All Forum Posts by: Joseph Bramante

@Cassie Wright, Jr. First, that's not a multi-family, it's a Plex which is single family.

Take out a hard money loan to renovate the exterior and Interior. Wait till leases go month to month if needed.

Good luck

@Brent Fowler welcome! Im on the multi-family side but happy to help if I can

@Darcy Niedermaier as others have said, multi-family is the way, for one you can hire professional management so you don't need to deal w tenants and have bad experiences. But plexes are not multi-family. If you can't afford to take down a complex yourself then you should look Into passive Investing, even less headache and great returns.

@Taylor L. Great feedback

@Brent Fowler I know it is. You should go

The inflation alarm bells are on high alert, and investors are jittery.

Inflation is unavoidable at this moment, with economists forecasting inflation for 2021. Last week Billionaire' bond king' Jeffrey Gundlach warned inflation could impact stock prices. Investors have reacted by sending the stock and crypto markets on a roller coaster ride.

Inflation is a portfolio killer - threatening both stocks and fixed income assets in a traditional portfolio. Inflation is a stock killer because it sinks stock prices. The Fed typically reacts to inflation by increasing interest rates to cool the economy - by using the ounce of prevention is worth a pound of cure approach.

Higher inflation means higher borrowing costs and input costs (supplies, materials, labor) for businesses. Theoretically, increased costs mean lower expected earnings in the long run, putting downward pressure on a company's stock price.

It usually takes months for the effects of inflation to play out. Still, mainstream investors don't typically wait around for the shoe to drop - sometimes reacting instantly to bad news as the markets have demonstrated in the past weeks.

The typical reaction by investors to inflationary fears and the potential slide in the standard of living because of reduced buying power is to divest themselves of stocks and put their money into savings or some other fixed income asset like CDs, money market accounts, or dividend stocks. The problem with this approach is the eroding power of inflation.

Putting money in a savings account, CD, or money market account that pays no more than 1% annually while inflation rages at 5% or more is an asset killer - eroding your buying capacity by 4% every year.

As for dividend stocks, they're just as vulnerable to market volatility as every other stock, and dividends are not guaranteed. Moreover, companies can reduce dividends at their discretion - even suspending them altogether during hard times.

Inflation will kill the traditional portfolio, but it won't kill every portfolio. How can you protect your portfolio? Invest in assets that leverage inflation.

As consumers prioritize their expenditures less towards luxuries and more towards necessities, investments in tangible assets that revolve around consumers' needs and not wants are what will best insulate a portfolio against the corrosive effects of inflation.

The ideal asset will generate recession-proof income while appreciating in step with inflation. That's why investors seek out commercial real estate during trying times - to generate recession-insulated income while preserving capital through the period of rising prices.

As the Great Recession taught us, there will always be assets that will be in demand - affordable housing being one of these assets. In a downturn and in inflationary times, consumers will downsize from single-family homes to multifamily housing to reduce expenses. Unfortunately, the demand for multifamily housing starting with the Great Recession hasn't let up - with the gap between demand and supply continually expanding since 2008.

Savvy investors anticipated inflation last year with the infusion of trillions of stimulus money into the economy. They prepared by picking up affordable housing assets, which weathered the storm better than most other commercial real estate segments - being one of the few segments that saw increased rents with low vacancies.

Inflation may kill the traditional portfolio, but it won't kill every portfolio.

Portfolios allocated to tangible assets generating cash flow while appreciating rising prices are the ideal hedge against inflation.

Please do not wait for inflation to rear its ugly head. Prepare now by allocating to the right assets.

@Harish V. and @Jeffrey Liou sorry to hear about your situation. You can not depend on syndicators these days to underwrite correctly since they seem to be more focused on growing large mailing list and collecting huge upfront fees for closing deals. Whether or not they perform is secondary. 

I recommend you take some courses on underwriting that are geared towards passive investors. Most of whats out there is for syndicators trying to buy deals. They are different things but with seemingly lots of overlap. 

Regarding experience, we have actually exited 5 deals for an average IRR of 23.5% and Avg Equity multiple of 2.63. I have attached 2 bell curves showing all 5 properties.

Looping you in also @Ryan Goff @Keith Meyer @Vincent Powell @Jeff Pollack @Jason Merchey @Santiago Fajardo @Gopinath Chandra @John Gatsoulas @Jay Hinrichs

How much does a Bad "Passive Investment" cost you?

Since the passing of the jobs act in 2015 and the proliferation of 506C offerings, there has been an influx of new, unsophisticated and inexperienced multifamily sponsors out there who are just learning the industry themselves and making all the mistakes you would expect them to make as a new investor except getting paid for it, upfront, and with your capital. Compound that with an incredibly tight multifamily market with cap rates at all-time lows with no further compression in the foreseeable future, and you have yourself a recipe for disaster. At this very moment, there are likely hundreds of new, would-be multi-family syndicators sitting in a seminar learning the basics of multi-family syndication so they too can then go out and raise capital from investors like yourself and buy properties. They will leverage every bit of experience they can muster in their multi-person general partnership teams in order to coax you into investing with them. They will naively convince you that they have the experience to underwrite and select successful deals and securely deploy your capital. And while passive investors could take all the same multifamily underwriting courses, the sad truth is that they don't have access to the same data that the sponsor has and will likely never see a trailing 12 statement, rent roll or complex underwriting model and have to make an investment decision based on the 30 to 40 page investment package and sponsor presentation provided to them.

After breaking down several investment packages for a few of you, I decided to create this masterclass to educate you on how to break them down for yourselves and analyze them at face value in order to determine if you should or should not invest in the opportunity. This course will teach you information that no other syndicator and sponsor wants you to know because if you did, you might not invest in their deals.

This is a live and interactive course where I will personally walk you through the training. I am so confident you will find value in this course, that I guarantee it or your money back. The course cost $275 (much less than a bad deal) and will be Tuesdays and Thursdays starting June 22 over 6 days, roughly 90 minutes per session, all recorded. Its roughly 9 hours of content focused mostly on the P&L, much more than most syndicator courses even offer. Its ideally suited for Passive Investors, Family Office Analyst and Capital Raisers who review deals from syndicators. You can click here to register for the course.

In addition to the course, I also offer one-off consulting for individual investments. The pricing starts at $1,000. Feel free to contact me if you have a specific deal you want me to review.

I look forward to engaging with you in class!

We close on just a few weeks. All Class B shares are now full. $2m of Class A shares remaining.

Register for one of our 30 minute webinars to get a no fluff presentation on the opportunity and see if this is the right fit for you.

Register in advance for this webinar:

https://zoom.us/webinar/register/WN_IdelSGjGT4yMSr8zqsE7Yg

After registering, you will receive a confirmation email containing information about joining the webinar.

RESPONSE FROM TRIARC REAL ESTATE PARTNERS – After hearing many stories of investors getting into deals with relatively new and inexperienced syndicators only to get burned when their numbers didn't work out nearly as estimated, I did 2 videos that provided a breakdown on the analysis provided. Neals was the first and admittedly it was a bit sloppy since I was doing everything off the cuff. However it was not my best work so thank you for giving me the opportunity to redo the video in excel this time and very clearly educate you and your investors on the dangers of economic vacancy and the many broad assumptions you, or more accurately the guy you hired to do your underwriting, made. So stay tuned for an updated video. And for the record, I have no ambition of growing my YouTube channel.

Now, lets get into some of your responses...and no, I haven’t seen your video but shouldn’t have to if the data is correct.

The Engineer vs the Data Scientist.

First, don’t play games with the numbers. I understand that's what you did on your quarterly update with your investors because they don't know any better, but don't try that with me or any post referencing me.

Per your Proforma, your Year 1 Rental Revenue number is $2.2M or an average of $183k/month. This is an average so it starts lower and ramps up. You state it starts at $175k so it must ramp up to around $192k in Dec. Your first month is elevated because it included carry over from the previous month you closed (very common) and the last month is likely elevated due to a surge in rental assistance money. Your average for the other 4 months is $175.7k minus $183.3k is $7.6k over 12 months is $91.2k shortfall or roughly 3.5% of GPR. I will need to check my notes, but the entire point of my video was that the economic vacancy, besides being a terrible metric to use, was too low. Looks like I was right and it was around 3.5% too low. You can conveniently blame it on Covid even though most reports show it had very little impact on multifamily, especially through July. We maintained our collections above 95% through that period as did most other good operators. But you play that card if you have to.

Now lets look at the NOI. Wow, where to start. So, one of three things happened here. Either you messed up the numbers, which it's a rather simple calc so I hope not. Or you excluded something from the actuals but didn't also exclude it from the budget numbers to get a true apples to apples comparison (yes). Or you way over estimated / inflated your expenses (yes). Looking at the two charts, plus knowing the RUBS estimate from your proforma of $121.8k, you can back into an expense number. I excluded the Jan and Jul months data since they were anomalies and I wanted more consistent data. For 4 months, I get $292k which when annualized is $875k vs the budget expense of $1,155k vs the T12 actuals of $950k so you "seemingly" outperformed expenses by $280k(32%) vs budget and $75k vs T12 actual. It looks like your actual taxes are $172k vs $285k and the $50k of lender reserve you had in Non Controllable Expenses was booked to capex (below the NOI) where it belongs. So $163k in extreme overconservativeness (taxes) and miss allocations (reserve). There is still $120K vs budget of inflated/overestimated expenses to account for. Being that overly conservative in your underwriting does not suggest any type of competency or skill, it suggest the exact opposite.

There are a few other items but the point is and has always been, the underwriting performed was sloppy, broad stroked and lacked basic inter line item relationship logic. Sure, you can apply a huge contingency to anything as a safeguard but that won't help you win many deals. What it will help you do is set a very high and above market GP compensation structure for deals by inflating the expenses to give the appearance of not being able to hit those numbers, only to close and reveal much better actual performance, triggering your promotes. On this one you get 50% of the distros above a 2.0x multiple on a deal already projected to hit a 1.9x for a 5 year hold. Thats robbery. Using the annualized NOI of $1.35M vs budget of $1.16M is $190k at a 5.6% exit cap is a minimum higher exit price of $3.4M, likely closer to $4M once income rebounds, of which you keep $2M in addition to your millions in other fees and promotes.

If you're an investor who believes that if a deal over performs they should keep a majority of those profits, attend one of our webinars next week for a 440 unit deal we are closing on in 3 weeks with a 22% IRR and 3.1x equity multiple. (The Weatherly was only 15.6% IRR and 1.9x equity multiple). It's a 30 minute, no fluff presentation. You should attend too Neal!

Register at the link below.

https://zoom.us/webinar/register/WN_IdelSGjGT4yMSr8zqsE7Yg

Originally posted by @Neal Bawa:

RESPONSE FROM GROCAPITUS TEAM – An investor (Mr. Hamrick) asked us about Mr. Joseph Bramante’s comment, so we responded. Our response is provided here in it’s entirety. This is Part 1 of the response. We are also providing the investor’s response to our response, where he mentions the sloppiness of Mr. Bramante's analysis.---------- 

We see no point of rebutting Mr. Bramante’s analysis on a blow by blow basis. Excel is a necessary but highly inadequate tool to evaluate a property. Understanding the market, the expense ratios and the marketability of a property is critical to understanding the true picture. It is our belief that if Joe had actually walked the property and understood it’s story, his commentary would be different. As it is, he is using a one sided picture of the story to grow his Youtube audience.

The proof is in the pudding. Here is a secure video link to the actual 15 minute video walkthrough of this property’s (post purchase) investor update, recorded recently. In this update, we walk through the property’s first 2 full quarters of ownership.

As you can imagine, with 4 of those months being coronavirus months, we dealt with HUGE challenges. But despite those challenges, shown below is the rental income and NOI vs BUDGET performance of this property. The entire 15 minute video is worth watching, but here is the bottom line, in 2 graphs.

NET OPERATING INCOME: The Net Operating income of the property is higher than the budget given to investors in all 6 months. As you will hear on the webinar, the drop in income in Feb and March was because we were pushing tenants out by raising rents, so we could rehab units. With a number of those rehabbed units now complete, our income and our occupancy is now increasing (and continued to be strong in July and August), even during a pandemic that prevents people from coming out to get tours. I would say that any project that beats pre-pandemic NOI budgets six months out of six is one to be proud of. Of course, our budgeted numbers get higher month after month, but I believe that to be true of every property, including those that Joe Bramante oversees.

BOTTOM LINE – Everything in our business is nuanced. One team sees opportunity, another team sees challenges. As LP investors, you pay us to convert opportunity into reality, and that is what we are doing. We will open this property’s books to you and to your fellow investors, should you decide to proceed to validate these numbers. Keep in mind that the 15 minute video was sent to investors who have already invested, so there is really no point in sugar coating anything.

INVESTOR (HAMRICK’S) RESPONSE TO OUR RESPONSE. NOTE HIS COMMENT ON JOE BRAMANTE’S SLOPPY ANALYSIS ---------------

I was reassured by your thoughtful and timely response to my inquiry.

Needless to say, my confidence in the ability of the Grocapitus team to analyze deals professionally and provide consistent above-average returns to your investors is not shaken.

Even while watching the Youtube video by Mr. Bramante I was suspicious of his speed and sloppiness in performing what was obviously a quick and dirty analysis without forethought or more background on the project.

Mrs. Hamrick and I look forward to many more years of unique, interesting, and profitable investments with you and your fine team of real estate investment specialists.