multi-unit rags to riches
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DESCRIPTIONMulti-Unit Rags to Riches. Month 1 – Agenda Identifying Markets & Marketing Strategies. Locating Multi-Unit Opportunities Identifying Possible Markets Marketing Strategies Acquisition – Analysis “In – Field” Physical Due Diligence Identifying Value Plays Turn Key vs. Reposition. - PowerPoint PPT Presentation
Multi-Unit Rags to Riches
Month 1 Agenda Identifying Markets & Marketing Strategies Locating Multi-Unit OpportunitiesIdentifying Possible MarketsMarketing Strategies Acquisition Analysis
In FieldPhysical Due DiligenceIdentifying Value PlaysTurn Key vs. Reposition
Month 2 AgendaFunding & Financing
Private Money Equity PartnersSyndicationWorking With Commercial Banks Property Management
In - FieldBuilding Your TeamRehab Budget & Scope of WorkContractorsWorking With City, Town, County
Due DiligenceOperations Management of Your TeamForms & DocumentationSettlement Preparation
In FieldProperty Take Over1-3-5 Year PlanResident RelationsInvestor Relations
Month 3 AgendaDue Diligence
Your Homework Was To:Research Possible Markets of Interest to YouIdentify Those Markets Indentify the Market Cycle Research and Understand the MarketContact and Communicate with Commercial Brokers/RealtorsIdentify Property Types Your Interested In Apartments, Mobile Home Communities, Self Storage7. Order a List from www.DunHills.com
Marketing Strategies for Multi-Unit InvestingIdentify Property Criteria
Sweet Spot - $500,000- $2,000,000 Apartments Mobile Home Communities Self StorageTarget Market Areas Selected A B C D PropertiesSize of Property Non Performing vs. Reposition Per Door CostsOnline Market Research Get a Feel for Market
MarketingMarketingMarketing Consistent Marketing Message for Properties in Target Market (s)
Consistent Marketing Strategy of Yourself aka Networking and Building Relationships
Marketing of Property Opportunity aka Property Package
Marketing for Potential Buyers aka.. Wholesale Opportunities
The Marketing Madness
Im Interested In Buying Your Property! Read OnOwners NameAddressCity, State, Zip
Dear (First Name), Im interested in purchasing your property at 73 Soloman Street Martinsville, VA. Are you interested in selling?I currently hold a portfolio of properties similar to yours and I am looking to add more.As a property owner, I realize that there are a number of reasons why someone may be interested in selling. Everyone has their own reason and my question to you is, are you ready to sell now? If so, I am ready to buy.I can close quickly or delay the closing as long as you like.Please contact me at your earliest convenience so that we can discuss the sale of you property. Call me now at 555-5555.I look forward to hearing from you.Sincerely,Your NameP.S. To Get The Best Price For Your Property, Call Me Now At 555-5555
Dear Property Owner,My name is Tammy and I am interested in purchasing your property located at 123 Main Street in Harrisburg, PA. Are you tired of dealing with tenant issues? Are you ready to be free of the headaches and hassles? Are you ready to just simply move on?If youre considering selling your property, lets talk because Im ready to buy. I can close quickly or I can take as long as youd like. The best part is, you dont have to pay a real estate commission because there will be no agent involved! The choice is yours.Call me now at 703-555-5555 so we can discuss the sale of your property. Hey, even if you dont want to sell at this time, Ill let you know what the fair market value for your property is in this market. I look forward to hearing from you! Sincerely,
P.S. Finally rid yourself of tenant hassles, get a fair price for your property, not pay a realtors commission and get to settlement quickly, Lets Talk!!! Reach me directly at 703- 555-5555!
The Marketing Madness
The Marketing MadnessClearly Defined Goals and Objectives
Your Risk Tolerance
A Relationship is NOT Something that You PursueIts What Happens to You When You Are Immersed in Serving the Dreams of Others! - Tom Peters
It Really all Boils Down to One Simple ElementThose Who Really Care and Those Who Really Dont! -Dan Zadra
In Order to Harvest You Must First
Carefully Plant Your Crop By Hand
Relationship MarketingF amilyO ccupationR ecreationM oney
Marketing Madness With NewslettersIdentify 4-5 Centers of Influence in Your Life
Your newsletter should have a strategic outline that, when followed, account for a higher read through and response rate. The newsletter should contain the following categories and then listed in order of suggested appearance.
Title/ Contact Info./ Issue Number/ Date/ Inside the Issue Table of ContentsEducational InformationPersonal InformationFinancial InfluencesSuccess ShowcaseCall To ActionVision Statement
The Property PackageCONTENT PAGEOverviewExecutive SummaryLocation MapInvestment HighlightsEquity at ResaleProjected Owner Cash Flows and ReturnsProperty Package Assumptions and Property Information
Marketing the Opportunity
Marketing the OpportunityThe Property Package
Financial AssumptionsMortgage InformationFive Year Proforma and BudgetAcquisition ExpensesFloor PlansArea DemographicsRisksCommitment Instructions
Marketing the OpportunityWholesale Exit Strategy
Build Your Buyers List Gold MineIf Seller isnt Interested in Selling; Identify if There is Interest in Acquiring Additional Properties in Area Document Their Criteria Wants & Needs
Whats the Wholesale Paycheck Worth to You?
Just Assign the Ratified ContractComplete Physical & Financial Due DiligenceComplete the Property PackageComplete 3rd Party Reports
Gross Collected Rent- the income of a business from all sources before deducting allowable expenses
Effective Income - Gross Income less vacancy and collection allowance, plus miscellaneous income
Net Operating Income - Income after deducting all operating expenses but before deducting income taxes and interest
Debt Service - the total of annual costs in principal, interest and charges related to the mortgage
Cash flow - A measure of a companys financial health. Equals cash receipts minus cash payments over a given period of time; or equivalently, net profit minus amounts charged off for depreciation, depletion and amortization.Analysis of a Multi-Unit Property
Capitalization Rate Cap Rate In commercial real estate, cap rate, or capitalization rate, is used to determine the values of income producing properties such as apartments of five units or more, office buildings, strip malls and other such properties. The cap rate can represent extremely different things to different people in respect to their interests in commercial real estate.
How it works..
Cap Rate has two main components which area: Net Operating Income (NOI) and Sales Price/Value of the property. Divide NOI by the Sales Price/Value of a property; you receive the Cap Rate.If you have 2 of the 3 components you can determine the variable in the equation. The different equations used to determine any of the three variables are below:
1. NOI / Value = Cap Rate
2. NOI / Cap Rate = Value
3. Value X Cap Rate = NOI
As you can see, depending on the information you have regarding the property, you can determine any of the three variables.
OK!!! So What? Why Do I Need to Know the Cap Rate?
Safe Investment: Cap Rate of 5%
Avg. Investment: Cap Rate of 10%
Risky Investment: Cap Rate of 20%
So Like Ok! Now What?
Debt Service Coverage Ratio - DSCRIt isa ratio used by bank loan officersin determining income property loans. This ratio should ideally be a minimum of 1.25, preferably 1.35+. That would mean the property is generating enough income to pay its debt obligations. In general, it is calculated by: A DSCR of less than 1 would meana negative cash flow.A DSCR ofless than1, say.95, would mean that there is only enough net operating income to cover 95% ofannualdebtpayments.For example, in the context of personal finance, this would mean that the borrower would have to delve intohis or herpersonal funds every month to keep the project afloat.Generally, lenders frown on a negative cash flow, but some allow it ifthe borrower has strong outside income.
Cash on Cash ReturnCash on Cash Return is probably the most important ratio you need to focus on when evaluating the performance of a property investment. Cash on Cash Return is the property's annual net cash flow divided by your net investment, expressed as a percentage. EXAMPLE:If the net cash flow from a property is $10,000, and the cash invested in the property is $100,000, then the Cash on Cash return is calculated to be 10% ($10,000/$100,000). The net investment in property is the cost of the property less the amount you borrowed. A way to view this ratio is to compare it to a return of a certificate of deposit. You deposit money in the bank and the bank pays you an annual return, say 5%. The 5% is the Cash on Cash ratio.
Analyzing Rule of ThumbUse Actual Figures and Expenses.. If not then the rule of thumb applies as an average of expenses
5-10% - Physical or Economic Vacancy
Mobile Home Communities 40-45%
Self Storage Facilities 35-40%
Detailed Rule of Thumb