Once you’re sold on the idea of buying an apartment building, the next question is: “What to buy?” One of the important principles to keep in mind is that it’s usually better to buy more units than fewer for a given amount of money. To see why, let’s compare two different deals on the same … Continue reading “Why more units are better than fewer”
Author: Moses Kagan
Why you should get pre-approved for a loan
Say you decided to sell your building and I offered to buy it. Say I offered you the following deal: I’ll buy your building for $1MM, but first I want you to guarantee you won’t sell it to anyone else for the next 45 days while I get the money together. You would be an … Continue reading “Why you should get pre-approved for a loan”
OK, I want to buy a building. What do I do first?
Call me. J/k. Sort of. The first thing you need to do is take stock of your current position. Here is what you need to get started: A decent credit score. FHA will loan down to a 580 score, but ideally you’d be north of 700. A stable work history. The ideal loan applicant would … Continue reading “OK, I want to buy a building. What do I do first?”
How much cash do you need to buy your first apartment building?
Not much, especially if you don’t already own real estate. The federal government has a program called the FHA which provides banks with insurance in case a borrower defaults on his mortgage. Because of this insurance, banks are willing to loan up to 96.5% of the cost of a 2-4 unit building, as long as … Continue reading “How much cash do you need to buy your first apartment building?”
Recourse vs. non-recourse
There is a major, major difference between recourse and non-recourse loans, as developers all over the country have found out to their distinct displeasure over the past few years. A recourse loan is a loan where one or more of the borrowers agrees to personally pay back the loan, regardless of what happens to the … Continue reading “Recourse vs. non-recourse”
Debt service coverage ratio explained
Time for some more boring real estate math. I guess this is the blogging equivalent of eating your broccoli. I’ll make it quick and painless, I hope… What is a debt service coverage ratio (DCSR)? It is the result of dividing the annual net operating income of a building by the total annual debt service … Continue reading “Debt service coverage ratio explained”
Why I write this blog
You might be wondering: Why does this guy spend so much time writing about apartment buildings? I think the financial crisis of the past few years has changed something fundamental about the relationship between young people and real estate, and I want to try to both explain that change, and help shape it and move … Continue reading “Why I write this blog”
How you improve the neighborhood
Sometimes all you need to do to improve your neighborhood is to yell at a priest. My brother and I own a 16 unit building on Reno St (the one from this story) that’s across an alley from a new church, one of those Latin Pentacostal deals. The street itself isn’t the nicest one in … Continue reading “How you improve the neighborhood”
Silver Lake Income Properties In High Demand
We’ve just completed a review of the data for sales of 2-4 unit income properties in Silver Lake over the past six months. For more on the methodology, please see below. Meanwhile, here are the headline numbers: Median estimated gross rent multiple: 12.7x annual rents Median estimated CAP rate: 5.5% Median sale price as % … Continue reading “Silver Lake Income Properties In High Demand”
How to add value to your apartment building
Some people take owning an apartment building as their opportunity to unleash their internal interior designer. It’s like the building becomes their personal canvas to show off their taste in decorating. Don’t be one of those people. The only way to make a rational decision about spending money to improve your building is to determine … Continue reading “How to add value to your apartment building”