FULL Underwrite on a Multifamily Development | How to Develop 200 Units in 2 Years (PART 3)
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- Опубліковано 5 жов 2024
- I am reverse engineering all the numbers on one of my big apartment complex developments in Arizona. This is the nuts and bolts of how you can develop and a 200+ unit complex and how much profit you will make. Long term wealth is all about passive income from complexes like these, ladies and gentlemen. And it is MUCH easier than it seems, as long as you can break down the numbers like I'll show you in this video.
Part 1: • How to Develop 200 Uni...
Part 2: • Designing A Multifamil...
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Jerome Maldonado is a 25+ year veteran in the real estate investing industry. He specializes in real estate development, and teaches his students how to developing single family homes, multifamily complexes, and entitle land to sell to developers (or develop themselves!). Jerome also owns multiple 7-figure businesses including a construction company and a realty company, founded in 1998 and 2000.
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Thank you
Glad I was able to get into multifamily with very little down.
Jerome this 3 part series is golden.
I'm in the beginning of analyzing 10 acres zoned for 82 unit new construction. I have talked to the bank for debt and capital equity fund underwriter.
Have the broker researching land development and met the architect who is also on the city zoning board.
I'm going to need more of your expertise and experience because this is beginning to roll.
Jerome, you should set up a call with me or my team. There’s a lot of moving parts to these but they are extremely viable financially.
www.eliterealestatesociety.com/homebuildingyt?sl=jerome
Man. I'm gonna have to watch this video 100 times. The underwriting process for these big development deals is pretty heavy on the fine details, but at the same time I'm starting to understand how you can apply a "stock" formula to each deal that will make it simpler. Right now I just scout deals for established developers but this will help me learn how to do it myself.
It’s your time bro
Excellent information , I’m currently working on redeveloping office space into apartment . 3 years for approval but we are ready to break grind in the next week or so. Thanks 🎯
@@Jlp9091
Congrats crush it. I love it. I love it. I love it.
This is a great series. Thank you!
Appreciate the vid, you should make a video like this underwriting a new construction home within the 500k-800k range
Hey brother, we have multiple videos underwriting single-family house bills between $500,000 and $800,000. It’s our business model on the single-family sector. Just search up on the UA-cam channel. We documented the whole entire process from start to finish on a new build.
Replay. This is Gold. Thanks Jerome. Victor Da Connector (Balderas)
Mind blowing Jerome, can we replicate these kind of idea in Canada. I might be sounding dumb but your reply is highly appreciated.
Yes, it just depends on lending parameters
So the only thing I don't get is how are you getting the 4m for the land ? are you giving the investors a debt or equity stake in the project?
@@andrewpugni4869 investors getting a preferred return on the Land
1 problem I'm not understanding is that when you get stabilized and cash out refinance 45m worth of debt. Unless you can access money for under 5% (P&I) or get interest only debt, your debt service is more than your NOI. The banks will required you to have a minimum of 1.2 DSCR correct? I'm still just a poor boy who has to take bank debt at current rates and there is noway that deal cashflows for me.
There’s a little bit more to it than that but it’s a great start in the direction you’re thinking. Banks right now or only lending about 70% loan to value at stabilization for even experienced investors. Valuation to drop the little bits of times have changed slightly from one year ago.
Learn the underwriting game inside and out and it will keep you fluid forever
A bit confused in regards to construction loans. If you have build cost at $35MM, what makes the bank give 90% LTV at "retail" when they initially said 75%-80% LTC? 19:00-20:30 for reference
The banks won’t give you 90%. They will give you 70 to 80% loan to cost.
Addison you’re right it’s LTC they lend on not LTV. Not sure why he’s saying he can get an LTV loan at 75-80%
@@jeromemaldonado Then that would me a that they will lend up to 80% of the cost to build in this case 35MM.. correct ?
Grest teaching! Jani'ce from Indianapolis
👊😍🙏🏼
Great presentation
Do you raise all the money to run the construction, if yes what percentage do you raise or how much do you allocate to run construction and holding cost?
We only raise money on the land. We get institutional money on the Build. Sometimes what is a tiny bit of capital for interest reserve
Real teacher👏🏾🤝🏾💪🏾
Best in the Biz bro 👊💪🏽
So Jerome what you’re saying is you would raise 4 mil for the land paying investors 10%-15% and once you get land shovel ready you refi your investors out with the construction loan bc they’ll give you 80% of the 52 mil and than you’re 100% owner and essentially did this $0 out of pocket?
I’m only confused on the fact that I know it’s 52 mil retail to construct but aren’t you showing the banks your bids at 30 mil and they give you 80% on that cost?
Hey Jerome I love the knowledge you provide!!! I have two questions or at least one question and another clarification.
1. You said there is complex math or understanding behind calculating of the LTC retail the banks will generically loan up to and that amount is roughly around the 90% LTV. So for this project that's 54mm and the bank would loan between 70-80% of that being around 37mm to 43mm, which would should cover full LTC wholesale which it does in this case. Am I understanding that Correctly? Do you ask your contractors for a wholesale budget and retail budget?
2. Second question is the refi out portion to cash flow 750k per year. Your cap is 5% which is 3mm a year, but if your refi is 75% LTV which is roughly 45mm which would be 270,000 a month with terms 30 year amortization at 6% which would be 3,250,000 how does that work? or do apartment loans differ?
Thanks again for the in-valuable knowledge,
Amandip (AJ) Singh
Amandip great questions
Please schedule a call with me
Info@jeromemaldonado.com
Love the content as well and I’m curious to hear the answer to this second question also. AJ did you gain any clarity or Jerome would you be willing to speak and provide some insight? Thanks again for the knowledge! Great stuff! Do you teach multifamily development in your course as well?
I watched this one 4x in a row. Victor Da Connector (Balderas)
We’re looking at your Landale touch base with us this week
If you get an investment loan of $40m (75% of LTV) interest will be $3.15 @7% quoted and on an GROSS income of $3m ???????
Thats before capital reductions on the loan or the deduction of management costs, maintenance or voids from the income. LTV is not the only test banks do, repayment ability is another one which is also stress tested, a standard test being reducing the income by 20% and still be capable of covering interest.
If you get a development loan 80% LTC on a spend of $35m you have to show the bank your 20% in cash of $7m, often it has to go in 1st after which the bank will cover 100% of the spend.
Sick series. The return on capital invested is insane. Dad got to partner on something similar few years back. You almost mentioned it but i never hear about it on social media and that is the tax credit money if you can qualify for it. Is there anyway i can add value to you? Love to get more involved.
Beautiful 🎉 nice pricing, whats up.
You're a wizard ✨️
What about minimum DSCR requirement for loan and cash to close to needed for down payment?
Great question. There’s a lot of moving parts to these. Do you have ownership or have you been a partner on any multifamily development projects thus far? If you have questions or need assistance, you’re welcome to schedule a call with me on my team.
www.eliterealestatesociety.com/homebuildingyt?sl=jerome
Can we get a copy of the worksheet??
Since you had 19 million in equity does the bank not require you to have a down payment of 15-20% on the 40 million it costs to build? That’s the only part I’m confused about
100% correct when you have that much equity you down payment is your equity
Coach,🙏🏾
Jerome, I have a question on the fifth way you mentioned where you depreciate the entire property 100% over 5 years. Is that called bonus depreciation? If not what’s it called and is there any caveats to that? Also is that the same rule that they’re phasing out by 2027? So here in 2023 would be 80% and 20% less each year until it reaches 0?
It is called cost segregation. Bonus depreciation was implemented a few years ago by the Trump administration. Great appreciate in segments very similar to as you listed above. They did extend the bonus depreciation. But traditionally call segregation can be done on the dwelling itself but not the land. Land cannot be depreciated and normal depreciation without bonus depreciation is taken over the course of five years or over the course of the ownership of the property.
Yea and some entire properties get depreciated EVERY 5 YEARS Until It has no life left. I know I am a 3 Unit Property but 100% of our value is taken by those that have all access to the value that we have lost. I quit accepting the pity benefits over 2 years ago when I accidently discovered fraud by "consultants/agents/contractors/bidders" and we are on Stand by awaiting the next storm. Classified Waste Zero Value. Worthless-(not really tho-we the GOLD MINE & ive shut down the mines and creating a really steep "fee schedule" for those that come to "manage Risks" while they laugh all the way to the bank. I dont even know where the bank is so I get to laugh all the way over here from the inside of the vault. Entertaining but as I Stand On ROCK SOLID GROUND the GOLD IS MULTIPLYING, and its only a matter of time before I break the Bank.....Id rather just go to the bank and collect the books and audit them, but you know how these banking wars go there is always silent in the street and everyone ghost until "blood sheds in the street" I guess that is what all the Trillionaires seek to find, the blood shed is where the money is. I dont know Im just depreciated property, like clock work every 5 years back to ground ZERO again....GROUNDHOG DAY.....lol shitz and Gigglez.
ya ya i know I could do a status correction and give it a shot at doing my own administrative process, but the STAKES are TOO HIGH and Im a laughing STOCK that has a book value of a little over 58 billion ( view only rights-that i now longer have because I spoke on it out loud) There are too many Expert Contractors out there that are more experienced in these type of contracts so Ill just keep standing my ground expanding my path of discovering America for the 1st time lol the whole time and refuse to compromise or negotiate and deliberately refuse to perform with others that "depreciate" me and mines and let the STAKES keep on Stacking until the HOLDERS realize that the BANK IS GONNA BREAK AND START Presenting REAL OFFERS or until someone undertakes them and they no longer get to present OPTIONS at ALL TO ANYONE. STAY TUNED>>>>>
24:40 - Don't you have to pay extra interest also, if you estimate too much, for covering Yield Maintenance and PPP?
We always take that service into account and we underwrite for it. There’s three parts to this video. I can’t remember which series we go over the debt service on the underwriting, but in one of the three series we talk about budgeting and allocation for debt service.
where can we get the proforma template ?
From property Managment companies on your market or from large Multifamily brokers
@@jeromemaldonado do you have one you can share?
Hey there! How do you valuate a piece of raw land that has civil engineering approvals for a MF development ??? Thanks !
I’ll based on price per unit underwriting on stabilized value. Use a solid current proformas
Ok thank you for replying
Is the appraiser going to give you a 5% cap rate when you go to refinance every time on new construction or is it 7-8%
The banks indicate the rate, and the appraiser indicates the value based on current market. Cap rates where similar products are being traded at the current time that you seek lending an appraised value from the appraiser.
Thanks for the help jerome you have taught me so much I am underwriting a 180 unit development in North Florida at the moment and the deal actually makes sense with a decent upside at a 5 or 6 cap. I want to do a bridge to hud 221d4 40 year ammortization loan.
So the tax benefits are based on borrowing from the equity when refinancing? Not connected to 4 or 9% LIHTCs?
There are several tax strategies, but the cost segregation comes from the depreciation of raw materials in the fix property. Land cannot be depreciated. A few moving pieces to the cost segregation process, but one of the most lucrative tax deferred strategies available.
How many acres is the property?
5
How many stories?
4
Great
How tall is Cody I'm 6"2 1/2 Chicano HE seems like 6"7
Bro, he’s probably not taller than 6 foot 2” himself but stands super tall when he’s by a 5’ 4” rockstar like myself!!!
@@jeromemaldonado chingon yessir absolutely Al cien !!!
@@jeromemaldonado Jerome do you have a webpage on mentorship to get way great myself at subdividing?
Hi Jerome, amazing info, I have a question, I did not see the permit fees, can you elaborate on that? Thanks
Permit fees are in the soft cost expenses!
How is the game changing with higher Interest rates ?
Banking is a little bit tighter. The land prices are coming down. Rates are going up and values are dropping.
Right now it’s time to get them out of the ground to stabilize the cash flow, and just a few years we’re going to have a heyday
@@jeromemaldonado I am currently working a 1 acre project in Pinal county AZ Im struggling to figure out what the unit value would be once completed
Do you offer your spreadsheets for underwriting?
Yes
Mr. Jerome, I need to connect with you and learn from you the proper process.. I might get investor funds..
Well, What is the Monthly ROI on this investment and It will get better as loan paid off?
2nd How long it took, start to end ( Months)?
Please let me know.
Thanks for the Video.
Love to help you. Loaded question and happy to help you run through the numbers. Contact me and my team and we can get you on a Strategy Call. Info@jeromemaldonado.com
that math aint mathin my boy lol
Cap rates do not measure revenue. Cap rates measure VALUE. If a dollar of NOI sells for $10 that is a 10 cap. If it sells for $20 then it is a 5 cap. You are explaining this incorrectly.
Cap rates measure, revenue and value. I think you’re a little confused as to how I’m explaining everything here. Explaining multiple ways you generate only value the revenue. Cash on cash return my friend.
@@jeromemaldonado how can i reach you to talk business ??
A cap rate is nothing more than NOI divided by property asset value and is expressed as a percentage.
@@cariocadobrasil7 And that percentage tells you the dollar amount that was paid for NOI in that closed transaction. V=i/r $10=$1/10% or say $20=$1/5%
An investor never needs to try to calcuate a cap rate.
Someone tell the camera guy to stop messing with the shot. Zoom it out to the board and leave it there! Come on noob! It’s making this impossible to watch!
Lol
I love it!
Cory should just be quiet. He doesn’t help and always screws up the flow. Incredibly annoying.
😂😂
total bs