All Forum Posts by: Kristina Sparrow

MH is less volatile than other asset classes during a downturn, but that doesn't mean they are pandemic resistant. Even though the selling point of MH is as the most affordable form of housing, that doesn't stop tenants from not paying rent if they lose their jobs. We've seen a 20-30% increase in bad debt across our MH portfolio. This may create buying opportunities down the road as owners get frustrated if the downturn persists. It may be a good time to invest in a few months. No one knows.

I think it would be a good idea to browse the larger property management websites (JLL, CBRE, etc) to see what their selling points are. The whole point of property management is to eliminate or lessen pain points for owners.

EBITDA = NOI for real estate. To get to unlevered cash flow, take NOI - capex - reserves or working capital - any other costs that affect cash flow (like partnership expenses, etc). Unlevered cash flow does not typically factor in depreciation, amortization, or taxes on income. Assuming your goal is to calculate a cash-on-cash return. Modeling real estate cash flow is much different than a company's cash flow.

Also, amortization does not refer to debt service. If that was factored in, it would be a levered cash flow instead of unlevered.

It depends both on your goals and how much time you want to put into ongoing property management. I choose to invest in larger buildings simply because I know it is economically more efficient to hire a manager for 75+ units vs a fourplex. With a building of scale, a property manager you hire can work on-site, having daily interaction with tenants and vendors. With a fourplex, any manager you hire will most surely not be on-site and will only visit the property every 2-4 weeks, if that. Also the property management firms that focus on larger buildings are much higher quality. This frees up A LOT of my time.

Yes, I'd argue that the stock market is a prisoner's dilemma. If we use your analyst research example, let's say the best analyst shares their research with everyone. The stock is more likely to move in the direction recommended by the analyst because of the increase in demand, creating more gains for everyone. True, followers would not see as much gain as the initial investor, but there is still a bigger gain to be shared for everyone. It's not like a peach tree because the peaches are a limited resource but stock market gains are not. This sharing of knowledge doesn't happen in reality because of HFT and the belief in EMH. I don't believe that the stock market is a perfectly efficient market, but it is definitely more efficient than real estate. I choose to invest in the most inefficient market available to me. Also real estate is the only market where it is encouraged and rewarded to trade on non-public information (ex: off-market deals..)

It also works out to the seller's benefit if they avoid any prepayment fees by letting you assume the loan.

Hi Shawn -- Welcome to BP. I'd love to compare notes on your target markets/strategy. Feel free to send a PM.

Like Greg said, they are equal once adjusted for compounding. Choosing which one to rely on will depend on how often you are expecting distributions from the property. Use a monthly IRR if paid out monthly and a quarterly IRR if paid out quarterly, etc

Second what Greg said. Many affordable housing projects are built for profit. The trick is getting approved for grants and tax credits. The federal government issues tax credits to state housing agencies who then award the credits to private developers of affordable housing. They're given on a project by project basis and the process is extremely competitive. Once granted, developers generally sell the credits to private investors to obtain funding. Once the housing project is placed in service (essentially, made available to tenants), investors can claim the tax credit over a 10-year period. With that being said, your company structure doesn't matter for this. If you know you want to go the non-profit route in the future, I'd suggest going with a corporation to start.

Representing from San Francisco! I'm a CRE private equity analyst by day and multifamily investor and land flipper by night. Generally invest in southwest & midwest markets. Happy to connect with anyone from the Bay Area.