CREChris - Commercial Real Estate w/ Chris Magistrado

so basically what I wanna do is

for all the people that are interested in real estate

um I wanna like create these videos for you as well as for myself

so I don't forget them cause I have it

tendency should forget things

so as of most recent I'm reading about commercial real estate

so I'm reading Brandon Turner's book

The Multi Millionaire

volume 2 see

so the Multi Family Millionaire volume 2

create generation of wealth by investing in large

multi family real estate the Multi Family Millionaire 2

it's written by Brian Murray and Brandon Turner

I believe this part of the book

the majority of it was written by Brian Murray

and yeah so I'm reading this one right now

and I would like to take you through

the different chapters and things that I've been learning

so we'll start with

okay so

there's different types of

investment properties that you can go after in commercial

so you gotta figure out exactly which ones you wanna do

this is specifically towards multifamily

and in that section there's other types as well

so the first thing that you need to do is you have CCC

which is called CCC which is for crystal clear criteria

you gotta know exactly

the areas of things that you're interested in investing in

and I'm gonna give to you

what is outlined in the book for the different types that are there

and obviously there are multiple different types and stuff right

so it's kind of just like what you're interested in doing

so there's high rises mid rises

so high rise is anything that is nine floors with an

so high rise is anything that is nine floors with an

9 or more floors with an elevator

mid rise is anything with an elevator in like an urban area

usually less than nine floors

garden style is one two or 3 story apartments uh

in that have like a garden like setting in a suburban or rural

locations so they may not have an elevator

you see a lot of these in Sacramento

like if you go like towards Folsom or anywhere out there

another types of like apartment complexes

that's what they'll have and they could have set number of units

even in Austin when I was living there

that was technically a garden style complex and then walk up

there's four to six story buildings without an elevator

so if there's no elevator and there's four to six stories

it's called a walk up

manufactured housing communities

so we're talking mobile home parks

Brandon Turner has built and created a lot of wealth from

from these types of communities

there's also special purpose housing like student housing

senior housing and subsidized housing

so subsidized being like low income

senior housing meaning like catering specifically to the elderly

and then student housing of course

like usually these are by like colleges and stuff like that

there's also different there's four

types of classifications that these multi family properties can be

you have Class a which is the highest quality constructed

within the last 10 years

the most attractive locations present will

and command high rates generally

and there's Class B

likely to have been constructed in the past 20 years

good quality with a deferred maintanence

and both a and B this is important

both a and b

generally are invested by larger institutional buyers and lenders

so

you know you might have to go to them

if you want to acquire these types of properties

if you're doing stuff

you know without working with large institutions

and class C and d might be better

so what that looks like is for class C

you have older with more limited or dated amenities

finished fixtures and applications are probably outdated

or often dated

more challenging to finance

but they also tend to offer more opportunity

to the value of improvements right

so what you're looking at is like it's gonna be

it might be more difficult to get funding

your project might have to have more there

and you might have to explain a bit more about like

how you're going to do this

and have your strong team to be able to back you up on this

and maybe the rates will be adjusted for the risk

because it's more risky to

to be able to get that financing for it however

if you can terrific

it all just you just have to play with the numbers

class d older and the less desired locations as well

distress due to combination of low occupancy

crime rate

and overall just bad management could be the thing as well

so these are more challenging the finance

but also they tend to offer the most opportunity for value

add so if you have bad management

you can bring on your own a new property management team

if there's low occupancy you can bring more people in there

there's ways that you can add more value to that specific area

go with

partners or at least people that know

and have worked in these types of projects before

if you're taking people and wanting to say hey

let's go from Class a to class d stuff

they might not know exactly that smooth transition

you probably wanna have people have done some class d types of

investment properties under their belt and work with them

now here's some pricing so Class a and B usually finance

you can usually get finance for up to 75 to 80% of the Loan-To-Value

so simple example let's assume that you have access to 2.3 mil

and 30,000 in closing cost plus 270,000 for post closing cash needed

so it's total of 300,000 now 2.3 million - 300,000 equals two million

so you take that 2 million and that cut that takes over the

20% that you're gonna need for the down payment

you're able to take a loan for anywhere between 75 to 80%

so that 20% is 2 million so what's 100%

that's 10 million

so you're gonna be looking for properties around the 10 million marks

that could be 6 million 12 million for class C&D

the same amount of cash that you have will go less

due to the additional risk factor

so instead of going from 6 to 12 million in your range

you might be going down to 5 to 10 million

now

the sizes so let's say that you're looking for classy properties

without an apartment priced at 8 million in the market value

where you have an average price per unit of class C at 80,000

so

you can calculate the amount of units that you would be looking for

once you have the amount of value that you're able to raise

and the lending amount right

so once you have those numbers

you can then work backwards so let's say for Class C you have

let's say you want your your markets 8 mill right

you want an eight million dollar property

and you know that for Class C in your area is $80,000 per unit

you know now that if you divide 8 million by 80,000

you're looking at 100 units that you're looking for

so you're looking for 100 unit properties

now you can go on and say okay

where are the hundred unit properties in my area for the Class C right

occupancy

so most learners like to see at least a minimum of 85% occupancy

once you drop below that

your borrowing options to get a little bit more difficult

and you're taking on additional risk

yeah so Brian Murray in the book he talks about how he

they had a lower occupancy when they were going through the process um

and it was more difficult to get loans and then they were

they wanted to add the occupancy so that they get more people

and then do the appraisal

so that way the loan comes in with that that

that additional thing I believe that's what it said

so target returns how much you're looking to make back

so usually you don't discuss this to the brokers

or anyone else helping you find the deal

the amount of returns only usually stays with the investors

and you speak to the investors of what those returns are

if I would assume this reason is

because if you start talking to the brokers about those types of

the money that you've been making on these deals

then they're gonna negotiate like oh

if you're making that much

then you know how about you give us this much or whatever the case

or they'll know how to shop it and sell

sell the deal somewhere else

all right so sample criteria

so let's say you have a location right

you want to go primary and secondary cities throughout the southeast

with populations trending upwards population

you have growth in the area type of class

you want class C garden style

with or walk up workforce housing with reposition opportunities

age type is 1980s construction or newer

but will consider others on the case by case basis

and your price point is a 5 to 12 million

with 1.5 million to 3 million in funds provided

that's for renovations and everything

100 units or larger is what you're looking for a cap rate market rates

and the value add that you're looking for

looking to require assets

and opportunities to value add through physical improvement

or better property management

so Brian actually goes into

to the specific deal that he did

where the property management was terrible

they were actually like

you know stealing and siphoning stuff

and like

they would actually quote contractors more and then pocket the money

like things were like really bad

so

one of the first things that he did

once he had it under closing

is that he got rid of the property management company

and then he worked with a newer one

and then they also helped get better

vendors and stuff like that to help them with the property and

and just by doing that like

it saves significantly on the cost of theft that was going on

just there

and as far as physical improvements and stuff like that

usually during that period

you could do some renovations as well

so yeah and I think it's important to add like

there's different types of ways that you can like go about these

so like

you know we're talking specifically multi family

but like you can even like target

like motels or stuff like that

if it's like a one bedroom or two bedroom and like

just turn them into apartment complexes and stuff like that

I've seen like

areas and different types of cities where people

have made apartment units out of like

something that was originally like a motel

right so

you can do these types of things where you're like shifting like

oh we're taking a Motel 6

then making it into an apartment complex

right so those could be big value ads

you have to try to like learn to see like

what is that amount that you can make on that transition

and what are the key things to look for

and ideally while you're looking there

figure out who's doing it and seeing like hey

if they're trying to partner or work on

on these types of opportunities

that's my

that's my thinking about this

like a lot of people they want to work with you

and people are generally happy to speak with you

so I recommend doing that

so that's the first

chapter of this book and I'll go into more chapters in a bit

thanks