Podcast Series 9: Understanding the Value of Small Apartments With Ed Craine
All right, hey everyone Cordell Davenport here with small apartment investment.com and I always say mindset the skillset was performance because results and with my show that I’m having I always talk about. What’s the main things that we all need to know about when it comes to apartment investing. .
Real estate attorney, CPA, the commercial mortgage broker and property management. I have a history with Ed you guys, of course don’t know but probably about 2007. I got my real estate license when I got my real estate license.
Let me back up. I first got introduced to self-improvement. I started learning about self-improvement and I got hooked on self-improvement and from that I decided that I wanted to be able to change my financial situation when I changed my financial situation. I discovered real estate so at the time I bought these bootcamp stuff in San Francisco. Paid too much money for it.
Like foreclosures or expired listings and I did this and that and then I came across apartments and commercial real estate starting learning about certain things and then I heard about CC I am. Stands for a certified commercial investment member that was in the world is that. And then I said, okay.
I want to be able to get into it. I said okay we find this and so I started looking up and I said all right, let me look up the directory online. I’m in the Bay Area San Francisco, I found Ed’s name contacted. Ed says, you know, I’m here and I want to do this.
I want to do that and you welcome me at the time after full-time job and trying to juggle two things about going on back and I couldn’t really give the attention to that I needed but what I was there was this company I learned a lot have a lot of respect for him and his team highly credentialed.
So my website is a small apartment. I have a free book you can download to talk about how to make a cash flow that takes care of your family living expenses expenses, but I want to introduce someone really fast. All right and crane at the CEO of award winning Smith Crane real estate financial San Francisco and its originating negotiating to billions with the B on all tax properties, he has the statewide president of California.
Association once professionals is the end of this as president of the Northern California chapter 6. I am Southwest Regional VP for CCIM and a national board records of the CCM Institute, And this company has won many awards including his being recognized as a California mortgage broker of the year 2008.
Brought his career in has been a speaker instructor and ride for the mortgage and real estate industries is also a concrete offer for the four best-selling business books. It holds the CCM designation and an MBA in finance and marketing from Cornell University is proudest business accomplishment is the fact that he has been able to help thousands of clients get loans they need to buy, build and refinance their properties.
So for everyone, My goal is to have a showcase once a month to talk about certain topics and our topic today is to understand the valuable partners of commercial real estate. And I would before we start getting to the details besides this profile, that’s ready for you. We all know I just read you into Cornell, but how’d you get started in real estate in particular?
Well that sounded and interesting thing that I. Long story short, my grandfather was a real estate broker and upstate New York in a small town and my father had an insurance agency. It was also licensed in real estate. I just grew up with it and you know when you grow up with something you don’t always go that direction, right?
You know, you see a lot of people now see your kids don’t want to don’t want to do what you do. They wanted to do just the opposite and I ended up finding it really interesting and real appealing. So I did a couple other things but, Came back to real estate.
So. No I know what it means CCM but you want to talk about what he’s saying is for those that don’t know.
Yeah, so it’s it’s designation that you get through the National Association of Realtors, which has a whole spectrum of designations for residential real estate agents. And commercial for commercial sales and investments CCIM is the top designation and it’s unique I think in the world of real estate designations because it’s there’s there’s a heavy dose of academic work and then you have to submit a resume of the actual transactions that you’ve worked on should you know, because they want they don’t want to just have book knowledge.
For you to see them they want you to have practical knowledge and then you have to pass a comprehensive exam. And it’s rigorous. It’s so it’s I actually I’m prouder of my CCIM designation than I am of my MBA, that’s how much I think of it. It’s real , it’s a great program you need and along the way you it’s a great way to network. You meet a lot of terrific people.
It, you know, I’ve done business through the years with many fellow CCIMs and. They don’t necessarily go through and get the designation but they come for the knowledge and have a lot of people and my spirit from that so no when I was you. Actually took. Control.
Do they have to have a real estate license?
I think you can still do it. There’s always been a track for people who are non-licenses, but. It’s you know, it’s not for everybody. I’ll just say that it’s it’s but there are corporate and corporate real estate departments that send people to for instance through the whole program.
Or what they want to be their strengths we all know this to real estate. The underwriting process some people may like when we are analytical so it makes a lot of sense for somebody to learn that process. Yeah, by the way, I did this. I was just thinking that one of my fellow CCIM guys, who was a property manager, had met at the.
There was one principal in particular that he did most of it most of his business is doing property management for that owner and he meant the owner NCC on classes because the owner wanted to get more knowledge just for his own for his own sake. That there’s that’s a good example of a non-licensee taking the program.
You just can’t say okay, here’s 20,000 dollars and. I want to be a real estate investor. Anybody here has some money, but what do you do? To stand the numbers it’s the business or even if you’re a method you have a property management company you need to manage that manager so you need to know what key metrics with key words or questions to ask it’s not like buying stocks you click the button boom, here’s money.
You know, real estate is not passive, it’s an active activity. If you want to go that route, of course. Occasionally still you need to understand the numbers. What does it mean so that you can just can’t take what somebody’s saying as true so I don’t want to go off on that tangent but today as I said.
What I try to have my show nothing’s rehearsed. We’re at the bar having a beer and. Have to talk about real estate but in particular this conversation. About understanding the value commercial real estates for those that don’t know anything about five above regards to the apartments that are considered commercial.
You can see that the difference is residential and you base it upon. But so I’ll let you take the floor and we can just you know, just go over the fundamentals for somebody who made like say on a triplex they know about that okay, they know about a four plus whatever might be but they want to step their game up they want to go from the triplex let’s say a 20 unit apartment, but what things should they know about commercial real estate value?
That’s a great question and by the way that’s a terrific path for people who want to get into into apartment buildings to own rental homes or two or three or four unit properties because the ownership it and financing and management are a lot easier and and get kind of get your jobs, you know doing that and and then figure out if you if you like it too that you don’t want to just be good at something right you want to really enjoy it because, On if you know life is short into it enjoy the enjoy the trip, so anyway the.
So. Going get started there and then go in from there to to say 20 units as an example is a lot easier because you’re going to be doing many of the things that you’ve that you did when you when you bought your two or three or four unit property, you’re you’re going to be evaluating the what’s the rental market what are the sales comes and what’s the temp profile and what’s the location and what’s the opportunity to add value and you know, a whole spectrum of things that go into.
A bit evaluation of a property well. So do your hands on things to get your experience with the small properties and then when you go out. And I I like to say if you’re 16 units and up. You’re getting some leverage of time typically and because those are properties that you’re going to have on site managers required by state law and California and some other states.
But yet you change the management’s that structure the whole management concept so a lot of us might be self-managing smaller properties. And you could still self-manage a 20 unit property or 16 and above but you’re going to have to have an on-site manager right so now you’ve got to manage a manager not just on the property and deal with the tenants but give them instructional you’re the boss, this is what I want you to do.
To check. But if you don’t know that if you know, that’s yeah yeah and by the way, of course I’m talking about the hands-on investor here, you could also have a professional property management company and you still need to be able to manage that right now. They can’t read , they can’t read your mind and they may not do a good job if they don’t know what you are if you’re not an active person and giving them direction, anyway.
So well you’re also gonna be leveraging your capital break so you’re you’re you’re not instead of having several different properties and different locations maybe and you’ve got every you’ve got all your money or bigger tons of money on one place and that can be more efficient too and it also if you’re if you’re moving from several smaller properties to one bigger property, you’re you’re now also changing your risk profile and, There’s some so you’re taking on greater risk now right and until you build till you build a portfolio a bigger properties, you got all your eggs in one basket right when you go for your three units or your twenty unit or two or three.
Well. Yeah everything from local market conditions like employment unforeseen things we’re right in the middle of covet pandemic right, which has. Who are your tenants? How do they get so impacted by changes in unemployment or employment? How do they get affected by it? Things like pandemic now how do they get affected by ships in the neighborhood, you know, the shifting demographics in the neighborhood.
That’s right for better or worse right shifting demographics can cut both ways, so there are just a number of factors. You have to be cognizant of the fact you’re not taking on a greater risk. So you want to have with these bigger properties as you go up inside you you want to have your rates of return be higher so just this is just kind of theoretical talk right now right it’s talking about what happens when you’re moving when you’re moving from smaller properties to bigger so they say that is background for.
So a few key things the that I want your listeners to really focus in on when they when they go out and they look for something to buy so and these also they apply to the small ones too, but they’re more important with the bigger properties. You need to know your rent, you need to know you need to see so many apartments you need to go shop for apartments and both are prospective rentals let’s say but also are prospective buyers but to the extent you can get in to see properties that’s a whole other topic for another time but.
To be able to walk. Into any unit in the market that you’re going to invest in. On and just to sidebar here get to know the market, pick a market and really get to know it, don’t be chasing all over the place because you know, you’ll be a master of none right you’ll.
Yes. For you. Fresno or you know Portland okay, we’re important, you know, yeah great yeah great point, you know, Berkeley’s probably got 15 or 20 neighborhoods and more than that micro niches, right? Oakland has I don’t know how many dozens but maybe maybe hundreds if you really break it down, but at Saudi rate you should be able to walk into an apartment and say I know I can rent this property this apartment for whatever it is within a very narrow range right and, Each each apartment unit in that in that building.
You should have a good idea of what you can rent it for.
And it is related to this is the whole idea of. Our UMB passive or active investor and what can and can is it is it going to be a value add and not and all that so you have to understand where that property is positioned it in in the in the little market that any market niche that you’re looking at right so are you at the bottom and top end you need to value add?
I don’t know if a lot of people know what to do. Short yeah so value add is that basically buying a fixer upper right and then fixing our upper doesn’t have to be something where you do extensive renovation, although it could be but it could just be cosmetic. Could be designed, you have a better eye for design and than the average person and you make it, you know, you take a plane looking building and make it look really great with just a few cosmetic things.
On. So anyway, so you it’s not good enough just to know what what the what. Rents for that unit. Will be when you when you if and when you own it. But could they be if you did one one improvement or another what could they be if you if you repositioned?
Property as a whole, right? So, um. Maybe you can go there and you know, they’re besides the the the, Just a. Value add in terms of fixing things up there’s a whole value add in terms of especially if you have a neighborhood that’s transitioning towards better, you know more upscale tenants.
How do you position the whole property exterior from the first time somebody sees the property all the way all the way to walking in the unit and what the amenities are and how do you reposition that? So you need to know what the rents could be and what it would cost you to get there, right?
So, When I’m what I’m saying I want you. So you know what the rents are gonna be when you walk in the door. You know what they could be? Whether you want to fix it up or not, it’s a separate question now, but you know what they could be, right?
So, there’s you. You should know more about Reds and the probably even most real estate commercial real estate agents and maybe not property managers but close to it, right? You should have seen so many units that you have a really good amount of my favorite websites for you guys if you want to figure it out.
Rentometer.com you can go by zip code and it’ll tell you one bedroom two bedroom three bedroom with the need. But you can also call up different properties, you know within a two mile radius say I’m looking to rent what’s rent for you can do your own notes.
You can look at apartments.com and sometimes like it was saying, you know, you want to find out the rents are you can even like have a conversation with a local property management company because they may have some numbers for you. Not to work with it as well. Yeah, we’ll talk a little bit about the one way here about building a team too.
This some still talk about your own personal knowledge, right? And the same thing with what’s the property? What other property sells for whether the what are the sales comparables and what what could it sell for when you fix it up what a you know, what are the what are the sales comparables for repositioned properties?
So what’s the so there’ll be a spectrum in any market, you know, what two bedroom one bathroom unit may run anywhere with let’s just say depending on the market of just make up some numbers could be fifteen hundred dollars to thirty five hundred dollars and in a fair. What most people might think of as a market it’s that’s probably they’re probably two, you know, two they’re in two different markets probably but but they could be geographically very close so people are thinking oh it’s you know, it’s West Oakland or you know, it’s with the layout or.
And and now it’s it’s not it’s we’re in Vallejo or we’re in West Oakland, but you could. You know, I don’t want to get too far in the weeds on that but you can get all the ideas. So you’re. You want to know that.
Based on the type of unit that you’re, you know, the units that you’re looking at. Per square foot per gross rent multiple owners of California, that’s a popular thing here, right it’s or by. Great. These are all kind of you know, very rough. Because the details the nitty-gritty is really important with any of these numbers that you’re going to use but um, so you you should have a really you should have a good idea of what?
Whatever the department building is, you want to buy or your system buying it. What other sales comparables are selling for per square foot per unit grossman multiplier cap rate for that particular property in that particular condition, right, so you want to elaborate on.
Yeah, so the gross rent multiplier is you just take the annual rents and you multiply. By a griffin multiplier and you get a value so if you had. You know, the hundred thousand dollars and gross annual rents and you had a ten restaurant multiplier you have a million dollar property right ten times a hundred thousand.
Or if you had a fifteen gross rent multiplier, you’d have a million five. So um, And how would a person know that that number is worth? So you just look at a lot of properties that that are for sale and it gets sold and you talk to you get to know real estate agents and I’d say a particular it’s not I find it’s good to find somebody who you really like and trust and and get to know them and some some of these really knowledgeable and that neighborhood that you’re that you want to be buying it.
Sales agents yeah and and they’ll show you comes and it’s got like all people all people in life summer better. And some are more honest some are not so good some are not so less straight so yeah you want to be really careful when you’re looking number one and number two.
Even if it’s an honest person who’s really good. You might have a difference. Right there, there is personal opinion allowed. So we can make a view and I am looking at the same property we might think it has very similar value or we might be. Part and I’d want to go since I know yet I trust it.
Tell me how what you’re thinking, you know how to come up with that so you want to have a person who can exchange ideas with right you might be thinking of something that I had and even thought of so. So that is kind of going along with the theme of building a good team right so when your team members you can also get to know what praisers.
Work on like brokers who you know, who typically worked for commissions praisers work? You might want to offer. Big you would spend giving them some. Hourly fee for you know, for help helping you understand so just as an idea. It would depend on the appraiser and the property type and I wouldn’t want to hazard a guess but.
You know, it might be a few hundred dollars an hour. I don’t know. Yeah, I know that it’s different designations.
To look for if a person wants to find. Yeah, they are different so MAI is the top tap designation yeah. And then there are some others you know, there are some really good people who don’t have that designation but. And then you know, there are a lot of data sources that are useful loop add co-star companies like that, you can get a lot of data online you can get on the mailing list these mailing list and dating myself right so emailing list distribution lists, whatever you’re going to call for or different apartment agents.
I got all kinds of stuff sent to me. I you know, I’m, I’m interested in and information about apartments more generally speaking that I’m talking about now because I have a finance property for people and a lot of different markets so I don’t I don’t really develop the expertise that it’s somebody who’s really good in their local market gets because they’re really an expert but I want to keep my my kind of my finger on the pulse of what’s going on and.
With cap rates and restaurant multipliers and that sort of thing so I get I don’t know a couple dozen. I agents sent me flyers so you mentioned multiplier,.
You divide the net operating income for a year. By the value of the property. So if you’re buying by the purchase price. So, Let’s go back to this 10 gross rent multiplier, $100,000 value of income in a million value. That $100,000 is gross income. It’s not that it’s not net money that you can use to pay your loan or put in your pocket if it’s pretty and clear.
So cap rate works with net income and that to say a quick rule with them and in the Bay Area’s. It could take 35 percent off of a gross income for expenses and have a net income and take a few percent for vacancy depending on the market you’re in but let’s just say, you know for round numbers well say you’re at 60% by the time you get a vacancy and it’s expensive.
So at $100,000 is really 60,000 from a cap rate point of view. And 60,000 divided by a million would give you a six cap rate. So theoretically if you paid it all cash you would have a bond that’s paying you six percent, right? Or be like putting your money in the bank at six percent interest.
That’s okay, that’s that’s that’s the idea and it’s considered a more accurate way of looking at the property because. Growth multiplier you youth especially in a say a city like San Francisco there are a lot of properties where the owner not only pays for its a water and garbage but they pay for heat and electricity for you know, their master metered properties still and so you could have you could have expenses there significantly significantly higher in one building versus another one right next door based on whether it’s a master meter attendance pay either utilities, so.
So that’s how camp rate came to be, it’s not the only reason why it came to be but one of the main ones. No. The sun investors they look at cash on cash and then look at high arm turn right at the turn. In your opinion is that really in which which from your clients which do they prefer they look at I know we haven’t even talked about cash in cash is or are it kind of talked about that but I’m curious to know what is the preference what what.
Was the gold medal who that way or just do your clients look at multiple things they look at they’ll get this and this and this and how do they do they talked to you about how they came up with the decision to go or not go.
Well the most sophisticated ones like these internal rate of return and that that’s a topic for another day, that’s a that’s a pretty it’s a pretty complex. It’s good I’ll just give a plug for CCIM education if you if you really want to understand this internal rate of return and you and you’re really scaling up your knowledge and you know, your business, your department business, it’s well worth it.
But basically it’s measuring your return based on time value of money and your risk factors, so you can plug those factors into your formula. What’s your cash flow coming in and what ‘s your cash flow sequence by the time the and this is going out like your down payment going out right and then you’re.
You’re annual cash flows and then when you sell so you take all of that whole spectrum of cash flows and you discount them based on a rate of return and the that you want to get for that particular property, so. So you can. If you’re the higher rate of return that you plug in.
The that you want to have that you want to get the the discount we discount the cash the future cash flows by this factor that you put in and hire it as the the the more we’re discounting the future cash flows to compensate for the risk. So you get the idea right that this wanted people to understand you’re trying to get a rate of return that’s that helps measure partly the riskiness of what you’re doing so that’s a little more it’s probably a little more than some people wanted to hear but yeah anyway, it’s just something to know so the sophisticated ones do that and they but they’ve got some real fancy computer programs and you know, they and they look some of them have.
They have a team they have they have analysts in-house, you know, like the the rates syndicated the big breeds all have they have staff of people running numbers all the time. But the people that I deal with a lot just average every day and mom and pop investors, you know using that colloquial term and do any.
Probably most of us on this call here would be much fit in that category, but it’s more like. A look at looking at grosser multiplier and cap rate maybe but it’s more a gut reaction to I’ve looked at a lot of properties and I know this is a good deal which is it, you know, it’s more that kind of criteria that people use and.
Can then they’ll start looking at that’s the first cut and then they start looking at the numbers to make sure that they’re going to get some cash on cash they want to be negative on their cash flow lenders want to let them do it anyway, so. And then that gets them into looking at some of the things we’re talking about price per square foot restaurant multiplier cap, rate.
Of all the apartments I’ve been so experienced here can I go to their county assessor office to look up past sales to do their own research or do they have to pay a fee to a service online service provider for them to do their own research if they wanted out you could you can do it it’s it’ll be arduous but you could definitely do it.
So what do you recommend for the easy way?
Get a team so you know, good real good real estate commercial investment real estate agent, good property manager. A good appraiser. Could have a real estate consultant and also somebody who doesn’t really broker but who gets paid hourly. There’s a site I do.
I do work like that sometimes and yeah, it’s not my main thing but there are people who do that right now and then and then use that to use some of the stuff like costar and loopnet and. There’s another one prospect now there are a bunch of yeah a bunch of tools that you can use.
I think that people need to understand when it comes to commercial real estate to team sport. Everybody has their role and you do want to be able to form your team and be aware of how beneficial this is because you’re not going to know everything you don’t want to know everything.
I think that’s very correct you just said and it’s like I listened to a podcast and somebody was saying like a at the end like what’s what’s the biggest mistake you made and I forgot what he said but he basically said that he put he put his team he tried to build his team last set of build his team first.
And depending on where you want to go a lot of times a lot of people say okay find a real estate sales agent, a broker that’s local to the area, not that you want. But the thing is a lot of the times too is. If depending on what the person wants to do and you can go with a real estate agent who may already have networks but you know, you can also go directly to the owner if you want to buy another property.
Can buy mailing lists like from Prospect now or some other ones similar letter in the mail they come back to you and see you they have an interest in buying but now they if they supply which is information say yeah, I want to sell my property you have to be educated on what those numbers are and what they represent.
I think the key to really having a criteria is that you want what is it that you want, what kind of things are you looking for, what kind of areas that you want to do and sell what this I want this this this this and within this area here.
This is what this equals out so as it comes through now it doesn’t work it didn’t work it doesn’t work does work so as I’m talking to you guys. I’m not saying I’m not coming to you like oh I got all this property and I’m big really walking around here with the gold medal, you know, I am learning myself but I do know I have direction or what I want to achieve.
But the team is very very very keen to hear that. The edges said through some other podcasts that I’ve heard that you guys have to develop a team it all depends on what you want to do though too, you know, you’re gonna be a passive reactive. To find a contract.
Find a handyman if you want to go that route now. The NOI is very important. Of course now for yourself and when it comes to underwriting the person wants to understand underwriting. And go through let’s say that a person does want to sell their property, what do you suggest that they do besides contact someone who has experienced but if they wanted to be able to get better handle things understand the process of the whole underwriting process in itself to understand the value of the property, what do you suggest well?
I got a few things to invite the way I you when you’re talking I’ve realized I forgot one really good resource people can use. For apartments, join the local apartment owners association and the market that you are really interested in because then you network with not just professionals but with your peers right away and if you develop good relationships.
You people will mostly be truthful about what’s going on with their properties, you know, not a hundred percent people like to put a positive spin on sometimes but you’ll get a lot of knowledge so it may be what I used to view. Journals, you didn’t see them monthly the other day.
But it wasn’t because it was a California apartment association or I forgot. Yeah, you’ve learned a lot just by reading the magazines, so you may have an attorney talking about something you may have a whoever and that’s how you learn. Yeah, so anyway to the underwriting question. I can really geek out on this but I’ll try not to. I used to teach underwriting classes to bankers and CPAs and attorneys and Mortgage brokers and.
Real estate agents but here’s my long story short you look at enough at enough properties that are for sale and and that of sold and get your team to you know, your property manager you appraiser your real estate agent to get you some local knowledge about.
I benchmark numbers if you have a really good CPA by the way, some suits some CPAs are good at real estate and they are very knowledgeable and others are but if you have a good one, they’ll know they’re a good resource also. And then there are some publications that you can get.
Someone some most of them tend to be like for bigger properties and for you know markets that are broader markets, but you can get. Average price per square foot for operating costs different operating costs for different types of apartments and different locations and I’ll just keep you one of the one of the ones that’s like the sister association to CCIMS I REM institute of real estate managers and they put out publications that they go into great detail of.
And I’m not saying those are appropriate for people on this call but you know what you want to do is be able to say okay this this owner is or real estate agent is saying that the repairs. The property is X number of dollars for repairs. I don’t want to pay attention to that because that’s what they they that that’s what they want to show or what’s it’s what they’ve maybe it’s off of even off the tax return that’s what they did one year.
I want to know what every year my repair cost is likely to be right and then with each one of the numbers you want to be able to do that and some of them you can verify you don’t have to go by theoretical numbers like PG&E, you can just have it as part of the contract that you’re you’re going to see.
The last 24 months worth of PG&E belts that you get to inspect them right or the water bills, trash bills, whatever so. So what you want to do is take the numbers and start verifying them because you know the old saying trust but verify. That’s your money, nobody’s going to care for it about it as much as you do.
So please even the number you get from people who are on your team. Just make sure that you that you get back up have them explain have you know, let’s let’s get down into the weeds here and by the way, sometimes in a hot market you’re not able to get as much as you’d like and you’ll you can make a business decision to go ahead with what what your own opinion is because you’ve looked at enough different properties for sale that you know, what what the PG&E would likely be for instance, let’s say anyway, I digress but you want to go through basically line item and reconstruct your own budget.
Right. And that’s what a lender is doing: lenders underwriters when they give them an income and expense statement for a property that you want to refinance your buy and they’re looking at their book. Their iron book or whatever and you know, when. They’re saying now that those of that number are not right, that number is not right, you know, and they come up with their own and they said to debate whatever you present for the refund.
Yeah, let’s not necessarily run but you know, they’re allotted databases again used at that in the world for underwriting right? Banks could have their own in-house lawn, could be iron, could be. You know an appraisal board. So, so how’s it? How does it work? So they have their standards in so you are doing a refi for somebody for an apartment building, but you have your numbers and they have their numbers.
How do you draw a middle ground? Well, when you really are experienced you end up being pretty close. So it’s not that far off. But sometimes we’ll get down to, you know, a discussion about where we’re located. The typical number for repairs would be say three percent say so.
I love three percent from an owner’s point of three percent. On lower rents may be too low of a number and so the blender may be the same for not going to use three percent. I’m going to use, you know, five dollars a square foot or so. That’s some other number that they think is more realistic.
What we do then is we just get into a discussion about well, okay, you know, we understand you’re using this number we’re using this number. But look at the condition of the property and and the condition of the property we just put on a new roof we just did well we rewrite the plate you know, we did it all these different.
Upgrades and so we’re not going to have that level of expense for another 10 years, so let’s you know, and we can come up with a compromise. And eight by the way in the end lenders also always go with the more conservative of what they come up with or what an appraiser comes up with.
So you could have this discussion with lender and then the appraised the appraisal comes in and you hit and you can have the whole discussion all over again because the appraisers got a little different view so just saying here it’s a little more this isn’t like you, you know, I one of those like easy glide paths no but with no bumps in the road this the underwriting process is a little bumpy, so.
It’s also for the base. It’s like let’s say that I am underwater at a bank and then you submit an application to me alone. I go through my diligence and then I have to go ahead and present the same thing to my boss or to like a mini board and then from that decision they make that come back to you and say yes we want to go with you is that the process yeah pretty much yeah there’s a lot of there’s a lot of pure review of going on right so because it’s, uh, That’s a team of protein so the idea is you know, let’s have a lot of eyes on this because we want to make sure we don’t make a big mistake.
And and and we it’s the reason for us to have teams ourselves, right let’s get some other eyes on because. We may be missing something people can have valuable, important input for us. Yeah, I do think that the, Route that I’ve heard many many times has been a very good method to buy.
One blank you buy something by a property you fix it up, you rent it out and then you refinance. I’m missing something else but you get that proceed and go to the next you buy who fix up you’re not refinance boom, boom boom boom boom in before, you know it you got to look portfolio and that’s actually that’s my game plan that’s what I want to what my goal is trying to achieve it’s it’s to utilize that and I’m kind of digressing but when it comes to refinancing, What tips do you have for a person does have a commercial property or let’s see yeah you have a commercial property and they want to refinance what what will increase the odds of getting what?
And having property that’s in good shape and and and really good records. And. Being realistic is probably more than anything right because sometimes people want to borrow more than than the lenders are willing to lend them. It’s just getting a good realistic view.
Okay. Well, I’ve got I’m gonna have you back multiple times it, you know, I think this is just like an introduction to know about you and there’s other toppers that we’re gonna talk about later on but do you have any last stops in regards to understanding the value? Just get out get out and do where your shoe leather right so look at properties until you get until you get the experience and then you know, you can have other people who are doing that for you but you yeah again, I think we’re tucked talking mostly to people who are kind of hands-on to just get in started right and that’s it’s how you get the knowledge so that then you can manage people you want to have you want to have that obviously the thing about to because you know for myself I thought about Trying to get my portfolio jumping off in central California.
Because it’s cheaper but like I thought about what’s my ultimate goal and so anyway, I got like I got a list of apartments and I did before I have expressed you like you were representing he was like, okay but these down so I can know what the numbers are so I can know what I call across the deal what’s good was bad.
I mentioned to you early by renting meters, so I know what the rents are so I’m expressing them just zip code for one bedroom and two bedroom three bedroom is this so if I come across something I already know. But I kind of transition I say, you know, I don’t want to really go that route.
I’m going to stick to the Bay area where my home is, you know, some people say best for your ad a lot of people say well California so expensive but my I’m back it up and say what’s called ultimate goal my ultimate goal for me to buy a manage, you know want to be able to be active in it but have systems in place but you reminded me now.
I have more problems. I have more research and projects to do. Where I’m going to get some stuff in Alameda County and start making up my list and one idea that well, somebody can have to those are listening you can hook up with a title company and make a request for go through agent and say I want to buy some properties well, I want to list of properties.
I’ve done it before for like five to fifty units and this county and you get a spreadsheet that’s fresh you have all the you have the address of the property you have where the owner is so you can email them or several letters. And then from that you can develop your own expression.
You can based on city or zip code and then like whatever saying you can start figuring out what’s the growth rate multiplier, what’s the cost per unit, what’s all this stuff and like for me now I’m in that process right now where I’m transitioning. From what I thought about you know, the central valley when we focus on alligator county where I’m at but anyhow how can people get in contact with you?
So God, easier steps to email me, um, it’s ed at Smith crane.com. And crane is the CRA INEE, so at s m, i t h, c r a i n, e.com. Um, always happy to spend a few minutes getting to know somebody and. See if you know, give them a little coaching and a little guidance and see what they’re up to. Love hearing people’s stories.
Well, thank you and as I mentioned when I first read your profile, I read your biologist today to my wife was like man, he’s accomplished and I was just for those that don’t know. Because I mentioned I worked with Ed for a while I recently got back in contact with him. We haven’t chopped it up, you know, talked just recently but I was telling him.
That I was the conversation before we started it. I said I was driving down the street and I seemed like a contractor, a plumber, an electrician , whatever had this truck up and they’re slowing us. There is no substitute for experience. And air definitely got the experience so my vision of course is once I get my thing going like I want to like I am of course of my reach out to Ed hopefully you guys too can do the same when it comes to commercial financing.
To stuff so well. I’ll talk to you guys later on and hope everything goes well and your family’s safe. And make it happen go to websites fall apart in the best of.com, get my free ebook stay safe be everyone.