All Forum Posts by: John Jacobus

@Jonathan Johnson Definitely continue to follow-up with the broker and check on the status of the deal in the coming weeks.  Deals fall through all the time and you want to be positioned to act quickly in the event this happens.  Many experienced multifamily investors credit their follow-through with opportunities that they initial lost to other bidders as a key source of successful deals.  Many investors give up and move on after they initially lose in the bidding process.  However, if this property really interests you, continue to stay in touch with the broker, remind them that you have your act together and can move quickly if/when needed, and generally position yourself so that you will be the first person the broker calls if the deal falls through. 

@Kenneth Garrett I transitioned my focus to multifamily investments about 18 months ago after ~15 years of SFR ownership in CA and AZ. I acquired my first property in DFW with partners and am looking to scale my ownership of mid-sized class B & C multifamily property in DFW, Houston, and Atlanta over the next few years. When I shifted to multifamily, a few things were and continue to be intimidating and/or difficult:

• Understanding the capital intensity and possible sources of capital to close a multifamily property and execute a plan to add value
• Getting commercial brokers and lenders to take me seriously given my limited experience despite a successful track record of investing in SFR's and professional background in investment analysis/financial planning
• Getting my mind wrapped around the increased scale and moving parts involved in finding, closing, and operating multifamily property

Below are some of the things I did to raise my comfort level and get over my fears of the unknown.  For me, after a solid period of focusing on education, I was able to overcome several debilitating mental barriers.  Getting your mind right and mitigating self-doubt is key.  I think Rod Khleif does a great job of incorporating the importance of winning the mental game into the themes shared in his podcast and book.  In addition, I've found that Jake & Gino, Michael Blank, and Joe Fairless do this well.  After researching other investors and operators, I quickly realized there were others who achieved success despite the fact that they entered the business without significant business and/or financial background.  The concept of owning multifamily property and operating at a much larger scale became much more feasible and accessible to me as I understood how others achieved success and noticed that many of the successful operators were like me and/or didn't have several key advantages or experiences.  These are some of the things that I did to become more comfortable with multifamily:

• Read books and listened to stories of others who achieved success with multifamily investments with little/no experience.  I've included a few recommendations below that I found useful.  Listening to the paths others followed, their struggles, and how they overcame obstacles was key in helping me get over my mental hurdles.  
• Networked with others who are successfully acquiring/owning/operating multifamily property in the markets that interested me.
• Networked with property managers who focus on managing multifamily properties in my areas of focus.  I asked them for advice on what potential investors can do to increase the chances of success with multifamily and/or get more comfortable with the intimidating factors associated with acquiring, owning, and operating multifamily property.
• Attended low-cost workshops, educational events, and web-based training.  I found a few active multifamily investors through BP and other channels (Mark Kenney, Brad Sumrok, Joe Fairless, Vinny Chopra) and participated in their live and/or virtual workshops.  Without spending thousands of dollars, I was able to meet others who were looking to increase their participation in multifamily investments, discuss shared concerns, and gather advice on how to move forward.  I also learned the basics of the multifamily investment lifecycle (selecting markets, understanding property classes, working with brokers and lenders, due diligence, financial analysis, investor communications, working with property managers, etc.).

Here are some of the resources that I found valuable when I first started transitioning to multifamily investments:

Books:

1. Wheelbarrow Profits by Jake Stenziano and Gino Barbaro - Focuses on purchasing, financing, and re-positioning "mom & pop" multi-family apartment communities.

2. The Ultimate Guide to Buying Apartment Buildings with Private Money by Michael Blank - A step-by-step overview of how to identify multi-family apartments and raise money from private investors to acquire and re-position them.

3. The ABC's of Real Estate Investing & The Advanced Guide to Real Estate Investing by Ken McElroy - Solid detail on the process as well as case studies and advice based on personal experience.

4. The Complete Guide to Buying and Selling Apartment Buildings by Steve Berges - A nice overview of the apartment investing process from beginning to end with case studies and personal stories.

5. How to Create Lifetime Cash Flow Through Multifamily Properties by Rod Khleif - A nice overview of the apartment investing process from beginning to end with case studies and personal stories.

6.  The Perfect Investment: Create Enduring Wealth from the Historic Shift to Multifamily Housing by Paul Moore - I enjoyed this because it outlines the merits of multifamily relative to other investment options.

Podcasts:

1. Old Capital Real Estate Investing Podcast - Lots of good stories about newbie investors getting started with multi-family investing

2. Wheelbarrow Profits Podcast - While they have a variety of different guests, Jake and Gino have several interviews with individuals who have scaled quickly and achieved success in the multi-family arena. The Jake & Gino personal story is also a great success story in the value-add multi-family area.

3. Apartment Building Investing with Michael Blank - Same comments as Wheelbarrow Profits

4. The Lifetime Cash Flow Through Real Estate Investing Podcast with Rod Khleif - You're already a listener.  I also enjoy Rod's podcast.  

5. Best Real Estate Investing Advice Ever with Joe Fairless - I recommend the "Follow Along Friday" episodes to you. In these episodes, Joe shares updates on his investment activity and shares lessons learned, mistakes, and best practices from acquiring multifamily properties. He has scaled from 3-4 SFR's to ~2,000 multifamily units in just a few years so his experience is particularly relevant given your situation.

Marcus & Millichap's 2017 Multifamily Investment Forecast provides a list of high yield markets that may interest you. Cleveland, Cincinnati  Columbus, Kansas City, Indianapolis and Jacksonville are on the list. In addition to listing high yield markets, the research report outlines low vacancy markets, total return markets, affordable markets (% of rents relative to income), and other key measures affecting prices and rent growth, including unemployment, job growth, unit absorption, and population growth.

The materials below are free after you create an account. 

http://www.marcusmillichap.com/research/researchre...

@Daniel Pierson  I've owned residential income property in Scottsdale for over a decade and know the area well.  I've lived out of state for the entire period I've owned rental property in AZ and have used third party management with success.  Send me a direct message if you're interested in discussing this topic further.  I'd be happy to share my experiences and professional contacts with you.

Further to one of @Austin Fruechting's points above, CoC doesn't pair well as a metric for evaluating and/or showcasing the strengths of a flip opportunity because flipping isn't typically an approach that generates significant recurring cash flow. CoC can be useful when evaluating long-term hold opportunities as it's a metric that is best used to evaluate the recurring cash yield produced by the property relative to the cash invested. For flips, I recommend using IRR, which takes into account all inflows and outflows over the life of a project. This includes cash invested, recurring cash yield, principal pay down (if leverage is employed), and cash proceeds at the time the property is sold. In my view, to be competitive with other investment options available to investors who are considering flips, your projects should have an IRR of at least 8%, though you'll find many flippers are marketing 15-20% IRR for their projects. I recommend that you research what other flippers are achieving in your market and use their projected IRR as a benchmark to assess the competitiveness of your deals.

@Seyed Javaheri The attractiveness of the cash on cash return for your deal should be evaluated relative to the prospective rates of return that your investors could earn by pursuing other opportunities.  It also depends on the qualities that your investors value in prospective investment opportunities (i.e., cash yield vs. capital appreciation). 

If your investors seek high yield investment opportunities, then your deal should produce at least 5-6% cash on cash return.  If the cash return falls below this level and the deal doesn't have a capital appreciation component to it, then your deal won't look very appealing to potential yield-seeking investors.  This is because they can pursue other options and achieve similar or better cash on cash returns.  

Alternatively, if your deal has an attractive capital appreciation component to it then your cash on cash return may not need to be as high--though it should be >0% in my view--if you are marketing it to a group of investors who are looking for capital appreciation instead of cash yield.

For yield-seeking investors, they will be comparing your deal to some of the income-generating investment vehicles listed below.  Research the returns of these vehicles to determine how competitive your deals are from a yield perspective.

• Publicly Traded Large-Cap Dividend Paying Equity Securities - ~2% yield
• 10-year US Government Bond - ~2.4% yield
• 30-year US Government Bond - ~3% yield

For investors seeking capital appreciation, they will be comparing your deal to some of the investment vehicles listed below.  Research the returns of these vehicles to determine how competitive your deals are from a capital appreciation perspective.

• Publicly Traded Large-Cap Equity Securities - 7-10%
• Early-stage Private Company Investments - 15-30%
• Med/Large Value-add Class B & C Multifamily Projects - 12-25%

If your deals offer a mix of cash yield and capital appreciation, which most real estate investment opportunities do, then your yield and capital appreciation projections should fall somewhere in between the options above.  

A good way to understand the competitiveness of your deals is to speak to investors and understand what they seek in their investments.  They will provide you with an indication of what they value in terms of yield, capital appreciation, holding period, volatility, etc.  This will help you market your deals to the right investors.  It will also help you determine if the deal you're sitting on will be attractive to others based on your projected returns.

@Garrett White  I haven't worked with Jake & Gino but I've read their book, Wheelbarrow Profits, and am an active listener of their podcast.  I recommend both resources to you and suspect their coaching program is worthwhile, though I don't have direct experience with it.  

You want to find a mentor who works in markets that interest you, is someone that you feel comfortable collaborating with, is actively doing deals with property types that you plan to focus on in the future, and has a track record of helping students successfully scale the learning curve and execute profitable multifamily deals.  

Here are a few other coaches/mentors who focus on multifamily syndication that are worth looking into:

- Michael Blank - He is the author of The Ultimate Guide to Buying Apartment Buildings and runs a great podcast called Apartment Building Investing with Michael Blank.  Both are solid.

- Brad Sumrok

- Joe Fairless - He is the author of Best Real Estate Investing Advice Ever Volumes I & II and runs a great podcast of the same name.  

- Mark Kenney - He runs a firm called Think Multifamily and is based on Dallas.  He is a great guy and is active in Dallas and Atlanta.

@Conrad Feh  I second Daria's recommendation of Brandon Hall.  He was a recent guest on the BP podcast a few months ago and only accepts clients who are active in real estate ownership.  I saw him speak at a meetup in NYC on Wednesday.  He was very knowledgeable and shared relevant and actionable advice for real estate owners.  I plan to transition my tax and accounting business to him this year.  Keep in mind  that he only works virtually with his clients, so if face-to-face meetings are a priority for you then Brandon is not your guy.

@Mark Neiger What are the prospective returns of the alternative investments available to you and/or your potential investors? If you find an opportunity with a stable 8% IRR over 5 years and you expect 1% from a savings account, 6%-8% from public equity investments, or 3% from a 5-year government debt security, the relative qualities of the alternatives should help you understand whether your opportunity is good, average, or poor. To be sure, there is always a degree of uncertainty when forecasting returns of various alternatives but the opportunity cost of your (or your investors') investment capital should be a major factor in determining how appealing your opportunity is.

@Richard Bull  I worked with Anderson Advisors to setup my real estate investment entities and establish a living trust.  The founder, Clint Coons, was a guest on the BP podcast a few months ago and is an active real estate investor, an important factor for me when selecting a firm to work with.  You can setup a consultation with them and explore the services they provide.  Their website also contains useful information.

https://andersonadvisors.com/