All Forum Posts by: Tyler Kesling

Still new here- I know I can find the cap rate by dividing the NOI by the market value but what's the most reliable way of finding the market value? Example, say I have a 10 unit property, $800 per month. 10u x $800 x 12 months x .9 occupancy x .5 expenses = $43,200 NOI. How do I know what cap rate to use to find out what the market value of the property is?

Thanks @jameswilcox for the insight. I drove the property yesterday and I'd say its probably a C+ or B- property in what i would call a B  neighborhood. The houses in the neighborhood are actually really nice. Anyway, Lex is one of the markets close enough to me that I could potentially invest in when I'm ready. Can you help me understand what expenses would drive that number up? I'm trying to learn what all I need to be investigating when analyzing a market. Thanks again

Yeah, that makes sense. No idea why they would state they're $200 under comps and not doing it themselves so maybe I'll see if I can get that $100K and send you 25% for the lead. Win, Win, Win. My initial infant level of knowledge would tell me it's a combination of being poorly managed (I calculated they're spending nearly 65% on expenses to only have $305K NOI on 95% occupancy at $875/m, if that's even the average rent/unit currently occupied). I had read 50% is a fair number to use for calculations which would raise the NOI by, drumroll...15%, but this is purely speculative) and perhaps the funds or energy to go through an upgrade if they're looking to get out of it anyway. Sell as is type of thing. This is in Lexington KY which AI says have grown 5.1% YOY but the latest data I saw for this particular zip code is a year old and says it's the lowest in Lex with a median of $900/m so +5% only gets us to $945. Look at me, figuring this out as I go in real-time!

I've since learned that the DSCR maxes at 10 units but even those are rare so just take that out of any equation. I'm still not 100% what the advantages to that are anyways, even on a 2-4 units but I still have a lot to learn.

So what percentage would you tack on to your fund raising to cover taxes, insurance, and upgrades? Is that just case by case or is there a general rule of thumb for each property class? 

Is it ok to post a link to the crexi listing or address here so someone with more experience can help me on what else to look for and how to find the additional info? I admittedly didn't read all the rules for the forum. I realize that once someone creates a letter of intent they can start on the due diligence phase to learn the financials, physical, and legal but what else can I learn about a property before making an offer? I'm just trying to learn and find example properties that I can play around with.

Nice. Thanks for the reply. My higher NOI is based off of .5 for operating expense instead of the 65% or more that $305k would be. 76U x $875 =66,500 x 12 = 798,000 x .5 = $399k. I don't know, but I've read half of your gross income will probably go into your expenses. I need to learn more about the DSCR but I thought there was a loan similar to that for multifamily. The extra $200 per month was based off the numbers provided on the listing. I'm just trying to make sure I understand the mechanics of how this works. I love processing numbers. I realize I'll have to dig in a lot more into the details before I can find the right deal. Thanks again for the insight and I'll keep all that in mind on my next analysis.

One week into my journey and I'm starting to analyze deals. I found 80 units / $5M / 95% occupancy / 6.11% cap (claim) / $305K NOI / also included in the listing is comps stating we can get an extra $200+/ month. I found an ad for the complex for vacant units at $875. My calculations say that this complex should be getting closer to $400K NOI at 95% creating a property value of $6.5m.

I buy the property with a DSCR loan at 7% for 30years for an annual payment of $300K. 20% down is $1M from investors.

Increase rent (value add) over then next year to $1150/m creating a new NOI of $524K. This allows me to pay investors around 22% return ($524K-$300K=$224K).

After "x" number of months/years I sell/refi the property at a new value of $8.576m ($524 NOI / .0611 cap). Pay back the investors their $1m and bank $3.5m.

Just the basics but what did I miss? 

Thanks for the resources. Can't wait to check them out. I read Lindahl's "Multi-family Millions" and watched the BP webinaire on BRRRR. I'm working on "ABCs of Real Estate Investing" by Ken McElroy and "Confessions of a Real Estate Entrepreneur" by James Randel, all of which have I've taken some great ideas from.

Wow...I'm such an idiot. I don't really use Facebook and didn't even think of that as a resource (out of sight, out of mind). At your suggestion, I went on an looked for Tri-State REI and Tri-State RE and not so surprisingly, there are groups for both in the area. I joined and we'll see where it leads.

Thanks for the nudge. I've got a 5 month old and just started training for a half-marathon so
I'm somewhat sleep-deprived and my brain isn't firing on all cylinders this morning. I've created a 6 months to property schedule for myself and today's task are to use BP forums to ID Pros in my area, read from the book "ABCs of REI", and write about how REI aligns with my life goals so I can check the first one off the list. Thanks again- T

I'm in a smaller town without any representation on the forum along the "Building Your Investing Team" tabs. I want to start researching investor friendly agents in my area. What tips or advice would you recommend to ID these agents and how would you go about trying to build a relationship? I don't plan on buying for another 8 months or more and I don't want them to think I'm just wasting their time but I do want to start seeing which agents will understand my goals and see what kind of opportunities each will send.

I'm also trying to figure out if there is a minimum number of units I would need to work with a PM and how to find one? I really don't want to be an landlord. A quick Google search for the Ashland, KY area only list a larger local company and I'm fairly certain they own all the properties they manage, or out of state companies that I'm not sure would manage quads (which is probably where I would start). 

Thanks in advance-

I'm very new in my research and education so I'm not exactly sure yet. My initial thoughts, which are definitely open to change, are to buy a quad that I can flip into something around 20+ units with some investors and build off that with a goal of at least 60 units trying to cashflow around $6K per month. I realize the current economics are great for those goals but that is my goal. After I get a base income, I could see myself leaving my current career and going fulltime into repositioning.  I do know that I do not want to be a landlord.