All Forum Posts by: Ellie Perlman

The Biggest Misconception: Lack Of Liquidity In Syndication

Many passive investors have the misconception that when investing in a syndication, their money will be tied up during the entire hold period. A hold period is the amount of time that you hold on to the property after buying shares in the LLC that owns the building. The time period is usually measured in years, and most syndicators hold the property for five to seven years.

Most investors believe that means their money will be locked in for five to seven years, and feel uncomfortable with the lack of access to their money for so long. However, this is a major misconception when it comes to investing in a syndication. In truth, when you buy a property in a syndication, you are part of a group of investors who all own shares of an LLC that owns the property. Hence, technically you have the ability to sell your shares to other investors in the group or even to an investor who wasn't part of the original group.

The Syndicator Determines Your Investment Liquidity

The fact is the investment’s liquidity is dependent on the syndicator. There may be cases where an investor or their family was involved in a serious accident, became ill or had a similar type of hardship, and they need cash. The syndicator may allow the sale of shares in some specific cases, but not all. As a passive investor, your due diligence should include inquiring if the syndicator allows investors to sell their shares and how easy is it.

The best thing to do is to ask the syndicator directly about their approach to selling investors’ shares. Another source is the private placement memorandum (PPM) that you sign when making an investment. It’s a legal document (required by the SEC) and includes the partnership agreement. The PPM also outlines all the information about the project, how the sponsor and investors are compensated, fee structures, preferred returns and how the rental income and appreciation will be distributed. It also contains information about the circumstances in which an investor can sell their shares due to hardship.

In some cases, the sponsor will have the right to refuse the sale of the investor’s shares. Remember, the sponsor vets investors the same way investors vet sponsors, and they want to know who is going to be their new partner. Their decision could be based on a variety of reasons, but the bottom line is the sponsor makes the decision.

On the other hand, some PPMs indicate that the investor can sell their shares without any constraints. As a syndicator myself, I chose to give investors the ability to sell their shares at any time in order to allow them full flexibility with their money. I do this because I believe it creates a perfect platform that combines the strength of owning real estate with the flexibility that the stock market provides.

How To Price Your Shares

If the PPM has a provision for an early sale to another investor and the sponsor will allow a “hardship” sale of your shares, how do you price them since the property hasn’t sold yet? It’s tough to calculate, because a good portion of the investment’s return is based on appreciation at the time of sale — and you can’t accurately state the amount of appreciation if you sell your shares early.

The best approach is to look at the return projections outlined at the start of the deal. Another approach is to look at the average returns for a multifamily property. For example, cash on cash returns average in the 6-8% range, but if you’re exiting the deal early, that number might have to be adjusted.

Another way to determine the price is to calculate the total return over the stated hold period, and then prorate the share price based on the year in which you want to sell your shares.

When you look at the potential of a multifamily property, you’re really looking at how much income or profit it is generating for its owners. What should you be evaluating to determine that? Start with all the basic purchase information, like the price and any additional costs involved in renovating or repairs that need to be done.

According to Multifamily Executive magazine, you should also look at factors that might make you pass on the deal, like the condition of area schools, surrounding job market, property taxes and the age of the property. These are often deal-breakers if they reveal too much potential risk.

The loan is another key metric: What type of loan will you have to finance the property? This will spell out the loan totals, down payment, interest rate, closing costs and other fees. Make sure you are comfortable with the loan structure (fixed versus floating rate, long-term versus short-term, etc.). You should also receive a detailed expense report on the property, including property taxes, insurance, maintenance costs, property management costs and others.

The most important document on a multifamily property is the detailed income information. This will include itemized listings of rent payments, current vacancy rates and more. When looking at income, look at net operating income (NOI) without taking into account debt payments. That way, you're looking at the property's income independent of a particular buyer's financing structure.

One caveat for investors is to ask for actual data and numbers in addition to pro forma data. Obviously, the seller or deal sponsor wants to make the numbers look their best, so they often resort to a pro forma, or estimate, of income and expenses. Prior to agreeing to any deal, get actual numbers from the sponsor.

Capitalization Rate (Cap Rate)

If there's a single number that's important when looking at a property purchase, it's the cap rate. The cap rate is a return on investment value that's independent of the financing information. It's calculated by the following formula: Cap rate = NOI/property price. It's the most "real" indicator of the amount of return a property will produce.

People often ask what a “good" cap rate would be. There’s no universal answer, and it depends on a variety of factors, but in general the current national cap rate is above 5%. Always compare cap rates on comparable multifamily investment properties in the area to see where your cap rate falls.

Exit Cap

The exit cap is a single number that the vast majority of investors forget to look at. Nevertheless, exit cap is one of the key factors in any underwriting that can significantly impact returns and can make the difference between an investment that fails and one that succeeds.

So what's an exit cap? Exit cap is the cap rate that the sponsor anticipates the property will be sold for. It's the ratio between the anticipated price of the property you invest in today and the property's NOI at time of the future sale. The main challenge with exit cap is that it's really hard to predict; there's no guarantee that this number will be achieved, because nobody can predict what a property's value will be in the future. However, the exit cap the sponsors use when they calculate the returns on any investments significantly affect the returns. Even the slightest change in exit cap can make or break a deal.

Despite the uncertainty, an investor should always ask the deal’s sponsor for the cap rate that the property was bought at, along with the anticipated exit cap. Once you have those numbers, see if the gap between the two is a reasonable one. A higher exit cap means lower real estate prices and a worse real estate market. Be conservative in the numbers. As a very conservative real estate investor and sponsor, I always assume that when I’ll want to sell the property, the real estate market will be worse than it is now, regardless of where we are in the cycle. Hence, I always assume an exit cap that’s 0.5% to 1% higher than the cap rate at purchase, depending on the strength of the market. If you use conservative assumptions and the deal still works, then you’re looking at a really great deal.

Vetting the syndicator involves learning about the syndicator’s past experience and credentials, as well as recognizing the gut feeling you will have about them and whether you like and trust them. A good place to start when evaluating a syndicator is to make sure you ask these three critical questions:

1. Can you tell me about one of your investments that failed or did not go as originally planned?

This question is important because the answer the syndicator will give you will be a testament to their honesty and integrity. If they do share a story of a failure with you, it’s a great sign that they are humble and truthful. What would be even better is if they share what they’ve learned from the mistakes and how they have corrected them since.

If they cannot give you an answer, they are either not telling the truth or are inexperienced and have not had many opportunities to partake in a deal that did not go as planned.

What you should look for: Pay close attention to how they respond to the question. Are they defensive or open to discussion? Are they humble about their own faults in the deal, or are they passing the blame to others?

2. What is your investment goal?

By asking this question you will be able to tell if the syndicator’s goals are similar to yours. Ask to see their business plan and decide if it is one you feel comfortable with. Study the hold period and look at if it is reasonable; some investors are comfortable with three years while others may be comfortable with 10 years. Look to see if they are cash flow or appreciation buyers.

What you should look for: Watch and see if they genuinely share their goals with you or simply tell you what you want to hear. Focus on:

• Desirable returns (IRR and CoC).

• Hold period (most commonly five, seven or 10 years).

• The business plan (turnkey or value-add?).

• Location (solid area, high growth or crime areas?).

3. What happens if the deal does not go as planned?

Ask the syndicator, “What if you cannot raise rents by the amount you plan?” In my own deals, I never underwrite with the exact premiums I plan to get. (Premium is the addition I get from renovating units interiors and increasing rents, so if a unit is on the market for $750 a month, and after renovation I charge $900, then the premium is $150.) For example. In my last deal I knew I could get over $250 premium but was underwritten based on $150 premium. The deal still worked with the lower premiums, so it will work with the actual premiums as well.

As a passive investor, make sure that the returns are still good with the lower rents in place by asking the syndicator to see the returns with lower premiums. Another good question you can ask a syndicator is, “What if you need more time to renovate units?” This way, you will be able to see if the syndicator has any experience renovating this market and if s/he has a plan B and what it looks like.

What you should look for: Pay close attention to if the syndicator is conservative in their underwriting, or optimistic (which is not recommended). Also, examine if they are prepared to face unexpected issues and underwrote the deal based on the worst-case scenario.

What additional questions do you feel should be asked when vetting a syndicator?

I’ve put together a 5-step process that I use to raise capital in a volatile market. I’m sharing it with you in the hope that it will help you raise the capital you need for your next deal. Feel free to share your best tips too!

Step 1: Always be Raising Capital

If you only engage investors when you have a deal to share, you probably won’t come up with the capital you need. I’ve learned that you should always keep an open line of communication with your investors and prospective investors, constantly building relationships with them. That way when you do have a deal to share, they are more likely to invest with you.

You’ve often heard the expression “out of sight, out of mind.” It’s especially true when working to build relationships with investors. You also have to remember that other syndicators are constantly trying to reach out to your investors. That’s why you have to be constantly present so that they don’t end up jumping ship and going with someone else. It’s just good business sense, and it’s why you should always be raising capital.

If you reach out to investors on a continuous basis, you’ll build top-of-mind awareness with them. Share recent deals you’ve completed, projects in progress, or other news of interest to investors. If you have a website and are posting blogs, email the investors with the current topics you’ve posted. The point is, when a deal does come along, you won’t be coming at the investors out of nowhere, as you’ve been communicating with them all along. They’ll be far more likely to respond than if you hadn’t been in touch all along.

Step 2: Address Investor Concerns

You should always address concerns that investors have and be open and honest with them regardless of the topic at hand. Don’t hope that your investors won’t be thinking about what could possibly go wrong, because they are. The COVID-19 pandemic is on everyone’s mind right now and is in the news constantly. Address the main possible concerns they might have right away, before they even have a chance to express them. It’s a lot more powerful when you own the situation and address possible objections, than react to them after they have been expressed.

Some key issues you’d want to address are “why invest now, during the COVID-19 pandemic?” Or, “what if we can’t raise rents once we acquire the property and do our value-add improvements?” Another one to address is, “what are the main issues or problems that we might face?” You get the idea. By addressing all of the issues upfront it helps you build credibility and trust, making investors more likely to invest with you when you have a deal.

Step 3: Be Creative

Syndicators who are creative in their approach to investors are more likely to get commitments and participation than those who aren’t. For example, you can create two groups of investors; the first group participates in the property’s cash flow from operations (rents, fees, etc), with no participation in the sale proceeds when the hold period is over (generally in 3-5 years).

The second group would receive slightly lower cash on cash returns but would participate in their share of the sale proceeds when the property sells. By doing this, you can cater to different investors based on their unique view of the market, their cash flow needs, and their desire to be willing to wait for a payoff when the property sells.

Another option is to add a flex-equity split that would change the actual numbers if the property doesn’t perform. Equity splits are very common in real estate syndications. With a straight equity split, investors are given a defined percentage of the property’s cash flow and equity on sale, often defined as “60-40” or “70-30.” The first number is the amount that goes to the investor, the second number is the percentage that goes to the syndicator.

With a flex-equity split, the deal can be set up as a 70-30 split, but if a 14% IRR deal ends up performing at 13% the split would convert to a 80-20 one. This gives an extra incentive for the syndicator to ensure that the deal performs as anticipated, while providing the investors with a cushion if it doesn't.

Another way to be creative is to use new technology to stay in touch with your investors. Most syndicators have a large number of investors, and the new technology will allow you to help target specific investors for a specific type of deal. You can classify investors by specific categories, like amount of money available to invest, type of property, location of property, and more. It helps to streamline the contact process, which will save the syndicator a lot of time.

Step 4: Keep Investors Informed

This is a good approach regardless of the economic climate, but it’s even more important during an economic crisis or a pandemic, as we’re experiencing now. Investors don’t like being kept in the dark, and that’s especially true when they hear news all day long about the economy and COVID-19.

Reach out when you’ve made progress on a specific deal. This could be when you get a discount from the seller, or when you have received new information on rent collections. It can also be when you want to share news about businesses in the metro area that are reopening, or when restrictions have been lifted. Investors crave news about potential impacts on their investments, so by sharing news you’re helping to alleviate stress and concerns.

How should you keep them informed? Try sending out emails to your investors, but be sure to individualize them with a personal intro. There are many templates available to you that allow for personalization, so it won’t look like a mass mailing. Posting updates on your website is another way to keep your investors informed, and you can email them a link that takes them to directly your website.

Step 5: Be More Proactive

Now’s the time to step up and be a lot more proactive than you were before COVID-19 hit. If you were used to having investors reaching out to you after you sent out a presentation or held a conference call, change things up and reach out to them proactively. Whether you text, call, or email your investors, getting in touch shows your interest

There are a variety of ways you can stay in contact with your investors. Texting each one is personal and is often very well received. Holding a group conference call is another way to keep connected and let investors know what is happening, not only with the deal but with the multifamily market in general.

Also, consider a personal phone call to each investor. Is this time consuming? You bet it is! And depending on the number of investors you have on your roster, it can take a while. However, I can tell you from personal experience that it is one of the best ways to build and enhance your relationship with your investors while keeping them informed.

Finally, consider meeting face-to-face with key investors. This can be as simple as a cup of coffee or having lunch or dinner. Nothing bolsters or rekindles a business relationship like meeting in person. It also helps prevent investors from becoming complacent to your other methods of contact.

I’ve put together a 5-step process that I use to raise capital in a volatile market. I’m sharing it with you in the hope that it will help you raise the capital you need for your next deal. Feel free to share your best tips too!

Step 1: Always be Raising Capital

If you only engage investors when you have a deal to share, you probably won’t come up with the capital you need. I’ve learned that you should always keep an open line of communication with your investors and prospective investors, constantly building relationships with them. That way when you do have a deal to share, they are more likely to invest with you.

You’ve often heard the expression “out of sight, out of mind.” It’s especially true when working to build relationships with investors. You also have to remember that other syndicators are constantly trying to reach out to your investors. That’s why you have to be constantly present so that they don’t end up jumping ship and going with someone else. It’s just good business sense, and it’s why you should always be raising capital.

If you reach out to investors on a continuous basis, you’ll build top-of-mind awareness with them. Share recent deals you’ve completed, projects in progress, or other news of interest to investors. If you have a website and are posting blogs, email the investors with the current topics you’ve posted. The point is, when a deal does come along, you won’t be coming at the investors out of nowhere, as you’ve been communicating with them all along. They’ll be far more likely to respond than if you hadn’t been in touch all along.

Step 2: Address Investor Concerns

You should always address concerns that investors have and be open and honest with them regardless of the topic at hand. Don’t hope that your investors won’t be thinking about what could possibly go wrong, because they are. The COVID-19 pandemic is on everyone’s mind right now and is in the news constantly. Address the main possible concerns they might have right away, before they even have a chance to express them. It’s a lot more powerful when you own the situation and address possible objections, than react to them after they have been expressed.

Some key issues you’d want to address are “why invest now, during the COVID-19 pandemic?” Or, “what if we can’t raise rents once we acquire the property and do our value-add improvements?” Another one to address is, “what are the main issues or problems that we might face?” You get the idea. By addressing all of the issues upfront it helps you build credibility and trust, making investors more likely to invest with you when you have a deal.

Step 3: Be Creative

Syndicators who are creative in their approach to investors are more likely to get commitments and participation than those who aren’t. For example, you can create two groups of investors; the first group participates in the property’s cash flow from operations (rents, fees, etc), with no participation in the sale proceeds when the hold period is over (generally in 3-5 years).

The second group would receive slightly lower cash on cash returns but would participate in their share of the sale proceeds when the property sells. By doing this, you can cater to different investors based on their unique view of the market, their cash flow needs, and their desire to be willing to wait for a payoff when the property sells.

Another option is to add a flex-equity split that would change the actual numbers if the property doesn’t perform. Equity splits are very common in real estate syndications. With a straight equity split, investors are given a defined percentage of the property’s cash flow and equity on sale, often defined as “60-40” or “70-30.” The first number is the amount that goes to the investor, the second number is the percentage that goes to the syndicator.

With a flex-equity split, the deal can be set up as a 70-30 split, but if a 14% IRR deal ends up performing at 13% the split would convert to a 80-20 one. This gives an extra incentive for the syndicator to ensure that the deal performs as anticipated, while providing the investors with a cushion if it doesn't.

Another way to be creative is to use new technology to stay in touch with your investors. Most syndicators have a large number of investors, and the new technology will allow you to help target specific investors for a specific type of deal. You can classify investors by specific categories, like amount of money available to invest, type of property, location of property, and more. It helps to streamline the contact process, which will save the syndicator a lot of time.

Step 4: Keep Investors Informed

This is a good approach regardless of the economic climate, but it’s even more important during an economic crisis or a pandemic, as we’re experiencing now. Investors don’t like being kept in the dark, and that’s especially true when they hear news all day long about the economy and COVID-19.

Reach out when you’ve made progress on a specific deal. This could be when you get a discount from the seller, or when you have received new information on rent collections. It can also be when you want to share news about businesses in the metro area that are reopening, or when restrictions have been lifted. Investors crave news about potential impacts on their investments, so by sharing news you’re helping to alleviate stress and concerns.

How should you keep them informed? Try sending out emails to your investors, but be sure to individualize them with a personal intro. There are many templates available to you that allow for personalization, so it won’t look like a mass mailing. Posting updates on your website is another way to keep your investors informed, and you can email them a link that takes them to directly your website.

Step 5: Be More Proactive

Now’s the time to step up and be a lot more proactive than you were before COVID-19 hit. If you were used to having investors reaching out to you after you sent out a presentation or held a conference call, change things up and reach out to them proactively. Whether you text, call, or email your investors, getting in touch shows your interest

There are a variety of ways you can stay in contact with your investors. Texting each one is personal and is often very well received. Holding a group conference call is another way to keep connected and let investors know what is happening, not only with the deal but with the multifamily market in general.

Also, consider a personal phone call to each investor. Is this time consuming? You bet it is! And depending on the number of investors you have on your roster, it can take a while. However, I can tell you from personal experience that it is one of the best ways to build and enhance your relationship with your investors while keeping them informed.

Finally, consider meeting face-to-face with key investors. This can be as simple as a cup of coffee or having lunch or dinner. Nothing bolsters or rekindles a business relationship like meeting in person. It also helps prevent investors from becoming complacent to your other methods of contact.

@Shane Thomas We have some deals with 506C and some with 506B. Since some of our investors are sophisticated (and not accredited), I won't want to buy a deal and not include them in it. The vast majority of our investors are repeated investors, and I'd like to include all of them if I can. The downsize is that we can't advertise it or offer it to an accredited investor we have no substantive pre-existing relationship with. However, I like to get to know my investors first and see if we are a good fit before I include them in a deal. It's not a deal machine. To me, it's a true partnership and we actually decided not to work with some investors with whom we though there was no good fit. It feels a bit like a family to us, and I'd like to keep it this way. So I believe we will keep offering 506B for the most part.

The COVID-19 pandemic has hit every part of the country, every part of the economy and every facet of the real estate market, including investing in multifamily properties. In the United States alone, tens of thousands of lives have been lost, unemployment is up to a staggering 17.8 million people, and many experts say it may get worse before it gets better.

However, people are still investing in real estate, including multifamily properties. Many investors think this has become a “buyer’s market,” while others believe that we’re in a “seller’s market.” Investors claim that they have seen this type of multifamily real estate market before, during the great recession of 2008. Prices have steadily climbed over the past 10 to 12 years, and investors felt that exceptional deals would once again be available. In their minds, it was simply a matter of waiting it out.

Tenants are Still Paying Rent

The biggest concern was that with unemployment at an all-time high, renters wouldn’t be able to pay their rent, forcing the multifamily property owner to sell his or her property at a discounted price. Despite media reports that predicted that a high number of renters wouldn’t pay their rent, the prediction never materialized. Now, I believe we’re in a “frozen market,” where there’s a gap between buyer’s and seller’s expectations.

According to recent national data, April's and May's rental collections were at 95%. June ended at above 90% collections.. My personal experience with our properties, which are located in Texas, Georgia, and Florida, was that we had 99% rent collections. That’s a far cry from the 75% collection level that the media had predicted.

Buyers were expecting rent collections to drop significantly, which might have moved multifamily prices to drop. Usually when we’re in an economic crisis, the market shifts from a seller’s market to a buyer’s market. That’s when buyers jump in and purchase properties at a significant discount, which is what happened in 2008. However, as I mentioned before, this didn’t happen to many assets. Yes, there are properties that have got hit pretty hard and their collections are way below 95%, but many properties thus far are not doing that bad during COVID. That’s why sellers, for the most part, are not willing to sell at a discount.

Lenders are Changing Loan Requirements

Another aspect of the current multifamily market is due to lenders, who are in the process of changing loan criteria. For example, lenders are giving property owners 90-days forbearance on their mortgages due to the COVID-19 crisis. That means that the expected discounted property prices buyers were expecting simply didn’t materialize. Sellers aren’t really incentivized to sell, not in the first 90 days of COVID, at least. Lenders still remember how painful it was to foreclose on assets during 2008, and are doing their best to avoid this scenario again. My gut feeling is that by the end of the summer, we may see many more deals in the market, as more and more sellers will be at the end of their forbearance period.

Lenders are also more reluctant to lend money at terms they were offering prior to the COVID-19 outbreak. For example, lenders used to require a loan-to-value ratio of 70% to 75% prior to COVID-19 on a solid value-add deal. Now, they've lowered the amount their willing to lend to 55% to 65% LTV, which means returns will be lower because you have to put more money into the deal. With lower returns, buyers must lower their prices to meet their minimum returns.

Another change is a new requirement from lenders that at closing, you have to put 12 months of debt payments into escrow. That’s a lot of capital going into each deal, which means that a deal that might have worked several months ago won’t work now. That’s how lenders are reacting to this rapidly changing environment, and they’re trying to predict which properties may default on their loan, for example. The extra capital also affects returns, which, in turn, means lower offers.

What Happens When Tenants Can’t Pay Rent?

While national collections were around 95% in April, that means that 5% to 7% of tenants weren’t paying their rent. What happens when tenants can’t pay? The answer basically is, “it depends,” and it mostly depends on what state your property is located in. Unfortunately, each state has its own laws and regulations that govern when an eviction can take place, so what is applicable in Texas, for example, might not work in California.

My personal opinion is that non-eviction regulations simply don’t make sense. During May and June, we saw a lot of new inquiries from people looking to move to Atlanta, and in one case we had one property that signed 4 new leases. When people see articles about landlords not being allowed to evict tenants for non-payment of rent, the concern was they’d begin to think, “Well, maybe I won’t pay, since nothing can happen to me,” even though they have a job and the ability to pay rent.

The media has been saying that one-third of the people wouldn’t pay their rent in April, and that was definitely not true. Our experience was that 99% of our tenants paid their rent on time in April, 95% in May, and again 99% in June. This helps to reinforce the fact that when it comes down to the basics, housing remains a clear priority to nearly everyone. We will see if this continues into the coming months.

Value-Add Upgrades

At this juncture in the pandemic timeline, many investors believe that it really doesn’t make sense to upgrade in order to raise rents. However, there is still demand for renovated units, even today.

Instead of eliminating value add upgrades, we’ve decided to keep them in place, but in a modified manner. Prior to the COVID-19 pandemic, we would renovate our units and then find tenants to occupy them. Now, we have reversed the order of operation.

When we are showing the renovated units to prospective tenants, we simply offer them the choice. I call it “Renovation on Demand”. The model unit is renovated, and they can rent it at a premium, or they can rent a “classic unit” that hasn’t been upgraded. Only when tenants choose to go with a renovated unit, we will get in and renovate it. It takes us 7-10 days to complete a renovation. This way, we were able to increase rents by 10%-29% during a global economic crisis!

Surprisingly, even in today’s market, many prospective tenants opt to rent the renovated unit at a higher price. That means if you were to stop all renovations and upgrades, you’d be missing out on opportunities to increase your overall income through higher rents. Instead, offer your tenants a choice. By doing so, you’ll still be able to have an opportunity to upgrade your property.

You must remember that not everyone is financially impacted by the COVID-19 pandemic, and many tenants are able to pay a higher rent for a renovated apartment that offers amenities and upgrades that appeal to them. You just need to ask, “Do you want a renovated unit, or do you want a “classic unit?”. The classic apartments are still in great shape, and they’re more affordable. Instead of assuming people can’t afford an upgraded apartment at a higher rent, let them make the choice.

Implementing Cost-Cutting Measures

In addition to doing some modified value-add renovations, we're implementing some very aggressive cost-cutting measures in order to increase our net operating income (NOI). While it's always smart to review costs on a continuous basis, it's even more important now thanks to the financial issues related to COVID-19.

I’ve had our property managers go through every contract, including landscaping, plumbing, and electrical – whatever is currently being paid on a monthly basis is being reviewed. We have renegotiated contracts or chose to go with a cheaper vendor to save costs. We’re also focusing on essential maintenance orders only, which helps keep our staff healthy (since they don’t enter apartments for nonessential work) and reduce costs.

The biggest cost saving measure that helps reduce operating expenses is to reduce tenant turnover. There are many costs associated with tenant turnover including cleaning, painting, repair costs, and advertising costs to attract new tenants. Implementing a tenant retention plan can help to minimize the turnover, and ultimately reduce those costs. Today, we renew leases at an average of 80% (versus 60% prior to COVID).

In short, yes, this is why I believe we can and should continue to invest in this "frozen" market.

@Terry Lawson Before making a decision, make sure you trust and like the sponsor. After all, s/he will become your partner for 3-5 years... I'd also add, that when you speak with a sponsor, ask them about their projections vs actuals on previous deals, and how their properties are performing during COVID. Combining your gut feeling (trust/like them) with some data on past and current COVID performance is a good mix... Good luck! 

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