All Forum Posts by: John Sayers

Congrats Jeremy!

Forgot to add, you can find it in meetup as well, if you use that tool; under "Austin Multi Family Active and Passive Investing Group"

Yes, so far it is monthly. Maybe next one will work for you.
6:00-8:00PM,  every 3rd Tuesday, Rudy's Country Store and BBQ, 3914 N Lamar, Austin TX 78756

I've had sponsors tell me, as low as 5% equity (GP), generally around 10%+. If the sponsor is maybe less experienced and/or really needs the KP, it could be 20+% range; depending on a mix of variables (needs, experience, Loan amount, asset type, terms, time table, etc)

In some cases (presumed rare cases), I heard from an experienced GP that a seasoned KP "may" get up to 50% (yes, quite high) by bringing solid experience and comprehensive value to a deal. I presumed that was more for first time, or low experience, sponsors. I see that as likely being a one-off and more likely on the smaller asset range where the general percentage ranges would not generate a $ value high enough to get a king sized KP to look.

On the other end, 0% can be had as well. I'd tend to throw out the far end numbers and go with the 5-10% up to 20's% ranges as what I've heard or seen the most.

Thanks also to @Greg Dickerson and @Tj Hines for adding to what Brian and Mike noted.

Thanks for the input. The ones that confuse me most are sponsors that have access, net worth, liquidity, agency history, track records etc (not 1st or 10th rodeo) and it's a value add on a stabilized property. Nothing heavy or opportunistic. Just seems (but I may be wrong) I'm seeing a bit more aggressive approach. Maybe to make the projected numbers not drop to far.

@Brian Burke Thank you! Good info there. 

In my mind I was comparing stabilized, 90% agency qualifying, but yet not opting to use it. I seemed to have left that out. Generally I see a higher LTV to lower the raise, add risk, yet project to yield average/par.

" As to the take-out risk: Sponsors (and their investors) should be
evaluating how much "lift" the value-add improvements bring, both from a
cash flow perspective and from a valuation perspective. If the value of
the property increases 20% from the improvements, an 80% LTV
bridge should be closer to 55%-60% LTV when it comes time to refinance.
Even when lending is constrained, properties with that low of an LTV
(and likely a high debt coverage ratio) should still find capital in the
marketplace. The bigger risk factor might be the overall economy wiping
out the gains in the income if job losses increase vacancy rates and
bad debt losses. Then it comes down to whether those market dislocations
work themselves out during the two maturity extension periods that most
bridge debt offers. "

Excellent point on the lift and the refi-LTV then being in the lower more desirable range in that market! I was forgetting all about that possibility (if the plan executes, low surprises, low delays etc). The overall economy factors that you noted is kinda core of my concerns. In that situation, the gamble of the combined storm factors seems less with non-bridge debt. One less factor to have to work with in such a situation.

"There's no doubt that bridge debt introduces additional risk. It should also help deliver higher returns, and if it does not, there's no reason to use it."

I hear you. 100%. If it doesn't deliver higher returns than what's out there (all things being ~ equal), I scratch my head.

I asked a similar question in a FB MF group but many syndicators seemed to shy away from the topic. Maybe more on BP can help educate.

Topic: Using 3yr +1 +1 type bridge loans in stabilized MF deals (say 120U+, basic B w/value add capacity) in the current market (economist are busy guessing) and the refinance risk 2-4 years from now when looking to refi...or even sell.

Any concerns on having a new bridge loan now, and hoping the market will not have an event in the short term that could temporarily dry up financing funds (agency and other) making refi near impossible; or any event that basically makes it hard / impossible to ride the storm as the longer term debt may better afford?

Maybe another way to put it... why are you as a GP/sponsor not concerned on using it with your current stabilized deals? What future financing assumptions are you making, if any, for a tight liquidity event?

I see deals that really don't need it and wonder what I'm missing, or what is not being said. I don't see the LPs getting a better overall deal for the added risk (even if one considers it low risk), but maybe I'm missing something.

I'm currently avoiding the short term debt, as a general rule. Right or wrong. I'll look at them, but if they bring nothing else to the deal with it, why bother?

If this is an existing topic/thread please point me to it. Thanks!

Maybe also see other threads: 

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

These 3 quoted items stood out (all were good). "number one concern..."  question is great on, thanks!

On the acquisition fee, it's earned in most cases, yet on the larger deals with high 6 to 7 digit acquisition fee (exclusive of recovered DD costs also reimbursed by the LLC investors), it's a clear win for the GP day 1 regardless of deal performance. The overused "alignment of interest" starts to fall apart in some of these configurations where it's basically impossible for the GP to ever lose.

On the topic query, mine are too young but events show that managing/overseeing the PM is critical. Not a bad idea for the AM to also be skimming/reviewing the maintenance tickets in the system for patterns of un-adressed root cause resolutions. Fixing items is one thing. Learning and then preventing more of the same is another. Reactive vs proactive can easily cost thousands extra.

Passives: Look at the OA & PPM to be sure all of your capital is actually returned upon any profitable sale. I see profitable deals that, as worded, would earn the GP a promote on sale yet there is not enough to actually recover LP capital due to the way it's configured. Worse, on some losing deals the GP still profits. READ the agreements closely! Some may know it's there but assume the market will continue to minimize that type of risk.