All Forum Posts by: Account Closed

@Chris Martino most major CRE firms that are underwriting retail/office/industrial are using ARGUS Enterprise software. Makes the modeling part of the equation much easier - definitely not cheap though ($4k for a license and $800 per year in maintenance required as of a few years ago). That would definitely be the most high-level you'd get.

Congrats! This is a very cool opportunity. 

Do you like real estate and want to do it for a career? If the answer is no (or even maybe), I would look into investing as a passive Limited Partner investor in a syndication. You'd qualify as an accredited investor with a liquid net worth of $1 million, so you'd have access to many opportunities. Most investment minimums are $25K-$50K, so you could start with one or two and see if you like the process.

This involves vetting syndicators, but if you feel comfortable with the investment team and their strategy, you can leverage years of experience and literally have a passive investment that can grow significantly. I've invested in close to a dozen of these at this point (I also live in California, so buying 1-4 unit properties that cash flow is difficult here) and have seen really strong cash on cash returns and overall returns for deals that have been sold or refinanced. It's truly "mailbox money", but you're also growing your inheritance in the process.

Hopefully this helps - good luck and let me know if you want any recommendations on groups to look into.

Evan, exciting times! Having gone through this process about a dozen times now, I definitely know the "nervous yet excited feeling". As you start to get to know sponsors and after you start receiving your first distribution checks, that feeling starts to go to more excitement than nervousness right after you wire.

I've invested with several different sponsors, and each time I expect to receive at least quarterly communication on what's going on with the deal (a quarterly report and financials work well here). Most syndicators I've worked with have been great with sending these out - one in particular has not (and I don't plan to invest with them again).

The first couple years have generally been great for deals with strong cash-on-cash returns going in (this is done through adequate funding for capital projects up front). The ones that haven't gone as well as I thought were more speculative (for example, a retail tenant finishing a build-out that experienced cost overruns and took longer than scheduled). 

It sounds like with a 200 unit complex that's stabilized and just has a small value add component/utility cost reduction or RUBS implementation, you found a very low risk deal without much speculation and with a good amount of upside. As long as the sponsors are guys you trust, I would imagine you'll be happy you took the leap a couple of years from now (depending on the macro real estate market as a whole).

Hopefully that helps. Congrats on your first deal!

@Twana Rasoul nothing too impressive, these are LP positions in syndications. But I definitely expect these to appreciate more than my deals in other markets (Denver/Austin/Atlanta).

@Twana Rasoul a mixture of both. The deals I'm in here are retail, office, and mixed-use. All of my multifamily is out of state.

@Jaysen Medhurst I agree with you - my answer probably wasn't clear enough. The cash on cash measures cash return as a percentage of cash invested (or your equity you've actively invested in the deal), not the equity you've built up in the deal through appreciation and principal paydown. Thanks for pointing that out. 

@David Boley, I'm not sure why the closing costs aren't included in the calculation for total profit if sold, but I believe the Annualized Total Return figure is an IRR. Try plugging these numbers into Excel and using the =IRR() function and see if you get the same answer. Your first value should be your initial investment (shown as a negative number) and then your following values should be your cash flow values for each year.

Let me know if this ends up working for you. Thanks!

Hey David, good questions.

1) The changing cash-on-cash ROI tells you your cash flow for each of these years as a percentage of your total equity invested in the deal. This grows significantly over time as your revenue increases, your expenses increase (but likely not by as much as your revenue), and your mortgage payments stay the same assuming you have the same loan on the property this entire time.

2) Your Annualized Total Return takes into account your sale proceeds (and any cash-out refinance proceeds if applicable) to come up with an annualized rate of return for the entire life of the deal. So while the cash-on-cash is literally cash in your pocket every year, the annualized total return is your annualized rate of return over the life of the investment when you sell a deal. You can think of this as comparable with the overall returns of the stock market, whereas the cash-on-cash is more comparable with dividend or bond yields.

3) This includes the cash flow you've received throughout your entire 30 year hold period.

4) I believe this is as a result of what I mentioned in #3 - including cash flow for each year of the hold period.

Hopefully this helps!

@Twana Rasoul a lot of the more established players in commercial real estate (that don't have to make money on acquisition fees) are doing this - moving money out of more volatile tertiary markets and into more core markets so they have more downside protection when a correction occurs. I think this strategy makes a lot of sense in your case.

Awesome, Linda! Can I ask where these condos are located? Arvada?