All Forum Posts by: Bobby Larsen

I highly recommend using a real estate attorney for each PPM. You’ll eventually have a template PPM which will cut down on attorney time going forward but each deal has unique risks and key transaction points that need to be addressed. Additional, legal disclosures change from time to time.

@Kendall Kelly

San Diego has a meet up called Beers & Deals every couple of weeks. Sign ups are usually on here or meetup.

@Michael Williams

There will be very few if any owners needing to sell as a result of the eviction moratorium or the end of it. It was takes about a lot 6 months ago but it’s not even a consideration anymore.

In terms of off market or direct from broker deals, there are some but typically when the off market price is so high that a seller cannot refuse it. With that said, budding in marketed properties is a terrible process right now. What was once a 2 or 3 step bidding process is now 5+ steps with multiple “best and final” rounds so I see the appeal of paying up for an off market deal.

I'll second what everyone has already said. Finding co-sponsors directly through events or hiring a broker-dealer. Although, I haven't come across any broker-dealers that raise amounts less than $5 million and they're typically through JV relationships. I'd be interested to hear if anyone else is familiar with broker dealers that raise syndication LP investments. To be a legal broker-dealer, you have to be licensed and they vet sponsors very thoroughly.

Another means is through co-sponsor networks, which is multiple groups of sponsors that come together. Structuring can be very tricky and you typically don’t want more than 3 sponsors in a deal.

CBRE both on the SBL side and conventional Freddie/Fannie

@Clay Rikard

Both have definitely impacted asset prices but can you elaborate on how the two factors impact rents? Are you saying a 25%+ increase to money in circulation has led to increased disposable wages and wealth to spend towards rents?

How do you think lower interest rates lead to higher rents?

Turnover, R&M, Admin, and contract services are all more or less similar across markets. What differs most are taxes, insurance and salaries (to a lesser extent). If you have a good understanding of taxes and insurance, you should be able to estimate expenses across most markets.

The overall expense ratio % is largely dependent on rents. In low cost western markets with tax friendly treatment, moderate climate and high rents, expense ratio can be as low as 35%. In markets with high taxes, sever weather and low rents, the expense ratio is usually between 45-55%. In tertiary markets with very low rents, the expense ratio can easily be greater than 55%.

Reports are probably just as reliable as broker OMs so I wouldn’t pay for those. Use ratios as a sanity check along with broker OMs and historical financials, adjust taxes correctly and be very confident in your insurance number.

Beyond that, you’ll need to conduct due diligence to fine tune the numbers further. And, of course, you can always ask why certain historical expenses are high and adjust accordingly.

@Spencer Gray

I’m curious, what are T3/Yr1 expense cap rates right now in Indianapolis? Rates on agency debt is amazing but leverage is really low in all of our markets.

@Bill B. But you're right, 3.5-3.75% is a bit of an exaggeration. That's mostly Seattle or the best locations of Tacoma.  3.75-4.25% is probably more accurate and maybe an occasional 4.5% in sub-par locations.

@Bill B. Sold in April which means it went under contract in January/February, or earlier.  Ages ago in today's market but I am mostly talking about properties with 100+ units.  And, I suppose it depends on how you define the cap rate.  That was Azul's "current" cap rate as defined by the broker and ignoring delinquencies. The cap rates that I'll almost always refer to are a T3 Income / Yr1 Expense cap rate or a stabilized cap rate whereas the T3 is the annualized trailing 3 month average income actually booked at the property and our adjusted Year 1 expenses.  I didn't see the financials on this one but there's been significant delinquencies in this market, and I would be surprised if it was greater than a 4.5% cap rate then.