All Forum Posts by: Account Closed

Brian, the appraisers I have worked with in financing commercial multi family properties usually derive a pro forma P&L and Stabilized value as follows:

Studios are usually cheaper than 1 BRs in terms of street rent, but usually yield more on a PSF basis. I would recommend finding studio rent comps with similar SF in the area (also do it for the 1BRs). Use these comps to estimate Gross Potential income (GPI), and apply standard vacancy assumptions and a 30% expense ratio, this will give you a good idea of the NOI for financing purposes. Commercial banks rely heavily on the stabilized value that an appraiser provides.

I have seen and financed small balance multi family deals like this before, and studio apartments are sometimes more in demand than 1BR, 2 BR, or 3 BR apartments. studios 100% add value to your commercial multi family asset.

Good luck sir. 

@Abe Macias what is the stabilized value for the project? The other commenter are certainly correct the cash flow analysis is not attractive--as you framed it above, but there may be value creation available from the build and in the land zoning.

For example, if the stabilized value of the duplex is, say, $460,000 and your total project cost ends up being $360,000, your gross developer profit would be $100,000.

For gross rents, again $2,200 ($1,100 x 2) would be a negative cash flow when subtracting $104 for vacant and assuming a 30% expense ratio with 80% leverage @ 4% interest and 30 year amortization, but have your checked the zoning? Is it possible to construct multiple structures or construct a 4 unit?

Another point in gross rents, I would double check the trends on rent increases in the market over the past three months 12 months and three years. Because inflation is so high and if, as you say, the local market is supply constrained then the rent increases in the local market could be fairly substantial. For example a 10% increase year over year on $2200 would be $220 extra dollars annually. Since it would take 12 to 36 months to build the property anyway you might be able to get a lender to finance based off of the pro forma value of the after completed duplex at a substantial rent premium to whatever your underwriting today.

As mentioned about $96 psf cost to build seems wildly low considering the market supply issues on materials and inflated demand do to low cost of capital and now congressional fiscal stimulus and tax programs.

Lastly, since you own the parcel next-door you might be able to get a blanket commercial mortgage finance them together based off of the income-based valuation that might be a scenario that is worth modeling out.

Best of luck sir.

Hello friends and colleagues, as a follow up to my earlier post:

Over the past month I realized that just because I have the opinion that Fundrise doesn't seem like a good fit for me at this point, does not mean Fundrise isn't an investment that could work for others.

I researched the founder a little deeper and feel that, in principle, he has noble goals to bring CRE investing to regular folks, and is dutifully executing them as such by means of Fundrise. Assuming long term solvency, if retail investors have access to CRE projects it stands to reason that they will get access to a more diversified return than dumping everything in their 401k.

It will be very interesting to see how the crowdfunding market and respective regulatory apparatuses evolve over the next few decades.

Hello I am looking to double close wholesale a deal and was wondering what typical transactional lender terms are? It is a short term (24 hour) loan correct? 

Any good transactional lenders in Pennsylvania?

I ran a NPV and IRR caluclation of Fundrise's expected returns for my $1,200 (assuming $100/ month contribution) over a 5 year horizon. The NPV was negative $1,898 and the IRR was 1.02%. A negative NPV means BAD DEAL.

And now I am hearing Fundrise is exercising some purported right to freeze redemption or withdrawals of units. That makes sense in general for investment REITs but not when the risk is so far from an adequate return for such a liquidity trap. Total crap. Someone please explain to me how democratization of real estate investing meaning a 1% loss (when factoring in a 2% annual inflation)? It doesn't make sense.

I will never put any money with this organization ever again. I would love to see what the management compensation is. While a 1% return is technically better than a money market fund or checking or savings account, this is a FAR CRY from democratization of real estate investing considering they refuse to return money to investors who figure out that they are getting ripped off after investing. 

@Ian you should not be giving these opinions unless you are a licensed lawyer 

Matt I hope this deal was successfully financed. If you have any future debt or equity needs in PA, NJ, or DE in the $1M+ range please keep Rittenhouse Capital Advisers in mind.

https://www.rittenhouserealty.com/our-company/rittenhouse-capital-advisors/

Thank you very much Benjamin, I sincerely appreciate your comments. 

What are the typical terms a hard money lender looks for? Is $10,000 sufficient to show hard money lender I have skin in the game? Is it okay to get a great property under contract while not exactly knowing where my funding is going to come from? I don't make a lot of money during my day job and would rather get into buy and hold but I want to do a hard money flip or two to get enough capital for a first buy and hold. Any advice would be welcomed.