Ask Mike

Got a question you’d like me to answer ? Then fire away below! I’ll post a response and may also talk about it on a future podcast or blog article..

If you have something of more personal nature to ask me (not too personal I hope -;) then please use the Contact form instead.

  • Rikard Knut Lorén

    What is a good debt % to be positioned at?

    So the investors in the multifamily deals are just in for a period of time until they have their equity back?

    Because what i have learned so far in deals is that you can give a prefered return on the equity, refinance, pay back the equity to the investors and “the investors keep getting cashflow each month” for as long as the property is active. So from what you are saying it seems to me that the investors leaves the deal once they have their equity back?

    I have thought of a “buyout option” where the investors could be bought out from the deal by the rest of the property/LLC members if the property could sustain the cost, but maybe there is a better way to structure the deal for the investors/me?

    So i re-checked the podcast and I mixed the words up, Rod said the following sentence: “There’s nothing better than free and clear multifamily real estate”

    So, i’m just wondering what it is that he is aiming for with that sentence?

    Please, feel free to enlighten me !

    Looking forward for your answer ! Best regards: Rikard Lorén

  • Christopher Throop

    Hi Michael,
    I’ve been taking in your class “How to analyze apartment building deals” and I have a question about calculating the profits from chapter 1. The spread sheet shows total combined profits as being the combination of principle reduction, cash flow and profit from the sale. Cash flow I understand, but isn’t the amount of principle reduction reflected in the profit from the sale and thus they shouldn’t be added together? In other words, any principle that’s been paid down will reduce the balance on the loan and so when the loan is paid off at the sale, your will receive the benefit of that principle reduction in the sale price. If you add the amount of principle reduction to the profit from the sale aren’t you in effect counting the same thing twice? -Chris

  • > Rod said the following sentence: “There’s nothing better than free and clear multifamily real estate”

    I would probably disagree with that on the one hand (refinance!), though if you’re in that position, there really is nothing better! 🙂

  • Yes, that is correct. Profit will consist of amortization + appreciation. Perhaps I mis-spoke (or was misunderstood), but the spreadsheet breaks these out as two separate profit centers. Thanks for the question!

  • Emran Chowdhury

    Hey Michael,

    On you custom built analyzer spreadsheet, under the section “Sale after year 5”
    Principal Reduction + Cash Flow + Profit From Sale = Total Combined Profit. However, Principal Reduction has already been accounted for in calculating the Profit From Sale, so the spreadsheet is essentially double counting Principal Reduction. The spreadsheet needs to be updated to removed principal reduction from the Total Combined Profit correct?

  • Rikard Knut Lorén

    Alright, thanks Michael!

  • Hi Emran … you are right! (Glad I didn’t make this mistake in the Syndicated Deal Analyzer, whew!). Good catch. The last section that calculates the Total Profit does indeed count the Principal Reduction twice. I’ve updated both spreadsheets, so if you log into the “How to Analyze Deals from A to Z” course and go to “BONUS # 1: File Downloads” and re-download the spreadsheets, this should be fixed. Thanks so much!

  • Christopher Throop

    Post recalled!

  • Christopher Throop

    Thanks for the help, Emran! It was really driving me crazy.

  • Jonathan Messier

    Hey Michael,
    How would you use your syndicated deal analyzer where one of the
    investor would be myself in a situation where I want to refinance and cash out
    all my investors (except myself) after 2 or 3 years.

  • Please see my answer in this short video: http://screencast.com/t/z92Atpyj

  • Jonathan Messier

    Thanks Michael, I will play with this and see where it takes me.

  • Dan

    Hi Michael,
    When buying a value add property, where do you enter the cost of the remodel in the spreadsheet? I don’t think it’s an expense or a repair because those amounts will be capitalized and are obviously not recurring. Thanks, Dan

  • You would enter these on the Summary tab, under Repairs. Hope that helps!

  • Emran Chowdhury

    Hi Michael,

    I was wondering how to find the good deals when starting off. I have been searching on http://www.loopnet.com. But the deals don’t measure up to returns that investors are satisfied with. Would working with a broker add benefit? What type of returns would start to become unrealistic for investors to ask for? Some are asking for a minimum 15% cash on cash return on income while counting profit from the sale of the property as a bonus. Some investors are asking for 8% preferred returns with 70% equity. This seems high. Do those numbers seem unrealistic to you? Mind you that these are already successful real estate investors that do their own syndicated deals, some of which run real estate hedge funds.

  • msurdyka

    Just watched your video and ordering the course. Quick question. I was on your site ‘How to buy an Apartment Building with Private Money’ and I was wondering how you only paid $4,000 down on a $500,000 property? I am looking at a very similar deal (12-unit $500,000, with under market rents) and the seller mentioned 20% down. That will be a huge down payment that I don’t have at this time. I was just curious how you got around paying the normal 20%?

    Thanks Michael. Have a great day.

  • Hi there … I don’t think I said I put only $4k down for a $500K property … where did you see that so that I can correct it? I’m all for creative deals but this wasn’t so for the 12-unit … it might have required a $4K deposit (but I think it was at least $5K), but it still required a down payment of 25% to satisfy the lender. Hope that helps …

  • Williams Denis

    Hey Michael! I’m actually using it on 6 deals I’m looking at for a capital investor I’m preparing a prospectus for. The deals are an average of a 2MM multi family building. Any advice? I watched 4 of the videos already. Extremely helpful and coming from a finance guy, great excel. Probably the best I’ve ever seen. The plan is that the investor will be paid a 6% PRR and receive 75% equity at the end of the deal of resale value because I do not have capital to put into the deal. Thank you.

    Best wishes,

    Williams

  • Hi Williams. … thanks for posting … what is your question please?

  • Williams Denis

    Thanks for your response. My question is:

    Given what I referenced above, what is an acceptable excess equity to offer the investor putting up the capital, and what is an acceptable equity to offer same investor on capital appreciation? Where should this be plugged in or reflected in the Syndicated Deal Analyzer? Thank you!

  • The rule of thumb is that the investors get between 60% and 90% of equity, and that is their share of all distributions and capital appreciation.

    To determine the equity split, you use the SDA to calculate the minimum average annual return. I’ve found that if you can show investors an average annual return of 13% or higher, they are likely to want to invest.

    To answer Your last question, you do that in the Summary tab here: http://screencast.com/t/qQUVx5I4X0

    But the question also may indicate that you may have not (completely) watched the training videos … maybe take a look at that again.

    Hope that helps …

    Michael

  • Emran -sorry for the delay, this one slipped through the cracks. when investors are asking for these kinds of returns, they are probably sophisticated investors. Stay away from these, at least for now. Focus on friends, family and high net worth individuals.
    sophisticated investors become relevant as you do larger deals … hope that helps.

  • Armando Payano

    Hello Mike
    Does your course offer a script for calling apartment owners to inquire about potentially selling the building? Also are there templates for direct mail campaigns? One last thing would I be able to send you a potential deal and get your thoughts on it?
    Thanks Mike great stuff thus far. I will be purchasing the course shortly.

  • Hi Armando … good to hear from you! I have 10 negotiation tips in the course that will greatly help when dealing with either brokers or sellers. I’m working on adding direct mail templates into the course (I provide updates for free, like I do for the Syndicated Deal Analyzer). However, the # way to get deal flow is by establishing relationships with brokers. However, once you do that, direct mail is a great complement to expand deal flow. WRT your last question re: getting my thoughts on a deal … I have by the hour coaching available which might be useful. Here is more info: http://www.ultimateapartmentinvestingguide.com/coaching/, Hope that helps!

  • Max

    Hi Mike, I have recently found your strategys on line and have been trying to put it into action, However my location is Canada. So things are a bit different up here but principles stay the same.

    Im currently looking at 2 buildings right now both asking $650,000
    One is 11 units run by an older fellow looking to retire. This one is managed very poorly and has loads of room to decrease expenses, good building, good neighbourhood and can be repositioned into a well permitting asset.

    The other is a fully renovated 8 unit building. Good area great building, Both have no vacancies. One is turn key, the other needs managing to make it a more valuable property. I’m more inclined to go with the 11 unit because I feel like I can create more value there.

    How do I come up with my offer price for either? They are both $650k and assessed in the low $500ks and for comps there are basically no apartment buildings that sell in the area as they are so rare.
    Typical cap rates in area are between 5-7%
    The 11 unit gross income is $70050
    8 unit is $64347

    If I get one under contact my idea would be to put together a deal package and then try to raise the capital with investors. Create a 2-5 year plan and go for it.

    Your advice on this would be much appreciated!!

    Cheers!

    Max

  • moran

    Hi Michael,

    If I join your mentorship, Is it possible for me to do those deals from abroad if I’m not a US citizen and living outside the US?

    Thanks!

  • Enrique Silva

    Hi Michael,

    Thanks for your comments and valuable feedback. I really enjoyed reading your posts and podcast.

    I have sent you an email, I will appreciate if you send me your insights.

    Best Regards,
    Enrique Silva

  • Trevor Rutherford

    Hi Mike, been a while, can you still give me some info on steps to a no money down deal. Apartment, Self Storage.

  • Matthew Ocasio

    Hey Michael,
    I’d just like to say that I love this program. It makes everything so much easier to see the numbers all in one place, it truly is worth every penny for it. I do have a question though. I am currently in law enforcement and trying to find a way out of it to put my family at ease of my day to day job. I have become very familiar with your multifamily videos and have analyzed tons of deals here in South Carolina. My question is about the partnering. If I was to bring the deal and fully manage it How would I be able to partner with someone with little to no money in the deal or skin in the game as people say? Any feedback on this would be helpful. Thanks!!

  • Viper 7

    Hello Michael, I hope my message finds you well!

    I was just listening to your podcast on BP and wanted to thank you for sharing your journey!

    I bought my first investment deal a couple of months back (like you mentioned: it’s easy using your own cash till you run out), so I was hoping if you can share with me a couple of documents you have friends/family review and sign for a 15% return on their investment with you.

    I would like to structure something similar for my business but thought I’d ask you so I don’t re-invent the wheel and miss items, so will leverage your material to build something that will apply for my business.

    Thank you so much for your kind help in-advance!

    Have a nice day/weekend,
    Eli

  • Hi Eli .. you wrote ” I was hoping if you can share with me a couple of documents you have friends/family review and sign for a 15% return on their investment with you” and I’m not sure what documents you’re referring to.

    I use the “Sample Deal Package” as a conversation tool to get them to the point where they’re comfortable giving me a verbal commitment, but it’s not something they sign.

    What they DO sign (later on) is the Operating Agreement and Subscription Agreement. Those documents will ultimately come from your attorney. I do have two templates/samples in the Ultimate Guide course …

    Hope that helps …

    Michael

  • Hi Matthew – I hope this page answers your question:

    http://www.ultimateapartmentinvestingguide.com/deal-criteria/

    If not, please let me know … thanks!

  • Yes, of course. While the (legal) details may differ, and there are intricacies involved in investing in the U.S. from abroad (that I am not expert on BTW), analyzing deals and the idea of returns and investors are universal principals … hope that helps!

  • Hi Max – I think it’s great that you’re analyzing deals! It’s tough for me to answer this kind of question on the quick, but However, I do have some options for you.

    I offer one-on-one coaching at $249/hr (prorated) which might be a good option to have me look over a deal. If you’re interested in this, please email me and I’ll send you a link to schedule a call.

    You might want to check out the Deal Maker’s Mastermind (DMM) program, which gives you direct access to me for feedback re: your deals. It also allows you to connect with other like-minded entrepreneurs in the private online forum. The DMM program is designed to make you a master at analyzing deals so you can make more offers with more confidence. Learn more here:

    http://www.ultimateapartmentinvestingguide.com/mastermind-lto

    Just one note: you will need the the Syndicated Deal Analyzer (SDA) to join. That’s because the Mastermind is all about helping you become a deal analysis master, and the SDA is the main tool that I (and others) use to analyze deals.

    To learn more about the SDA, please go here:

    http://syndicateddealanalyzer.com/

    Once you have the SDA, you can join the Mastermind by clicking the green button from within your SDA member area.

    Hope that helps !

  • Matthew Ocasio

    Thanks, yes it answers my question. are you and the investors you have only willing to do the deals in the major cities that you have listed? or as long as it meet your criteria or case by case?

  • John Bryson

    Hi Michael,
    In the custom built analyzer spreadsheet, under “Income”, “Other Income” seems to be subtracted from the total. Shouldn’t this be added to your total income? It’s even blue in your video leading me to believe that it should be added rather than subtracted.
    Thanks,
    John

  • Hi John – I don’t have it in front of me and it’s been a while, but I think you may be right! Thanks for bringing this to my attention … please fix it in your version. Thanks!

  • johanna

    Hi Michael,

    Thank you for your podcast-Ive been tuned in nonstop;) I love your niche of first time multifamily purchase and raising the money for it. I just got my first offer accepted! Im transitioning from SFR investing and want to partner up w/ someone more experienced in MF. Do you think a 50/50 deal using their expertise and my hands on work including possibly physically being there to oversee the repositioning is fair or overly generous?

    Best,
    Johanna

  • Maybe, but it also seems reasonable. I think it’s OK to give up “more” in the first deal, just so you get into the first deal. Good luck, and keep me posted!

  • johanna

    Thank you!

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