Left my career in the investment field was in great shape financially to go and try something else. Spent of couple of years working on a business project that involved a lot of r&d chose not to take salary while trying to get the project on it’s feet. Ended the project as the engineering wasn’t getting us to were we thought it needed to be.
I spent the next couple of months deciding what I wanted to do next. Then I realized real estate investing was something I was interested in and something I thought I had the capability of being good at given my financial background. So I did a great deal of study on how to be a professional Real Estate investor.
I am mainly interested in multi family I have the money for down payments I have money to keep in reserve ect I have found a few properties with great financials and positive cash flow. What I don’t have is 2 years tax returns because I was living on my savings and investments nor do I have so called experience. So I seem to be stuck unless I want to pay cash or do 50% ltv which kills my cash on cash returns. Other than owner finance are there any other suggestions.
Advertise you are looking for properties where the owner will hold the mortgage…Offer terms and types of properties you are looking for to weed out the junk…Im sure in this market you will find enough takers to build a portfolio…The down side is you lose your power to negotiate because you bring nothing to the table…But you get lucky and find a truly disgusted property owner with lots of equity looking to unload and hold a mortgage…Otherwise I don’t see any other option…
Interesting choice of words ( I bring nothing to the table )and interesting market from a common sense investment standpoint.
I am looking at a 24 unit apartment property for $750k. After a lot of analysis this property has NOI of 90000 its debt coverage ratio is in excess of 1.8 it has $40k+ in net cash flow I have the $150k down and another $100k in reserve for unexpected YET I HAVE NOTHING TO OFFER.
my statement that you bring nothing to the table was in regard when you seek owner financing you are at the owners mercy (meaning his/her lack of negotiability) because he/she is not being paid in full like a typical deal that is financed through conventional funding…You took my words out of context…Also if you plan on being so specific in the exact kind of property you want and have a few dollars in capital maybe you can get an equity backer…Surely being that you were in the financial industry you know people who would back u at lower than HM rates…This way you can play both sides of the deal…
And after reviewing your numbers you arent putting down a tremendous amount of money for the cost of the property…The property is 750k and you want to put down 150k (thats %20)…And 100k reserve for repairs etc…Im sure you have alot more capital than this but if I may ask you a question without getting your panties in bunch…What is your experience managing a property of this size?..This seems like a property for an experienced property manager rather than a beginner…
All the banks and mortgage companies said a likely down would be 20 to 25% so 150k down is 20%. I budgeted money in for maintenance and repairs the extra 100k is cash I have allotted to keep in reserve for these projects.
Yes this is my first deal and I understand the 24 unit complex is large for a first one. However I have a degree in Finance and Real Estate in my career in the investment business I manged large institutional clients with $100s of millions of dollars and thousands of individual clients. I have been studying hard property management real estate financial analysis and landlord tenant relations and law over the last few months in preparation for this. So although new not something I think is impossible for me to handle.
No panties in a bunch here just looking for ideas to overcome the entry hurdle.
patton1,
Sounds like you have a pretty extensive background. For software, I think QuickBooks Pro would work out very well for you. You could separate each unit into its own class and have P&L information for each unit.
If you go thru with this, try to treat your tenants with a reasonable amount of respect and be good to them. We always tell our tenants we want to know when things are wrong and we’ll fix them. Too many people just put things off hoping the tenant will quit complaining about it. We take care of our properties and keep the prices reasonable so people will want to stay there.
Good luck and let us know how it turns out.
Thanks for the advice I spent a week reading up on landlord tenant relationships and what and what not to do. Agree with treating people well. Have been thinking of what software would work best I had seen some software that was geared directly towards rental property’s wasn’t sure which was best. My realtor also has 30 rental units so he is a good source of info. Now if I can get the banks on board.
I may be able to get the guy to owner finance which would help me get in but I think it will have a balloon in 5 years. Wondering how hard if things go well it will be to get the property refinanced before the balloon is due?
The big concern I’ve been hearing about financing is that interest rates have to go up at some point. Many people are worried about what the rate will be when they reset in a few years on the balloon type loans. We had one from 2007 that reset this year where our payment went down by over 10%, but that may not be the case in 3 more years. Our goal is to get as many of them paid off in the next few years so it doesn’t hurt so bad if rates go to 10% or higher.