All Forum Posts by: Account Closed

@Mike Cumbie as a broker of multifamily properties exclusive, I could not agree with your opinion more.

@Neal Royal My partners and I exclusively sell multifamily apartments, so my answer will be in that context. I’d say one of my largest frustrations stems from clients who put a property under contract, conduct due diligence, and then retrade for reasons that were disclosed during the marketing process. An example would be someone coming back from a credit for an boiler replacement when they saw it during theIr tour, the age of the boiler was disclosed in the marketing materials, and there are no current issues with it. Sounds crazy, but it happens with new buyers a lot. Another thing that drives me crazy is when people give me general acquisition criteria, don’t follow up, and expect me to send them deals. If I had a dollar for everyone time someone told me they were looking for “value add apartments” in a “good area” for a “good price” and then never follow up with me, I would be rich. Thanks for posting a broker vent session :-)

@Jill Buhrfiend are you looking for any one trade in particular or just a general 'jack-of-all-trades' maintenance guy?

@Robert Bowker we exclusively sell apartment properties in the Chicagoland suburbs, and we've made the decision not to purchase properties in our market because it tends to lead to conflicts of interest between us and our clients. There are some clients of mine that would not work with me if I was purchasing properties off-market instead of telling my client base about them. What I can tell you, though, is that our clients are getting inundated with direct mail from off-market investors wanting to buy their properties.

@Robert Bowker you nailed it. A quarterly mail campaign to the same people over, say,  a 5 year period is a powerful marketing force in any sub market. 100 concentrated, specific mailers sent on a consistent basis are much more effective than 2,000 boiler plate mail-blast flyers

@Robert Bowker we use direct mail in our business and we find that it is more of a brand identity/market force than it is a campaign to try and get people to call you off the flyer. In 2 years, I can count maybe 3 or so opportunities that came ‘from a flyer’, but the overall effect they have on our brand recognition in our market is very worth it

@Joshua Falls we usually see insurance costs for larger complexes like that to be about $300/unit/year, so $30K for 110 units doesn’t sound that far off. I would recommend reaching out to Travelers to start. You could also reach out to an intermediary like Provant to shop some costs...I doubt you’d be able to find something significantly lower though. Hope this helps

@Robbie Venter if it is a true commercial multifamily loan, 20% is probably all you’ll get away with. Some people use ‘multi family’ interchangeably when referring to 2-4 unit buildings. Those qualify for loan programs that allow smaller down payments

@Cameron Coleman it sounds like you have had a less than positive experience with a brokerage. Would you mind sharing the details that prompted your post instead of making the general claim about investment brokers 😊

Originally posted by @Dustin Beam:

Originally posted by @Account Closed:

You're correct, they would sell at a new market cap rate, but I'm not sure there is as much of a gain (at least with this deal) because in order to increase the NOI, you're likely going to have to spend some money to do so.

See the attached image. If market cap rates are 6%-7%, this deal (once stabilized) should be able to sell for somewhere between $2,166,971 to $2,528,133. That is quite the spread. Let's say it settles at 6.5% cap rate, or $2,333,661 sales price. That may seem like a good return - $238,661 profit - but it is unlikely the new owner is going to be able to raise the income to the 'Stabilized' level without spending some money along the way through renovating units or general building maintenance. How much is the question...and this is where good deals are won or lost. 

I had a long post typed out, but I think we have a different idea of how CAP rates are used and there is no use going back and forth on this. It seems like you're implying it's used to evaluate a deal. I'm saying it's used to establish "comps" for a given class of property in a given area/time.

Buying a property at 4.x% CAP when that market says it's 6-7% seems foolish unless a major play could be had to make that up. The numbers you provide show that the buyer will make virtually no money (outside of cashflow difference) by going through the trouble of raising rents, turnovers, etc. I wouldn't do that, but it's JMO.

Dustin, I don't disagree with you, they're certainly used as comparable information, but they're also used when evaluating the deal. Both applications are correct. Regarding your second point, I would argue it is only foolish to someone who isn't planning on owning the building for a long period of time.