Thread: SUCCESS STORY: Steve O

Thanks very much for the story.

I haven't the first idea about construction or anything like that. Not exactly a "handy man" but it's really awesome that you've had so much success with this.

SteveO, your story is really inspirational. I'm sure you've heard that two dozen times, but real estate has always grabbed my attention as a possible "fastlane" vehicle for me. I honestly never thought that I could put myself in a position to be one of those high rollers that actually owns the apartment complex (due to my middle class status), until now. I thought maybe a residential "house flipper" or "landlord" at best (not knocking those ideas at all!). I'm not sure why, but thinking about someone who owns several hundred units... I pictured some large firm...or someone with 30 years in the business and tons of start up capital. Thanks for the eye opener.

Originally Posted by DKH

I honestly never thought that I could put myself in a position to be one of those high rollers that actually owns the apartment complex (due to my middle class status), until now.

That is exactly what I thought until about 12 years ago. Since then, the focus has been directed at learning how to obtain and operate them. during the past few years the focus has been on competing with the reits and syndicators.

I found a 4-plex in Carlsbad, CA. that fit my criteria. After a lengthy negotiation I purchased it for 180K with a 10% seller carryback on a note. In order to get the money I had to max out a credit line, and take a 3rd mortgage on my house.

Within a year I refinanced and paid off the credit line and 3rd. So I was basically had all my initial investment back. At year 2, I sold the property and exchanged it into another property with some other investors. I had 30% of a 46 unit property in Riverside, CA.

Hi Steve O - I'm wondering how you made the jump from buying a small building by pulling together everything you had to owning 30% of a much larger building only 2 years later. It just seems very fast to me. Am I missing something? I'm not from the US so maybe I just don't get the RE financing process over there.

This actually inspired me to start a thread so feel free to answer there:
http://www.thefastlanetomillions.com...9-figures.html

Steve,

Good to hear you make a comeback after a really difficulties and struggle.

You have give me an inspiration for me.

Bravo Steve

Your story is inspiring. I have been thinking about getting into real estate for a while now and your story tonight has caused a shift in my thinking. Thanks for sharing and inspiring

Thanks so much for your story, SteveO! I've been a real estate investor for 8 years (mostly in Orange County, CA and Dallas, TX). I've been actively researching purchasing my first mid-sized apartment building. What were the terms for the owner carry-back downs you mentioned? Thanks!

I have been swamped lately and will respond in the next couple of days. There are exciting changes to talk about.

Thanks so much! I've been researching apt bldgs and crunching numbers and want to pull the trigger on my first bldg. I appreciate your advice and am impressed with your story!

History is a great teacher in many ways. Understanding deals done in the past will certainly allow for creative ways to look to do deals.

Understanding the present is more important though.

I have lost track of the requirements for mid sized apartments. All the deals that I have done during the past few years have been on 100+ units. With this in mind, some information may not match your current needs.

Lenders want skin in the game. The securitized lending frenzy brought on a lot of high leverage. There was plenty of money floating around to place and the lenders got more and more aggressive. Everyone knows this story.

Now the basic deal requires 35-40% down. Most lenders are seriously frowning on seller carrybacks.

To top it off, they want to see experienced buyers.

Lenders are the primary reason that real estate transactions are not happening.

There are many deals out today. I attended an auction on a 144 unit deal the other day that went for 1.9M. That property sold for 4.8M a few years ago. The bank had to cut some losses. I was interested in this for 1M.

Lenders have been bit by operators that don't have experience in a tough market. So they are pulling back.

The best way to leverage these days is to gather funds from other investors. This is challenging because most of the real deals out there are losing serious money. I have seen some negative cap rates but you know people are not going to pay you to take the property.

If you are a proven operator, you might be able to convince people to invest with you in some of these deals. There are goldmines out there right now. Aquiring them is the challenge.

To address your question about past seller financing. I would look at 75% LTV leverage with a bank or other apartment lender. In my offer, I would ask the seller to carry back the loan on an interest only or accrued interest loan. These had interest rates of anywhere from 6% to 9% with a balloon in the range of 2-5 years.

As with most deals, you can get price or terms. It is hard to get both. Most sellers these days are pricing high leverage deals are premiums that are not worth it.

Steve

I have heard there are 23,000 apartment buildings in the United States (capacity). I do not know what the cutoff was for this number whether they are for over a 100 unit configuration or a 50 unit configuration, etc.

Do you know the numbers??

Thanks much for the reply, Steve-O! How do you find good lenders for your commercial loans? I have a few I got as referrals from other investor friends, but with the ever-changing lending world, I like checking with other top mortgage brokers to see what else is out there

Thanks for the post Steve! It was great to hear a story relative to my own goals. Thanks again!

Originally Posted by SteveO

Now the basic deal requires 35-40% down. Most lenders are seriously frowning on seller carrybacks.

To top it off, they want to see experienced buyers.

Lenders are the primary reason that real estate transactions are not happening. .

exactly the scenario I've been fighting on a couple of small deals recently.... the properties are being purchased at 50% LTV, but the demands are just as stringent as if LTV was 95%.... just crazy.

But there's got to be a way around it... any other suggestions or ideas?

Originally Posted by randallg99

exactly the scenario I've been fighting on a couple of small deals recently.... the properties are being purchased at 50% LTV, but the demands are just as stringent as if LTV was 95%.... just crazy.

But there's got to be a way around it... any other suggestions or ideas?

What if you look for deals with assumable loans only? (I know this limits your potential deals, but hey, it could work, no?)

i would like update how are you doing today steve o frank

Originally Posted by randallg99

exactly the scenario I've been fighting on a couple of small deals recently.... the properties are being purchased at 50% LTV, but the demands are just as stringent as if LTV was 95%.... just crazy.

But there's got to be a way around it... any other suggestions or ideas?

Not much different in Canada either.

I think it's sort of the price of admission. The "easy" way is to circumvent lenders and go in with investor $$, but that's obviously a challenge of it's own.

And hardmoney lenders are pretty nervous these days as well, which obviously doesn't make sense in the first place unless you can REFI or exit right away.

However, in some of the harder hit areas (at least in Canada) the cost of commercial property has sunk, creating a nice buyer's market, even if that means challenging capital.

Kick, scratch and claw. Do what it takes...

-Chris

Not sure if you mentioned it and missed it but what book(s) did you read for apartment buying and selling? I have always said that it would be something I might want to look into.

Thanks.