From an investor and rehab standpoint the two big issues that people get hung up on are under estimating the rehab cost and under estimating the time to complete the project. You’ll find that if you go forward that type of lending, they’re always going to ask, “What’s your exit strategy? What’s your backup exit strategy? What’s your third exit strategy? That’s what I try to find. If I can’t refinance out, can I quick sale? Can I fire sale it? Can I do some type of creative strategy? What does it look like on a commercial note? What does it look like on a fixed 30-year, you know Fannie and Freddie note? I try to play out that worst case scenario, “can I weather that storm?” Then I back into the deal.
CREPN #96 – First Multifamily Syndication with Jason Yarusi
It is said that the First Multifamily Deal is the hardest. For Jason & Pili Yarusi, they realized that there are efficiencies in multifamily are greater than what you can get with smaller properties.
Once they decided to move forward with multifamily, the question turned to where?
Jason & Pili are residents of New Jersey, where real estate prices are prohibitive for investing due to compressed cap rates and tenant laws do not favor landlords.
First, they set their Multifamily investing criteria:
- Number of units, more than 100 and less than 200
- Market Population stability or growth
- Stable employment
- Areas they were familiar with
The markets they found to support their criteria:
- San Antonio
- North Carolina
- Kentucky
Then they built their multifamily team.
The first member of the team in was property management firm. The criteria for selecting a property management firm:
- Not too small
- Experienced
- Real time software that provided access for their investors
- Ability to provide onsite management and maintenance
- Extensive market knowledge
How did you find the property?
Their property manager led them to a property that had been on the market previously. They believed it had some value add potential. They analyzed the deal, and made an offer. The seller countered, but quickly they realized they were too far apart.
After six months of a continued search, they circled back, and made a second offer to the seller. This time, they provided numbers to back up their offer and explained the reasons for their offer. The seller came down $600,000 and requested that the buyers pay their brokers commission.
After analyzing hundreds of deals, making multiple offers, and always being disciplined, their efforts paid off.
For more go to:
Podcast: The REI Foundation Podcast with Jason and Pili
INFO@OAKCAPPARTNERS.COM
CREPN #91 – The Leverage of Other People’s Money with Jay Swensen
Investing in Real Estate works because of leverage. Other People’s Money is the leverage of real estate.
Whether you use a bank, investors, relatives or seller financing, you are using other people’s money. It is the leverage that allows people with little or no cash of their own to buy a property and benefit from real estate.
This is unique to real estate.
In the stock market, you buy shares of a company. Your upside and downside are limited to the gain or loss of the shares you own.
In real estate, you are able to benefit from the value of the whole property. In residential real estate, your success is determined by the surrounding properties. In commercial properties, you can force appreciation through reducing expenses and increasing rent.
The power of leverage is undeniable when compared.
Stock Market vs Real Estate and Leverage
Let’s say you have $10,000 to invest.
If you invest $10,000 in the stock market, and the stock goes up 17%, which is really good. Your $10,000 is now worth $11,700 and your gain is $1,170.00. That’s great!
Compare this to $10,000 invested in Real Estate.
Suppose you purchase a property for $100,000 and are able to get in for just $10,000. It happens a lot. You have $10,000 of equity and $90,000 of leverage using other people’s money. According to the Case-Schiller Index, home prices rose from 1987 to 2009 an average for 3.4% per year. In this case, your $1000,000 property would now be worth $103,400.00. Your gain is $3,400.
Which would you prefer:
17 % on $10,000 = $1,170.00
or
3.4% on $100,000 = $3,400.00?
That’s the power of leverage!
This is one of many reasons to consider investing in real estate. Currently there are tax benefits available to real estate investors. There is the real possibility that the Trump Administration may reduce some tax advantages of real estate in an effort to simplify the tax code.
Regardless of what happens with the tax code, the power of leverage remains.
Click here to get your FREE Real Estate Deal Workbook.
References:
https://ycharts.com/indicators/sandp_500_12_month_total_return
CREPN #85 – Clean Carpet Makes Easy Rental with Joshua McKeown
Clean Carpet is a must for landlords looking to attract new tenants. The cost to replace carpet is significantly more than the cost to clean it if cleaning is possible.
The prospective tenant’s first look at an available unit is a lasting one. Stains, smells, and worn spots will keep a tenant from renting your unit.
For your FREE Guide for Property Owners & Manager click here
If your market has low vacancy rates, you may be able to get away with less attractive carpet. However in a market with higher vacancies where tenants have more opportunity to chose from available units, you will need attractive flooring to compete.
Life Expectancy
The average life expectancy of carpet varies from five to ten years depending on quality of carpet, traffic, care, etc It is estimated with regular cleaning that the life can be extended up to twice the average.Continue Reading …
CREPN #83 – Systems for Success with Matt Faircloth
Owning one property is manageable for most investors. One problem, one unique solution. However, for true wealth, multiple units are the goal. To accomplish this without going crazy, or broke, you need systems for success.
Systems provide direction, a playbook, for what to do when you or your staff face a situation. Knowing what to do, how to do it and who to call when a crisis shows up, gives you the confidence to have a predictable outcome and freedom to focus on other matters like growth.
We spoke with Matt Faircloth from The Derosa Group about systems for success. Matt is an investor, flipper and multifamily syndicator. In order to grow, he developed systems that are written in pencil because he recognizes that if a better solution is recognized, he wants to use it.
System for Success in Property Acquisition:
1) The first step is to do a Market Analysis. If it is your local market, it is easy to know the different areas of town and their reputation.
If you are not familiar with the area, you need to find the answers to the things you cannot change:
- Crime statistics: the type and frequency of crime committed in the neighborhood.
- Local area median income: Can your potential renters afford the rent you need to get?
- Affordability index: Are there enough potential residents that can afford the rents you want to charge?
- What are the market rents for similar units in the area?
Additionally, answers to these questions will tell you if the area is on the upswing:Continue Reading …
CREPN #68 – How to Use Market Data for Commercial Real Estate with Chris Beck
Buying and selling commercial real estate is a game of poker. If you know the cards your opponent has, you have an edge. The cards in Commercial Real Estate are market data.
If you don’t have the market data, you might be betting against a full house instead of a pair of two’s. How can you know what the potential for a property is if you don’t have the data?
Get your 10 Reasons to Choose Costar
Fortunately, not everyone does their the homework, and that creates opportunities for those in the know.
What kind of data can help you make a purchase or sale?
The easy market data is the property physical characteristics: address, square footage, year of construction, and owner. This is the easy information that you can get at the county courthouse.
However, if you want to know the contact information for the owner, or current rents, for the specific property and the competition, where do you go? What lengths are you willing to pursue to get the information you are looking for?
What if there is a new employer coming to town and you know that rentals are going to be in demand?
Do you have a buyer looking for a stand alone building with traffic counts north of “X”?
Fortunately, the collection of all things data can be useful for these specific questions through the use of BIG data. One specific company that collects and provides information to subscribers is Costar.
If you make your money when you buy, are you more likely to make money on a property that is listed, or an off market property with an owner that has been thinking about selling?
What class of asset are you interested in; Multifamily, Retail, Office, Warehouse, Land for development?
To learn more about how market data can help you in your Commercial Real Estate endeavors, contact:
Chris Beck
cbeck@costar.com
503-956-4021
CREPN #62 – Get Found Online
Are you good at making sure you get found online?
Do you have a brand? Do you rely on your employer’s site? Are you creating opportunities for you sales staff?
Do you Push or Pull?
What are you doing to get found?
The worldwide web creates opportunities for the savvy marketer and competition for those who are not.
David Klein with RevLocal is an online marketing expert who is passionate about helping businesses stand out online so customers can find them.
When business is going well, and sales are easy, business owners tend to forget about the constant need to have an online presence.
Rules for marketing online that will help you get found.
– Know your audience. This is fairly obvious, but worth mentioning. Who are your clients, let’s find more.
– Brand – When you know you are, by name, logo, tagline, punctuation, etc. don’t mess with it. Make certain that every time you post, the information is the same. Ie; if in one post you list your business as “123 CRE” and another time you list it as “123 CRE LLC”, you are diluting your efforts. Be the brand.
– Content – Create useful content for your audience. If you have industrial space for lease, create or find and repost information useful to tenants of industrial space. Get specific. The deeper the better.
– Pictures & Videos get higher ranking
– Consistency – At a minimum, you have to post something once a month and more often is better. Your goal is to make sure machines can find you.
– Don’t wait to start. Like most good marketing, it takes time to develop traction. With the right plan and commitment, more opportunities should develop within 60 – 90 days. If you have a good presence established, you will be more prepared for the next economic downturn.
– Make sure your information is mobile friendly.
– Have a presence on all of the major search engines; Google, Yahoo, Bing, Yelp, Facebook, etc. Continue Reading …
CREPN #29 – Senior Housing Investment Opportunities
Senior Housing Investment Opportunities – Have you considered these?
Investing in Real Estate requires knowledge of the marketplace. Who are the potential renters, what they want and their economic abilities.
When considering the Commercial Real Estate investment options, you may have looked past the opportunities included in Senior Housing.
The investment opportunity eluded me, until I had the opportunity to interview Rick Lynn with Marcus & Millichap National Senior Housing Group.
My initial reference point goes back to the early 1970’s when visiting my Great Grandmother in a Kansas Nursing Home. The memories are of a foreign smell and sounds not like I was used to, nor wanting to return to.
When my Grandmother was living in an Independent Living facility in the 1990’s – 2000’s, it was like going to a resort! The place provided a full social calendar for the residents including, meals, physical fitness, transportation to shopping & appointments, parties and more. My Grandmother loved it!
More recently, I have visited several places with my Mother to determine where she will eventually call home, even though she if fully capable of living on her own, she is ready to give up all of the cost and concerns of owning a single family home.
The time have changed. My original orientation was of an endpoint for my Great Grandmother. Now the Senior Housing options are full of life and opportunities for active seniors to enjoy the company of their peers.
Senior Housing is an intersection of three markets; Housing, Hospitality & Healthcare.
The marketplace is full of investment opportunity. You can invest directly as a Landlord and lease out the operations to an operator, act as an Owner Operator providing the care to your tenants, or invest through a REIT focused on Senior Housing.
Properties range in size from tens of units to hundreds of units, with the average property having 60 units. Interestingly, while many retires head for the sunbelt to enjoy their active living years, many return to be near family when they are ready to move into Senior Housing, which means the investment opportunity is all across America.
There are four recognized levels of operation from least to most care required:
Independent Living (IL)
Assisted Living (AL)
Memory Care
Continuing Care Retirement Care (CCRC)
This option allows movement from (IL) to (NH)
Nursing Home (NH)
There is a surge in demand in the Independent Living marketplace to meet the aging Baby Boomers next stage in life.
The market provides similar returns and measuring points as other Commercial Real Estate Investments including:
Development
CAP Rates
Rent Increase
Vacancies
FREE Senior Housing Market Research Report click: http://bit.ly/CREPN-SrHousingReport
For more information on Senior Housing investment opportunities, contact Rick Lynn with
Marcus & Millichap:
Rick Lynn
630.570.2228
CREPN #25 – How to Minimize Fire Sprinkler Water Damage to Your Building
If you own, live or work in a building with a Fire Sprinkler System, you will appreciate my interview with Matt Scarpuzzi, owner of QuickStop Fire Sprinkler Tools who has developed a tool that allows you to minimize fire sprinkler water damage to your building.
Since the mid 1940’s buildings of size and particular use have been built with an Automatic Fire Suppression System, or Sprinkler System.
Early on, building owners found that the cost of installing a sprinkler system was off set with substantial discounts on Fire Insurance. Systems have proven over time to save lives and property from significant damage.
Sprinkler heads deliver between 30 -100 gallons of water per minute. When putting out a fire, this is great. Once a fire is out, the system will continue to run until the supply line is drained, which can cause significant building damage from water including mold.
That’s what led San Diego Fireman Matt Scarpuzzi to develop the QuickStop Fire Sprinkler Tool.
The QuickStop Fire Sprinkler Tool has been used and tested by firemen worldwide and saved property owners and insurance companies thousands in fire sprinkler damage avoided. In April 2014, Matt appeared on ABC’s Shark Tank.
To learn more about Matt and the development of the QuickStop Fire Sprinkler Tool, check out my interview.
Matt has generously provided an EXCLUSIVE DISCOUNT to our listeners. Listen and learn how you can save on a QuickStop Fire Sprinkler Tool purchase.
For more information go to QuickStopTool.com.
CREPN #23: Commercial Financing Tips with Darryl Dahlen
From a post in the Facebook Group, Commercial Real Estate Network regarding a refinance of a 400 unit apartment complex, I learned about Darryl Dahlen & his company Global Solutions. I invited him on CREPN Radio to share commercial financing tips with our audience.
FREE CRE Finance Worksheet http://bit.ly/CREPN-DarrylDahlenCREFinanceWS
We will dive into various topics with Darryl regarding:
Current Marketplace Opportunities for Investors:
Areas of the country where undervalued opportunities still exist
Rates of appreciation year over year
Types of financing
Purchase
Purchase & Rehab
Refinance / Cash Out
Length of ownership operating required for consideration
Global Solutions is an experienced commercial brokerage with years of experience that specializes in funding commercial real estate loans for domestic and international clients.
Our business model is based on leveraging our strong lender relationships that have been formed over many years to bring our clients the best terms possible.
Using a “square peg square hole” approach we use our 10 years of lending experience to match a loan with appropriate lender.
We have an array of loan products which allows us to be extremely flexible and competitive. We can arrange financing using SBA, USDA, HUD, Fannie/Freddie, bank loans, CMBS lenders, bridge loans, and hard money or private money.
While our focus in multifamily properties, we are well-versed in many asset classes and welcome any owner-occupied or non-owner occupied properties that are:
Assisted Living
Office/Medical
Office flex
Light Industrial
Manufacturing
Self-Storage
Strip malls/Shopping Centers
Stabilized Hotels
