All Forum Posts by: Percy N.

We evaluate various public and proprietary data sources every quarter and track 5-6 markets that meet our research team's criteria. 

There is a lot of time, effort and expense that goes into this so we share this research with the investors in our fund.

This topic could be an entire chapter if not a book by itself.

A lot will depend on the size of the asset (20 doors or 200 doors?) and the market.

- Use market-specific metrics (especially for taxes, insurance, etc)

- Your taxes are likely going to be much higher if the seller has held the property for a while and the value has increased significantly

- Use a realistic exit caprate (and ideally increment it by at least 20 bps for each year you plan to hold - again, market dependent)

- What concessions are offered in the off-season?

- What is the rent growth?

- What is the loss to lease?

- What is the delinquency?

- What is the expected a expense ratio?

- Is the property properly staffed? What will payroll be?

- Will rebranding need a larger marketing budget?

- Internal and external capex budgets

- Cost of goods (especially with supply chain issues)

- Are you planning to use new property mgt software or other tools?

- Debt service (especially with rising interest rates)

- Partnership expenses (tax preparation, attorneys, etc)

- Resident engagement programs

- Misc (travel, etc)

From what I understand, Delaware Statutory Trusts (DSTs) have specific criteria that prevent refiance, etc. So it has to stick to its business plan and has limited options for change should the need arise. This is one of the main downsides to it in my mind and why I would only do one with a massive cash reserve.

Yes you can but it also costs a lot and you may need a high deductible.

One of the main rules of investing....never say never.

This is also why we like secondary markets with strong fundamentals (like high job growth and lower rent-to-income ratios) vs markets that may have seen massive run-ups in the last few years. We have been diversifying our multifamily portfolio from primary cities to these secondary markets for the past 3-4 years and have been seeing great results. The exit caps for properties in these markets can be reasonable and generate a decent profit.

We do believe the capital market situation will create some opportunities for those who are well-positioned and are just about to launch a $50mm fund focusing on multifamily opportunities in high growth secondary markets.

@Michael Figueroa there is tons of information on BP and various books available on amazon. Youtube also has a lot of videos and there are tons of web resources available with general educational content, including ours - 

Education - Penn Capital 

@Ezra Robinson what syndication costs does your underwriting model account for? 

With the Capital Markets the way they current are, what is the LTV you expect?

Not sure about your investor base, but I suppose our investors would expect much higher returns (I guess we have spoiled them).

@Sanjay Sharma, a lot of it will depend on your investing goals.

What type of returns are you looking for? Investment horizon? Regular cashflow vs backended payout? Tax benefits, etc.

There are many good resources on BP and some good sponsors. We do large multifamily in high-growth markets that fly below the radar.

I started as an LP investor myself and switched to GP as I increased more of my portfolio into Multifamily. Feel free to reach out directly if you have any questions.

Coincidently, I was at a roundtable discussion yesterday where the keynote speaker was Sam Zell and someone asked about the SFR rental market. He echoed some of the same points and said the jury is out in his mind since he needs to see the model work at scale when you are trying to maintain different homes with different roofs, HVAC systems, etc that are spread over different geographic markets (keep in mind his reference point was 100s or 1000s of homes). Planned or BTR communities are a little different.

Another point he made was that the transaction costs for SFR on a % basis tend to be much higher.

I would also add that the underwriting models will be different. Who will be managing the properties? What is the exit plan? Risks? Volatility of SFR vs MF etc.