tag:blogger.com,1999:blog-7800674.post6270245552269409354..comments2023-06-22T05:23:55.920-07:00Comments on Shaun's Real Estate Adventures: My First Investment In Multi-unit PropertiesShaunhttp://www.blogger.com/profile/05654897560778650994noreply@blogger.comBlogger19125tag:blogger.com,1999:blog-7800674.post-39081371761774179362008-03-05T08:14:00.000-07:002008-03-05T08:14:00.000-07:00Any updates about this deal? It looks very interes...Any updates about this deal? It looks very interesting, based on what you mention.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7800674.post-24496157323826648192008-02-14T00:50:00.000-07:002008-02-14T00:50:00.000-07:00"Anonymous" I would be interested in talking to yo..."Anonymous" I would be interested in talking to you about the project. Please send me an email at livelearninvest.com<BR/><BR/>Regarding the 95% occupancy. I agree that the current owner may have done those things to get the numbers up. If so, that information will be revealed during the due diligence process.<BR/><BR/>Even so, we expect the occupancy to drop after close because the new management will increase rents and therefore we'll see some turnover.<BR/><BR/>AI, our group has access to these properties as do the "investment grade" people. This property had multiple offers on it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7800674.post-64105974988813006122008-02-11T09:42:00.000-07:002008-02-11T09:42:00.000-07:00This is truly great information. I have been looki...This is truly great information. I have been looking at deals in Texas as well. I was told that this is the only place where the rents cover your debt service enabling good cash flow. According to Anonymous, this information could be incorrect. Anonymous, I would appreciate your email address to run a few deals past you as well. You don't find too many people willing to offer their advice especially after they have made it! How can we talk?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7800674.post-35375746929661503992008-02-07T10:29:00.000-07:002008-02-07T10:29:00.000-07:00Shaun,I am looking at a similar deal in fort worth...Shaun,<BR/>I am looking at a similar deal in fort worth the problem I am running into is that I have to be an accredited investor in order to join as a partner. Is that the case for this houston deal as well? Or any deals like this? Currently, I would just miss qualifying as one. <BR/>Thanks!<BR/>LuisAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7800674.post-8405653183320627692008-01-31T14:50:00.000-07:002008-01-31T14:50:00.000-07:00Shaun:I agree that you should tune out the "noise,...Shaun:<BR/><BR/>I agree that you should tune out the "noise," but when other people that know what they are talking about advise you not to do this, you should at least stop and listen to what they say. I have analyzed cash flow for hundreds of major projects over the last 25 years, and "anonymous" knows what he/she is talking about. <BR/><BR/>This group is trying to sell you an investment, and you should at least be skeptical of the numbers presented. In addition, these people have only invested in a rising market with stable or decreasing cap rates, and have never experienced a cap rate blow-up. <BR/><BR/>Like "anonymous," I am suspicious of the 95 percent occupancy and some of the other assumptions. Everything that he/she said about what sellers do to boost occupancy is true. The returns you project are not reasonable. If this were an "investment grade" property with these levels of returns, an "investment grade" buyer would have picked up the property long before your group had a chance to see it.<BR/><BR/>Since "anonymous" offered to analyze the deal, why not let him/her do that? You have nothing to lose, and a lot to gain.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7800674.post-14779882990963092412008-01-30T20:47:00.000-07:002008-01-30T20:47:00.000-07:00Shaun, this is "Anonymous". I posted the other day...Shaun, this is "Anonymous". I posted the other day cautioning about investing in your deal in Houston. I read some additional comments on here and wanted to clarify some things. First, I commend you for wanting to invest in real estate, especially multi-family. It can be a very lucrative business. However, I have also seen people lose everything if they don't do it right. I started buying properties in 1998 and started with duplexes and triplexes and traded up. Now I buy 300 and 400 unit buildings. I buy all over the country and in about 15 different major markets. I don't want to discourage you, but I do want you to see things for what they are. Deals always look good on paper. In reality, they are much different. And there is a simple reason, sellers and brokers lie (or at least fudge the facts). That 95% occupancy is great. I am sure that the owners offered specials and concessions to boost occupancy leading up to the sale. How would you know if 2 months ago they offered 2 free month's rent for someone to move in...it wouldn't show up on a rent roll now (that concession would have been burned off). Who says they didn't write off old delinquent rents, etc. to shpw great collections. If you would like, I am happy to give my email and you can feel free to run things by me if you wish. I am happy to give you the benefits of my successes and my failures (because I got snookered a few times too). I am not suggesting that your syndicators are anything by honest, but you need to be really careful. Let me know if you want my email.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7800674.post-63465521367763237282008-01-30T08:46:00.000-07:002008-01-30T08:46:00.000-07:00Kenric - yeah, I've noticed that for every single ...Kenric - yeah, I've noticed that for every single investment I have posted about here, there has been at least one person that has warned me against it. I look at it as the "noise" Kiyosaki writes about and I've learned to tune it out. Still, occasionally someone mentions something I have overlooked, so I do read all comments.<BR/><BR/>I also think this looks like a good deal. I am, however, finding out that Steve isn't as good a communicator as Les is. It's interesting to see the different styles of the people I invest with.Shaunhttps://www.blogger.com/profile/05654897560778650994noreply@blogger.comtag:blogger.com,1999:blog-7800674.post-32122307986794657562008-01-30T00:48:00.000-07:002008-01-30T00:48:00.000-07:00Shaun, you'll find that every time you post an inv...Shaun, you'll find that every time you post an investment that you will get a slew of comments or emails warning you from your investment.<BR/><BR/>The truth is that people like to toss in their opinions without seeing all the data. In fact, I know I do that also.<BR/><BR/>In regard to anonymous's post. And its exactly the type of reaction that we expect. Steve's strategy is to buy in markets that people say to stay away from. I think he's proved that it works.<BR/><BR/>In fact, Anon, if you're out there reading this. Send me an email on my blog www.livelearninvest.com and I can get you in contact with Steve. He's always interested to how other investors valuate their deals.<BR/><BR/>In all honesty, this 324-unit is a pretty amazing deal. I have not seen many B class buildings that will give you cashflow on 20% down.<BR/><BR/>I have seen a few 10 caps in Houston and they were all C class or below and in very bad neighborhoods.<BR/><BR/>The good thing about these blogs is that people can come back in 1 or 2 years and see how these investments went.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7800674.post-6524053283309348442008-01-29T06:16:00.000-07:002008-01-29T06:16:00.000-07:00Well, it's entirely possible I'm calculating the c...Well, it's entirely possible I'm calculating the cap rate incorrectly. As for the vacancy rate, it has been verified in person, as have the rent rolls (meaning concessions would be seen). Thanks for your advice. I will keep it in mind in the future.Shaunhttps://www.blogger.com/profile/05654897560778650994noreply@blogger.comtag:blogger.com,1999:blog-7800674.post-57176454113884407112008-01-28T21:42:00.000-07:002008-01-28T21:42:00.000-07:00I am an experienced multi-family investor (I own m...I am an experienced multi-family investor (I own more than $65 million in apt. assets). Let me advise you against investing in Houston. I have looked at deals in this city thoroughly and it is a very bad market to invest in now... It has high vacancy (I would be surprised if the property was 95% occupied...I haven't see one in Houston yet that is). Anyone who does have that occupancy is buying it through concessions. Second, a 5.2% cap rate is horrible and a projected 7.2% cap rate is horrible too. For the risk involved, you need a much better return. Third, you will never get anywhere near a $50 increase in rents. Shaun, if you want some additional unbiased information, feel free to ask. But take it from a guy who has looked at a lot of deals (including many in Houston), I wouldn't touch a deal down there for less than a 10 cap deal.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7800674.post-79463095933909721602008-01-28T10:23:00.000-07:002008-01-28T10:23:00.000-07:00No firm date for a sale. The analysis shows we'd g...No firm date for a sale. The analysis shows we'd get the greatest ROI if we sold after year 2, but of course, that's an analysis using pro forma numbers, so that's subject to change. About the only thing I can say is we won't sell for at least a year, since the first year will be when we make all the improvements to the place and we'll need time for the property to pay back the improvement costs. The deal will be analyzed each year to see if it should be sold or not.Shaunhttps://www.blogger.com/profile/05654897560778650994noreply@blogger.comtag:blogger.com,1999:blog-7800674.post-77474287493132351922008-01-27T15:27:00.000-07:002008-01-27T15:27:00.000-07:00Cool, Shaun. Hope this goes a lot better than the...Cool, Shaun. Hope this goes a lot better than the LA deal. Steve is great at finding diamonds in the rough from what I've heard, so this will no doubt be a winner I'm sure.<BR/><BR/>Do you have a ballpark figure on when the group plans to actually sell the property?Stevehttps://www.blogger.com/profile/00481907039111729122noreply@blogger.comtag:blogger.com,1999:blog-7800674.post-35972835079816741952008-01-25T09:17:00.000-07:002008-01-25T09:17:00.000-07:00It's in the Westchase District.It's in the Westchase District.Shaunhttps://www.blogger.com/profile/05654897560778650994noreply@blogger.comtag:blogger.com,1999:blog-7800674.post-79609654361632993892008-01-25T09:14:00.000-07:002008-01-25T09:14:00.000-07:00Shaun, what neighborhood in Houston is this proper...Shaun, what neighborhood in Houston is this property located?<BR/>I met with Steve down there and we looked at a couple places, but nothing that really jumped out at me... The only one we actually liked wound up going into contract a week after our visit, so we missed the boat... A lot of the stuff we saw was in so-so area, or areas that were showing weakness...<BR/>The thing about Houston is that there are a TON of large multifamilies (amazing, really)... I'd never seen another city with a similar housing composition...<BR/>It was definitely an attractive area due to population growth, though...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7800674.post-80402167512261827292008-01-24T21:16:00.000-07:002008-01-24T21:16:00.000-07:00If anyone thinks they can judge the financial meri...If anyone thinks they can judge the financial merits of his deal by the numbers I have posted here, they are sadly mistaken. There is no way I can condense a 100 page analysis to a few paragraphs and give any sort of numbers that will stand up to reverse engineering. Also, you are making too many assumptions ("typical expense ratio" and "implied rent levels"). You have to because I have not posted all the minutiae of the deal. For instance, I never mentioned the bank loan is interest only for the first three years then it converts to including principle on a 30 year amortization schedule.<BR/><BR/>I am not about to post every detail of every financial statement here. This is a public venue and I consider that level of detail to be private information. I will continue to post general information about the performance of this investment, good or bad. You are more than welcome to come back and visit and check the progress, but if you expect to be able to take the numbers I write to your accountant for verification, you will be disappointed.Shaunhttps://www.blogger.com/profile/05654897560778650994noreply@blogger.comtag:blogger.com,1999:blog-7800674.post-79317733601657688932008-01-24T20:48:00.000-07:002008-01-24T20:48:00.000-07:00I would LOVE to see the offering memo on this one....I would LOVE to see the offering memo on this one...<BR/><BR/>Using your figures and a typical expense ratio for projects with lots of amenities (pools and fitness centers) of 45 percent, I work back to a TTM AGI of $304 per unit with the 5.2 percent overall cap rate. Adding your $100,000 of capital improvements (some of these expenditures are really operating expenses...) to the purchase price and applying the 7.2percent overall rate works back to a pro-forma gross income of $420 per unit.<BR/><BR/>My analysis is quick and dirty, but the implied rent levels don't support $50 a month increases, much less what is required to bump the first year cap rate.<BR/><BR/>Doing a slightly different analysis, they are buying on a 5.2 TTM overall rate, paying 6 percent interest on 76 to 78 percent of the purchase price (assuming the capital raised comprises the down payment), and paying the equity position 9 percent cash on cash. The increase in first year NOI would be phenomenol to accomplish this.<BR/><BR/>I'm sure they did not include the appraisal in the offering memo, but I would love to see what the lender got.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7800674.post-64387283170270969922008-01-24T15:00:00.000-07:002008-01-24T15:00:00.000-07:00Current occupancy rate, as I mentioned above, is 9...Current occupancy rate, as I mentioned above, is 95%. I forget the exact occupancy figure from a year ago, but it was within 1% of current. <BR/><BR/>GRM (gross rent multipler) is generally only used on properties of 20 or less units. Therefore, it is not applicable to this property.<BR/><BR/>Cap rate based on 12 month trailing income from Oct 2007 is 5.2%. Pro forma cap rate for the first year is 7.2%. Second year is 8.6%.Shaunhttps://www.blogger.com/profile/05654897560778650994noreply@blogger.comtag:blogger.com,1999:blog-7800674.post-5694402053832551072008-01-24T13:48:00.000-07:002008-01-24T13:48:00.000-07:00What is the cap rate based on current rents? What...What is the cap rate based on current rents? What is the current occupancy rate? Same questions going back a year in time.<BR/><BR/>What is the GRM?<BR/><BR/>Also, if you are planning on investing in Texas multiunit properties you should probably read up and develop your own opinion about the 86-89 bust in Texas.<BR/><BR/>One resource is Craig Halls' book "News of My Death Was Greatly Exaggerated: How I Survived the Texas Depression : My Financial Strategies for the '90s"<BR/><BR/>http://www.amazon.com/News-Death-Was-Greatly-Exaggerated/dp/0312044402/ref=sr_1_1?ie=UTF8&s=books&qid=1201207409&sr=8-1Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7800674.post-53347942265471810402008-01-24T13:44:00.000-07:002008-01-24T13:44:00.000-07:00This is great information. My ultimate goal is to...This is great information. My ultimate goal is to own multi unit properties. An apartment complex or hotel would be ideal.Anonymousnoreply@blogger.com