All Forum Posts by: Trevor Richardson

4% is a pretty good deal. I doubt you are going to get a better rate than that from a conventional commercial lender right now. What is the estimated cap rate?

You can absolutely ask to lower the price. The seller accepting it is another issue, and you may lose your deposit if you cancel. But yes you can and should do that if the investment pencils at a lower price. That’s what due diligence is for when looking at an investment property. 

The reason? You like the deal better at X, simple as that. 

It sounds like this transaction is more in the residential escrow arena. Multi fam deals have more emphasis on due diligence deadlines which is where renegotiation happens a lot. The investor looks at all available data and the deal works or doesn’t. Resi investment deals in escrow would benefit if the transaction was structured that way. 
 

I was wondering if you could expand on the disconnect between reading all the books, watching videos etc… and actually putting it into action. I’m pretty fascinated by that issue, and have seen it happen to a lot of investors. What is holding you back? 

I think you are on the right track with 4 units. Commercial lending for multifamily is tough, mainly because lenders will underwrite the property only when it's in escrow and won't lock in your interest rate and LTV until they review everything including the appraisal. That's just the commercial lending process.

To take the next step I think you need complete analysis of several properties to see where they rank and what their returns are. When you calculate 10-20 available properties all at once you have the confidence you are picking the right one. Info and math is powerful in taking the next step. I’ve had many clients at this phase.

Hope that helps. 

Capex is all about taking the top of the market potential proforma rent for a unit (2brs will rent for x,xxx) and look at the subject property and determine how much per unit it will take to get there. Have the proforma rent verified by the property manager you intend to use.

Once you know roughly what each unit needs (flooring, bathroom upgrade, fixtures etc…) and have a great contractor network you can get a $/door estimate to underwrite that rehab amount into the deal prior to determining the purchase price. Experienced investors in a given market can look at a couple of interior photos, the area, and know it will be roughly $18k per door for renovations to hit that proforma mark. 

I always tell investors, construction and confidence in rents, it undoubtedly the most difficult of the entire process. Sans multifamily commercial lending which I call “landing a plane on fire”. 

@John O'Leary Correct for lending there is the over/under 4 units. Usage is identical, it provides housing to a tenant. Multi fam properties have higher density zoning which comes with different development standards. I guess my question should be, how do investors view them. Lending aside, is there a major difference to an investor if they are looking for 4-units vs 5-units? Their cash flow will change due to the differences of commercial rates, LTV requirements etc...

I wanted to get some feedback from investors on what they would like to see more of from investor friendly agents.

How do you search for investor friendly agents?

Do you know any investor friendly brokerages that focus on single family investments all the way to multi fam?

What tools and service would you like to see more of?

I wanted to get some feedback from investors on what they would like to see more of from investor friendly agents.

How do you search for investor friendly agents?

Do you know any investor friendly brokerages that focus on single family investments all the way to multi fam?

What tools and service would you like to see more of?

I have struggled with this for awhile and would like to hear from you! Residential and Commercial are such defined silos in real estate. Multi fam seems to just get thrown into the commercial area because they are larger assets. But by definition they are residential, where people live. Why isn't a single fam property with cash flow considered commercial? It's an investment property and just as important as a 50u multi fam building. Just a single unit instead of 50.

If I could define it I would lump single fam rentals and multi fam into one area called Residential Investments. Thoughts?