U.S. apartment vacancies near historic high

[hatterasguy]

My "hard money" is from people with lazy capital. Just people of means who have an extra $150k laying around doing nothing.

 

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[MonTexan]

Self-directed IRA money is a great resource to pursue. I have found that people who already have an Entrust account have been "well-schooled in the ways of hard money."

Entrust offers classes/mixers to attract people who have money to loan and those looking to place it. They do a good job of educating their clients about the 10-12% returns that we RE investors are capable of yielding, so not too many are happy with a 4-6% return.

 

[Sid23]

Jackie,

Maybe help us people on the other side of the fence (who have been through large transactions on multi-units and NOT used your methods) learn a little more about your methods you would feel comfortable giving us an example of a deal? Maybe some further details on how you or your investors controlled a larger deal, say 20+ units, using the methods you describe?

I don't think people saying your method doesn't work, its just that none of us have done a deal that way.

Just a thought.
Sid23

 

[Russ H]

JScott-

Thanks for clarifying.

I guess I was thinking along different lines:

If you (or some other REI) lined up a dozen or so folks w/Self directed IRAs, and told them you'd let them know if a deal came along, you'd probably find uses for their money.

I never realized the incredible power of partnering until I played a cashflow game w/Les Gee where he had us play as different investing "personas": One was the "lone wolf", who only used their own money, and had to pay off all debt before investing. Another was "the leverager", who played like we do in real life: Using OPM to do deals, but keeping everything to ourselves.

The third persona was "the team player", who HAD to partner w/other players to do any deals. This forced that person to work w/other players.

The team player was out of the game in just a few moves!

Even Les was suprised at how much faster team players exited the rat race compared to others.

So much so that he actually changed his whole approach to investing-- it made that much of an impression on him.

I guess that's why I had the "aha"-- working w/other people w/their self directed IRAs seems like a perfect match for REIs who see lots of opportunities but are always looking for more funding!

(Sonya, you listening?)

-Russ H.

 

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[phlgirl]

*****None of my experience has anything to do with apartment buildings*****

The private investors I've spoken with (friends and former colleagues in the tech industry) don't want to to lend money at relatively low interest rates (less than 7%); they want to partner, providing them a larger upside.

All of our private money sources are over 7%.

I don't need funding badly enough that I'm willing to give up a percentage of the deals; I'd rather use my own cash than do that.

This can be a very powerful tool. It permits you to deals way beyond your current means (which means you may meet your end goal much faster).

This is why bank financing is my preferred method. That's the route I take with all my short-term financing, and am working on securing long-term financing that way as well.

Agreed. When the money from this source is flowing, it is the easiest money I have seen yet. One point of contact, one process, extremely quick transactions. Ahhh... heaven. :heartbeat:

I don't want to speak for PhlGirl, but I believe her goal is to *sell* investment property to those who want to invest out of their self-directed IRAs, not borrow money. I could be wrong...

Back end money, front end money..... I am ALWAYS looking for money.

A few wise people (KJC being one of them) stressed to us, years ago, that you always need to be looking for money - particularly when you don't need it. It is part of my job to line it up and wait for the deals. I'm not NEARLY as good as I would like; however, I do quite enjoy it. It's a fun, calculating, game.

Several buyers have directed money from their IRAs to purchase our turnkey properties. Some 100%, some partial financing. We use private (non-IRA) money to finance all front end transactions - rates vary. Partners of ours use IRA money to do front and back end. Rates are comparable to hard money, but no points.

 

[phlgirl]

If you (or some other REI) lined up a dozen or so folks w/Self directed IRAs, and told them you'd let them know if a deal came along, you'd probably find uses for their money.

Absolutely agree. Can't wait!

We started pursuing this avenue perhaps a year ago (?) when Diane Kennedy mentioned it here a few times. The events are pretty good (better up north, in my opinion.... but, then, perhaps we just relate better here). We have one coming up at the Borgata mid-August. It's building relationships, learning something new.....meeting people with similar thoughts. Good stuff.

You begin to realize that anything is possible, if you get the right team members in place.

 

[Russ H]

You begin to realize that anything is possible, if you get the right team members in place.

Man, if you could sum up what I've learned from being around Diane Kennedy in one sentence, this is it.

-Russ H.

 

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[Russ H]

You begin to realize that anything is possible, if you get the right team members in place.

Man, if you could sum up what I've learned from being around Diane Kennedy in one sentence, this is it.

-Russ H.

 

[unicon]

Currently rentals are taking time to fill, my apartments are full but single family homes are going slow, the commercials I have are fortunately leased but are having problems. The one commercial I have had vacant for some time, but use the offices on the top floor so it is considered a cost of doing business (rationalization).

A separate 10,000 sq ft commercial with 4 units in which I share a partnership is managed by an owner operator who has stopped paying rent for his unit. The other day he suggested selling the building which I objected but would buy out any hurting partner. He has a conflict which will have to be confronted.

Lots of local apartment buildings have come up for sale and would have a choice if pursued. They are hurting but prices have not softened in the same proportion.

My monthly losses to cash flow would be $6475/mo aside from the above mentioned partnership (which supports itself). This number is relative to scheduled income which is being corrected but is an exact figure. Is this number bad or good? It is all relative but means we have alot of internal work on going.

In reading over Reed's blog the other day on his critique of the gurus of Real Estate one of his points was that most real estate investors manage their own rentals and the ones that hire out management very seldom survive. This is more likely the rule and probably generally true. In our local the lazy investors are the ones with outside management and their buildings are for sale at a premium. They are ripe for negotiation.

This thread got me thinking of my own pattern of doing deals which consisted of many creative deals in my youth and fewer more value significant as I got older. A volume to quality pattern. This quality also took along time to learn in corporate acquisition and development as well.

An additional pattern is the doubt that surfaces when you do not have enough team members in place or quality members in place.

Management and team members is such an important concept. It is actually easier in Corporate management with the employees and support. Investment management of rentals is slow growth in the initial stages but has little margin for waste or employees.

What is fast is the ability to creatively acquire any and all the real estate out there with no money, the management is what slows that process down - not the acquisition. Management ability is a capacity issue and when you are older you add another dimension of Quality which you have a hard time sacrificing.

Because of sitting on alot of cash being older one is not likely to part with it, in my youth it would have been moved more quickly. If I were to acquire another building currently it would not affect my cash position, I would use the knowledge gained using all the above creative methods to perserve the cash.

The attitude must be that all deals out there are for your taking your only problem is to manage them. The crux is more and always will be to build a QUALITY team. It is truly a priority and is information based, not cash based. It is the only thing that limits you.

To the extent I sit on my own cash I am inefficient. The fact that I am aware of this and so much more, is painful. What may seem like a good postion to others on the surface, may prevent one from making deals in an enviornment of contraction. The best choices are clarified by a team that has been there and done that.

Build a team and don't close down creative ideas, creative acquisitions, possible partnerships, quality improvements and other skills that just speed up the process.

My own Quality design and improvement team member was worried that he would run out of work, 3 years later he realizes how foolish that thought was as he is backlogged. Seeing and visualizing quality is part of the acquisition process to increase margins. He now can see!!

To go internal or external is the Question? As seductive as a deal is, one must be in tune with ones Capacity!! Sometimes no action is the best action.

 

[randallg99]

Absolutely agree. Can't wait!

events are pretty good (better up north, in my opinion.... but, then, perhaps we just relate better here). We have one coming up at the Borgata mid-August. It's building relationships, learning something new.....meeting people with similar thoughts. Good stuff.

You begin to realize that anything is possible, if you get the right team members in place.

is this the event on Aug 14th at the Waterview? I just spoke with the company that handles my directed IRA and he mentioned this event. Have you been to one of these before? is it casual? just a bunch of booths?

 

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[phlgirl]

is this the event on Aug 14th at the Waterview? I just spoke with the company that handles my directed IRA and he mentioned this event. Have you been to one of these before? is it casual? just a bunch of booths?

Yes, this is the same event.

We have only been to a few, so far, up north. The events I attended have been shorter, evening, sessions - one at the Pyramid Club and another in a hotel conf. room. They were set up more like a coctail hour, with a 20-30 minute presentation about an opportunity mid-way through. My husband also hit one up in NYC and another in Bucks Co., I think.

The event at the Waterclub appears to be an all day event (9am - 3pm), with multiple speakers. The topics listed for presentation are Sherrif Sales, Lease Options, Interactive Advertising and then a final presentation about investing using your self-directed IRA. Breakfast and lunch is included.

 

[CashFlowDepot]

One of the other things I've done to get private lenders is to teach a 1/2 day seminar about the advantages of being a private lender. I created a 70 page hand out that explains how they are protected, the various programs available ( short and long term) It shows sample documents, etc. I also created a power point so the presentation would be very professional.

This is strictly NO SALES -- it is only informational or you could get in trouble with the SEC

I ran ads in the business journal to get people to come, and charged $69

Got about 50 people and 5 new private lender immediately.

It's good to have an attorney from the title company explain the documents and how they protect the private lender.

You only have to do this once and you're set

 

[andviv]

In reading over Reed's blog the other day on his critique of the gurus of Real Estate one of his points was that most real estate investors manage their own rentals and the ones that hire out management very seldom survive. This is more likely the rule and probably generally true. In our local the lazy investors are the ones with outside management and their buildings are for sale at a premium. They are ripe for negotiation.

...

An additional pattern is the doubt that surfaces when you do not have enough team members in place or quality members in place.

Management and team members is such an important concept. It is actually easier in Corporate management with the employees and support. Investment management of rentals is slow growth in the initial stages but has little margin for waste or employees.

What is fast is the ability to creatively acquire any and all the real estate out there with no money, the management is what slows that process down - not the acquisition. Management ability is a capacity issue and when you are older you add another dimension of Quality which you have a hard time sacrificing.

...

The attitude must be that all deals out there are for your taking your only problem is to manage them. The crux is more and always will be to build a QUALITY team. It is truly a priority and is information based, not cash based. It is the only thing that limits you.

...

Sometimes no action is the best action.

this is an exceptional post. Rep++

In my limited experience with apartment buildings I've noticed that success in the investment is 20% the right acquisition and 80% of great management. Tenant management is the key to sustain your investment in the long run.

In my SFH investments the return was highly positive when the right property management was in place, and everything was hell when the PM sucked. Problem is, most PMs suck big time, and very few are good at it.

In today's market the best managed properties will make it, as they will have the lower vacancies. If you as a renter can pick and choose, why would you stay at the place where management is bad, while you could get similar concessions and rents and great service?

 

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[CashFlowDepot]

Management is absolutely no issue for me. I do not hire an outside management team yet still have no problems. All my rents are collected in less than 5 minutes. I never get any maintenance calls. And my average tenant has been with me more than 5 years - some more than 10 years.

The reason ... I learned David Tilney's Hassle Free Property management System.

This will absolutely change your life!

 

[andviv]

Management is absolutely no issue for me. I do not hire an outside management team yet still have no problems. All my rents are collected in less than 5 minutes. I never get any maintenance calls. And my average tenant has been with me more than 5 years - some more than 10 years.

The reason ... I learned David Tilney's Hassle Free Property management System.

This will absolutely change your life!

Does this apply to apartment buildings --the original topic for this thread-- as well? (I really doubt it).