All Forum Posts by: Brian Alfaro

It depends is probably not what you want to hear, but true. 

Holding something "forever" rarely makes sense if your goal is to scale. There will be CapEx issues down the road you probably don't want to deal with.

It comes down to opportunity costs, in my opinion. There is absolutely nothing wrong with holding, but at what cost? 

There is nothing wrong with selling to scale up, but make sure you have the next step(s) planned in pencil and are ready for the challenges that come with it.

Managing a 100+ unit apartment is not as easy as the gurus might make it sound, especially in today's environment.  

Hello!

I am looking for someone who may be interested in an underwriting analyst position for a group with 8 years of experience and over $500mm of AUM in the Multifamily space. 

We are looking to grow and would love to talk to anyone with a finance background (young or experienced) who may be interested.

In addition, there is an open opportunity in the Investor Relations space for anyone who is located on the East Coast or West Coast. 

Feel free to send me a message if you or someone you know may be interested.

I have yet to find a sponsor who has intentions to hold 30+ years. Just because an asset is performing today doesn't mean it won't have problems tomorrow.

Part of the reason has to do with the CapEx requirements a property needs as it ages. Holding a property too long adds a layer of risk - things will start to break and have wear/tear the longer you hold it.

For example, buying an 80s asset (now 42 years old) and holding it 30+ years means it would be 72+ years old (the equivalent of buying a 1950s product today - which most sponsors don't want to touch). Technology rapidly changes, so the property is likely to be physically obsolete at that point with major CapEx needs in MEP.

In addition, there are depreciation factors to consider and tax implications. Trading the asset every 5-10 years means the entire investment group (GPs and LPs) can upgrade the quality of their portfolio (less headaches), and they get to reset their depreciation schedule for everyone (super important).

Not saying holding long term is bad; I am saying it's not black and white. You can't just go in there with a buy and hold forever mentality. There are a lot of other variables to consider. If you want to buy and hold forever, I would recommend you find a JV partner on a smaller asset (not a syndication) who you know intends to do that or build your own portfolio of SFH/MFH.

Define long term for me. Are you looking for 5+ or closer to 10? 

I know a few sponsors who typically are longer term holders, although my opinion is holding too long (more than 5-7 years) is actually more risky depending on several variables. Happy to make an intro. I will say, if you are looking for cash flow in Multifamily right now, you're going to have a hard time (not impossible, but harder to find). Yields are tight, and even sponsors who promise a pref are going to have trouble hitting that throughout the lifecycle. 

If you're looking for cash flow, you need to look at higher yield asset classes. Think STRs, Car Washes, Industrial, Etc... Happy to make referrals to those in I know in those asset classes.

Diversify. I would look into:

Multifamily STRs - Higher Cash Flow, but more hands on usually. Do your research and partner with someone experienced as Airbnb has changed recently and certain markets will be impacted by a potential recession.

Hard Money Lending - if you want to be more passive and have a higher velocity of capital. Partner with an experienced HML and learn the ropes. Lend to experienced flippers.

Industrial & Multifamily are golden children right now, but cash flow is tight. If you want to diversify for appreciation, still a good play. Could be a Co-GP or LP to learn the ropes, depending on how active you want to be.

Small Business Acquisitions - find some small/mid size businesses to buy that generate higher cash flow + biz owner benefits.

Keep some cash on hand for potential opportunities. 

Feel free to reach out if you want any referrals for the items above. Might know some people who could help. 

What @Bonnie Griffin Kaake said is spot on. If you're a W2 employee, it's going to have very little impact on your tax situation. If you are married and your partner is a real estate professional, things can change. Consult your tax professional as this is my opinion and not tax advice.

Happy to make a connection for you. PM me. 

Roman, I am happy to make an intro to some active Multifamily investors in KC, if you’re interested. PM me if so. 

@Chris Lesak We can connect you to a few, depending on the asset size you are looking for and acquisition strategy. 

@JC Chavez

I would encourage you to build rapport with a local lender or property management company that specializes in Multifamily. You can then, after you have a relationship, ask for CoStar reports to see rental comps and sales comps. Some states, like Texas, are non-disclosure states, so please keep that in mind. You may not be able to see past sales comps.

I agree with all the other great info shared above. Your asset is always going to be valued by your NOI and Cap Rate. In today's market conditions, it is not uncommon that you are purchasing based on upside vs actuals, so please be aware of that and ask yourself if your investing thesis aligns with this. For smaller deals you may be taking down yourself, you can potentially absorb that risk. However, if you are planning on bringing on JV partners or Syndicating a larger asset, you are then becoming a fiduciary of other investors' money; you don't want to take unnecessary risks on upside unless market data supports it.

I personally would advise on your underwriting when considering what offer to make you should factor in some vacancy expectations. I think it would be a gamble to assume 100% occupancy 365 days a year on your underwriting model and assumptions. If you're newer and sending your proforma to a lender and they see 0% bad debt, vacancy, loss-to-lease, etc, you are going to be giving off some red flags - it's an aggressive assumption to assume 0% vacancy for an entire year.