Why You NEVER Ask the Broker What the Cap Rate Is!

blog Sep 08, 2019
If you don't start collecting information, you will have to go on what the broker tells you! You have got to understand the numbers!

The reason why I come up with some of these topics is because I see students doing things incorrectly while some students are doing things perfectly. And I want to get everybody on the same page. One thing is that investors, students and new investors, they just go. They're running all over the place as far as the market, what markets they should be in and where they should go. So much so that they never become experts in their market. 

So I want to identify some of the mistakes I see new investors are making when they are not the experts in the marketplaces that they're looking for. If you just focus your business on one particular area and capture the data from every property you evaluate in that marketplace, you will be able to move on a dime when the opportunity presents itself. No one will be able to bamboozle you. You'll know the numbers...

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Why Utilities Show Up On The T12?

blog Jul 07, 2019
Tenants pay utilities so why does the electricity show up on the T12 (Trailing 12)? Charles also discusses"tenant paid property" vs an "all bills property". 

Tenants pay utilities so why does the electricity and other things show up on the T12?

In other words, why is the property paying the electric bill if the tenants pay the electricity? Well, for a lot of reasons. When you own property as a landlord, you're going to have your own meter for the parking lot lights, the stairwell lights, the common area lights, the office lights. 

And then the other thing too, is you're always going to have the meter for the vacant units. You got to keep the electricity on in the vacant units since you got to turn the lights on when people walked in. And that's the landlord rate or a lot less expensive. Typically what most utilities do is they give the landlords a special rate for those vacant units. 

Apart from that, always remember that the water and the sewer are always the...

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Preventive Maintenance Plan

blog May 05, 2019
One of the things you need to prepare for when you are making the transition to ownership is a Preventative Maintenance Plan. Kate Dobens discusses how Preventative Maintenance is part of the day-to-day operations of running your apartment business and how you must prepare for it. Another example of what you can learn on an Owner Forum Monday Night Group Coaching Call!

These are things that you need to prepare for, when you're making the transition to ownership. Now this is something that you know, Preventive Maintenance Plan. It comes up when you're buying, taking over the property. You want to be diligent and you want to do everything right. You want to make sure you're showing your investors that you're managing the property correctly. 

So you set up a preventive maintenance plan along with your property manager and the maintenance man. In that way, they know that in every single month or every quarter or every six months, they have to go and change filters or that type of...

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Two Questions Before Making a Multifamily Offer

blog Mar 24, 2019
What two questions must you be able to answer before you make an offer on any multifamily deal? When my students bring me a deal to review, I always ask these two questions. If they know the answers without giving it a second thought, make the offer. If they can't - MOVE ON!

Here are the two questions you've got to ask yourself when you're analyzing any deal. 

When I get into the Cash Flow Analyzer software and receive the offering memorandum from students, I start looking at it and call them up. As soon as we discuss it, they can't even answer the first question. If they can't answer the first question, most likely they can't even get to the second question. So let me tell you what it is that I'm talking about. 

The first question is, what's my exit strategy? Why am I buying this property? What is it about this property that excites me? If I'm going to sit in front of a group of investors, I can say, “this is a good deal, because…” You've always got to...

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What is "Good Income" vs. "Bad Income" in Multifamily and Apartment investing?

blog Sep 07, 2018
Taken from one of the Multifamily Investing Academy's Owner Forum weekly group coaching calls.

I want to come up with a rule that everybody can use and keep in their back pocket. When you're analyzing a deal and you're trying to figure out exactly what to do, you can apply this rule and it's going to give you the answer towards how this works.  

So, what is the rule that we apply to make a determination? What you learned was that to capitalize the income, you increase the value of the property, and you pay more for it if you do it wrong. You don't want to be in that situation! So what rule can we use to come up with a solution so we know exactly how to do it?

Here's a new rule : If the tenant modifies their behavior the next month and then the income disappears, it's not income worthy of capitalization (ergo, it's Bad Income). 

So always ask yourself the question - What if the tenant changed their behavior? What if the tenant started to perform under the terms of...

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Multifamily Expense ROTs and Ratios

blog Jun 22, 2018
Assigning a contract in Pennsylvania may cost you transfer taxes
Expense Rules of Thumb and Ratios

One of the first things that we talked about is what we call the Pennsylvania transfer taxes. One of my students was asking me a question and I thought his question was ridiculous. Then, he posted the same question on the Whatsapp group with all the other OWNER FORUM members on there and they all thought his question was ridiculous. His question had to do with transfer taxes. 

What he was planning on doing was signing the purchase and sale contract in the name of ABC LLC, his entity. When he goes to buy the property, the bank wants him to sign a contract to the entity that is getting a mortgage who is going to own the property, 123 main street LLC. So all he does is just take one piece of paper that says assignment right on the top. And he goes through it. And he says, OK, I assign this contract from ABC LLC to 123 main street LLC and transfer. So both are done. 

He got on...

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How to Respond to a Broker's Questions?

blog Jun 15, 2018
Always Remain in Control of the Deal!
How do you respond when an investor asks you what type of cash on cash return you are looking for? How do you respond when a broker asks you who you will be using for your lending source? How do you respond when a lender tells you that you are not entitled to an acquisition fee?

What I have done over the course of a week or of the last two weeks was accumulating stories or questions from students about stuff that's going on in their business. And we brought this to our weekly Monday Night calls. 

I'm going to give you three broker questions that people came up with. And just giving you an idea of how I teach. But more importantly, how I want my students to perform and what I want my students to do when they're in these types of situations. 

So the first situation is, I had one student who sent me this question from a broker. And the student asked me, “how do you respond to this brokerage’s question?” And so the...

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Joint Venturing - the one rule you need to know!

blog Apr 22, 2018
Attorney Jeff Lerman joined us to discuss Joint Venturing on your next deal instead of raising private money. What’s the difference? Learn and make sure you understand the one rule you need to know to make sure you do it correctly.

I just finished up with a another call for our Monday night OWNER FORUM. It was a great call and we had a lot of fun. I know, I always say they're great calls. But they're always great calls. But this one was different. 

We had a special guest, Jeff Lerman, who is an attorney out of California. Jeff Lerman is a transactional attorney and as a litigator. What we talked about today had to do with joint venture partnerships and how to avoid securities laws by doing a joint venture. 

You might think to yourself - if I'm raising private money, I've got to be doing PPMs and subscription agreements in determining whether accredited investors or sophisticated investors and all that type of stuff. But what Jeff got into is the fact that if you're...

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Tale of Two Investors

blog Apr 01, 2018
Two of my successful students have exact same investment strategies in mind when they enter a deal but each approaches it entirely differently.
How two of Charles' most successful students use completely different strategies: Debt & Equity

One of my students is buying a 48 unit apartment complex in Kentucky. He nursed it from beginning to end. He's got himself a nice property that's going to be a very great launching pad to his 1,000 units. He'd already gone to probably before, but this is a little bigger scale. So that was a great deal. 

And another student who should be closing on a much bigger deal next week. Fingers crossed. I think that one crosses the finish line as well. But we had a bunch of topics we talked about, the one that I want to bring to your attention was really cool. 

I had two of my most successful students on the call and they both have the exact same investment strategy. But they come about it in different ways. Now, that sounds strange, but let...

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How to Structure Debt Financing on Cash Flow Analyzer

blog Mar 25, 2018
Charles examines an Owner Forum member's CFA and delves into how to structure Debt Financing. He ask his students to send him over property packages of deals they are currently working on. Then, he choose one and analyze it live during his weekly Owner Forum Coaching Call.
This is a summary of Charles' tips for analyzing a deal.
Here's one: Never, never, never share your analysis of a deal with the broker!

With all the members of the OWNER FORUM that are all on the call, I just want to kind of give you an overview of some of the fun stuff we talked about - kind of giving us some great tips on multifamily investing and how it works. I have a bunch of students and I ask them if they want to see me analyze a deal online and we can take a look at it. They send me a property package and I will choose one. I will analyze it while we're on the call so that you can take a look at it and see how I analyze a deal. 

We did a little small 9-unit property, not a big property. It was an...

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