Apartment buildings and other residential and multi-family housing can provide a stable income to an investor. This Financial Poise webinar discusses some of the pros and cons of being a landlord. It provides a basic overview about how to find and assess opportunities, obtain financing, negotiate a deal, and manage a multi-family investment. The accounting, tax, and legal aspects of being a landlord are part of the discussion. Part of the webinar series: REAL ESTATE INVESTING 101 - 2022 See more at https://www.financialpoise.com/webinars/

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Practical and entertaining education for
attorneys, accountants, business owners and
executives, and investors.

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4. Disclaimer
The material in this webinar is for informational purposes only. It should not be considered
legal, financial or other professional advice. You should consult with an attorney or other
appropriate professional to determine what may be best for your individual needs. While
Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate,
Financial Poise™ makes no guaranty in this regard.
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5. Meet the Faculty
MODERATOR:
Tracy Treger, Principal- Syndicated Equities
PANELISTS:
Brooke Jackson, Director of Investor Relations - Midloch Investment Partners
Tammy Kelly, Managing Director & Head of Asset Management - Redwood Capital Group
Jeff Leibovich, Advisor - Kiser Group
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6. About This Webinar
Investing in Residential & Multi-Family Real Estate
Apartment buildings and other residential and multi-family housing can provide a stable
income to an investor. This Financial Poise webinar discusses some of the pros and cons of
being a landlord. It provides a basic overview about how to find and assess opportunities,
obtain financing, negotiate a deal, and manage a multi-family investment. The accounting,
tax, and legal aspects of being a landlord are part of the discussion.
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7. About This Series
Real Estate Investing 101
Real estate has always been a popular asset class for investment. After all, as the adage
says, “they’re not making more of it.” More and more investors are turning to real estate as an
investment class.
Investors considering making an investment in real estate have a variety of choices: retail,
office buildings, industrial, raw land, and, of course residential. This Financial Poise webinar
series covers several types of real estate classes that one may choose to invest in, explaining
where to look for opportunities; how to diligence them; possible funding solutions; and best
practice for execution.
Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and
executives without much background in these areas, yet is of primary value to attorneys, accountants, and other
seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to
entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that
participants will enhance their knowledge of this area whether they attend one, some, or all episodes.
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8. Episodes in this Series
#1: Affordable Housing/Community Improvement Investments
Premiere date: 3/31/22
#2: Investing in Residential & Multi-Family Real Estate
Premiere date: 4/28/22
#3: Investing in Commercial Property
Premiere date: 5/19/22
#4: Commercial Leases, Their Provisions and Pitfalls to Avoid
Premiere date: 6/30/22
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9. Episode #2
Investing in Residential & Multi-Family Real Estate
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10. Types of Investment Residential Property
• Single family home/condominium
• Multifamily with up to 4 units (i.e., three-flat)
• Larger Multifamily (i.e., midrise, highrise, or apartment complex)
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11. Potential Advantages of Multi-Family as Compared
to Single-Unit Investing
• Rental diversification
• Economies of scale/ affordability of professional management
• Availability of multifamily-specific lenders and tax incentives
• Less competition from owner-occupiers
• Opportunity to adjust rents regularly as units turn over
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12. Factors to Consider in Selecting a Multi-Family
Building
• Location – proximity to public transit, employers, schools, amenities, “walkability”
• Amenities of property, both in-unit and common areas
• Condition of property, both structure and aesthetics
• Competition, including known future development
• Market conditions, including demographic trends and rental rates
• Anticipated RE taxes, building and unit expenses, and property management costs
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13. Economic Due Diligence Tips
• Determine market rates and vacancies for similar properties in same area and compare to
current rent roll
• Consider product mix in the market, including anticipated new deliveries
• Determine costs for releasing and unit repairs/upgrades when typical tenant vacates
• Opportunities for additional revenue such as pet fees, trash valet or amenity space rental
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14. Economic Due Diligence Tips (cont’d)
• Estimate operating costs
✓ Fixed expenses – obtain copy of seller’s insurance policy, property tax bill, utilities
bills,
in-place contracts like scavenger services, management company bills
✓ Variable expenses – obtain property’s financial statements & compare to actual
invoices.
• Capital expenses - Consider cost to eventually replace roofs, HVAC, parking areas, and
upgrades to in-unit and common area amenities
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15. Other Expenses to Consider
• Advertising/marketing
• Cleaning, landscaping, and maintenance
• Commissions paid to rental agents
• Home owner association/condo dues
• Insurance premiums
• Legal fees
• Mortgage interest
• Taxes
• Utilities
• Management Fees
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16. Acquisition/Disposition Costs
• Transfer taxes
• Title insurance
• Loan fees (tax and insurance escrows)
• Move in- move out fees
• Legal fees
• Due diligence costs (inspection, environmental, etc.)
• Survey
• Broker’s commissions
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17. Contract Considerations
• Earnest Money and how it’s held
• Contingencies
✓ Due diligence
✓ Financing
✓ Other (permits, licenses, approvals, changes in property condition, etc.)
• Representations and Warranties, and how long they will remain in force
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18. Contract Considerations
• Closing costs
✓ Who pays for what
✓ Prorations/reprorations of taxes, rents, income and expense
• Access to property during due diligence period
• Estoppels and lender SNDAs
• Title survey requirements
• Closing mechanics and deliverables
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19. Underwriting Considerations
• Tenant turnover
• Collections
• Requirements for affordable units or rent control provisions
• Maintenance
✓ Rule of thumb –buildings with 20+ units will likely support cost of professional
management and a live-in manager; 10-20 units will usually only support a live-in
manager; < 10 units usually require owner to manage
✓ Potential for appreciation
o Discounted price
o Fixer-upper
o Rezoning potential
o Demographic shifts
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20. Financing
• Commonly based on property’s ability to generate income as opposed to buyer’s credit
• Lender pool includes Fannie/Freddie in addition to banks and other commercial lenders
• Sometimes such investing is encouraged through favorable financing regulations or local
tax incentives
• Leverage – pros and cons
✓ Average down payment = approximately 30% of purchase price
✓ Amount of equity invested can change risk profile
✓ Interest rates in comparison to cap rates and inflation
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21. What is Equity?
• In real estate, the financial value of someone's property over and above the amount the
person owes in debt.
• For example, assume you buy a home worth $100,000. If your mortgage is for $80,000,
then your loan to value ratio is 80% (because your loan of $80,000 is 80% of the home’s
total value). You have 20% equity, worth $20,000.
✓ Calculate the LTV ratio by dividing the loan value into the property value:
80,000/100,000 = 80%
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22. Generating an Operating Proforma
• Revenue: Rent and other income (parking, utility reimbursement, etc.)
• Expenses: Property Taxes, Insurance, Repairs & Maint., Turnover Costs (leasing & make
ready), Landscaping, Utilities, Contract Work, Legal, etc.
• Net Operating Income: Revenue less Expenses (NOI: Purchase price creates a cap
rate value)
• Financing Expenses: Interest, Principal, Reserves
• Capital Expenses (roof, windows, appliance replacement, major repair, etc.)
• Cash Flow: NOI less financing costs and Capital Items – when created for a predicted
investment hold period, a DCR analysis can be completed.
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23. Cap Rates
• If you collect $1,000,000 in rents and other income (i.e., parking space rental) and pay
$600,000 in expenses (excluding major capital expenditures), your “Net Operating
Income” is $400,000.
• Once you have the NOI, divide the price or value of the property into it. For example, if
you have $400,000 in NOI, and you paid $6.8 million for the property, the Cap Rate =
5.88%.
• Cap rates do not take leverage or loan fees into account
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24. Cash On Cash Return
• If you have a mortgage, your return isn't the money you collect in your NOI. It's what you
have left after making your mortgage payments
• To calculate your after-debt return, called a cash-on-cash return, you divide that net cash
flow by your down payment. If you put $2,040,000 down on a $6.8 million property (30%),
you would owe $4.76 million
• If your annual debt service was $238,000, and you took it out of the $400,000 NOI, you
would end up with a $162,000 annual cash-on-cash return
• When you relate the $162,000 to your $2,040,000 down payment, you would end up with
a 7.94% cash on cash return
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25. Alternative to Cap Rate
• A Discounted Cash Flow analysis assumes an investment for a period of time, and
discounts it back at an investment rate.
• This can be analyzed as an IRR or Net Present Value.
• Ignoring the NPV for now, the IRR allows one to determine the return of an investment
over a period of time.
• The calculation includes the initial investment, a projected end value for the investment
and all of the distributions in between.
• While it has some faults, it can be a more accurate tool than a cap rate.
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26. How Do You Calculate NOI?
Net Operating Income Formula
Potential Rental Income
- Vacancy and Credit Losses
Effective Rental Income
+ Other Income
Gross Operating Income
- Operating Expenses
Net Operating Income
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27. Key Contract Provisions
• Contingencies – inspections and attorney review
• Tax proration – make sure you understand local taxes, payment and reassessment dates
• Seller reps and warranties
• Required condition of title
• Default and remedies
• Amount of Earnest Money required and who holds
• Proration of Rents and assignment of Security Deposits
• Assignment of leases and collection of rents following closing
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28. Title and Survey Considerations
• Boundary line issues – (Insured over by title?)
• Environmental issues, including flood planes
• Easements (must be reviewed and understood)
• Liens - should be released at closing
• CCR – covenants, conditions and restrictions of record – should be reviewed and
understood
• Condo or homeowner’s association documents – any restrictions on leases/sales
• Tax status
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29. How to Take Title
LLC, Partnership or Corporation
✓ Advantage is limitation of liability to assets of the entity
✓ Holding title personally is never recommended
✓ Lender issues with holding in an entity
In Trust
• Includes land trusts, personal/family trusts, and Delaware Statutory Trusts (DST)
• Lender-friendly structure
• If multiple parties investing, DST and some land trusts compatible with 1031 tax-deferred
exchanges
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30. Considerations if Self-Managing
• Leasing strategy – How will building be kept occupied? Cost of leasing. Collection of
rents. Understanding Landlord-Tenant laws.
• Repairs and maintenance – Do you have time? How will tenant issues be handled?
• Property tax assessment monitoring and appeals.
• Capital Improvements/Construction: Who will monitor and assist when larger items need
to be addressed?
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31. Multiple Properties
• With multiple properties – several issues should be considered:
✓ Should all be titled in the same entity or should new entities be formed for each –
isolating liability for each property in each entity
✓ Location – Ideally they are close to aid with ease of management
✓ Financing – independent or cross-collateralized
✓ What insurance coverage is available across properties – even if held in different
entities
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32. Mortgage Rates Are Currently Increasing
•
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SOURCE:
https://rdceconomics.wp
engine.com/wp-
content/uploads/2022/04
/Freddie-Mortgage-Rate-
Chart-2022-04-21.png

33. Residential Rents Nationally Exceed Pre-Pandemic
Levels on Average
SOURCE:
https://rdceconomics.wp
engine.com/wp-
content/uploads/2022/0
4/Fig-2-YOY_by-
bedroom.png
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34. About the Faculty
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35. About The Faculty
Tracy L. Treger - ttreger@syneq.com
Tracy Treger is Principal at Syndicated Equities. Tracy helps high net worth individuals and family offices to
profitably invest in real estate across the US in all asset classes. She also assists investors in identifying
appropriate replacement property to complete tax-deferred 1031 exchanges, particularly in DSTs and TICs.
Drawing upon her 20 years of legal experience in the areas of real estate, bankruptcy and corporate
restructuring, finance, and commercial law, Tracy is an active member of Syndicated’s acquisitions and
investor relations teams. Her legal career includes serving as vice president and assistant general counsel for
a Prudential-owned REIT, where she handled all legal aspects of the company’s daily operations and its joint
venture relationships in the U.S. and Mexico, and as a partner in two large Chicago-based law firms. Tracy
holds a B.A. in Psychology and an M.S. in Psychological Services from the University of Pennsylvania, and a
J.D. from Chicago Kent College of Law. She actively serves on both the National Commission and the
Regional Board of the Anti-Defamation League (ADL), and she is the Board Secretary of CREW Chicago, a
global organization for commercial real estate.
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36. About The Faculty
Brooke Jackson- brooke@midloch.com
Brooke Jackson joined Midloch Investment Partners as Director of Investor Relations in March of 2022. Based in the
Chicago Office, Ms. Jackson will focus on strengthening existing and expanding prospective investor relationships by
managing investor communications and operations.
Prior to Midloch, Ms. Jackson was Vice President, Multifamily Capital Markets, Debt & Structured Finance at Newmark,
where she originated multifamily loans nationwide. She focused on lending directly through Fannie Mae, Freddie Mac, and
HUD, as well as placing debt through other various lender relationships, including Life Companies, Banks, Debt Funds,
Bridge, and CMBS platforms. Before that, Ms. Jackson was a Vice President at SunTrust Bank, where she worked on direct
lending via Fannie Mae, Freddie Mac, HUD, bridge, and construction loan programs.
Ms. Jackson is currently a member of CREW Chicago (Commercial Real Estate Executive Women), REIA (Real Estate
Investment Association), ULI (Urban Land Institute), and a board member of REFF (Real Estate Finance Forum). Outside of
the office, Ms. Jackson enjoys scooting through the city on her Vespa and spending time with her family at the Chicago
beaches during the summer and the MSI when it’s too cold to swim or SUP.
Ms. Jackson holds degrees in Finance, Political Science, and International Business from the University of Illinois at
Chicago.
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37. About The Faculty
Tammy Kelly - Kelly@RedwoodCapGroup.com
Tammy is a Senior Vice President of Asset Management at Redwood Capital Group. Ms. Kelly, CCIM, CPM is
responsible for oversight of all asset management, including budgeting and capital expenditure requirements, as
well as all strategic dispositions. She also assists with sourcing and underwriting the firm’s investments. Ms.
Kelly optimizes value by managing with strategic oversight and by identifying and seizing market opportunities
thereby maximizing asset values. Prior to joining the Firm, Ms. Kelly was Senior Vice President at Blue Vista
Capital Management from 2006-2014 where she oversaw a multi-million dollar commercial real estate portfolio
consisting of various asset classes. Ms. Kelly’s asset management responsibilities at Blue Vista included
executing on strategy and monitoring asset performance, as well as serving as the liaison with the Firm’s
operating partners. Prior to her tenure at Blue Vista Ms. Kelly spent a year at Equity Investment Group where
she was responsible for overseeing, coordinating and evaluating the company’s property acquisitions, which
consisted of closing over 2 million square feet of retail shopping centers. From 1999 to 2005, she worked as a
senior property manager for both Equity Investment Group and New Plan Excel Realty Trust where she
managed retail shopping center portfolios in excess of 1.4 million square feet, respectively.
To read more, go to: https://www.financialpoise.com/financialpoisewebinars/faculty/tammy-kelly/
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38. About The Faculty
Jeff Leibovich- jleibovich@kisergroup.com
As an Advisor for Kiser Group, Jeff focuses on the sale of multifamily buildings throughout Chicago and the
surrounding suburbs Jeff’s clients benefit from his exposure to a wide range of real estate assets. Since 2015, Jeff
has had exposure into real estate deals ranging from the purchase and repositioning of a 680,000 square foot mall
in Texas to lease negotiations on behalf of retail tenants. Most recently, Jeff has been involved with the
development of 278 multifamily units at 1400 W. Randolph from inception. Working closely with previous
ownership, Jeff worked on underwriting the redevelopment as well as assembling a parcel owned by a billboard
company. Jeff is still involved with the project and attends weekly OAC meetings.
Before Joining Kiser Group, Jeff spent 14 years as a consultant in the Pro Audio Industry. With clients ranging from
institutions, A-list musicians and producers to the hobbyist recording in their basement, Jeff maintained the highest
level of repeat business within the company due to his nature of putting his clients’ needs above all else.
Jeff has a BGS degree from the University of Michigan with a focus on Sound Engineering. Jeff spent 7 years
touring with his band, Great Divide Having grown up on the North Shore of Chicago, he now lives in Highland Park
with his wife and two children. When not working, Jeff enjoys creating music, perfecting his BBQ and smoker skills
as well as spending time with his family. Jeff also speaks fluent Russian.
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39. Questions or Comments?
If you have any questions about this webinar that you did not get to ask during the live
premiere, or if you are watching this webinar On Demand, please do not hesitate to email us
at info@financialpoise.com with any questions or comments you may have. Please include
the name of the webinar in your email and we will do our best to provide a timely response.
IMPORTANT NOTE: The material in this presentation is for general educational purposes
only. It has been prepared primarily for attorneys and accountants for use in the pursuit of
their continuing legal education and continuing professional education.
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41. About Financial Poise
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