REI Wealth Magazine Featuring Paul Finck | Page 88
5) Unemployment Rate: Go to the Bureau of Labor
Statistics website, BLS.gov and check this out. It
shouldn’t be more than 20% above the national
average at the most.
6) Unit Mix: The Offering Circular from the promoter
will normally say how many units are studios,
1bedroom, 2bedroom, and so on. Avoid projects
that are largely studios and ones because turnover is
higher, and so are related costs.
7) Project Plan: Also in the Offering Circular there is
usually the promoter’s plan for the project to add
value by remodeling, adding amenities, raising rents,
and so on. Consider this carefully because all of the
projected returns from the promoter depend on the
plan succeeding.
Diligence and the Property
When it comes to the property, bear in mind that the
promoter will be presenting it in its best light. Here are
the primary items that need to be investigated
8) Rents: Go to zilpy.com and accurent.com to check
out the rents given presently and projected by the
promoter. If not satisfied, feel free to call the property
manager to discuss them. Don’t be shy. Your
investment is at stake.
1) Age: Nothing older than age 3035 should be
considered. Syndications intended to add value to
deficient older properties usually turn out poorly due
to excessive rehab costs.
9) Market Conditions: Oftentimes these are discussed
in the Offering Circular. There is no formula for
evaluating this, but see if they make sense to you.
2) Building Class: A=Luxury, B=Professional,
C=Working Class (“Blue Collar”), D=Low Income
(“War Zone”). Luxury apartments don’t cash flow as
well, and low income units are, frankly, treacherous.
Stick with class B or C.
3) Pictures: Hire a service such as wegolook.com to
take pictures of the property and its surroundings, or
go to Google View, or Bing Street View. Properties
need to be fairly cleanlooking. No industrial properties
or strip centers close by. Schools, a hospital, and
houses of worship are a plus. You probably know
“nice” when you see it. Tenants do, too!
4) Crime Rate: Go to ciity.data.com and check out the
neighborhood crime rate. While you are there, check
out the school ratings and the household income.
Renters are attracted to low crime areas with good
schools, and you need that to keep your building full.
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