All Forum Posts by: Nicholas Alexander

Originally posted by @John Casmon:

The willingness to partner with others. Starting out I felt like I had to do everything by myself. Looking back, I could have had more success sooner if I was more willing to work with others. People always say apartment investing is a team sport, but I didn’t fully embrace that right away.

To be fair when you are first starting out, you don't know what you don't know. I think you have to learn by doing in order to understand what value each role brings, and more importantly what value you bring.

For me the biggest thing is persistence and focus. I think it is important to develop a focus that fits your values and goals, but then to re-evaluate and make adjustments along the way. Wash, rinse, repeat.

Good point about building flexibility into your financing. On the rate compression, I wonder if population growth to the region will counterbalance any risk adjustment. I'm not sure of the exact numbers, but based on what I hearing and seeing, the growth trend has actually increased over the past 6 months as folks are leaving crowded and more expensive coastal urban centers.

Jason, thanks for your response. I hear you on value add 3.0 and 4.0.

Having been through the great recession, I know this isn't a normal cycle, I'm curious if there are any lessons learned that can be applied here. Obviously being overleveraged is a big risk factor in a down cycle. I suppose conventional wisdom would say in times of uncertainty it is prudent to maintain liquidity and discipline in terms of chasing deals.

The Charlotte commercial multifamily market seems to keeping pace or exceeding that of residential. I was curious if investors were adjusting their strategies (e.g. switching from buy-and-hold to flipping or developing, condos etc.), moving to other sectors (e.g. self-storage), considering other markets, or what they are doing to find deals? I am open to partnering with other syndicators and was curious if anyone would be willing to share their experience. Thanks

Technically I think ROI would be the measure for a principal residence, but basically you would look at the projected return on the build project over time v. rental income over time. E.g. high level if you have 100K to invest assuming 80% financing in a build project (200K land + 300K build) in 2 years (the time required to claim principal residence exemption) that is will be worth 600K when you sell you have 33% after-tax annual ROI (assuming 1 year build time). On the other hand, if you invest in 2 rental properties you would compare annual CoC return + potential appreciation in 3 years. Don't forget to include transaction costs in both projects e.g. financing costs, broker commissions etc. I think you just need to walk through each transaction step by step in a spreadsheet to compare. In my case I already owned the land and was living in the house so there was no additional transaction cost other than surveying the subdivision and recording.

Originally posted by @Forrest Faulconer:

@Nicholas Alexander

That’s awesome, very much wanting to look into building a home, will also look into subdividing down the road!

Thanks, my approach is all about finding value or creating value. Finding a house on property that is large enough to subdivide is a great way to create value. You'll probably have to jump through some hoops though like I did, because if it was obvious or easy someone else would do it.

@Kenneth LaVoie You could sum the total cashflows and gain, over he capital invested, and then divide by the number of years = ((total cashflows + gain) / capital invested) / years). That would basically give you annual ROI, but would probably be a little high compared to IRR because it doesn't take into account debt paydown for one thing. It's a decent swag at total return as to whether the project is worth due diligence or not.

My homes have definitely been investments, in fact they have spring-boarded my career in real estate investing.

My first home was purchased in an up-and coming area at the right time during the great recession. It produced an annual 30% increase in value upon sale (150% annual CoC return) that I paid no taxes on due to the principal residence exemption.

My next home was on a property that I subdivided and built a second home on. The first home produced an annual 5% increase in value upon on sale (24% annual CoC return). The second home (on the new lot) produced an infinite return (no cash down due to a dirt equity construction loan). Overall the entire project produced about a 40% annual CoC return which I paid no taxes on due to utilizing the principal residence exemption (twice).

While I likely won't ever be able to replicate either of these projects, you have to be willing to put a lot of thought and energy into finding value before anyone else can see it or in ways other people tell you isn't possible. I love it when experts tell me I can't do something.

Hello all, I am looking to purchase an apartment building (8 to 40 units) in the Charlotte area. Referrals to local commercial brokers who work in that space much appreciated. Thanks in advance.

Thanks for the feedback. Good advice about looking in the PM contract for opportunities for the PM to upcharge. I think it's important to have your interests aligned as much as possible. Awarding bonuses to align with profit seems like a good way to do that. I would think you would have to scale to a certain size (larger than 20 units) though before you are in a position to take a PM on as an employee and pay them a salary.