Tampa, FL · Member since 2019 · 41 posts · 53 votes
Bigger pockets has been an excellent source of knowledge, networking and collaboration for me over the past year.
I've read and learned quite a lot while scrolling through this site, and figured I'd create an open forum to (hopefully) offer some help and advice back to the BP community.
Personally, I have owned a single family portfolio, small multifamily, airbnbs, managed SPV/funds, invested in 25+ syndications as both a general partner and limited partner.
Indianapolis, IN · Member since 2021 · 193 posts · 150 votes
4y
@Sam Silverman great markets that are booming. My only concern is oversupply and overbuild in these markets. Have you thought about the Midwest? ie Indianapolis, Cincinnati, Columbus, Kansas City. I like these markets preferably because of the return and supply in these markets.
Chattanooga, TN · Member since 2021 · 23 posts · 18 votes
4y
@Sam Silverman - Hello Sam, I am new to REI but really get fired up by multifamily. I have been reading books, on BP forums everyday, listening to podcasts, attending local real estate meetups and also signed up for the BP Multifamily bootcamp. I am currently employed outside of the RE (as an engineer for a electric utility) but I am looking to work my way to RE. Apartments really excite me but I am trying to find out how to get involved or obtain the skills for the job (such as underwriting - I like numbers but I also love to meet and interact with people). So I guess my question is, for someone trying to get into apartments/syndications as a GP, what would you recommend to be the first couple of steps. Thanks
Tampa, FL · Member since 2019 · 41 posts · 53 votes
4y
@William Costello primarily within the sunbelt -- Texas, Arizona, Florida, Georgia, Carolinas. I prefer to be in lower cap rate markets, ideally below 5.5%, this creates the most value when investing in value-add projects.
We are expecting to sell anywhere from 4-8 projects this year then ideally 1031 exchange into new assets.
Tampa, FL · Member since 2019 · 41 posts · 53 votes
4y
@Christopher Burge from my experience, there are two main areas that can help you break into the general partner side of multifamily -- find a deal or find the capital needed to fund the deal. Everything else, while important, is not as easy to get your start with.
I would focus on finding off market deals or networking with high net worth individuals, the groups below can help point you in the right direction.
There are a ton of groups that have educational courses -- Real Estate Labs (focus on small MF and underwriting), Multifamily Deal Room (on facebook), etc
Indianapolis, IN · Member since 2021 · 193 posts · 150 votes
4y
@Sam Silverman great markets that are booming. My only concern is oversupply and overbuild in these markets. Have you thought about the Midwest? ie Indianapolis, Cincinnati, Columbus, Kansas City. I like these markets preferably because of the return and supply in these markets.
Congratulations on the success in several different REI ventures. Being both an active and passive investor certainly gives you a unique vantage point.
How are you changing your investment strategy to adapt to post-covid macro forces?
Tampa, FL · Member since 2019 · 41 posts · 53 votes
4y
@Zachary Inman we are moving away from Class C assets as a core focus and moving to Class B and better. Additionally, we are evaluating partners in the self storage and mobile home park space.
We are also focusing on more primary markets within a given metro that has infrastructure and proximity to employment.
I think it's also extremely important to educate investors that cash flow is going to do down as cap rates continue to compress to ensure their expectations are realistic.
Tampa, FL · Member since 2019 · 41 posts · 53 votes
4y
@William Costello for example, the Phoenix MSA operates at a collective 95%+ occupancy in apartments. The bulk of new product in areas such as this are extremely high end class A, we don't compete in that market. Our focus is on value add, workforce/attainable housing that is discounted vs the replacement cost value.
I prefer lower cap markets than the ones above -- if you add $1 of NOI on a 4.5 cap property, that is worth far more than adding value on a 6.5 cap property.
Specialist · Indianapolis, IN · Member since 2021 · 312 posts · 282 votes
4y
@Sam Silverman Having the core market fundamentals in place is crucial for mitigating downside risk: diversified sectors, pop/rent growth, school systems, etc.
I'm interested to hear more about why you're investing in Class B and above assets in primary markets. There are more forced appreciation opportunities in secondary/tertiary markets with similar risk, fundamentals, and occupancies.
Investor communication is a highly important, and often neglected, part of the GP/LP relationship. Glad to hear you are actively communicating with your partners.
As I evaluate LP opportunities I seem to see 3 kinds of operators....
Smaller GPs often 3-4-5 couples who are pooling their money and resources and perhaps have done 1-5 deals..maybe as many as 10. These folks often raising money from successful, but still mom and pop type investors, maybe docs/dentists, and often thinking B/C value add deals.
Mid-size operators....maybe a little more experienced, operating out of corporate office space....maybe 10-50 deals under their belt, maybe have done a variety of different deals D to C to B to A, value add, cash flow, maybe one ground up in there. Little more professional set up....little more sophisticated....some experiences they would never do again.
Bigger operators...maybe like Ashcroft.....full professional staff, multiple deals, good deal flow, vertically integrated with PM and construction.
Which ones would you concentrate on today? Good or bad experiences within these different groups. Do you think that is a good breakdown of segmentation?
Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
4y
@Sam Silverman What do you think the future of funds will be? In some ways it seems like some funds may be given preference when there are multiple offers since there will be no risk of fundraising. Maybe they also have more hard funds up front to commit before due diligence.
When you are loosing deals now, who is winning, and how are they beating you?
In the best case scenario, I prefer the mid-size operators that act as if they are already big time operators. I mean this in the sense of that their reporting is on or close to institutional level, they have their systems and process down, multiple exits and ultimately less risk. When investing here, you are likely to get better terms of investment structure vs true institutional operators, with very similar risk profiles.
I love seeing vertically integrated, especially if that business is not designed to be a massive profit center -- to me, great operators can build a PM business that will help fuel their syndication business.
Fees should typically go up in each level operators as they have mouths to feed in regards to full time salaried employees on payroll. Additionally, if they are at this level and investing in $40m+ or larger type assets, they likely have $1m or more in hard EMD day one to have a shot at winning deals.
I will still invest in a few of the early stage operators deals each year in partnerships in hopes we can grow together. The true mom and pop deals (also under 100 units) is where you can typically find an incredible basis that gives you a great chance of doing a refi and pulling out the bulk, if not all of investor capital.
In terms of my personal allocation, this only makes up 10% or so of how I allocate my capital. I view these are long term cash flow and tax benefit investments, where the larger operators I invest with for velocity of money.
For funds, I see the future being the top operators will only raise capital from and leverage funds. Once operators or fund managers have enough of a track record, the blind pool fund is the ultimate tool for flexibility and velocity when targeting projects. This allows the fund managers/GPs to move quickly, make offers more confidently and leverage their discretion. Earning a track record that allows you to raise capital in a fund like this the trickier part. I have investors who invest in every single deal that we put in front of them, but they still want the chance to review the OM prior to locking in their commitment. This is earned over a period of time and can be a win/win scenario when done the right way.
Also funds can be used to get preferential terms from top operators for the investors within the fund -- higher preferred return, better equity split, less hurdles etc.
San Jose, CA · Member since 2018 · 5 posts · 2 votes
4y
hello Sam I have a few questions around tenant leases. Recently rents have been increasing at a tremendously fast rate. Much faster than tenants on fixed income can keep up with.
Q1: When you have tenants that are due for lease renewal what would be the ceiling from a % standpoint that you would raise the rents? Something to keep them near the fast increasing market rent.
Q2: When a tenant refuses to sign an annual lease and instead opts for month to month, what do you like to do in this situation? They need some financial pain to "incentivize" them to sign the lease, but curious to hear your approach.
hello Sam I have a few questions around tenant leases. Recently rents have been increasing at a tremendously fast rate. Much faster than tenants on fixed income can keep up with.
Q1: When you have tenants that are due for lease renewal what would be the ceiling from a % standpoint that you would raise the rents? Something to keep them near the fast increasing market rent.
Q2: When a tenant refuses to sign an annual lease and instead opts for month to month, what do you like to do in this situation? They need some financial pain to "incentivize" them to sign the lease, but curious to hear your approach.
Q1: In any project we look to raise rents to the current market rent in which our improvements will support, % does not factor into that as much as the current fair market value does
Q2: We don't allow for month to month renewals at market rate rent. If we have a lease up window in which we need to give an incentive, it is always a one time move-in incentive that gets the tenant to true market rent, rather than a discount across their lease. This shows far better in a t-3 when looking at NOI.
@Sam Silverman I'm always curious to hear about other Fund Manager's end game or exit strategy. Can you elaborate on that?
Personally, I don't have an exit strategy -- I genuinely love doing it.
In terms of longer term approach, the bigger the track record you have, the more capital you can then raise with the least restrictions. I have partnered with excellent operators rather than operating deals myself, longer term, I should be able to continue to get better returns for my investors by bringing larger checks to the table.
Also, becoming more of a family office is extremely appealing -- the ability to help newer real estate groups guarantee loans, source capital etc.
One of the most appealing parts of this business in "moving up" with larger checks is the people you now get to interact with on a daily basis -- think education by association.
Investor · Detroit, MI · Member since 2014 · 97 posts · 40 votes
4y
Congrats @Sam Silverman on your success throughout the years in real estate. What ways are you and your team finding deals in your target market? Specifically off market deals?
@William Costello primarily within the sunbelt -- Texas, Arizona, Florida, Georgia, Carolinas. I prefer to be in lower cap rate markets, ideally below 5.5%, this creates the most value when investing in value-add projects.
We are expecting to sell anywhere from 4-8 projects this year then ideally 1031 exchange into new assets.
What about yourself?
What parts of Florida would you recommend for multifamily investing? I see you're from Tampa, I'm sure Tampa is (or was) good, any others? Also, do you have a quick explanantion of what to look out for now in Florida since that condo bldg collapsed? I heard something about less than 5000SF bldgs are exempt? Thanks
Dallas Tx · Member since 2021 · 112 posts · 31 votes
4y
@SamSilverman - Hello Sam, I am a new investor residing in Dallas tx,
I have been reading books, live on the
BP forums, listen to podcasts, attend
local real estate meetups with My wife who is fully.on board now, (took me about 2 years to educate and bring her on board)
I am currently employed as a gm for a family owned restaurant ( not my family) working long hours but I am looking to work my way to RE
Initially I was fired up about multifamily specially duplexes, but here in Dallas unless it's off market there are virtually none existing, and when one is finally found it's either above 400k.
So we decided to get our feet wet with a sfh that we are saving for and plan to invest in here in the next 10 months, currently learning to analyze deals and run numbers. We plan to rent it out after 1 year and move in with some family continue to save up and repeat the process.
During that time j will be dully dedicating my sparw time from work ,breaks. Days off to educate myself further on RE, So I guess my question is, for someone trying to get into sfh, eventually multifamily and apartments
What would you recommend to be the first couple of steps or what strategy would you follow?
You are very experienced and have seen and donde deals I can only dream of at the moment ,but I know with the right skills and strategy in due time we will get there