5 F'S to FREEDOM!
Find, Fund, Fix, Fill, Financials.
I'd continue doing what I'm already doing. Create a fund and leverage it with other equity to raise $10,000,000 in equity and then leverage that with $30,000,000 in bank debt from a community lender to target value-add small bay warehouse in the midwest.
FIND
To find off market deals we execute a two part direct marketing sequence to brokers and property owners. Direct mail, ringless voicemail, text and email campaigns. We use skip tracing jobbers off fiverr or upwork and bots to generate contact data for this. We analyze the deal by determining the Max Allowable Cash Offer (MACO) per SF.
To do that we analyze what the buildings net rent rate would be and multiply that by the magic Multiple. Mine is 9.375. You can find yours by taking your desired cost to value ratio and dividing it by the market cap rate.
Maco/SF = NRR x Magic Multiple
Offers offers offers.
We secure deals and use a due diligence checklist to structure away as much risk as possible.
FUND
Then we fund the deal using our fund and debt partners. We pay our equity partners a preferred return of 10% on their funds plus 50% of the upside.
FIX
We fix the building using an internal project manager who manages a team of subcontractors. We track the work using buildertrend gantt chart software and process draw requests using the AIA forms.
FILL
We fill the vacancies using a hunting, fishing, farming strategy. We prospect (hunt) for tenants by using a bot that gathers google local business and Yelp data and employ a direct marketing sequence like we did to brokers and owners in the find the step.
We fish for tenants using online listings and signs. We farm for tenants using networking with brokers.
We screen for income, credit and business financials. We target multi unit building with 5+ tenants so any one vacancy doesnt impact is much.
FINANCIALS
We put 3rd party management in place. We achieve market rate occupancy at market rate rents once the building is fully renovated. We structure away unnecessary expenses by separating utilities or billing them back using RUBS, updating lighting and heating systems, eliminating wood on exterior and using materials that last.
FREEDOM
Result is a portfolio stabilized value of $60M, $10,000,000 of which is ours and our partners doubled their money too.
Having a system for deal flow is critical and a quick way to analyze deals and make offers.
The magic Multiple helps with that and a marketing strategy is key to getting deals done!
Cash flow is the end goal but we achieve a massive cash flow by creating value first.
Mike
