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RG 003 – Why I Love Multi-Family Investing Here in the U.S. with Frank Roessler

Show Notes:

In case you missed it here are all some of the highlights from our conversation with Frank:

About Frank:

  • Has over 10 years experience in institutional multi family acquisitions and management
  • Is an asset manager of a portfolio worth of $400 mill.
  • Founder of Ashcroft Captial http://www.ashcroftcapital.com/
  • Loves to travel!

Nuts and Bolts:

Why we love investing in large multi family apartments communities!

  • Cashflow is KING! Multi family properties have greater cashflow than single-family houses (SFH)
  • Amortization: your tenants pay your mortgage for you!
  • Forced appreciation: Increasing the value of the property by increasing the NOI, whilst cashflowing, through value-add measures like:
    • Increasing rents by renovating apartments
    • Increasing operational efficiencies that reduces the operating experiences
    • Remember CAP Rate = NOI / Property Value rearrange
    • Value = NOI / CAP Rate
    • You increase the NOI by $1 you increase the value of the property by $10 (ie: 10% CAP).
  • Easier to obtain financing: Multi family apartments have a lower risk of default on the debt than single-family houses.
  • Banks underwrite the multi family deals: SFH the banks underwrites the borrower, not the deal.
  • Less volatile assets
  • Multi family properties we like:
    • Great area
    • Great occupancy
    • Under market value
    • But the owner hasn’t taken care of the property and needs a spruce up!
    • And/Or, operating efficiencies haven’t been maximized by current owner
  • Renovating apartments: Rule of thumb – Minimum amount spent per unit is proportional to how much the rents will increase.: ie: minimum 25% increase in rents: $500/ month currently – renovated: $625 that’s an increase of $1,500/year which means we spend $6000 per unit = $1,500 / 25%.
  • Key Team Member: Property Manager! Get a property manager to partner with you, they will be incentivized to make the property to perform at its peak!