All Forum Posts by: Harish V.

@Rob Block

Verifications should be done by the sponsor - they hire a third party.

99.9% chance none have done it because in the past they have not had too. Raising money was like picking apples and investors don’t care

Investors need to be more diligent going forward if they want to truly understand their risk

That's true.  But people have said on this forum that his track record isn't good, so I'm trying to find people who have invested in his full lifecycle deals to get more perspective.

The deal I mentioned has an assumable fixed interest rate (for 5 years) of 5.3%, so interest rate jolts are less of a concern there.  I have looked at the underwriting and it mostly looks reasonable.  But I'm not an expert and could be missing something.

I know this is an old thread but I am going to have to pile on here.  Avoid Anything to do with Growth Equity Group or SDIRA Wealth as if your life savings depends on it.  I had a terrible experience with them, mostly because I missed/ignored all the flashing red lights.  For me, deal was... Purchase a multi unit building, managed by a management company.  The management company just happened to be hooked into the deal with Growth Equity group and they also provided the interest only hard money loan for the balance of the purchase price.  The kicker was, the purchase price was WAY over valued!  Which means, you are paying too much and barely covering your expenses.  By the time I got out of it I lost quite a bit but I was happy to free myself of the aggravation of doing business with these people.  If you are going to do this type of business make sure it is in an area you can visit or make yourself familiar with, you have someone that is representing YOU at the table like your Attorrney, and you don't make decisions based on "we need to wrap this up".  These are the type of tactics they use.  IMHO, avoid anything or anyone that was ever involved with Growth Equity Group or SDIRA Wealth.

OP don’t need personal detail.  

But you stated your kids get free rent and free education. Your topic is about CAP rates and DCSR.

My point is I don't care about CAP rates. As an example is your situation above. I can change your personal cap rate very easily.

A. Get your kids to pay rent. That will increase your DCSR and DTI.

Pay your kids education and deduct it.  
Do they have a car?  Deduct it.

Now you might say the above don't make sense.  Or are not legal.   Talk with your accountant and understand how you achieve the above.  

Based on the above your view of a cap rate 1/2/4/6 becomes different than another investor.

B.  1031, downsizing 2 out of 5 primary, corporate or military move, fired and moving, married and combined income, etc.   Each persons view of cap rate is different.        

C.  As @Chris Seveney said a cap 2 isn’t a cap 2.  Could be from a capex standpoint, resale standpoint, property tax.  Again each persons view of cap rate can be different.

Plus who gave you the CAP rate? Do they even know how to calculate? Plus what can you do to value add the cap rate.

My point again is we don’t use cap rate.  The fun is what each of us sees in the deal and how we add value.  

Below is a storage property we just looked at in Pisa Italy.  Let’s say it is a Cap 4.  I am willing to pay a 5, because I can get an 8 value out of it within 6 months.  If 

for example is folks buy in that inverse U slope in 2013 and later 2025, your reward/risk is higher than those who purchase at 2019.

Also, CRE long cycle boom/bust cycle is every 14-15 years so this is pretty predictable. First is 1992 ; followed by 2008 and then 2022/2023.

What's very dumb in my opinion is that some CRE guru like Shumrock (read it at the real deal com) is instructing their student to buy using floating than fixed debt while rate is near zero but CPE is increasing. When M2 is being added in massive and CPE increases it would just means inflation 12 months ahed, so rather than buy fix or hedge the floating with swap, this guy is just buying with floating, hence massive foreclosure today.

the cap doesn't really matter but the slope of the cap that matters.

when we chase CRE basically we are trading the spread between 5Y bond and cap rate.

This is same like buying stock, buying at 40 or 300 doesn't matter if we don't know the context, so in stock going up is better; with CRE what matter is the width spread between SOFR/5Y and fair cap rate.