All Forum Posts by: Michael Bishop

@Austin Joseph I'm coming from a commercial MF perspective here, but multiple reasons:

1. Price of entry is more reasonable in DFW (as opposed to Austin).

2. Population growth for the MSA as a whole is among the best in the country over the past several years.

3. Job growth coupled with employer diversification. TONS of companies have, in the past several years, and will, in the next several years to come, move their headquarters to the market. The DFW job market isn't dominated by one industry which greatly reduces risks. While I don't have solid numbers, I'd imagine that Austin employs A LOT of techies.

4. More commercial value-add opportunity in DFW (as opposed to Austin) as it's simply a bigger market (DFW is around 6-7 mil people while Austin-Round Rock is around 2 mil) and is more established/has been "around" longer.

None if this is to say that there aren't deals in Austin, because there are. There are plenty of people killing it here in every REI niche - it really just comes down to personal preference.

If you're like @Andrew Johnson and like to be in control of your real estate investments, syndication is 100%.. nay, 110%.. not for you. Unless you're on the GP side.. then maybe.

I think it depends largely on the deal/Sponsor:

1. What type of relationship do you have with the Sponsor? Who from the GP brought you in to the deal? Do you have easy access to information or to ask questions? This isn't the case with a REIT.

2. In what market is the deal (or does the Sponsor operate) in? As @Andrew Johnson said, with the right deal and team, you absolutely can earn higher returns.

3. How conservative is the Sponsor in their underwriting? Downside protection is huge and commercial MF has, historically, at least survived big market downturns. Very conservative Sponsors can even provide a small return.

Also, you may know this already, but limited partners have limited influence (voting right) for a good reason - liability. The second they start having voting rights, they'll likely be liable beyond their initial investment in the event of a lawsuit or some similar event. Thought that was important to mention as mitigating downside risk is a big stress point for most (if not all) Sponsors.

All that being said, I personally think both can be good investments. Really just depends on the individual investor - which fits best in to their investment portfolio, how risk averse are they, how much money are they looking to deploy at the moment, etc.

Unless your game plan is appreciation, there are better markets. As @Jordan Moorhead asked, why not somewhere near home? If it's Texas you like, try looking a bit south in San Antonio.

What exactly you're looking for might help folks provide better insight as well - you say MF. Small? Large? Commercial? How many units are you targeting per property?

There is a lot of new construction competition in and around Austin. BUT, there are deals to be had, as @Bruce Petersen is a testament, you might just be looking at lower grade properties to stay "affordable." 

@Shanae Williams have a game plan for your rehab timeline and exit strategy and follow it strictly.

A lot of people buy their first house as an "eventual investment property," get comfortable, end up staying there for years and never make it a rental property like they initially intended.

Great idea if executed properly.

@Dave Foster is the 1031 guy and may be able to provide some insight here on steps necessary / difficulty level to 1031 from 2 4-unit buildings to 1 22 unit building.

@Mark Williams if you have an established relationship with a broker in your area, they should be able to pull up information on comps so that you can look at price per door. This should be beneficial only in determining your price-per-door relative to, or as a percentage of, comps, and not when determining your offer price.

Instead, as @Patrice Penda stated, your offering price should not be determined by nearby properties, but rather the property actuals. I.e. Value = NOI/CAP.

If possible, base your numbers/offer on the T12/T24/T36 (the actual trailing 12/24/26 month financial statements) rather than any estimate or projected pro-forma they provide you - be insistent that they provide you with the T12/24/36 so that you can run numbers yourself.

@Mark Holmes from what you've said I can gather two things:

1. Cash flow isn't out of this world

2. Your income isn't enough to secure a loan on a property this size on your own

That being said, it's likely you'll need a loan guarantor. Have you factored their cut (common to see 2-3% of the loan here for "lending"  you their asset sheet) in to your returns? Surely it'll cut in to your bottom dollar and decrease attractiveness of the opportunity to investors.

Also, as @Matt Lefebvre said, be careful raising private equity. You're stepping in to securities territory there so be sure to consult a securities attorney before making any serious moves.

@Will G. I think that property grades are highly subjective and can't necessarily be tied directly to one or two factors. Property grade of course will have an affect on achievable rents, desirable amenities, etc, but will only have an affect on the CAP via the NOI, i.e. CAP is equal to NOI/price.

Deferred maintenance should NOT be confused with value-add opportunity and  any extensive deferred maintenance should lower the purchase price, thus increasing the CAP.

Bottom line is that if the costs incurred due to deferred maintenance squeeze your numbers, and the seller is unwilling to come down on price, don't try to tweak things to make the deal work. Just walk away and be patient, the right deal will come along.

@Account Closed