs compared to SF homes practically everywhere in this country between STC ratings, fire ratings, storm water,  fire suppression requirements etc. 

The last thing you want to do is turn over to a bank a half baked construction budget and then come back to them with substantial increases because they won't take you seriously. Doesn't help if your assumption is $250K/unit out sale but are only arriving at $7.9M as complete (10%+ under target).

As a 36 Unit condo building, there should be a higher carrying cost assumption as well, particularly with the interest burn rate. Very difficult to sell condos until at least 50% are under contract in order for the units to be warrantable. At $250K/door I don't see how you are finding buyers unless these are warrantable units.  There are ways around this in some instances with phased deliveries but it sounds like this is a single phase build. 

Again, start with the build costs, everything else is secondary. 

@Frank Pyle Have you had this construction priced? I don't believe there's anywhere in the US where you can build a 36 Unit 65,000 SF building at $80/ft which is how you are describing the costs if you expect to build this structure for $5.2M. That's where you should start, because I am afraid you are way off with your cost projections. Hopefully you can achieve a higher sell off than $7.9M/$220K/door as well because I don't believe this is a feasible project (your $250k sell off doesn't align with your $7.9M sell off either).

@James Zobrisky Relying on cash flow to fund future acquisitions is a challenging proposition. View cash flow as necessary to cover expenditures and meet debt coverage ratios in order to obtain favorable financing, do not view cash flow as a vehicle to cover future down payments. 

The key to purchasing more real estate is by focusing on the fundamentals of the real estate. Your ability to identify properties and markets where you can generate equity (both imputed and appreciated) while using debt responsibly and knowing when is most appropriate to sell is how you acquire more real estate. 

Most who fail  buy C/D real estate without strong fundamentals. They then obtain a favorable appraisal and achieve decent cash flow in the earlier years. Unfortunately cap ex usually catches up to them and the appraised value rarely translates to a similar sale experience and all along the property has merely been a highly levered property. It's at this point many exit the real estate investing business. 

With $330/m in cash flow, unless you have sufficient reserves set aside those funds should remain as liquid as possible in the event of repairs or cap ex. It's not enough money to be concerning yourself with better ways to re-invest the funds.

@Sam Ojo The $900K of equity isn't relevant without understanding the value of the real estate. For instance if this is a $10M portfolio that's levered with loans totaling $9.1M, there's no equity that can be pulled but if this is a $1M portfolio with $100K of debt, its a different story. These are extreme examples used for illustration purposes.