Feb 14, 2019
Let’s continue our journey with
the Six Pillars to Profits series. Today, I’m going to talk about
Pillar 2 - Secret Language of Apartments. The multifamily world
uses a different jargon than the single-family space.
You need to be able to learn and
understand the multifamily language to make you feel, sound, and
appear credible and confident. So, I’m going to share with you some
“magic” words that you need to use when talking to brokers,
managers, and banks.
Topics on Today’s
Episode:
- Being
new and no BS; don’t fake it until you make it
- Gross
Scheduled Rents: Annual income of property where all rentable space
was rented or collected
- Vacancy: Represents amount of income lost from
unoccupied units
- Concession: Copying a unit (i.e., a 12-month
lease with the first month free)
- Credit Loss: Non-paying tenant
- Residential Utility Billback System (RUBS):
Income received from billing back your portion of water, sewer, or
trash
- Total
Income: Referred to as capital improvement, CapEx, rehab money, or
cost per door to identify how much much money needs to be set aside
for property
- CapEx
Reserves: Money a bank requires to hold back for capital
improvements
- Net
Operating Income (NOI): Your income minus your expenses number or
cap rate that determines value of property
- Pro
Forma: Assumed forecasted or information presented in advance;
financial statements of actual statement, if underlying assumptions
hold true
- Operating Memorandum (OM): Sales brochure
brokers prepare to sell property
- Acquisition Fee (Acfee): Fee that sponsors take
for putting together a deal
- Call
to Offers: Deadline date to make offers on a property
- Best
in Final/Final at Best: You may not have the best and strongest
offer, but you want to get through all the other offers
- Pricing Guidance: Information needed to get
into the best in final
- Debt
Coverage Ratio (DCR): Measure of cash flow available to pay current
debt obligations; states net operating income as multiple of debt
obligations due
- Deferred Maintenance: Dollar figure when owner
or operator avoids regular upkeep of a property or it starts to
need work
- Due
Diligence: Inspection period of doing physical and financial
inspections
- Letter of Intent (LOI): Included when
submitting an offer for a property
- Make-readies: Rental unit that becomes vacant;
it’s a make-ready until it’s cleaned up and becomes
rent-ready
- Plays:
-
- Momentum Play: Stabilized property is taken to
make micro repositionings or minor improvements
- Occupancy Play: Unstable property with a high
vacancy percentage
- Repositioning Play: Low occupancy and a lot of
rehab to bring property to a fresh, new standard
Links and Resources
Mentioned:
Quotes:
“When you’re talking with
brokers, with lenders, with banks, you want to appear and look
confident, that you know your stuff.” Corey Peterson
“One of the easiest ways to make
some additional income is to install and start a RUBS program. We
do that on almost every property.” Corey Peterson
“What Wall Street loves is a
nice steady rising income. If you can accomplish that and then also
have no deferred maintenance at the property...that’s called an
easy button.” Corey Peterson
“When you master it, things
really start to change. Brokers will start to look at you
differently because you are becoming a master of the verbiage.”
Corey Peterson
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Series, and if you like
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