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Apartment complexes are great to look into especially given that rental properties are very favorable right now due to the amount of homeowners that have went into foreclosure. Occupancy rates on rentals have improved dramatically. However, out of 50 complexes that are out there for sale, maybe 1 makes utmost economic sense. You need a FULL and EFFICIENT team in place. Realtor, Finance guy for future refinance, Asset Manager, Property Manager, Renovation crew.
In my opinion, the best opportunities are what are called "Value Add" assets. This involves buying a neglected / distressed asset and some could be ugly, but that is the hidden beauty in it. Buying – Stabilizing – Holding makes an enormous amount of sense in the right property. If you buy a stable asset, you are buying on the wrong side and being sold a wholesale product. If that is ok with you, then that is fine as well, but most equity is developed by adding value to a distressed/neglected asset in todays' current market conditions.
I am currently under contract for a C-Class 336 unit apartment complex in Orlando, FL. We have negotiated a deal from the bank at $8,900 per door. Market value from comparable sales is $25k to $30k. At $8,900 per door, this development needs $2.5 million in Capital Improvements. It is effectively going to make the complex nearly new. So an investment of $2.5 million into the complex will bring our total to $16,300 per door, still considerably under market value. Currently the complex is 15% occupied. That will cover most of the current operating expenses which is a positive. Rehabilitating the complex will take the $2.5 million, but if done according to plan, we will not have to lay out all of that money. We will phase out construction and use the gradual increase in occupancy to pay for most of it. So we will pay the $3 million for the asset and inject another $700k or so to get things moving. From that point forward, we are expecting rental income to pay for the remaining improvements.
The complex will take 18 months to stabilize in our projections. At 75% occupancy with the Net Operating Income that it will have, the complex will have a 9% Capitalization Rate, valued at $10 million. The area occupancy rate is 93% so we budget and project conservatively.
The acquisition process is tough if you want the best deals. In most cases, banks have no idea what is going on with the complex. You must deal with the lender, the Receivership, the Asset Manager, and the Special Servicer. It's time consuming, but worth it.
Anyway, that is a traditional acquisition that we find very lucrative for the right investor.
We are constantly working with our contacts in the Florida area for bank owned or Deed In Lieu opportunities. We do not have anything now, but if you send me a private message, I can send you a due diligence package that we provide once something comes up. They are bank direct. No middlemen. If we assist with the sale, our asset management firm simply collects a commission. We provide Receivership reports, Financials, Comparables, history, etc. In most cases, quick action is required. That is typical when dealing with the bank, otherwise we risk having them pool their non-performing notes together and selling to an investment bank. I've lost several deals because of that!!! If you would simply like any suggestions on investment in apartment complexes, I would be happy to assist in answering any.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeWe handle a lot of SW Florida investment properties for international buyers.. Mostly duplexes like this person in the article bought. I was able to look up the Wright's duplex that they purchased as I assumed it was our area where duplexes are great rentals. They overpaid by about $15,000 which is a lot when the price is $96,000 and your rental income is just over $12,000. The rental income is about right, but the price was very inflated. I guess they are happy which is all that matters.
That price is even more than the Multiple Listing Service provides. But at the end of the day…real estate is worth what someone is willing to pay. I would never call anyone out if they overpaid and were on this forum, but I just wanted to point it out that this price isn't even close, hence the reason for working with good people or doing more research is necessary.
Mike
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeYes, foreclosures can be tricky. When buying anything built from 2005 to present which is most of what our business consists of, be sure to ask about Defective Chinese Drywall. Trust me, you don't want issues with that. You can google the problem to see for yourself.
Rental rates have stabilized in many areas and in some areas are rising. My 2 cents about websites: Zillow, Trulia, etc are mostly outdated and do not report information that is entirely accurate.
There is a lot of international money coming into the states and historic trends and percentages say that now is a very favorable time to buy. More value is added with the currency rates. We are buying multi-family homes that are showing 12-17% Capitalization rates that are bought for $70k to $80k. Cash flow aside, the duplexes will still achieve a Cap Rate of 9% if the homes are sold at $120,000. That said, foreign investors will continue to buy all the way up to that pricepoint for their yield of 9%. Again, now is the time to buy low.
Mike
http://www.MyRealtySource.comCheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeYes, even domestic investors are finding property management to be the biggest issue. Sorry for leaving things out of the article. I didn't want to be too long winded, just general. I should really update that because you raise good points.
In Florida, we work in the SW Florida region (Ft. Myers/Cape Coral) we are achieving tenancy in under 30 days. It could be different with others. What we do is purchase small bulk from the banks. Large bulk doesn't really exist to us that much anymore. We wholesale them out individually. So there is an A to B transaction and B to C transaction. The bank is A, our firm is B, and you for instance are C. Once the A to B transaction closes we rehab the property to rentability. Our rehab team creates our budget before we put a hard deposit down with the banks. Once we close A to B, you would contract with us to form the B to C transaction. Your closing (if cash) would take about 20-30 days where prior to closing all of the rehab work is completed. Mostly cosmetic. In almost all cases, we have tenants ready by Day 1 of the C transaction. Not in all cases, but most. We haven't gone 2 months with consistent vacancy. The management company we work with has guys in the field all the time. They have their own handymen, and if something is needed by a licensed contractor, they provide the service calls. You can also purchase an insurance policy for about $350 per unit annually. This covers appliances, electric, plumbing, HVAC, Heating, etc. Taxes are broken down several ways…Ad Velorum, City, Schools, etc…Your water tax is covered under the city portion, same with garbage. Assessed values of real estate is way down. Taxes are very inexpensive in our area.
I hope this helps in clarifying.
Thanks,Mike
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeYes, once in a lifetime opportunity. If you can get cash or get a mortgage perhaps through Llyods or HSBC you should be able to line yourself up for a lucrative opportunity. We are seeing a lot of foreign money coming in. We also have a long time business in New Jersey on the Hudson River across from midtown NYC in addition to Florida. LOTS of international interest. Although we did not procure all of the sales (wish we did!), there is one building in Jersey City NJ where there were 19 sales over the last 2 months. 14 of those were from foreigners! Yeah, prices are higher but upside is what they look at.
We recently wrote an article about foreign national investing if anyone is interested: LINK
Finding good deals you can probably do sitting in your recliner at home in a foreign country. The most problematic issue is management. Most good management companies are all online where you can set up with them via phone or visit, then they give you an account on their website where you can get all of your monthly accounting reports and everything else. Fortunately and unfortunately, we have worked with about 2 dozen management companies over the last 8 years and all of them suck pretty bad with the exception of the 2 that we have continued to work with. It's process of elimination. Very hard to just interview a company and find the right people in one day or even one year.
Mike
My Realty SourceCheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeYour own due diligence is the only thing that can make your investment seemless. There are thousands of agents pitching investment property. Question: Do these agents even know how to calculate Net Operating Income? Do they include true expenses when calculating that NOI?
Real estate agents in the U.S have the same reputation as Used Car Salesman and that is a shame because there are a lot of good ones out there (nothing against used car salesman..it's just a stygma). We work with international investment groups and only recommend areas that we have our own money in. Company and personal asset investments. Every investor that has come to our area, we show our own properties to that we own. Agents selling in areas that they do not invest in either do not believe in the area entirely or do not have the wherewithal to purchase. Wherewithal should not be a deterrent in many cases, but are you going to buy an IPO stock from a stock broker than hasn't unloaded himself? Different, but same. The U.S is a great market to invest in but it is a major "BUYER BEWARE" market also. If you do it right, you can set yourself up for a very profitable 10+ years.
Mike
http://www.MyRealtySource.comCheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeWe have been getting a lot of inquiries from AU and UK for investment / income properties in Florida. Real Estate Investors: be aware that Florida is VERY local. Some markets provide a good opportunity and some just don't make sense. You would see distinct differences with your own eyes. Anyone pitching "appreciation kickers" or speculative buying don't belong selling real estate…IN MY OPINION. Speculating on appreciation today is like trying to predict the weather in 10 years.
Today's US investments will come from cash flow, IRR, Cap Rates, etc.. Put your money up and make an ROI. Today we need to rely on old-school simple fundamental real estate. In 3-5-7 years when you decide to sell and your property is worth more, that is gravy. Achieving 10-15% Capitalization Rates is lucrative and the returns are unlike any other investment vehicle. ROI's are inflated today in all marketing materials so do your own numbers, compare, and analyze. If you do that you could find some really nice opportunities.
I am a former small level executive with a lender in Florida. Once the bank was forced into involuntary BK due to red financials during the collapse, I broke off and continued my investor services. If you would like to see properties that we work with, please visit our website at http://www.MyRealtySource.com. We target 2 main products: Multi-Family Residential and Single Family Residential. We buy in bulk and sell off individual assets at about 5-8% above our cost.
For anything 1-4 units, we purchase in bulk from the banks and wholesale. Our prices are about 20-30% under current market value and about 75% of the prior note (which is pretty irrelevent these days). Most of our 1-4 unit homes are 2005 built or newer. Feel free to look at our site. I would value any ideas and would be happy to address any questions. We are pretty black and white and would certainly like an opportunity to show you if you ever came to the states. CHEERS!!
Mike
CFSCheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeHello Hirav,
I would be happy to answer any questions you may have about investing within the US. I am located in Southwest Florida and we have opportunities to fit all budgets. Jeff is correct, you will probably need about $30-60k to get started on a good investment. Anything much less than that you could be getting an older house where although in the short term the price is low in the long term you will spend more money in fixing it up as items slowly break. Also within this price range, you risk the quality of the neighborhood which means the risk of receiving your monthly check dramatically increases. We have several opportunities in which I can discuss with you within the $30-60k range. Our most popular product is approximately $80,000US and are duplexes with Cap Rates of 13%.
Feel free to contact me to further discuss.
Regards,
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone Me
