Giving Due Diligence

October 22nd, 2020 by admin No comments »

Multi-family investments are currently dominating market activity. Young people are preferring to rent while families losing their homes to foreclosure have no option but to rent. Already there has been a sharp decline in the rental vacancy rate to 6.2% in first quarter of 2011 and a double-digit rent hike is being anticipated by economists over the next two years in the hottest markets. This has investors flocking to buy rental apartment buildings.

Buying commercial real estate may be glamorous, but the financial due diligence needed to do it wisely is not. Still, financial due diligence is essential for basically any commercial real estate acquisition today. There is no such thing as a “small” acquisition that can afford to forgo a rigorous financial due diligence review, and there is no commercial distressed asset acquisition that is “simple” or risk-free. The current commercial real estate market involves assets typically ranging from $10 to $50 million, but can fluctuate from $5 million to $500 million. This is especially true of the multi-family investments. Analyzing past operations in order to project future property performance is never a black or white endeavor – it’s very grey. Evaluating the true value of a garden apartment building or multi-family midrise is a complex, multi-phase undertaking that often eludes complete clarity. A wide array of variables conceal the true value of a property.

How can a buyer be sure that they are getting the benefit of their bargain and avoid the financial and legal pitfalls that lie at every stage of the process? Although risk is an unavoidable element in any commercial real estate purchase, the stakes are even higher when buying distressed assets in today’s erratic market. The only way to limit risk is by conducting adequate financial due diligence on the asset.

Whether purchased through short sale or by buying notes or bank-owned (REO) properties, every distressed asset is unique and requires a multi-step process of examination, including valuing the note, valuing the real estate and conducting due diligence on the loan, property and seller. Rushing to purchase troubled assets before conducting thorough and comprehensive due diligence can all too often lead investors to pay inflated prices and eventually lose money. Cash-rich funds have been especially susceptible to this mistake.

The market has changed drastically. Assumptions utilized in the past are no longer accurate (and possibly never were.) Instead of accepting underwriting based on past expectations, it is important to find the “true value” of the asset. The primary task, then, is to gain a clear financial picture of the asset today and uncover any current or potential trouble spots. This is accomplished through a comprehensive financial due diligence review and an honest and conservative market analysis. It is a process that few companies are qualified and staffed to conduct in-house.

Many investors are turning to financial due diligence specialists for help. In addition to a market analysis, financial due diligence specialists conduct comprehensive financial audits, compiling and interpreting many layers of documentation within sharply restricted time frames. This process includes:

validating and verifying all rents, as well as any income from additional sources, such as parking, vending machines and the like;

validating and verifying all expenses; these are generally more numerous and variable than income items and can include outlays for anything from snow removal to elevator replacement;

establishing the historical record of income and expenses in order to verify the accuracy of the sellers’ projections for future budget and cash flow; and

reviewing bank statements to confirm that income is reflected in statements.

The data is then compiled and presented in a comprehensive report with a clear and concise executive summary.

When specifically conducting due diligence on a distressed note, it becomes necessary to conduct multi-layered due diligence. The first step is to organize and abstract the loan documents to ensure a clear understanding of the rights, obligations and responsibilities of all parties. Next, a financial review of the underlying property is needed, to the extent that access to available documentation allows. There is simply no other way to properly evaluate the value of what is being acquired.

Proper and accurate due diligence can also be helpful post acquisition with the complex organizational and logistical issues that arise should the investor need to take ownership of a foreclosed property. The purchase of notes on distressed properties also has many legal pitfalls to avoid. Investors need to hire qualified counsel to ensure the enforceability of the loan documents and protect against any potential lender liability claims brought by a borrower in connection with an acquisition.

Family Real Estate Business

October 15th, 2020 by admin No comments »

We all have families, but not all of us work with them. If your real estate business includes a family member or two, you already know what the good and the bad of it is. Learning how to increase the positives will help in creating not only a stronger platform for your business, but also in stronger ties with your family. This particular balance can be a tough one to manage; however, it is very possible.

As a real estate mom, no one has to tell you how difficult it is to combine your career with your family life. When part of that family life is also an integral key to the success of your business, complications can arise. Issues such as fair compensation, flex-time, favoritism, and familial boundaries can each lend a hand in specific problems you likely won’t face with non-family employees. The goal is to achieve a harmonious working relationship without jeopardizing those all important family ties. To do this, you need to plan ahead and take into consideration any and all possible issues.

Making it Work

Whether you’re worried about being taken advantage of or taking advantage of, some simple tips will have you headed down a much smoother path to the work environment you’re seeking. These 5 tips should get you started:

o Form Definite Boundaries. While this rule sounds simple, it can be difficult to achieve. The best way to handle it is open communication from the very beginning. Explain clearly that while on the job, it is best to keep family chit-chat to an absolute minimum, if at all. Let them know this goes both ways – that you won’t be calling them at home on the weekend to discuss work. Keep the two entities as divided as possible!

o Keep the Clients Separate. Sticky situations can sometimes arise when a family member is a social friend of a client. Business is business, and any possible work issues need to be kept confidential and not turned into fodder for gossip.

o No Hard Feelings. Real estate is a competitive environment. Realize that the monthly sales figures could cause negative emotions in whoever is on the lower end. Be supportive to each other to get through these moments of crises – and be prepared to deal with them when they occur.

o All Employees are Treated Equal. From day one. If your normal course of action is to put a job offer in writing, including compensation and benefits, don’t deviate from this with family. While the process may seem more casual, it isn’t. You need to be as effective and vigilant with family employees as you are with non-related ones.

o Communication is Vital. You already know this, but don’t forget it’s just as important when dealing with your family in your workplace as it is in other areas of your business. They deserve the respect of one-on-one business meetings to voice their concerns and to discuss their job, and your business, in general. Miscommunication is the biggest cause, by far, of poor job relations. Keep this in mind, and you’ll go a long way in keeping everyone happy. Including yourself!

All in all, the way you treat an employee should be consistent. Whether a part of your family or not, creating the correct boundaries from the beginning is imperative. However, that being said, a non-related employee probably hasn’t seen you in your PJ’s, or at family gatherings, or visited you when you had your first baby. Therefore, normal innate boundaries aren’t going to be in place with family unless you strive to put them there.

Once you do, however, you will begin to see the positives when working with a family member far more often than you will see the negatives. It is possible to combine family and career – as long as you know what you want, how you want it, and take the proper steps to communicate those wants effectively.

How to Make a Fortune Investing in Multi-Family Real Estate

September 25th, 2020 by admin No comments »

We’ve all heard the dictum about the dangers and risks associated with putting all our eggs in one basket so many times that you would think when it came to real estate investment few sane people would want to place all their investment in a single-Family property.

Yet many of the people I meet in the courses I run have exactly this kind of approach which shows, perhaps, just how powerful market conditioning can be.

Most of the real estate moguls we get to hear about tend to be single-Family property types (with the exception perhaps of Donald Trump who has taken the eggs in the basket dictum very much into account in everything he has done) and this tends to brainwash us into thinking that either this is the only type of real estate investment available to us or that this is the only type of real estate investment there is.

The truth is that investing in multi-family properties spreads the risk of your investment without drastically increasing the costs and, in addition, allows you to create a built-in buffer against an apartment or two going vacant at some point (which is always a risk you need to be prepared for).

With a single-family property should the tenant’s personal circumstances change you may well find yourself missing out on a couple of months of income which is enough to wipe out your profit from that property for the year.

The risk of this is spread thin with a multi-family property however where a tenant or two moving out does not affect your monthly income from the building enough to seriously jeopardise your annual profit and that is one of the beauties of investing in multi-family properties.

Couple it to the fact that thanks to popular misconception you are competing with fewer other real estate investors for the choicest properties than if you were active in the single-family home market. This is not to say that you should develop a mindset which specifically looks at multi-family properties to the exclusion of everything else.

Far from it. Good business is where you find it and as a real estate investor who has bought single-family homes to flip (indeed I started out my career in real estate investing with a single-family home) I can tell you that if you come across a good deal or need to buy a property to flip quickly so you can invest in an apartment block you should never overlook the possibilities offered by the single-family property, much as you leverage multi-family ones in order to build up a portfolio that will guarantee you never have to work to someone else’s schedule ever again.

Multi-Family Real Estates Are the Way of the Future For Real Estate Investors

September 6th, 2020 by admin No comments »

Old adages are always true because they have come about as the result of direct experience and of them all perhaps none is truer than “you can’t put all your eggs in one basket”.

Take real estate for instance. This is an area where you can make a fortune or lose your shirt. It depends how lucky you get, how you handle it and whether the market is running with you or against you. All of these factors spell ‘RISK’ with capital letters and risk is just the kind of four letter word real estate investors really hate to hear.

So what do you do? Well, if you are in the single-family property you do everything you can to make sure you control the things you can control and hope you made the right decision in the things you cannot control. If, however, you are still thinking of getting into real estate and are right now weighing up whether you should go for a single-family property or a multi-family set up I can give you the direction you should be thinking towards in just three words: “risk aversion strategy”.

In the risky world of real estate a single-family property is just too exposed in terms of how it operates and how vulnerable it is to the vagaries of the market. A multi-family dwelling, on the other hand simply spreads the risk in a way that makes the entire venture a lot more acceptable.

It is this, more than anything else, that makes multi-family dwellings seem so attractive that I am convinced they are the way of investing for real estate investors of the future. Whenever I come out with something like this I have to also list all the obstacles that prevent other people from thinking the same.

The list is not long but it looks, at first sight, formidable. For instance, investors worry about having to deal with a dozen irate tenants at once, all ringing up late on a Friday night to complain about the plumbing backing up or the heating having broken down. In fact, the main objections, seem to be that most people think of a multi-family dwelling scenario as all the problems of a single-family one multiplied by the number of residents.

Switch mode of thinking however, think about spreading the risk and you realise that what you are actually get are approximately all the problems of a single-family dwelling spread over the number of residents with the added attraction that you do not ever have to be the one dealing directly with them.

Now, that is beginning to make a lot more sense and it is just the kind of thing I talk about when I say that multi-family dwellings are the way of the future for real estate investors.

David Lindahl, also known as the “Apartment King” has been successfully investing in single-family homes and apartments for the last 14 years and currently owns over 7,000 units around the US. David regularly shares his secrets and experience on the same stage as Tony Robbins, Robert Kiyosaki, and Donald Trump! For two FREE copies of his highly recognized newsletter Real Estate Insights.

What Is Multi-Family Real Estate Investing

March 13th, 2020 by admin No comments »

Multi-family real estate investing is the process of buying units that provide housing for multiple different families. Unlike owning a single family home that you rent out to only one person or family, multi-family buildings have two or more separate dwellings. Multi-family buildings can range from a duplex to a huge apartment complex, but no matter the size, can be a great investment as long as you understand what is involved in finding a property and being a good landlord.

Considerations in Multi-Family Real Estate Investing

When you are considering multi-family real estate investing, you are usually going to need to make a larger investment than you would for a single-family home. You will also need to qualify for a mortgage for a rental property, which may involve a different approval process than qualifying to buy your own house. For instance, applying for a mortgage for an investment property that is a multi-family unit may involve showing how the property itself will generate income by doing projections of your expected expenses and cash flow.

Once you have obtained financing and purchased the property, you will need to deal with both the advantages and disadvantages of multi-family real estate investing. One of the most obvious advantages is that you have the potential to earn more rental income than you would if you had only a single unit and a single tenant. Your income streams are also diversified because you have several different renters. This can be safer than having just a single unit home, since when your tenant moves out of the single unit rental you are left with no rent at all.

Of course, the downside to this is that you or your property management company will need to make sure all of the units are rented instead of just worrying about finding a single tenant. If two tenants move out at the same time, for example, you’ll need to work to find two new qualified tenants.

With multiple tenants, you also have the potential for problems among the tenants, such as noise complaints or other related issues. While these problems can exist to some extent from neighbors in a single-family home, the issues tend to arise more when many different families are sharing space. Having clear rules in the lease about noise and tenant obligations can assist you in stopping problems like this before they start, and hiring a property management company can allow you to avoid having to deal with issues of this nature at all as the manager will take care of them for you.

Other possible advantages of including a multi-family property in your real estate investing will vary depending on the type of property and your situation. For instance, you might be able to live in the property yourself and make enough in rent for the tenant to pay off the mortgage, essentially allowing you to live for free in your own home while gaining equity. You also have the opportunity to allow an on-site manager to live in one of the rental units in exchange for providing building maintenance. This can save you money as your management fee will likely be reduced, and can help to ensure that your tenants are happy in the building and that issues are promptly resolved.

Marketing, Promoting and Advertising Your Business

February 28th, 2020 by admin No comments »

One thing that goes without saying in today’s business world, is that regardless of the nature of your home based business, a website is an absolute MUST. Whether you have a product or service to sell, whether local or global, your business will go nowhere fast if you don’t have an online presence. If you need internet marketing help, you’ve landed on the right article. I’ll give you some home based business marketing ideas that will help you promote your business successfully.

The first step is choosing a domain name and getting it registered. You can build your own website (if you have the time) and host it yourself or you can have everything done by another company (if you have the money). Either way, you have many options and tools at your disposal that can align with your business plan and budget. Also note that you can still start your own home based business even if you don’t have a product or service to sell. There are thousands of individuals and companies that have products you can sell for them while earning a commission, called affiliate marketing.

Of the many business marketing strategies known to man, internet marketing is, hands down, the best strategy to use for promoting a home based business as it is the cheapest method and has the potential for reaching millions of people all over the globe. Driving traffic to your site through online resources is like killing two birds with one stone. You can tackle print advertising by writing articles and publishing them to directories and ezines and by submitting ads to the many available (and most of them free) classified ad sites. Online media advertising encompasses writing press releases and distributing them to press release sites. One of the biggest and most popular online advertising trends today is via social media advertising through sites such as Twitter, Facebook, and LinkedIn where you build relationships with your customers. Forums and communities are also great ways to build relationships which helps promote your home based business in the long run. Simply Google your market or industry with the word ‘forum’ or ‘community’ behind it and search for one or two that seem to be the best fit for you.

All of these methods of online advertising contribute to search engine optimization (SEO), which is to say improving your online visibility and escalating in the search engines like Google, Yahoo and Bing. Your goal is to claim the #1 spot in the organic search results (the results on the left, not the right side which are paid ads). This is where your traffic will come from. If you are 800 in the list of search results, no one is ever going to see your site because very few people have the time or patience to scroll through 800 search results. Research shows that people typically won’t even scroll past 4 or 5 search results, let alone 800.

Can you grasp the importance of internet marketing for any business? If you are new to the internet marketing phenomenon and don’t know exactly where to start, there are many great programs or systems online that walk you through every aspect of marketing your online business. A lot of these systems were created by online entrepreneurs who have spent thousands of their own dollars trying to figure it all out over the years and finally DID. Their sacrifices have made it easier for newbies to become successful at their own online home based business. If you are new to running your own home based business, I recommend you find a great system (do your research, read reviews, ask questions in forums) and start marketing your home business from there. Don’t waste the time and money that so many of us have in going it alone, without a proven system, as it will just set you back further and hinder your progress.