All Forum Posts by: Bobby Larsen

Any meet ups coming in the next month or two?

@Jay Hinrichs No, next to Nike in Beaverton.

Two investment strategies, same structure of 2% acq fee, 80% LP / 20% GP over an 8% preferred return, and a 2% disposition fee if the preferred return is achieved.  Given where I believe we are in the cycle, we're mostly focusing on the longer term strategy unless it's with an institutional partner.

1) Short term (3 to 5 years) with debt between 65-75% LTV from debt funds

2) Long term (7 to 10 years) with debt typically between 60-70% LTV fixed rate loans from Fannie or Freddie with 7 to 10 years of interest only payments.

@Canesha Edwards 70/30 over a 8% preferred is very reasonable for investors then.  Unless it's one investor/group that's considered institutional in which case they may try to bump that 8% up a point or two but I'd push back because it's an off market deal.

I'd aim to have 1500 units in one area before I'd start an in-house property management company but that's just my opinion.  A good rule of thumb is one leasing employee + one maintenance employee per 100 units.

If a co-sponsor is just providing the deposits until close and the credibility/networth for financing then I'd say it could be structured either as a % of the GP or as an upfront fee or a combination of both.  Opinions on this will vary widely so I'm just throwing out best guestimates but 25% of the GP split or 1-3% of the loan amount if an upfront fee which your investors would ultimately fund through their investments.  If a co-sponsor is providing deposits, financing, and equity then I'd expect a minimum of 50% and perhaps up to 75%.  If they're providing all of that then you're basically a broker providing an off-market deal at the end of the day and I'd expect them to control the deal and for you to receive 1-3% of the purchase price.  Then again if it's a screaming deal then all of these estimates could be much lower.

It's common for off-market seller's to withhold financials and a rent roll before seeing an offer or proof of funds.  Since you need help with equity, financing, and deposits, it does sound like your best option is to partner with another syndicator and co-sponsor.  If you're able to, raise the equity pursuant Rule 506 of Regulation D and your legal fees shouldn't be too high and they are passed on to the property as close anyways.  Bringing equity and sourcing the deal will allow for a much better split with the co-sponsor as well.

As for the fees, it depends on if you're charging an upfront acquisition fee or not.  With or without an acquisition fee, 70/30 sounds reasonable but on the aggressive end if you're also charging an acquisition fee.

Definitely hire a PM at that size, a co-sponsor would most likely require it.  You should have one full time leasing professional and a full time maintenance professional.

@Jared Carpenter I worked for a large national multifamily group as well and recently made the transition to start syndicating deals this year. Planning took a solid year and it required numerous pieces and partnerships coming together, but it's possible.  I've acquired properties in Phoenix and Nevada and SLC is also on my radar.  Your name sounds familiar, did you work with John and Stew down in Southern California?  Let me know if you'd like to chat.  

@Travis Watts 15 of my the investments in my career have gone full cycle with an average hold of 7 years but ranged from 5 to 10 years.  All but one exceeded pro forma and that was a 2008 acquisition that ended with low single digit annual returns.  

I read through 10+ large offerings a week and have participated in 50+. In the long run, I think sponsors are more likely to miss on their cash flow projections vs IRR/annual return for two reasons: 1) Cash flow is harder to embellish or at least the assumptions that drive cash flow growth are easier to red flag, and 2) the cap rate environment the past 20 years has only headed one direction for the most part (down) and even the most aggressive assumptions will assume cap rates stay at the same level during the investment hold. Most sponsors will assume cap rates will increase 5-10bps per year, so even if a sponsor misses on their rent growth, renovation premium, etc. assumptions, they outperform their total return because cap rates decreased. However, the shorter the hold the less cap rates overcome bad assumptions.

Welcome to the community, Alex. Portland is a fantastic market, I've been a buyer of multifamily there for about 4 years now.  Closing on a 550+ unit property there next week.

It's true, you can partner with a group or individual on anything to overcome a shortfall but you must also be able to bring something to the table besides time and effort or else you're just "entrepreneurially" making yourself an employee.  You should also look at the math - is 100% of a small pie better than x% of a large pie?

@Michael K. Smith I'm also in San Diego and I focus on major metros Denver-west, but larger scale multifamily properties ($10-30m).  It's true, cap rates in San Diego make it difficult to cash flow at the same level but there is cash flow.  Despite the low cap rates, San Diego is one of my favorite markets at this point in the cycle though.  During the last downturn, prices in San Diego dropped the least out of every market that I watch so I consider it less risky than other markets and why I think the lower cap rates are justified.