All Forum Posts by: Tony Guarino

Raj, 

I think there are two ways you can do this. In fact, I would do both and see how you comp each one. 

1. Comparable sales approach (Per unit) - it seems like you are familiar with comping duplex's, triplexes, etc. Find a few comparables based on the unit type. For example, if the 5-unit contains 2 bedrooms/1 baths per unit and each one is around 1,000 sqft, look for duplexes which contain the same type of units. If the duplex sold for $200,000 ($100,000/unit) then you would comp the 5-unit at $500,000. 

2. Reverse income approach - You can find market rents on zillow, look for comparable apartments, reduce what's on market by $100-250 to come up with a reasonable expectation. This will allow you calculate gross income. I'd say you are probably safe using a 40% expense ratio. So your 'NOI" will be 60% of what your total rental income is. Then you want to see what kind of debt you can secure. For a 5-unit, I would try your local banks commercial lending department. (Make sure to ask for their requirements such as: NW, Liquidity, DSCR, Debt Yield) Lastly, you will want to run an analysis and see where you come in at for cash flow. Assuming you are using a spread sheet, you can calculate what you want to make for ROI and adjust your offer price.

Obviously you will need to adjust each method by accounting for defensive and offensive capital improvements, but these are two methods to use. Feel free to DM me and I can assist! 

Cheers and good luck! 

Has anyone looked into developing tiny homes? My curiosity with tiny homes is driven by a few economic factors, mainly affordability, but want to look into some type of BTR model.

I initially ran the numbers assuming you buy the 'Lego set' from Home depot for $50,000 each, but realized those would technically be considered manufactured housing. Therefore you would need to be zoned for a MHP. However, while at the local watering hole, someone proposed, "what if you build them on site and fix them to the ground". Therefore, they are just tiny homes, not tiny manufactured homes and could build them in any residential lot - assuming there are no restrictions about minimums.

Anyone explore this or have anyone they can recommend that has done something like this before? Is it possible or have I spent too much time at the watering hole?

Has anyone looked into developing tiny homes? My curiosity with tiny homes is driven by a few economic factors, mainly affordability, but want to look into some type of BTR model. 

I initially ran the numbers assuming you buy the 'Lego set' from Home depot for $50,000 each, but realized those would technically be considered manufactured housing. Therefore you would need to be zoned for a MHP. However, while at the local watering hole, someone proposed, "what if you build them on site and fix them to the ground". Therefore, they are just tiny homes, not tiny manufactured homes and could build them in any residential lot - assuming there are no restrictions about minimums. 

Anyone explore this or have anyone they can recommend that has done something like this before? Is it possible or have I spent too much time at the watering hole?

Hey Pat, 

I found my first property on-market. If you don't have any experience, I recommend asking around for 'the best real estate agent for investors' in your area. I bought a duplex that needed work, negotiated seller credits, and got in the deal for $5,000 out of pocket. 

Tenants were already in place and paying rent and I was living for free, while paying down a mortgage. I'd be happy to hop on the phone and talk you through some things to think about. Shoot me a connection! 

Hey Kim, 

I want to piggy back off @Jeff Stein. I use QuickBooks for my personal finances and RE investments. It's fairly simple to utilize the class feature and I think that will solve your problem. You assign each revenue or expense to a class, then can pull reports based on each class, or run a total business P&L. 

P.S. I am always looking for freelance work!

My vote is to keep them and when they break, buy new ones. Here's my example: 

I bought a duplex which provided them (they were really old). About 8 months into ownership I got the text message that the dryer was broken. I bought a brand new washer and dry, with a 3 year full warranty, for +/-$1,200. 

That's about $33 a month over the 3 years. I financed it on a 12 month interest free credit card and paid it off within the year. While I think this would be harder to do on scale, I am providing a huge amount to value to the tenants. I try to make sure all of my investments are within the top 90th percentile of my market and providing washer/dryer can help you get there.

But for scalability, just provide the hook ups and avoid the headache!

A huge strategy that you're missing out on is to contact the selling agent yourself. A script would sound something like:

"I found this property on Zillow and would like to make an offer, but I'm not represented by an agent. I can let you write the offer for me and collect both side of the commission, how does that sound?"

This may not work depending on the state you are in, or the relationship of the selling party and their agent, however, that usually provides a huge incentive to the selling agent to sell the property to you. Even if they don't allow for a transactional relationship in your state, they will always find a friend of theirs to represent you. 

However, I do believe that a knowledgeable agent is worth their weight in gold. Try delegating more work to them and treating them like an actual team member. If they don't do their job, there are plenty of agents who will work tirelessly to sell you a property. 

Hey Justin, 

If you are new to real estate, it might make sense to house hack first. You can get some hands on experience as a property manager, and leverage the "I own and operate 3-4 units" in conversations. This will give you some added savings in your living expenses, and have something to talk about with people who want to invest in real estate but don't know how. Depending on your market, liquidity, and current employment, this could be done in as quick as a few months. I've successfully done this and can provide some insight if you want. 

Then, I think the play for people like you and I is to look at 10-40 unit apartments. If you are targeting 100-300 units, you are competing with high level players who can afford those small margins until the refi/ sale to see returns. At 10-40 units, you can target off market 'tired landlords' negotiate seller financing and, in my own opinion, have a higher success rate. 

I freelance underwrite for syndicators and investors and can help you out when you find a deal. I'm just of the opinion that you should build up to those larger deals. If you came to me and asked me for financing, the first thing I'd ask is, "tell me about your last deal and what assets you have under management". 

Good luck with everything! 

A lot to talk about here. I am in a similar situation and decided to keep it and rent it. In a high inflation environment, the best thing you can do is keep your property with cheap debt. Your alternative option is to use that equity to buy another house, and given interest rates are not 2-3% anymore, I would think you don't have to run the numbers to see which is better. 

In addition, alternatively to hiring a property manager, look at some software that takes a lot of headache out of the job. Rentredi.com is a good one that's recommended by BP. 

Goodluck!

Not to be a broken record, but look up 'REI Meets Ups {{City Name}}". Adding on to that, if I were in your shoes, which I was not too long ago, I would say to get good at some easy skills and market some services - discounted or free - to CRE brokers.

I'm thinking Professional Property Photos could be easy for you to provide. A lot of out of state investors need local boots on the ground.