All Forum Posts by: Ryan G.

I am looking to connect with new contractors working in any of the trades involved in typical SFH renovations. I am also curious to meet well-recommended General Contractors or Project Managers.'

This is currently to support SFH flips but would consider using value-add multifamily as well.

I am in the Southwest PA area and would need contractors active near Pittsburgh, PA or Allegheny County.  Please let me know if anyone can share any recommendations.

Thanks!    

Number one advice: Never trust a broker's pro forma.  We have sold a few properties and experiencing this process from the seller's side double underlined that for me.  They want to sell for as much as possible.

Use the broker's pro forma as a thumb to the wind guide for your interest along with the rest of the offering memo (right location, asset class, etc.).  Do your own underwriting.  Ask for historical financials and what adjustments were made for the OM.  This OM uses expense figures that are round and likely not 'current' as advertised. I am not going to deep dive here.

I usually lose these sorts of deals to people willing to underwrite more aggressively.  I find the sellers want some of the upside of the future performance and the deal will not work if you do not achieve a substantial portion of it.  You probably need to pocket 20%-30% of the upside over the first three years to make this make sense.  

The deal is risky unless you know the market well, have experience executing this strategy, and have accounted for the quality of the asset and tenant.  You may run into issues with re-tenanting and it may take longer than you expect or cost more.  

Let's assume the financials in the package are good for a moment (they probably are not) AND that you either do not or do achieve the broker's pro forma:

If you purchase this asset, achieve ONLY the 'current' NOI, grow NOI 2% per year, and exit at a 5% cap at the end of Year 6, you will have a 4.8% unlevered IRR. You would arguably be better off buying a CD at a slightly lower yield with almost no risk, time, or stress requirements. If you take out debt to acquire, you will be negatively leveraged.

If you purchase this asset, achieve the 'current' NOI, grow NOI at 2% per year, and achieve the 'market' NOI by year 3, then exit at a 5% cap at the end of year 6, you will have a 20.5% unlevered IRR. Super awesome deal. Probably BS.

Why is the seller the courts?  Why did the former owner not execute this strategy?  There is a catch somewhere. 

Is something wrong with the property?  It is from 1977.  I see window air conditioners. Exterior looks somewhat aged.  Hard to tell as the area is not a focus of mine.

Something feels fishy.  Some of it is the pie in the sky broker underwriting (probably).  I feel like there is something else too.  The seller is a court appointed referee.  I would assume that what led up to that situation likely has an impact.  

I am looking for any advice regarding investment in Pittsburgh.  I am coming from the ground-up multifamily development world and I am struggling to understand how smaller properties are seen by investors.

Where do you invest in Pittsburgh?  

What strategy do you use? 

What analysis is required for you to get to 'go' for an opportunity? I know where deals 'go off' in CRE multifamily development and acquisition. Things seem different with SFH and small multi.

Most of the rental deals I look at either have negative cashflow or barely positive cashflow.  That would not fly in multifamily unless there was a reasonable expectation of fixing the issue quickly.  Is that where deals go off?

Most of the flips I look at are razor thin on margins based on estimates.  I would love to do a lot of flips, but for my first one, I am looking for more meat on the bone to absorb any mistakes that I make.

I will start by saying that I believe we are talking about slightly different forms of co-living.  Everyone seems to have their definition.  I would love to hear yours.  I would also like some examples for your points above based in the real world.  You show start up costs as lower for co-living.  Assuming we are talking about similar versions of co-living, I would argue it is higher.

I own a co-living space in Pittsburgh, PA.  Part of a larger development.  It has done well.  Increased revenue and decreased parking demand allowed us to carry income-restricted units as well.

We originally planned on spinning it out into a brand, but we never had the bandwidth to do so.

Our largest hurdle has been education as most of our tenants are coming in to rent traditional units.

Investors did not love it.  It has been a huge point of concern for large investors as they want to hedge risk and co-living is a complete unknown.  They won't touch it with a 10' pole unless they know you very very well and trust you even more.  We have explored disposing of the asset multiple times and the same comes up during sale.  

If it is higher reward, it is because it is higher risk. 

I am mesmerized by this post (in a good way).  I do ground-up urban infill multifamily development and we are effectively at standstill as far as new projects go.  

Are you having luck doing new-build single-family infill projects?  That pencils?  I am dying to branch out into something different while the dust settles in my usual stomping grounds.  I have been leaning toward acquiring existing assets as new-build in my area is about as expensive as existing assets AND it takes years to spin up until cash begins to flow.