062: The Six Pillars to Profits: Pillar 2 - The Secret Language of Apartments

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:

 

• Why the Rich Get Richer: The Secrets to Cash-Flowing Apartments
• Kahuna Cashflow Calculator

 

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

 

Don’t forget to download my Free Workshop Quickstart Video Series, and if you like what you have heard please leave a review on iTunes.

 

Text the word MONEY to 408-500-1127 to get my free private money program and credibility kit for single family.