All Forum Posts by: Raj Vachani

Question on whether you can invest with me or not.  

I've frequently receive questions form people I don't know on whether they can invest in a deal of mine.  The answer is NO.  Sounds surprising but let me explain...

I've seen a lot of Multifamily syndicators recruit investors on sites.  The SEC rule 506B states that if you invest with a syndicator, then you MUST have a pre-existing relationship with them.  So for you to invest with anyone that is putting out a security there, you MUST take the steps to get to know them and build a relationship.  Hope that helps.  So in the interest of the spirit of Biggerpockets, my objective is to meet, educate, and dialogue.  So, while I can't accept investors I don't know, I am up for networking, doing webinars, and building relationships for the future.

What would you like to learn abut building a multi-family career?

@Joel Brown  Joel, once the dust settles with the current deal we're working on, I'd be happy to do a webinar on on case studies.  I'm going to suggest some of the topics.  Everyone, please add on.  

What is multifamily?

Who valuations work?

What are the key levers?

Why people fail or succeed?

Different investment models.

How multifamily changes in economic up's and downs.

How to acquire a deal?

What lenders look for?

What's the overall business strategy in Multifamily?

What else do you want to see?

@Ola Dantis  To answer your question, I'm both.  On my deals I'm a GP and I also invest as an LP.  On some deals I'm only an LP.

@Yonah Weiss

Yonah askked "Why in hot markets do you put the vacancy rate so high?"

Yonah, it's just the way we underwrite.  We aim that on a conservative level we'll double an investor's money in 5 years if the economy is soft and we'll triple it if the economy is good.  I think when you take all the key levers in your business plan (reversion cap rate, vacancy rates, rent growth, etc) and go aggressive in all of those factors then you will get burned and you will burn your investors.  When our investors are putting their retirement savings, and kids education money into our deals, we have an obligation to ensure that we reduce risk as much as possible while provided healthy steady state returns.

@Jan H.. 

 Jan wrote "Not sure about anyone else, but...it's slightly annoying when someone comes in an almost-bragging-like manner (hey, look what I just did) and offers no other information. What is the point of this post?""

Jan - you're totally right.  I've been drinking out of a fire hose working 14 hours a day over the past week. I have not been on BP.  I've just spent the past hour responding to all.  Sorry bud.  Hope to be on more often!  Just settings expectations, I'll be on maybe once a week at the most.  I'm focused on making a my current deal a success.

@Sam Grooms  Sam asked "Do you plan to only acquire in those two markets for 2018?"  Sam, we like Dallas, San Antonio, Salt Lake City, Provo, Tampa, and Atlanta.  We're looking for partners in those markets that we can do a deal with where we would do all the heavy lifting.  

@Gino Barbaro  Gino, 2017 was super hot.  With the current administration there is so much unpredictability.   The most important thing we can do is make sure we underwrite conservatively.

@Yonah Weiss  Yonah asked "You say you have underwritten the deal VERY conservatively, what factors do you adjust to make that conservative estimate?"

Yonah here are the key factors that you should look for when investing in a MF deal:

1) Rent growth.  If the city is growing at 4.5% make sure the sponsor is not putting in that number.  Instead you should see underwriting with 2-3% growth.

2) Economic Vacancy: In hot markets the sponsor should put between 10-12%.  If seen some guys put in 4-5% and I think they're nuts!

3) Reversion cap rate.  If you're buying a property at 5% cap rate, then you need to have your financial business plan assume that the market will soften and that you'll be selling your property for a good deal for the buyer and that the cap rate on sale will be 1.5 to 2 points higher... e.g. 6.5% to 7%.

4) Buy properties that are renting below market and do value add so you can get higher rents for the value you provide.

Those are the big ones.

@Dennis O.  You got it right.  Financial freedom does not happen overnight.  The person who got me into Multifamily was my neighbor who bought a condo next to mine in Hawaii.  He made his money in MF and is now 65.  He's now put all his money in 5 condos in Hawaii that brings him around $500K a year in revenue.  It took him 35 years to get to that point.  

@John Woodrich

John, typically each asset has around 30-50 partners with each investing anywhere from $50k to $150k.  Our typical investment carries debt of 75% LTC, and the rest is through our passive investors.  My partners and I end up being guarantors on the loan.  Our goal is underwrite the deal conservatively so that partners double their money in 5 years.