All Forum Posts by: Andrew Hogan

Quote from @Nick Robinson:

@Jason Malabute
Jason just a couple of things about your analysis. The FED has only increased interest rates one time so far and that was March 16th.  Interest rates have been going up but that is not the FED raising them that is the market.  The FED controls the FED funds rate, which is the overnight rate banks give each other.  When the FED raises, the rate is does have some impact on the short-term bonds but the further you move away from the 1's and 2's the less the FED funds rate affects it.

I agree about there being a housing shortage.  I believe last time I looked there was about 240k houses on the market.  That is extremely low when you consider the last, I heard 1.2m to 1.5m listings would be a balanced market.  A counter argument to that is the 2yr treasury is at 2.342% right now.  If you look at a chart the FED funds rate and the 2yr treasury are usually the same.  The FED funds rate is .25-.5.  If they raise the rate up 2% that will cause a lot of panic in the market considering if they raise FED funds again, they will be very close if not invert the 2yr and 10yr treasury.  If the yield curve inverts there has been a 100% chance of recession since the end of WW2.  There is a certain point that if you raise interest rates, which is increasing the cost of the home, you will crush demand enough to hurt the market.  The question is what is that pressure point?  Is it 5%, 10%, 20% interest rates?  

My base case is the FED will continue to raise rates to fight inflation until they break something. The cure for high prices is high prices.  When you have a lot of speculation in the market it's time to sit back and reassess your positions.  Right now, the Reverse Repo Mart is paying a premium to actually own the collateral (most cases US treasuries).  This shows big institutions and banks are moving towards safety paying less than what a bond is yielding.  I am not saying that houses will go down 40-60%, but this would be a time to have some cash on you waiting for some deals whether they are in RE, stocks, etc. 

 @Nick Robinson Love your take. You're going to need that cash when you're up against Blackrock!

There are opportunities to be found at any point in the cycle and I've seen too many folks sit on the sidelines since 2020 hoping to buy at rock bottom 08/09 prices -- not gonna happen.

Congrats on the successful business and successful exit @Erik Johnson.

REITS are derivatives of stocks and do not offer tax advantages like owning real estate does. Although you're not directly involved in the day to day decisions of syndications, you do get the tax advantages, AND you get to connect with the operator as needed/wanted. 

As you mentioned, this is a team sport so underwriting the team that is executing the business plan and their track record is essential.

Happy hunting!

Now would be a good time to mention that this is just one of the reasons why you never underwrite/assume the "everything goes right scenario!"

Leave cushion in the assumptions for some wiggle room e.g.:
-rate hikes

-vacancy

-bad debt

-rising cap rates

-less favorable loan terms

-refi vs no refi

-5 yr exit vs 10 yr exit

Just to name a few :) 

FNMA/FRE have long been the coveted investment property loan providers. The problem is they know this. 

We have sourced debt through other means in recent years.

@DongHui Patel

Wherever you want to invest, make sure and partner with somebody local to that area. I'd recommend starting out with smaller multifamily (maybe 16 or 30 units) before trying to take down the 100+unit deals. 

@Roseann Koefoed Getting the water bill under control could be a GREAT way to increase that NOI without injecting too much capital into physical renovations.

On the other side, bringing utilities bills up to market has been a huge value-add for us. Lot's of people lookover the "ancillary income" and figure it can't budge much but it can make or break a deal.

Hey @Jordan Santiago good to see you again and congrats on all your success thus far. "23+ units by 24 yrs old" is a great start towards 100MM!

I'd recommend starting with a smaller multifamily first like a 16-unit or 30-unit. Treat those first few needed investors like gold and over deliver on those first few deals and your investor base will branch out naturally. This will springboard you towards your 100MM in success once you get a few successful MF deals and a handful of happy investors. Odds are you could probably raise the needed equity for 16 or 30 units in your sleep with your inner circle. No need to compile a big list of investors first.

Keep talking about real estate everywhere you go and on all your social media platforms. Get in front of people and make sure they know what you're doing so that when you have a good deal come to you, they've warmed up to your dream.

All the best!

@Emily And Eric Erickson congrats! It's not easy to find good deals that only require 19k

@Jimmy Watson agree with Jay, IF you sell to buy new deals, don't buy low quality assets.

That very low Return on Equity means your money could be working harder for you elsewhere...

@Sheeva R. Taylor is right, big brokers are the best way to source quality deals for "big multifamily".

The problem is that if you don't have a team or track record, they won't give you the time of day.

Now if you partner up with a team who does have a solid track record, this can help get your foot in the door.

Or you can start from scratch but you'll likely need to "aim low" meaning settle for a smaller multifamily like a 16 or a 30 unit building to build that track record.

Strategies to source these can be direct mail or skip tracing the owners and cold calling them.

Good luck!