All Forum Posts by: Abel Sng

@Michael Le gave a great run down on different scenarios that all have the same total return over a similar hold period but with different IRRs.

On the flip side though, you can have a deal that has a higher IRR but a much lower total return over the same hold period.

IMO IRR should be used more as a hurdle than an end all be all metric.

@Christopher Munn in a distressed situation like you're describing you're going to have to shoot the difference of typical (NOI/Cap rate) and replacement cost. Depending on the vintage, size, condition, etc you're going to be hard pressed to find something for $12k a unit. Even $25k a unit is low. This is what brokers try to pitch as a pound for pound price. It doesn't make sense on a cap rate comparison but could make sense on a price per unit.

The $2.5M can totally work if it's 1031 money that needs to be put to work. How did you come across the deal? Most of time when I see deals like this I spend about a 5 minutes thinking about it and move on. No use in wasting time!

Good luck!

Both good suggestions from @Sam Grooms. What part of real estate do you like? People? Numbers? Marketing? Operating?

Best part of real estate is that that there is something for everyone. It's not about the "best career" but the "best fit" for you. You can be successful in any aspect with hard work and a little luck. Finding a good fit will make it enjoyable while you're at it.

Good luck!

@Garrett White if you're using an SEC attorney let them tell you what you need in the PPM. Main thing you'll want to walk through with them is the company agreement or operating agreement. This is where it will spell out the structure of your LLC, how distributions will be made, etc. FYI, not all SEC attys are equal. This is an area worth spending a few more bucks on. To give you an idea, we pay ours $15k an offering. This gets paid by the LLC at closing so you shouldn't have to come out of pocket for it.

Good luck!

@David Calme it depends on which SEC reg you are offering under. As @Percy N. said, 506(b) allows the investor to self identify as an accredited investor or not. Typically you will include an accreditation questionnaire with your subscription agreement that will take them through the process.

Cheers!

@Scott Skinger as many have mentioned capex is not typically included in NOI. When I look at deals I don't really care what the seller says the cap rate is because my proforma is going to look completely different from theirs which could be higher or lower than their in place cap.

My suggestion is to underwrite your deals based on what your return criteria is and if the price fits your model great, and if not then you can always throw in an offer that makes sense to you. If your number is grossly different than what the seller asks then typically it's just worth moving on to the next deal!

Good luck!

@Alisha Decoteau ditto to what @Jeff Greenberg said on POF. In all the deals we've issued an LOI on, we've never been asked for POF. Only time I ever hear POF is for some "off-market deal" that some whole seller is trying to pitch that usually leads to nowhere.

Also, I would suggest speaking to a lender VERY early on in the process. You can get bit hard if you don't have a solid lender you can trust.

Additionally, is your deal in ATL? I am very familiar with that market and my group owns two properties there. What do you mean by no cash flow? What's the cause? Out of the almost 75+ deals we've looked at in that market this year the majority of them cash flow.

Good luck! 

@Tj Hines another strategy is to just increase rent. It will all depend on your demographic and comps in the area. Most tenants are sophisticated enough to understand that no one gets a free lunch and they will be paying for it one way or another. We've done this at one of our properties with great success. Cheers!

@Account Closed welcome to the world of MF! If you have the net worth, liquidity, and equity lined up I would reach out to experienced MF sponsors and bring that to the table. Are you trying to get agency debt (FNMA/FMCC)? If you can KP or be a guarantor on a deal as a co-sponsor that will help you start qualifying on your own.

As for finding co-sponsors, there might be multi-family specific meet ups. In my experience, most MF investors don't attend general meet ups which are catered to SFH investing.

Good luck!

@Kyle Bryant you're probably looking at a sliding scale. Here are key components to being a deal sponsor not necessarily in order.

1. Investor data base and ability to raise equity

2. Relationships with lenders, brokers, property management, etc.

3. Net worth

4. Experience in underwriting

5. Experience in operating

6. Experience in RE in general

Obviously there can be more to add to this list but it will all depend on the reasons of why you need a co-sponsor. The more items you need from the list then essentially the more you will have to "pay" with equity. If all you are doing is just bringing a potential deal and expecting to co-sponsor to hold your hand through the whole process then you're looking at a very SMALL piece of the deal. Maybe 1-2% if you find a deal that works for the co-sponsors investment criteria.

At the end of the day everyone has to start somewhere. My advice is to not be greedy and chalk up your first couple deals as education. Aim to provide value and you'll find your way. I'm always fond of the school of though that a small piece of a large pie is better than a large piece of no pie.

Good luck!