All Forum Posts by: Trevor Richardson

Quote from @Jay Hinrichs:

U guys are killing us with all this BS.. give it a rest please.. 

I noticed today there was a bunch of fake replies to Pace posts so they rise up the forums. Some of our posts get taken down because we are apparently “promoting” our business. Then this stuff is blatantly and obviously spam for the BP/Pace partnership. 

You could create one… we did.

Quote from @Evan Polaski:

@Trevor Richardson, I completely understand.  Although, I would argue there are a fair number of mom and pop-type retail strip owners.  Not as many as small apartment owners, but still a decent number.  

I do appreciate the findings of your survey.  I totally agree.  Commercial, to most people, including myself who has worked in real estate for 16 years now in both retail strips, large multifamily and personal smaller multifamily, I don't think of an 8plex, or even a 20 unit as "commercial".  Most jurisdictions don't define them as commercial, either.  Many move from "residential" (4 or less) to "apartments" (5 or more) to commercial (non-housing use).  

@David M. one way I am guessing 5+ units is not the same as commercial is eviction laws and procedures.  Even the most landlord friendly of states tend to have tougher restrictions to remove a person from their housing than a business from their rented space.

Here is the problem. 

If a company owns one 250 unit apartment building they are deemed “commercial”.

If a separate company owns 250 single family homes in the same area that are for rent that's not a "commercial" operation? That's "residential"? Additionally, the 250 SFR units collectively will add up to a greater asset cost thus a larger investment in housing units.

All these units are in the same neighborhood, are where people live, compete for the same tenants and have the same leasing structure. 

Further, Invesco a couple years ago changed their multifamily family fund from “multifamily” to “residential” because they believe they will own as many SFRs in the same fund as apartments. 

I think we are a little early in this semantics shift but I predict in 5-10 years because the real estate industry moves soo slow we will see multifamily and single family investments move underneath “residential investments”. “commercial investments” would include the rest of the assets where people work and do commerce, instead of where they reside. 

Quote from @David M.:

@Trevor Richardson

As a real estate broker, how is multi-family "residential by definition?"  1-4 family is legally residential.  5 family/units or more is legally commercial.  All the various consumer protections, laws, regs, etc. pretty much don't apply in general to commercial properties regardless of their use.  Can you clarify?

Yes. This is a super fun topic that I like to dive into.

Multifamily is residential simply because it’s where people live. There actually is no legal classification for commercial. In fact, unless you have a mixed use zoning you can’t build apartments in a commercially zoned space because that’s deemed commercial. Just like you can’t build an office building on residential land, where depending on the density you can build SF or MF.

More importantly clients and owners don’t care what the classification it. We have polled apartment and multifamily owners and simply asked (them) do they consider their 8,10,20 plex commercial or residential. The vast majority or all consider it “residential”. Most say commercial is where people work, like a shopping center or an office building.

So even if lending changes at 5 units, and you need a property manager for more units. There is not much else that separates the dynamics of a 4 plex from an 8 plex.

I hope that helps. Brokerage is even more confusing, I believe multifamily is just tacked into commercial brokerage because it doesn’t have its own space. Most commercial brokerages are built around where people work instead of where they live. 

Remember this is going to be a multifamily DSCR loan. You may not be able to put 20% down unless the property cash flows enough to cover the min DSCR ratio (typically 1.25%).

In our market because interest rates are through the roof investors have to put 30-50% down. So this small MF range you are in could cause the down payment to go up (based on the cash flow). We have a 10 plex in escrow right now and our client may be looking at 50% down to hit the 1.25 DSCR. It's been a tough deal. I've been doing multifamily brokerage for 8 years and this is one of the toughest deals (because of the lending environment) I've ever done.

Do you know the difference between residential multifamily lending 2-4 and commercial multifamily lending 5 and up?

Quote from @Evan Polaski:

@Joseph Dasmerces, timing the market seems to almost always be a losing strategy.  

Solid real estate will generally continue to be solid real estate.  And commercial can mean many things.  From a lending perspective: a multifamily building with 5 units or more is commercial, because Fannie and Freddie won't lend on it.  Maybe you mean office, or retail, or industrial, or hotel, or medical...

The moral being: if this is a space you want to get into and build a career out of, then getting in now is always the best option.  But, you need to understand the nuances of each.  If you don't know what phase 1 and phase 2 reports, ALTA surveys, lease estoppels, lien releases, etc are, then digging down the due diligence rabbit hole for a while could be a great option.  Talk to commercial lenders, since they will be dictating a fair amount.  Talk to brokers.  Go to industry events.  

In my experience, the commercial people (meaning not multifamily) are career professionals. There are very few meetups for people looking to buy Kroger anchored shopping centers or 1mm sq ft warehouses.  So you need to dig harder and pay money: ULI, ICSC for retail, CCIM (if possible without holding the designation), etc.

Good points. I love how you included office, industrial, retail as commercial and excluded multifamily. I totally agree with that, multifamily is residential by definition.

Anyways commercial assets are largely owned by institutional investors, so there is less traffic on something like Bigger Pockets. 

Here is some data. Roughly 97% of all US small multifamily inventory 2-50 units is owned by small investors or individuals. Only 7% of that is owned by institutions. Those 2-50 unit stock accounts for about half of the entire small multifamily stock. Point there is a ton of small multifamily individual investors, very few on the commercial side.

You said it may be impossible to make something work in your area. 

My question. How many deals a day/month do you analyze like this?

Investors, we are a real estate “investor friendly” brokerage with some pretty advanced tools that we use for our investors to analyze deals.

We can provide our investor tools below for your investment deal you are looking at.

We are only asking for Google reviews (for our company) if we helped and or likes/subscribes to a couple of our social media platforms. 

We want this to be valuable for you and if the analysis doesn’t help then we won’t have you like/subscribe or review.

DM me for questions or if you would like to try it out.

Thanks,

https://drive.google.com/drive/folders/1hKoYdeeXTe-HWDx7-OF8...

Real estate investors, interest rates are challenging, but there are still great deals to be found. Here is an investing tip.

The best investors are always in an "acquisition mindset" and don't stop looking for deals, no matter the market cycle. Real estate investing is about persistence.

We hear all the time, "If only I could go back to 2011 and buy everything." But in reality, in 2011 it was almost considered a crime to want to buy real estate.

What we think we will hear in the future is:

"If only I could go back to 2023 and buy."

It’s only going to collapse if the demand collapses. Have we solved the roughly 5 million housing unit shortage in the US? No.

Even with the inventory coming I highly doubt that. Struggles with debt, returns etc affect the ownership. Jobs, economy, housing units affect apartment demand for tenants. None of these three are cracking.