Rules Of Thumb For Multifamily Real Estate Investing

Welcome message from Gino Preview 00:48

Rules Of Thumb, The Book Preview 14 pages

This book lays out our guidelines and parameters for a good deal. Here we discuss cap rates and cash on cash returns that we strive for. It is vital for beginning investors to learn how to correctly analyze a deal.

What formulas should I use? You will be able to analyze a deal quicker and more accurately using our Rules of Thumb. What are some of our rules?

○ Cap Rates: What is a cap rate, and how do investors use them?
○ Cash on Cash Return: What is our return that we strive for? (hint: 10%)
○ Debt Coverage Ratio: What ratio does a bank look for when deciding whether to provide financing?
○ Management Fees: What are the going rates to manage a property

Once you learn the basic rules of thumb, you will become more confident in analyzing deals, going through the due diligence phase, and putting in offers that will land you deals. You will also learn how to manage your property more effectively.

Introduction to Rules of Thumb For Multifamily Investing. Preview 00:34

Loan to Value, learn what banks are willing to lend you. Preview 02:17

Loan to Value, the amount banks are willing to lend as a percentage of the total loan. As you will see, loan to value will differ on the type of deal you have and the amount of experience you bring to the table.

Cap Rates and how to measure the rate of return on your investments. Preview 04:12

Often misunderstood, cap rates are a widely used calculation in multifamily investing that measures the rate of return on your investment. Understanding how to properly use cap rates is vital to investing.

Cash on Cash, calculating your rate of return. Preview 01:55

One of the most popular calculations in among multifamily investors to calculate their rate of return is Cash on Cash. In this lesson, Gino is going to teach you exactly how to us this calculation and why it's so important.

Debt Service Coverage Ratio (DSCR) and how to best qualify for loan approval. Preview 01:53

This is a very important metric that banks use to decide whether to finance your deal. Find out what the banks are looking for and see what Jake and Gino strive for. This formula will show you if your property is generating enough income to pay the mortgage and the bills.

Percentage of Expense to Gross Income and knowing your numbers. Preview 04:01

Do you know how much your expenses should be as a percent of your gross income? In this lesson, Gino is going to map the path for you to making certain you know the percentage of the gross income of your investments.

Capital Expenditures, how not to be caught with your pants down Preview 04:13

Capital Expenditure is one of those rules that many investors are confused by and tend to neglect. Let us show you how to calculate cap ex and give you examples why you need to set up a capital expenditure account. Don’t make the same mistake that Jake and I made, almost sidetracking our investing careers.

Mortgage Points, the difference between discount and origination. Preview 02:21

Mortgage Points are often confused with origination points. So, what is a loan point and should you consider points when financing a property? We will discuss origination points and show you how to lower the origination fee on a loan.

Management Fees, hiring companies and self managing. Preview 07:35

As far and Jake and Gino are concerned, knowing your management fees are among the most important elements of running a successful multifamily business. Knowing what management companies charge, and knowing if you should hire a management company or self-manage. We let you decide.

Cash Flow, The reason why you should be investing in real estate. Preview 02:37

Cash Flow is the REASON why anyone should be investing in real estate. We view capital appreciation as icing on the cake. Would you buy a business that is losing money? Neither would I, and you shouldn’t purchase a property that has negative cash flow.

How to use the Gross Rent Multiplier(GRM) when investing in real estate property Preview 01:17

GRM, also known as Gross Rent Multiplier is a quick calculation to estimate a property’s value. Although it is not a very accurate calculation, it shows us if the property is vastly under or over priced and leads us to analyze the property more in depth.

Calculate your Vacancy Loss and learn your Acceptable Vacancy Rate Preview 02:23

A landlord hates to experience Vacancy Loss, but it is a value play to investors. We describe the benefits as well as the detriment of experiencing vacancy loss and the acceptable amount a landlord should tolerate.

Due Diligence, the two most important words in investing, here's your checklist. Preview 11:38

Due Diligence, two of the most important words to every investor, can be a confusing process to any novice investor. Seasoned investors often overlook small details, so we assembled a checklist to follow when performing due diligence prior to closing on a deal.

Rule of 72, estimate how long it will take to double your investment and ROR. Preview 01:38

Jake and I often use the Rule of 72 to calculate how long it will take us to double our money with a certain investment. Conversely, we also use the formula to show us the rate of return we have to achieve if we want to double our money within a certain time period.

How to Hold, employing different entities for real estate and top preferences. Preview 04:30

How to Hold your real estate is a critical Rule of Thumb, and investors vary widely on the type of entity they use. Some investors find it wise to hold real estate in their personal names, and we will show you the benefits of creating an LLC to protect yourself.

Insurance Expense, finding the right coverage for your investments. Preview 02:29

Insurance Expenses can vary widely from market to market. We will discuss the type of insurance every property owner should purchase, as well as the cost per unit to estimate when buying a property.

Buy on Actuals, properly using your pro-forma to buy at the "right" price. Preview 01:54

Buy on Actuals is a mantra of Jake and Gino. This quick video will discuss what a pro-forma is, what it’s used for, and why you should not purchase a property with pro-forma numbers. ONLY use the actual performance of the property.

Understanding Unit Mix in an apartment complex. Preview 03:11

Unit Mix, what every multifamily investor should look for when purchasing an apartment building. This is an often overlooked rule for beginner investors, and can seriously impede your cash flow and valuation of the property.

Property Class, learning the pros and cons of each four. Preview 05:28

Property Class is split up into four designations, and we will discuss the benefits, as well as the disadvantages of owning each type of class. Find out what our preferred class is, and why. If you want to sound like a pro, don’t skip this video.

Marketing, fill your vacancies, reach a larger audience and save a lot of dough. Preview 03:27

In the Marketing lesson, find out what is working in today’s market to lease up your vacant apartments. Gone are the days of relying on print media. Learn how to reach a wider audience, and save time and money while leasing up.

Negotiation, tricks from seasoned pros to apply in your investing career. Preview 10:52

Negotiation is a learnable skill in real estate. Most of us don’t realize that we are constantly negotiating for “things” in our life. Let us show you how to become a better negotiator and begin to create win-win scenarios so people will want to sell their deal to you.

Property Inspection, protecting yourself and hiring the right inspectors. Preview 03:25

Property Inspection, a process whereby you can actually save money by spending it. What does property inspection entail, and how do you pay an inspector? We will show you the importance of this team member and how you can use an inspection report to your benefit.

Repair Allowance, getting cash back at closing to use on deferred maintenance. Preview 02:37

What is a Repair Allowance, and do investors actually use it successfully? When we first asked for a repair allowance, the broker told us it would never work. We’ve heard that line before, and thankfully we stuck to our guns. You will see how to use one successfully to get cash back at closing to rehab your property.

Multifamily Rules Of Thumb Quiz

This 20 question quiz will test your skills on your knowledge of the Rules Of Thumb necessary for investing in Multifamily Real Estate. Take your time, review all of the lessons in sequence and then attempt the ROT quiz.