1. Deferred Maintenance
1. These are items the previous owner has neglected over the years and you will need to address to bring the property up to its market potential.

1. i.      This could include: peeling paint, damaged roofing/siding, insect issues, landscaping, hanging  gutters, concrete/parking lot repairs etc..
2. i.      This could include replacing items such as: Roofs, Windows, Siding, HVAC systems, flooring, electrical etc

2. Capital Improvements
1. These are typically one time major “capital” improvements you will have to perform for the property to reach its full potential

In regards to ongoing operating expenses of a property there are two main buckets those expenses will fall into: Fixed Expenses and Variable Expenses. When reviewing a potential purchase you should expect to receive what is called a Year to Date Operating Statement from the current owner, this document should outline the income and expenses associated with running a property. NEVER take what the seller gives you as absolute truth-you must always verify expenses and speak to local management to ensure the expenses you are projecting are in line with similar properties in the current market. Below is a breakdown of common fixed and variable expenses.

1. Fixed Expenses
1. Taxes, Insurance, Utilities, Trash
2. Variable Expenses
1. Management, Maintenance, Turnover Costs, Payroll, Grounds Maintenance, Advertising, Legal, Accounting

Having a good understand of your expenses when projecting the performance of a property  is essential for your success. This will allow you to be well prepared and also identify inefficiencies in current operations and ultimately find ways to increase your Net Operating Income.  A rule of thumb to use when analyzing a property’s potential net income is to use your Gross income (after vacancy) and subtract 50% to get to your potential Net Operating Income.

-          Christopher Urso, founder of National REIS and URS Capital Partners

1. Contact local brokers that specialize in multifamily property
2. Contact local property managers-make sure they have experience managing the types of properties that you are targeting
3. Establish your target price point of the property you would like to purchase
4. Establish the returns you require from your investment
5. Begin analyzing deals and surrounding neighborhoods, you have to understand market rents and vacancy rates of similar properties
6. Have a clear plan on how you will finance your purchase Conventional, Seller Financing, Private Money, Equity Partners
7. Establish an offer price based on your required return
8. Create and Submit a Letter of Intent
9. Perform Physical Inspections-ALWAYS INSPECT EVERY UNIT WITH A  PROFESSIONAL INSPECTOR
10. Put your financing plan into action
11. Get your management team involved in the process
12. Close on the deal – CELEBRATE!
13. Establish an ongoing communication plan with your management team
14. Should be at least a monthly call (could be as much as weekly for larger properties)
15. Collect your rent checks
16. Look for another a deal

-          Christopher Urso, Founder National REIS and URS Capital Partners

As you may be aware, on a case-by-case basis National REIS works with other sharp investors and successful businesspeople on partnership deals.  If you are interested in finding out more, contact us online or call the office at 516-280-7674.

News article: Commercial mortgage backed securities that are currently in default are at all time with almost 13% of all CMBS loans delinquent. http://www.housingwire.com/2011/07/29/fixed-rate-cmbs-defaults-near-13 .

What Does Commercial Mortgage-Backed Securities (CMBS) Mean?

A type of mortgage-backed security that is secured by the loan on a commercial property. A CMBS can provide liquidity to real estate investors and to commercial lenders. As with other types of MBS, the increased use of CMBS can be attributable to the rapid rise in real estate prices over the years.

Commercial mortgage backed securities that are currently in default are at all time with almost 13% of all CMBS loans delinquent. http://www.housingwire.com/2011/07/29/fixed-rate-cmbs-defaults-near-13 . Many of the loans were originated between 2004-2008 based on inflated values and unrealistic operating proformas.

A simple way to view the issue is that brokers and lenders were underwriting deals with “BEST CASE SCENARIO” guidelines such as 95%+ occupancy levels and rent growth of 5-10% per year during the life of the loan along with Debt Service Coverage Ratios at 1.1 or even 1.0 in some cases. After the recession of 2009 the national faced extremely high levels of unemployment and many building owners saw their occupancy fall well below levels that could support their debt payment and could no longer make payments.

These deals can often provide the greatest returns but also can be quite difficult to get done. The property will often be controlled by a receiver who takes care of the property for the bank while they pursue taking title back. At which point it is ready to be sold most likely at a significant discount.

Chris approached me earlier this year with an opportunity to invest in his National REIS Equity Partners I, LLC. Being a professional securities trader I was looking outside the stock market to diversify my investment vehicles and was interested in his product. After completing my due diligence I was impressed with his model. Knowing his work ethic I decided to make an initial investment. Chris has been more than accommodating in updating me with the progress of the fund. He has sent out newsletters to fellow investors as well documenting some of the deals that have been taking place on a monthly basis. The returns and financials have been provided on time and as projected.

I am a supporter of this business model for long term prospects as I am impressed by the strategy and execution that Chris is implementing to secure, address and distribute his properties.”

National REIS was founded to let you create huge wealth through cash flowing real estate positions, and to serve as a mentor, advisor, and partner on the wide range of transactions that you will be using to build your current and future generational wealth.

These days, the shrewd investor is pressed for time, efficiency, and competence when evaluating investment choices.  We pride ourselves on our outstanding experience, reputation, and highly personalized approach combined with a “take no prisoners” work ethic.  See more of the rave reviews we’re getting from both passive investors and partners alike, or read more About National REIS.

Mark L.
Manhattan, NYC

National REIS was founded to let you create huge wealth through cash flowing real estate positions, and to serve as a mentor, advisor, and partner on the wide range of transactions that you will be using to build your current and future generational wealth.

These days, the shrewd investor is pressed for time, efficiency, and competence when evaluating investment choices.  We pride ourselves on our outstanding experience, reputation, and highly personalized approach combined with a “take no prisoners” work ethic.  See more of the rave reviews we’re getting from both passive investors and partners alike, or read more About National REIS.