I sat down with John VanDuzer, a Partner with James Moore & Co, CPA Tax Accounts and Auditors. In this video we discuss a couple of ugly tax scenarios he has seen when syndications blunder.
Many churches own some of the best real estate in the country but knowing what to expect when striking a deal is important. In this Deals on Wheels video I discuss the process of doing real estate deals with big churches, what to expect, and a little insight into how they think and make decisions. I explain what it is and how to create it in this quick podcast clip.
Investors with lots of margin in their lives attract top talent, top brokers, and other investors to want to be around them. I explain what it is and how to create it in this quick podcast clip.
Don't be fooled by the rising interest rates. Hear some advice based on what I'm seeing in today's market.
The shorter the inspection and closing times, the more attractive your offer is. Take a listen to this video details.
Great question. Not including closing extensions is one way. Take a listen in this podcast interview.
Providing proof of funds is a normal request made by brokers in order to assist the seller in making the best decision in multiple offer situations. This video will explain how an early-stage syndicator can earn a seller's trust.
Reputation is a huge part of an investor's deal flow so avoiding these 5 mistakes will only help your acquisitions game. Joe LaFleur and I discuss them in this video.
Multifamily real estate pocket listings, or off market listings, are talked about often because the theory is that you can buy real estate below market value and without competition. In this video, we discuss what a pocket listing is, how often they occur, and how they occur.
Using operating expenses as a percentage of income in underwriting can be dangerous. Hear why in this podcast clip.
There are scenarios in which a newbie investor's offer is chosen over a proven buyer's offer. Hear how in this podcast clip.
If it is done incorrectly or with no supporting reason, cutting a broker's fees could cost multifamily investors tens of millions of dollars in lost opportunities. Every circumstance is different and should be thought out. Here more in this video.
Freeing up time to pursue more deals is critical. I discuss several time management hacks in this video.
I asked Adam Wonus of Atrium Management this question. Hear his answers in this video.
I get asked this question all the time. Many don't like the answer. I discuss how I do it in this video.
In this video, we discuss how real estate investors can be different from their competition so they attract more opportunities from every broker in the market.
I find that some investors are concentrating on too few markets and as a result they aren't seeing enough assets coming for sale. I discuss the importance of mastering geography in this video.
There are two buyer clauses that really annoy multifamily real estate sellers that you should avoid adding to your PSA. I discuss them in this video.
There are a number of big boy multifamily real estate investors that are buying smaller under 100 unit assets in addition to 100+ unit assets. I discuss why in this video.
What may seem obvious to you may not be obvious to the party you're dealing with. Listen to a story of a recent deal that hammers home why you need to add this clause to all future PSAs.
I get it, investors can't fully underwrite every single deal on earth, there isn't enough time. But there is a way to efficiently and effectively manage that process. Hear my thoughts on how in this video.
Property managers know better than anyone the mistakes real estate investors make when managing assets for their clients. Hear Adam Wonus of Atrium Management give his top 5 mistakes he sees real estate investors make.
The top 3 things lenders look for in a real estate investor have little to do with personal finances or the number of units one owns. Hear Gill Dolan of Greystone & Co discuss those things in this video.
A few simple external improvements can bring a great ROI on your multifamily investment. I talked with value add master, Jason Schaller, who provided his top 5 value add ROI projects in this video.
It is common in this business to “crash and burn” from the stress and long hours. Hear the story of “Joe” from my book who discovered a healthy work/life balance that actually increased his success in the business.
Generally, it is only ok to consider retrading a deal if the impact on price is large enough to make a significant dent in your long-term cash on cash or IRR. This video explains in more depth.
Offering the very highest price and best terms you can is always the safest bet to win deals, but there are instances when a lower price can beat out a higher price. In this video, we discuss how that's done.
In multifamily real estate when an investor has built momentum, they are extremely hard to compete against. In this video, we discuss The Law of The Big Mo, as author John C Maxwell calls it in his book The 21 Irrefutable Laws of Leadership.
Determining rental comps to use when valuating multifamily real estate is highly important. Especially when you're looking to add value to the asset after a renovation. Part of the process involves some sort of online membership-based software that can query all the assets in a market. Some of it is a gut feeling about whether a comp matches and some of it is an investor's knowledge of the market. Hear my best practices in this video of a real-life, practical example.
Proper document preparation on the front end before going to market is necessary in order to maximize sale price, close quickly, and with little drama. When I take a listing, the first thing I do is hand the seller a list of documents I’d like them to gather before we go to market. I provide an in-depth explanation and the actual list of items I recommend in this video.
The worst thing a buyer can do is play the game of only offering just enough to win the deal. In this video, I give 5 tips for winning every competitive real estate bid.
There are a number of things that go into developing an awesome reputation as a seller. A very simple one that’s easy to do and goes a long way is how you care for your property during the marketing and contract period. In this video, I discuss several ways to build or improve your reputation in the marketplace so both buyers and Brokers are more likely to work with you more often.
As an overall answer to the question, it's a fact, they make you more money. Make no mistake only real estate agents can create an environment that earns a seller the most the market will pay. Hear five reasons in this video.
Elite investors are highly focused and say “no” a lot. They say no to anything that doesn’t have a 90% likelihood to help them procure more deals. This video explains how they do it.
If you want more deals to come to you, make it easy for real estate agents and other referral sources to reach you. Seems obvious, right? But watch this video for something you might be missing.
The answer is simple. Buy a CRM (customer relationship management program) and then put in some work to make it work for you. Here’s how to use a CRM to drive more business from brokers.
Real estate investors are losing millions of dollars in productivity by NOT hiring paid personal drivers to take them to appointments. This video gives a step by step on how I hire paid drivers so I'm more productive.
Michael Jordan is arguably the greatest basketball player to have ever lived who consistently got referee calls to go his way. Some thought it was unfair. If you want an unfair advantage in real estate investing, take a listen to this video.
You may want to reconsider that thought. It’s more of a study on human motivation. Hear my explanation and then you decide.
After conducting a two-year study of Class A, B, and C assets in Florida, I reveal the answer in this video.
To get brokers and referral sources to notice you, you must let them know how active you are. In this video, I discuss the importance of marketing your achievements and being active on social media.
Lenders typically consider a property to be "student housing" if 40% or more of the occupants are students and that will dictate the type of financing offered. The owner of the asset, however, may not always consider their property to be a “student housing property” if only 40% are students and 60% are conventional. Owners tend to view their proprety as student or conventional by how they market and lease it; whether they have set move in/move out dates (August to July is more typical in student), or whether they offer student packages (furniture, cable, internet bundles).
Frankly, multifamily will sell at any time of the year because it is such a sought after asset class. That said, based on our research there are more optimum times when you consider holidays, competition, etc. The short answer is that the most optimum time is between March and August and the least optimum time is between mid-November and end of February. I would encourage you to review our study on this subject.
The answer depends on the interest rate, LTV, and amortization to name a few. But read this article for a detailed explanation.
A lender source Charles Knighton III, MSRE wrote, “According to appraisers and underwriters, 5.0% vacancy is 100% occupancy.”
That depends on whether you are buying a newly built apartment deal that has just been fully leased or whether it is still under construction and the lease up hasn’t occurred. Typically an investor would be buying the property once certain occupancy has been completed (90% or more) so my answers will focus more on that scenario. The video referenced can be found HERE.
1. Instead of asking for income tax returns or P&Ls during your DD period, ask for the pro-forma the developer provided to their lender to get financing for the project. Remember to also do your own research on market rents and expenses too.
2. The rent roll need shouldn’t change, you’ll still want to know the unit mix, rents for each style, deposits, size of units, lease end dates, etc.
3. Instead of asking for the last three to six months of utility bills you’ll want to know what utilities the landlord will be responsible for and the projected cost of each, which should be within the pro-forma the developer gave to the bank. Verify these projections by calling the local utility company and getting their thoughts.
4. Instead of asking for a past property tax bill (which would only be a vacant land valuation), the best way to estimate taxes on a new construction apartment deal in the first full year (first full year is the year following a Certificate of Occupancy was granted by the building department), go the property appraiser website and do a property search for apartment complexes that were built in the last 3 years and then calculate what the assessed values were, per unit, for the first full year of each of those projects. That will give you an indication of what yours will come out to. See how that compares to the developers pro-forma assumption give to his lender. It would be smart to also have a “true up” clause that survives the closing on new construction projects. This basically means that the seller agrees to reimburse buyer for any increase in property taxes that was some percentage above the projected property taxes on the proforma at the end of the first full year. That won’t fully reimburse you for the cap rated value you paid but it helps a little.
5. As for insurance, this should already be in place and you’ll want to review the “dec” (declaration) pages to makes sure the proper amounts are in place. Shop his/her dec page around with other carriers.
6. Obtaining the title and survey during DD is still customary in a new construction deal.
7. You’ll still want copies of all leases and any amendments. Because it is new construction, and there will have only been one lease done, it isn’t necessary to obtain estoppels from all the tenants but that is up to you and your lender.
8. As for the “5 Year Capx List” mentioned on the video, since this is a brand new deal you’ll want to instead obtain all the warranty information for all the major components of the project (roof, HVAC, appliances, etc.). It would be a good practice to set up in your management software how long each of these components last per the item specs and enter that info ahead of time so you don’t have to search for it years later if/when something breaks. You’ll want to know the vendor, install date, contact person, warranty period, care info, etc.
9. You will still want the environmental report that was required of the developer by their lender. Your lender may also want either a new report or the current one updated by the same vendor.
10. You will still want to run a crime report, you’ll want to see the leasing traffic log, and you’ll ESPECIALLY want to make sure there are no open permits on the project prior to closing.
A lender source Charles Knighton III, MSRE wrote, “…the investor’s net worth must be equal to the loan amount. In addition, they want to see your post-closing liquidity (readily available cash) equal to 10% of the loan amount (or 9-12 months of principal and interest payments).”
A lender source Charles Knighton III, MSRE wrote “Think about it like this: when a bank lends you 75% LTV on your asset, they are inevitably purchasing your property for 75% LTV.” “You have to look at it as a risk. Mitigating that risk is what’s important to getting your loan funded.”
A lender source Charles Knighton III, MSRE wrote, “Many lenders in today’s market need to see a debt coverage ratio of at least 1.25x on multifamily and 1.30x on other property types. This shows that the cash flow is healthy and if the property suffers a 25%-30% decrease in income it will still produce enough to pay the annual debt.”