All Forum Posts by: Spencer Gray

I'll be speaking at Deal Maker Live, so see everyone there! 

@William Costello Carmo puts on very nice events with some very big institutional players, very eye opening. 

I'm also considering the Jake and Gino event and a few family office/REI events.

I've only done limited direct mail outreach with not much success. I know @Sterling White has quite a bit of experience doing this and has been successful. Like with anything persistence is key. That being said I believe there are more effective means to get in touch with owners (email, phone, having a broker reach out for a small fee). 

Commercial is usually defined as 5+ units. That being said, there may be local codes that use a different definition. I would look up the specific code for your area.  

Curious to everyone's opinion on the market? @Jim Holmes @Daniel Vaccaro @Casey C.

There's currently 1000's of large MF on the market in Terre Haute and we're taking a look. We invest in Indy, Granger/Mishawka, Bloomington, Lafayette, Evansville, sold out of Muncie, but never Terre Haute. 

There's not much historical growth, but it sounds like the casino is going in and some areas are growing moderately. 

I'm trying to understand where the market is going. 

Someone more snarky than me might say "there's no such thing as a "good" cap rate, cap rates have nothing to do with return." So while the first part is technically true, we all know what you're asking and are looking for. 

The best way to answer your question is to network some local investors/brokers/lenders and see what they are seeing/buying. That will give you a good sense of the market. It's not so much that you pick a target cap rate and you find a property to match. Instead, learn the market cap rate range, and see if that aligns with your risk tolerance and works with your strategy. You may decide you'll need to move up on the risk curve to get the return/cap rate that you're looking for. But still don't judge a deal just on cap rate alone. 

 A property purchased at a 3% cap rate can have a significantly higher cash on cash and total return than a property purchased at an 8% cap rate. The opposite can also, and often is, true. 

If you buy a 5 unit that is 40% occupied, at a 3% cap, but you are able to lease up the other 3 units at significantly higher rents, raise rents on the two renewals, you could be operating at a 7-8% yield on cost (or cap rate), with a 10%-+ cash on cash return. These are rough numbers, not exact.

Buy at an ~8% cap rate, but two tenants disappear after destroying their units. Now you could be operating at a 4% yield on cost, or worse.

Higher cap rate = higher risk low investor demand. Lower cap rate = lower risk higher investor demand. 

In a perfect market risk = return.

Now the trick is to identify where the market is inefficient at pricing risk, and exploit it. However to do that, you do need to know your baselines, how to operate, and be confident in your execution. 

Best of luck! 

Regardless of what you and your partners decide do, you should start allocating some of your profits into cash flowing assets, either directly or passively. I don't see a problem to continue wholesaling and if a good multifamily deal comes across your radar to take it down via syndication. That being said, syndication is a full time business: raising capital, sourcing deals, managing assets, managing investors, etc. Syndication is a more scalable and evergreen business model compared to wholesaling. 

If you stopped wholesaling tomorrow, your income would drop to zero, assuming you aren't already investing in income producing properties. If you decided to stop syndicating new projects and investing in deals one day, you would still have multiple streams of income that would come in for years to come. 

I've never invested with Nighthawk but took Michael's "Platform Builders" course/program last year, I thought it was high quality and my team and myself got a lot out of it. I also recently interviewed Michael for my soon to be released podcast, The Gray Report. He seems like a very genuine, mission driven guy. 

So while I can't speak for Nighthawk's track record or returns, if their multifamily syndication operation reflects the quality of his other offerings then it would be at least worth looking into.  

As a KP I've received both a finance/guarantee fee around .5%-.75% of the loan amount and/or 5-10% of the GP. Larger balance sheets would be able to negotiate for more, however.  

On one hand I love sharing how awesome the market Indy is, on the other I want Indy to keep it flying under the radar to keep prices reasonable and yields up. 

@Clay Cook I would ask if there is a floor/ceiling for the rate. There often is or you ask for a ceiling or "buy" a ceiling so you know what your max rate exposure is. I would then stress test your deal using the ceiling rate. For your "baseline" model you could use the mean of the floor and ceiling or the mean of the current rate and the ceiling.