Realty411 Magazine The Future of Real Estate is Here | Page 67

•Loans are generally more difficult to obtain •Loan terms are not as good •Price per unit is higher •Banks prefer local borrowers •Properties are generally older •The economics cannot justify full-time, on site management and maintenance And, it is usually difficult to manage effectively. Stories of offsite management showing up after a week or two at small multifams only to discover that drug deal- ers have run off decent tenants are common stories. Also, a single vacancy in a small mulitfam has a greater percentage impact on cash flow than in a larger investment. Again, one valuable way to mitigate these factors is to purchase a larger product with partners through syndication. Due diligence is much more critical than with single-family rentals but there are also more resources available to get a lot of the general information because there are a lot of marketing firms that support the REIT and institutional investors who mostly purchase large multifamily and commercial properties. A multifamily seller’s proforma (projec- tions of the potential income and expenses in a perfect world) should for the most part be disregarded. True expenses are seldom less than 50-60% of gross income, otherwise be suspect. And study local de- mographics carefully. Visit the prospective property unannounced, walk it, and then sit in your vehicle to observe who is living on and visiting the property. Take note of the time of day and night. Yes, evening observations are the most enlightening. Go to the local schools, parks, and retail stores and see whom your prospective tenants and demographics are. Do you feel at risk parked so near your potential property, or would you feel com- fortable joining the tenants for a barbeque? Please do not rely on website data about the neighborhood. There are a lot of variances in a one-mile radius. Lastly, my post data analysis is always punctuated with the sat- ellite view question: Would I be comfort- able with my daughter living here? In addition to syndications an alternate way to have many of the benefits of a mul- tifam with less money down, an achievable loan, and much less risk is with a portfolio of single-family properties. Throughout my investment career, I have always also owned many 1-4s. This approach spreads your risks by building a “mutual fund” of properties in various locations. In addition to having a variation of rent, price appreciations, and occupancies that tend to converge on the averages for a region, single-family homes are more liquid, have less expenses, are less complex to manage, and tend to appreciate more because they are based on owner occupant demand rather than on income. In the next decade, most economists project a higher upward trend in occupancies and rent for single-family homes and for multifams. The most important ingredient is to se- lect that right team of professional resourc- es. How much experience and knowledge do they have in the region and product of interest? Are they invested in the products themselves? If you are considering partner- ing to own multifamily properties, do they have experience with syndications and ac- cess to experienced and qualified investors, lenders and property management? When you invest in real estate, don’t start with the “deal.” An honest assessment of the amount you have available to invest, your risk tolerance, your experience, and your long-term goals, along with the right professional team, will lead you to the right deal or deals: A multifamily investment or a portfolio of cash-flowing single-family properties? I choose both. Tom Wilson is a 37-year real estate veteran who has executed over $100M and 2000 units of real estate investments. Wilson is also a weekly host of the Real Estate 360 Radio program on KDOW 1220 am every Wednesday at 2 pm. Listen to his podcasts on iTunes or his website: www.tomwilsonproperties.com INVEST WITH CONFIDENCE INVEST WITH CONFIDENCE I M M E D I AT E C A S H F LOW I M M E D I AT E C A S H F LOW D D Typical Property Price $139,000 Rent $1,395 Year Built 2001 Price: $110,000, fully renovated, built 2005 Currently Rented 4 Bed for 2.5 $1,195 Baths e: $110,000, fully renovated, built 2005 ently Rented for $1,195 Mention Voice Magazine and receive one-year 1 of free Mention REI Realty411 or reWEALTH and receive year property management premium home warranty with with your your first first purchase. purchase. iscover the lowest-risk, highest-quality residential investment properties in t country. Using sophisticated methodology, the best investment iscover the lowest-risk, highest-quality residential investment properties in the properties a country. Using sophisticated methodology, the best properties are to secure carefully selected by an experienced investor and investment rehabbed beautifully carefully selected by an experienced investor and rehabbed beautifully to secure the flow, you best tenants. With competent property management, and instant cash best tenants. With competent property management, and instant cash flow, your investment pays worry-free dividends from day one. investment pays worry-free dividends from day one. PROFILE OF YOUR FUTURE PORTFOLIO PROFILE OF YOUR FUTURE PORTFOLIO • • Highest Flow Highest Cash Cash Flow • • Lowest Properties & Cities Lowest Risk Risk Properties & Cities • Immediate Equity • • Quality Immediate Equity Newer Brick Homes and Stable Neighborhoods Quality – Newer Brick Homes Leased, and Stable Neighborhoods • • Turnkey Clear Title, Rehabbed, Managed Turnkey – Clear Title, Rehabbed, Leased, Managed • • Home Warranty • Home Warranty Mention REI Voice Magazine and receive one-year of free Realty411Guide.com PAGE 67 • 2014 property management with your first purchase. “Contact me for a “Contact for a free cash flow me analysis.” free cash flow analysis.” TOM WILSON, President 408-867-1867 TOM WILSON, Presiden [email protected] TomWilsonProperties.com 408-867-1867 reWEALTHmag.com [email protected] TomWilsonProperties.com