All Forum Posts by: Dominic M.

Thank you for providing the details - I wouldn't say this is a new partnership model. This is quote on quote syndicating and you're incorporating a lease option.

Raise funds from LPs and you're the GP. Your waterfall is 50/50.

This is one way, but in the traditional sense in private equity, it would be an acquisition fee to the GP, asset/and construction management fee to the GP, and then a waterfall on the exit - possibly include a promote for exceeding expectations.

LPs would probably seek 17-25% IRR and 2x MOIC. This is a win win for both GP/LP if the GP can perform and as your suggesting, you'll out perform this. Would love to see your modelling, PPM and OM if you have this?

Anyway, what I'm hearing is you are foregoing the former fees and sticking with the latter on a 50/50 waterfall - what if you underperform? are there hurdle rates to meet before your split kicks in? are you contributing equity? 

Typically a few types of PMs out there

The individual agent, little to no staff

The PM company that's a set it and forget it, glorified rent collector

The PM company that's a true partner

I would on top of the suggestions above

search for a PM that owns their own portfolio too

They treat your asset like they treat their own portfolio

- There should be a full staff and readily available to answer the phone

1. Accounting department

2. Leasing department

3. Maintenance department (are there preventative maintenance procedures?)

4. Tenant relations

5. Legal 

6. Property manager and assistant property manager (as your direct contact)

cheap, fast, and good - typically you can only pick two

I agree - we underwrite conservatively.

IRR and deal multiple looking (ROIC) are the metrics we closely look at.

17-25% IRR and 2x deal multiple over 5 years is the general target.

So long as there's cashflow (NOI - Debt service)

This could be low single digits in y1 - for newer properties.

(The higher the cashflow means typically leads to buying older properties. This cashflow is quickly wiped out to as expenses stack up)

My thesis and we execute this is:

We buy newer vintage properties with seller financing about 10-15% below market

Great asset/ property management - keeping expense ratios low.

Paydown + 2-3% YoY appreciation gets to the 2x multiple in 5 years on exit after expenses.

Love that! i'm happy to help in any way I can if you need any lender, broker, contractor references etc etc 

Prior to diving in I would suggest a few things: I agree with @Kevin Sobilo

Invest in relationships and knowledge before taking the leap

1. Find a local mentor

2. Connect with lenders, agents, property managers, contractors, attorneys etc.

3. Perhaps work for/as a property manager, real estate agent, and/or wholesaler

4. Build up your cash as you build your knowledge and network

5. Underwrite, underwrite, underwrite - master this

Hi Cassidy - are these events still going? - happy to join and participate if they are 

I'm curious, what worked for you when acquiring your first two deals? Did you bring debt or 100% equity to acquire these? 

Connect with lenders and brokers, see what rates are out there, underwrite the deal and see if it makes sense after debt service. 

A good lender should be able to piece together a strategy with you, whether that's cross collateralizing or not, underwrite each option with conservative numbers. 

Hi Kyle - we have two development projects currently in DC. One is a condo conversion, 1.45mm project and the other is a townhouse around 470k. Permitting does take quite some time but you should factor this into your underwriting. Pertaining to air rights and laws we do not develop in this nature so not sure I can be any help here.

LENDING QUESTION! what do you think of these rates???

Recently quoted 7% for a 30 year fixed commercial loan (Asset/ DSCR based loan) at 80% LTV.

Is this reasonable given the recent rate hikes? 

What are my BP friends seeing for commercial rates? 

Both work but probably bests to stick to one marketing system until you can predict and forecast your numbers. Then it becomes more of a science vs. hoping and praying you get a deal. 

I find and close on my own deals I don't wholesale. I only do SMS and network with people such as yourself.