All Forum Posts by: Henry Clark

OP  

For your buy box. How much money do you want to invest? Let's say $100,000. What type of financing will you use? 10% downpayment, 25%, 40%. Let's say 25%. Then your deal size is $100,000 downpayment at 25%, then a $400,000 deal. This will help narrow down your buy box. Even if you have $0 dollars there are ways to get into REI.

Glad you're looking at Crexi and doing some deal analysis.  Actually, post some here so people can ask questions and give advice.  This will really help build your analysis skills. I would look at deals in your drivable area for now, while you are developing your analysis.

Develop a deal checklist.

Develop an analysis spreadsheet.

Personal/professional life- as your noting, something that fits them.

Personal/professional life- versus you staring at ground zero. Look at your personal life- example- kids in extra curricular- Building for Training center, daycare, you like golf- put in a small rent by the hour Indoor golf/social unit, etc. Are you kids teenagers or soon to be? Put in an RV campsite and have them run it, for the season. Pay them, they can use for a car or college and you get to deduct. Professional- use your existing analytical skillsets. No matter what you do, the same holds true for REI investing.

We do Self Storage and Country Subdivision Lots, plus Teak plantations in Belize.  Retired now but was a Controller/CFO working 50 to 70.  Make it fit your lifestyle.

Talk with your local or area Chamber of Commerce or City planners.  Ask them what is missing in your area.  Example: To get into our Dentist you have to book 6 weeks out.  They work 4 days a week.  We need another dentist, parents say that.  So, build a building suited for dentists.  Contact a Dental school or Military job outreach and do a deal analysis.

OP

Add value to your post   What execution or due diligence was missed?

If I got the company right.  They started in 2022 and have amassed $1.5bl in 16 states in 33 properties with 4,200 units.  Is this the company?  

They do quite a bit of college housing. 

 Covid was 2020.

    Realize this is a commercial deal.  But for reference.  Avg 30yr mortgage rate    2021 3.15%; 2022 5.53%; 2023 7.00%; 2024 6.99%; 2025 7.09%

Why would a syndication deal fail?  OP do you know for your investment?     

1.  Occupancy projections-  above they started in 2022, Covid was 2020.  They would have been aware of issues.  Especially for college MFH.  X% to y% have they executed?

2.  Rent rates- would not have changed much in a 2 year timeframe.   Other than they added value or not, to raise the rent.  $xxx to $yyy have they executed.

3.  Interest rates.  Again they started in 2022.  High interest rates already started so they didn’t get caught going from say 3.5% to 7%.
4. Capex-???? Have they executed???

5.  To grow that fast during 2022 to now is extraordinary.  Plus to find good deals.  The market has been tougher during that timeframe.  Or did they bring existing projects from another Syndication umbrella, which if pre interest rate hikes or pre COVID were projects with existing issues.

OP. Versus keeping a count of Bad investments.   Add value to your discussion.  You are the Investment Banker for these types of investments. 

OP

This isn’t a Real Estate question.  It’s about personal finance.

Both homes you bought as a homeowner and not as an investor.  Homeowners will always and can pay more than an investor.  I would recommend you step back and do the deal analysis and view them as investments.  

Just a hunch either one won’t work out as a Real Estate investment.  Ok as a home.

1.  How are your companies, jobs and your personal employment.  Risk analysis on your current home.

2.  Insurance, property taxes, maintenance.  You have to do a deal analysis.

3.  $170 k gross or net.  Let’s say gross and your take home is $120k.  

4.  Just your house.  You need to do the personal finance numbers. Say $48k PI, insurance $4k, property tax $5k, capex $2k.  $59k total.
 
5.  $120k take home, $59k housing without utilities. 

6.   Haven’t discussed your vehicles, and other personal finances.

Change the numbers above.  Recommend you sit down with an Accountant who won’t have the emotion tied to your house and life style.

Let the numbers guide your thought process.  But I think you need to sell both houses and downsize.  Or sell the first house.  Then one of you needs to get an extra job if you want to stay in the current house.  Only if both your company and you have job security.  If either of you are unemployed for 6 months your house or savings are at risk.  

If you decide to get into Real estate investing come back and pose a question. Let’s look at options before buying that will make you money.  

Look up my post.  What happens if you die?  

OP.  I would stop for a second.  On paper put your goals and then a plan to scale.  You will see you hit a road block very quickly on your cash or equity to do the next deals.  

Divide your REI types into the following. Appreciation long term, cashflow, and cash snowball.

In your shoes and current situation I would do a value add to build cash.

A. Pick a house with extra acreage you can subdivide. The original house if it is a 2/1 then ADU into a 3/2. Use as primary for 2 years and sell taking advantage of no taxes in capital gains 2 out of 5 years primary. Rent a room. You take the smaller unit.

B.  Pick the worst house in a great neighborhood and modernize.  Again see if you can do ADUs.  Or split off lots.  Again 2 of 5 years.  Rent a room.  You take the smaller room. 

C.  If you’re near military, coast guard, hospitals, airport, etc.  look there for your future MFH.  Or your house with room to rent. 

OP.  I would add another action item to my response above.

If you have a commercial loan and are in year 4 or 5 of your term, I would go ahead and refi at this point.  Get another 5 years or even ask 7 years.  You might give up a percentage point for one year.  But you trade off for security of getting refi’d and locking in your interest rate. 
Yes looking at different investment assets is great.  But I would take care of existing first.  I would not be selling say MFH or Retail to get into a new asset type at the moment. Would only do as part of an asset pruning exercise. 

OP

Ask your utility company to do an energy audit. This will show where your usage is coming from. 

Ask your insurance company or your hvac to do a temperature scan.  This will show cool and hot spots.  Way to check for insulation and airflow issues.  

Both of the above are free for us.  Get your PM to do.  

General comments. We have also been concerned about the economy and have taken actions.

1.  Self storage is our main investment.  You need to stratify the discussion into ABC markets.  Our investments in C markets say 10,000 population.   Our occupancy has been at 99% forever.  We have increased our rental rates by 25%.   Too small a market for both Large or small investors to attack.  “A” markets draw the large locations and large REITS and oversupply and unit price have deteriorated.  Our “B” market investments are Performing well.  Self storage is great in both good and bad economies due to housing movements up and down.  Having looked at many markets in the U.S. there are still many markets that are under supplied.

2.  MHP maintenance.  It’s been 50 years but sewer line, water line and road repairs aren’t that big of a deal for established parks.  
 MHP needs to be stratified between lot rental only or Park owned units.  
      
  MHP are  housing of the last resort or a low cost entry point.  Both are great for a recession.   

3.  Senior homes.  Ride the Silver Tsunami.  Demand is guaranteed.  Baby boomers with all their wealth.  Problem this is an intense customer, regulatory, secondary customer- children, dietary, therapy, medical industry, employee based industry.  The real estate part of it is large but the easiest part of the equation.      

More than investment type concerns for a poor economy we have looked at the following.      
 A.  Reduce debt.    
B.  Increase cash reserves.   
C. Diversification of asset types.       
 D.  Pruning investments.      
E.  Both hold off or Start new investments.  We have held off starting our next Self Storage location even though the market analysis is concrete.  We are bringing to market a Country Subdivision.  We don’t build houses and this is the worst time to start a subdivision.  Luckily recessions don’t last that long and subdivisions usually take a while to fill.  We are doing this with cash and not a loan. 
F.  I personally would not start a new asset type going into a recession. Unless it was small and I did it for experience so I could ramp up quickly coming out of a recession.  

OP and other DST investors. Would you post your due diligence list and the various Stress Tests you performed on these investments?

The emphasis on Student housing.  What is the underlying concern being identified?  What was the impact of Covid versus your occupancy stress tests?  

We don’t invest in DSTs or REITS.  The investor plays the role of an investment banker.  Always wondered how Passive investors take on the Active role of an Investment Banker.  Could you state your technical profession. Would like to know how closely that aligns with the Active skill sets required.  

OP not sure on what you mean by more technical.   

1.  Keeping water flow into the downstream neighbors property the same.

2.  Do you create a damming effect causing a portion of a neighbors property to now be in a flood zone.  

3.  Sewage lift pump.  Do you have enough “fall” across your property, or do you need a lift pump.  

4.   Storm drains.  Do you have enough “fall” to connect to the city or reach a storm pond.  

5.  Surface coverage versus drainage.  Example.  If you have say 80% building coverage that drains onto a drive say 5%, it will flood your building.  Grew up in LA and TX.  The most unexpected place I saw this was Lubbock TX.  The town would flood because it was so flat and had to much building coverage for the drainage.