All Forum Posts by: Alberto M.

I got my real estate license a few years ago. I have been using it for my job to perform market research, comp analysis and to help friends and family. However, I have never used it to buy or sell properties for people.

I’m interested in start using my license as a realtor but have a problem: I don’t like making cold calls or sending cold emails.

Is there any virtual assistant that could help you get leads? Or what are other ways to find buyers or sellers without the “cold strategy”?

We have been looking into entering the build to rent business model. However, it has been hard for us to identify a good investment.

In a general understanding of construction you look at you cost of land, soft and hard costs, estimate the time, project a selling price based on comparisons and market research and figure out your IRR and/or ROI. However, when dealing with construction and rental income, the initial cost tends to be too high that the returns don't look that attractive.

Does someone know a standard, let’s call it, Rule of Thumb return to look for when developing a build-to-rent project? What are the metrics important to follow and lastly does someone have a proforma or financial model I could look at to have a better idea?

Anything will help! Thank you in advance.

@Dallon Schultz does this reversion cap rate applies for all type of multifamily? Can you elaborate more on the logic behind this rule of thumb?

Thank you so much!

@Kevin K.

Hi Kevin,

Thanks for your input, you have no idea how helpful this is.

I totally agree with you, the more compression you apply to you going in cap rate the more aggressive and risky the investment is.

Now, is there and factual or statistic explanation on your rule of thumb of adding 25-75 basis point to your terminal cap rate? Can you elaborate more on the reasoning behind this cap inflation?

Second question, could you expect or project the same inflation to your cap rate for any type of multifamily? More specifically, I got invited to an opportunity to develop a multifamily property in Florida. The numbers look good but they are using the same going-in cap rate as the terminal cap rate (which I find aggressive but maybe it’s because it’s a new construction). How could I look at cap rates for new developments?

Thanks in advance!

@Evan Polaski

Thanks for the feedback Evan!

@Jordan Burnett

Hi Jordan, I’m not a tax expert and you should definitely ask that question to an accountant. However, based on my personal experience, and as Taylor mentioned, you can report your capital distribution in your K-1 regardless if it’s at a capital event or during the Holding period.

My only piece of advise would be to try not to do so, as then you will have to pay taxes on the capital gains.

It’s always best to distribute the cash flows during the Holding period as it can be diluted with some depreciation (to reduce your tax exposure) and then when you are ready to sell, you reinvest your capital gains into an opportunity zone or through a 1031 exchange and can defer paying most (if not all) capital gain taxes.

Hope it helps.

@Greg Dickerson thank you Greg.

I see you are a developer. As a developer, let's say you build a 30 unit property, but you intend to keep it after finishing construction, rent it out and hold it for 5 years to receive rental income. In your proforma to analyze if it's a good investment or not you will have two pieces: the whole construction side and the Holding period with income and expenses. Now let's say it will take 7 years (2 to build and 5 holding it), then you intent to sell it. How can you determine your terminal cap rate at this point? If you are raising capital, your investor would want to know how much money you will return to them and the only way will be by stipulating a selling price. Do you take your same cap rate you had when stabilizing the building and just update the NOI (as it will be higher in 5 years), or do you apply a cap rate compression?

Any advise on your experience? Thank you!

@Charles Seaman

Great feedback Charles, thank you!

I'm sure everybody here knows what a cap rate is, if you don't, a cap rate is basically a measure to understand your rate of return based on NOI (net operating income) the property is intended to generate.

In general terms, it is a simple formula:

Cap rate = NOI / Purchase Price

So far so good, however, it starts to get tricky when we talk about cap rate compressions. This happens mostly when the value of a house increases (due to let's say market factors) and the NOI stays the same, decreasing the cap rate (compressing).

Until this point I understand it perfectly and I hope was able to explain it clearly to those that didn’t know about it. My questions comes on how to determine a cap rate compression in a proforma for a project you are planning to acquire?

A couple weeks ago I received an Offering Memorandum for an investment opportunity and it had a proforma for 5 years. In the cash flows I saw that on year five they will intent to sell the property with a cap rate compression.

How can you know if that assumption is conservative or aggressive? How can you project a cap compression in 5 years from now?

I hope this helps as well as if someone can help me understanding this I would really appreciate it.

@Greg Szymbor

Hey Greg, I have personally used StackSource.

Last year we found a multi family portfolio in South Florida and sent an offer. We got it under contract and started looking for financing.

We had one lender that had used in the past and went ahead and applied for financing. Long story short they were able to help us but wanted for us to sign PGs (personal guarantee).

We didn’t feel comfortable doing that so one day I went on Google and type: commercial loans. One of the first options was StackSource, so I click on it and read about them; I had a friend told me about it so felt confident to applying.

The application was very user friendly and simple process. Right after applying I got a loan officer assigned to my case, Andrew Bouton.

He gave me a call and we went over the deal. What I liked the most about them was the fact that I told him every detail on what we were looking for and what we didn’t want. They never tried to sell me something or offer me different options, Andrew went ahead and found all the banks or lenders that met my exact criteria.

He not only sent me the lenders contact info but was very on top of the application, talking to the lender and offering support throughout the way.

We were able to secure a loan with the exact terms we were looking for and were very satisfied with the experience.

My only negative comment is that I found their fee quite high (1% of the financing amount). The good part is that they won’t charge you a dollar if the loan doesn’t close.

I would totally recommend using them, I am in fact currently in conversations with Andrew for a new loan. Just make sure to include their fees in your cash flows and financials so that if doesn’t lower your protected returns.

Hope it helps!