I recently conducted a podcast with Public insurance adjuster Andy Gurczak. You can check it out here!
For those of you that don’t know, a public insurance adjuster can provide several benefits to a multifamily property owner when filing insurance claims, including:
Here’s the scenario. Everything’s on the way up. Prices. Occupancy. Rents. Investor Capital. All the right things are on the way down. Cap Rates. Expenses. Vacancies. Delinquencies. Multifamily investing has never looked better.
Raising private money is easy. Everyone has it because the government has been giving it away like it isn't worth anything (Editor’s Note: Last statement to be read with sarcasm). So, investors are on a buying frenzy of historic proportions. Prices continue to rise, as do rents and dreams of massive paydays at the closing table; especially for those GPs who care more about acquisition fees than whether their syndication is a good deal or not. It feels like 2008 all over again.
And then cracks in the armor start to appear. The first of which is when the customer base (a/k/a tenants) start to wise up and say, ‘hey, we can’t afford to keep paying the next investor group a 9% preferred return like we have for the last...
With interest rates on the rise, multifamily investors and property owners alike are feeling the effects. This is why now more than ever, it’s important to make investments in yourself that will not only help you succeed in today’s market, but also help you prepare for a future of profitable investing. Enrolling in the MultifamilyOS™ mentoring program is one such investment that can have an immense impact on your success as a multifamily investor.
What Makes the MultifamilyOS™ Program Unique?
Charles Dobens, the Multifamily Attorney and founder of the Multifamily Investing Academy has developed a comprehensive mentorship program called “MultifamilyOS™” that helps investors understand and navigate the multifamily asset class. There is no other multifamily mentorship program on the market that offers so much value for its price point. The MultifamilyOS™ offers access to experienced professionals who have been through the process...
There are two types of income. There's what we call rental income and other income. So we look at the rental income separately than all the other income because the rental income is comparable to other properties down the street.
But the other income is usually unique to that particular property. That is why we break up rental income and the other income. And we have the other income within that category. We have two other categories : good income and bad income. But we're not going to talk about the other income right now. All we're talking about is the rental income.
When we break down rental income, we start at the very top, which is the Gross Potential. This is never, neverland. This...
The ALTA survey is what you find in Article V of the Purchase and Sale Contract. You have to understand how important this survey is. But before we get into the details, let me show you that ALTA means “American Land Title Association”.
If you go down to Texas, they don't use the ALTA. They use the TLTA or the “Texas Land Title Association”. You need to understand what is the gold standard in different markets predominantly across the country. The gold standard for the serving is the ALTA survey. And, the other thing that you have to understand is that not all surveys are the same. So when you see an ALTA survey, you could see another one called a Boundary Survey.
A Boundary Survey is inadequate for...
What is RUBS? It's called the Ratio Utility Billing System. It's not a company.
There are several companies that have this service or have created their own service but the general generic term is a RUBS system. And so, if you have a property that is an all bills paid property and you want to get away from it, you go online and you find a company that does RUBS and then you give them the information about your property and they'll give you a quote. They'll tell you what they can do for you.
So, it's a method of allocating utility costs in apartments and other multi-family properties or multi-unit. The actual utility bill for the property is distributed to each resident based on an allocation of their usage, an allocation formula. Factors in the formula combine like the number of occupants.
You see, this a lot especially with water. Water gets a lot of RUBS type of situations. If it's a one-bedroom, the water is going to be...
Well, HVAC is ABP means Heating, Ventilation, and Air Conditioning is All Bills Paid. This is versus tenant-paid.
As we all know, we don't like to do all-bills paid. There are things that you need to know what to do when you're looking at the financial statement.
If you see utility income on that statement or on the income section, that means that the tenants are paying up for a portion of the utility. You need to take your finger right down to the expense line item for what the utility expenses are. If you see the utility income is $60,000 you follow your finger down to the utility expenses. I can almost guarantee you, it's not going to be 60,000 bucks for the expenses. It's probably going to be closer to 100,000.
In any type of a situation where you're billing back the utilities to the tenants, you’re never going to get a dollar for dollar payoff. Usually about...
Rent concessions are what we call an income reducer. Income reducers are those things that bring your report from the gross potential income down to the gross collected rent. Everything in between is what we call an income reducer. Rent concessions are an example of an income reducer. Typically you don't like rent concessions.
There are properties that offer rent concessions but don't report it. I caught somebody doing this one time when I just did a Google search on the address of the property. A Craigslist listing popped up, showing that they're giving away $200 free rent for the first month. I went to the seller, I said, "Hey, you're giving away 200 bucks." He goes, "Yeah, yeah." I said, "It's not showing up in your books." "Oh, it just started doing that. It hasn't caught on yet." But he never disclosed that they were doing rent...
What's the difference between the net operating income and the net ordinary income?
Well, technically, nothing, but you have to understand what you're defining here. When you say net operating income, you're talking about a multifamily property - NOI. When you're talking about a net ordinary income, you're talking about every other business.
So, a net operating income is unique to multifamily. And net ordinary income is not - it talks about every other company. What happens is, when you become experts in multifamily financial statements and when a broker sends you the documentation, you're going to be able to look at it right away and know whether you've got a good report or something that is one step above a cocktail napkin.
And the easiest way to do it, is to look at the income, the expenses and the line that says net ordinary income. If the financial statement that they're giving you...
Capital stack is nothing more than all the money you need to raise in order to buy that property, and it's going to come in a couple of different forms. It's going to come in debt, or your mortgage.
"Well, I got an 80% loan-to-value."
Great, 80% of your capital stack has just been taken care of.
Now we got 20%. Well, where is that going to come from?
"Well, my pocket, I could put down 5%."
Okay, fine, now we need 15%. Where is that going to come from?
"Well, I got investors. "They're going to come up with 10%."
Good, now we're at 95%. Where's the other 5% going to come from?
"Well, the seller's going to give me a seller financing."
Boom, we just got our 100% capital stack.
That's what a capital stack is. That's all it is.
It's where all of the money is...