All Forum Posts by: Chris Collins

For now, read the following 3 books, all have GREAT emphasis on how to raise capital effectively.

1. Joe Fairless - Best Ever Apartment Syndication Book

2. Matt Faircloth - Raising Private Capital

3. Hunter Thompson - Raising Capital for Real Estate

Read them, but more than that, decide to take action on the tips and processes in there.

Rather than just 'pick a market' perhaps you could also consider these 4 factors, and go from there to fine tune your search.
1. where you live now (CA is tricky, but you'll know the streets and market the best).  With rates today, and cap rates expanding, you may be surprised what you can find if you look.
2. where you grew up (you'll know this 2nd to your hometown now. Plus if you go back today, you'll have an idea of what has grown/expanded and what areas have gone downhill, so you can see/feel the growth)
3. where you want to retire (this will be somewhere you'll care a lot about, where you wont' mind investing the time and energy to go to often, and where you'll want to own long term)
4. where you have boots on the ground. (this will be absolutely key to investing out of state. these boots would have #1 or #2 above, so they'll know the areas better than your internet searches and can provide a ton of value as you go hunting)

Now take those 4, and then look through the markets above and see what you can connect to.

Bonus tip #5. search your home airport and any cities you're planning on buying in, sort them by cheapest, most direct flights, and last minute prices.  Never fun to have properties where the tickets are insanely expensive and you have 2 connections just to get there.

go get em!

 no problem. Good luck out there!

After you underwrite 50 deals in the market, you'll see what the prevailing cap rates are for your chosen property class/size. Just exposure therapy :)

But when you're newer to underwriting deals in that market, then I recommend your best bet is to call 3-4 of the main brokerages (JLL, M&M, CBRE, Berkadia, KW Commercial, Kidder Matthews, NorthMarq, Cushman/Wakefield, Avison Young, Re/Max Commercial, Capstone, etc) ask for a referral to one of their brokers that deals in the size you're looking at, and then simply ask that broker ''hey, I'm new to this market but keep hearing its a great place to invest, can I get 10 minutes of your time to tell me about the market?'' 

then when you ask your questions, make one of your questions a simple 'what cap rates are A, B, and C deals trading at these days?'

you'll get a variety of answers, but certainly will give you a good idea if 3-4 brokers tell you the same numbers.

Best of luck!

Also don't forget Gene Trowbridge's 'It's A Whole New Business' to do a deep dive on the legal side. It's not the most fun to read, but it'll save you the most jail time! ;)

For the soup to nuts though, I also recommend Joe Fairless' big red book.

Rod Khleif and Jake/Gino's books are also great walkthroughs.

@John McKee lot of good wisdom here. One tactic you can use in that instance is:

Use their 7% cap against them to start negotiations.

Find your 'actual' NOI for the property based on the T12 (or annualize it based on the T3, whatever works in that market), and then go to the broker and say 'ok, so you say this property is a 7 cap. I'm looking here at the T12, and based on this current NOI, this property should be worth $X, is that right?' (and that number will of course be lower than their offer number)

Then they'll have to justify that 'well, that 7 cap is based on X, Y, and Z projections...' and from there, you can start your conversation.  Don't forget to listen more than you speak.  Brokers sometimes have great ideas about how to reposition the properties, or where to capture value to justify their numbers. Great opportunity to get more info from them.  'so you mentioned upgrading XYZ... are those items currently in need of repair so they're ripe for replacement?' (translation, opportunity to negotiate since there are capex items needed...)

This is 'the game' and everyone knows it. Its not unusual, but it can start a productive conversation since they're already putting a cap rate in print for you to work with.  And if you show them that you know how to read the numbers, they can have a conversation knowing you're a player.

good luck!

I highly recommend Michael Blank's syndicated deal analyzer.  For one its a great tool, but also it comes with an instructional video series.  What good is a tool if you don't know HOW to use it.  

Great job getting out there an analyzing deals!

@Glenn Barlow 
Here's my quick take: Class C properties are trading closer and closer to Class B properties (both price-wise and cap rate-wise), so many savvy investors opt for the newer properties for not that much more cost.

The longer version...

Check with your brokers on price/door they're seeing trading in the markets you're in.  Oftentimes today, that Class C property that traded for $60k/door is now trading for $120k/door.  The class B property may now be trading at $150k/door.  It's not THAT much more, and will come with way less deferred maintenance, and less headaches, and (arguably) be more desirable to incoming residents. That's why a lot of investors are choosing to invest in newer properties.  "The cat is out of the bag" on class C properties, pushing cap rates DOWN on C class properties, but B class properties cap rates can only go so low before it stops making sense.  

So, to answer your question, do the research in your market.  If you can get a nicer/newer/lower hassle property for 'not that much more' then why wouldn't you? 

Best of luck in your decision and attack strategy!

@Kathie Riedel also consider that you could potentially split this up into 3  4-plexes.

I'd ask a commercial broker what they'd list your 12 unit for, and I'd ask a residential realtor what the 3 4-plexes would sell for. 

Quick trip to the county would tell you if you could legally split it up or if it has to sell as one property. 

-Chris

@Brandon Beaudoin don't overthink it :) stick them in a checking account (high interest or other) and reinvest once you get to a large enough dollar amount to invest in the next deal.   Unless you're talking millions in distributions, those small points won't add up to much, so don't overcomplicate it.

Just be clear with yourself whether you're trying to use them for personal spend in your life, or if they're specifically going to be used for future investments.

Great job investing and getting distributions!

-Chris