All Forum Posts by: Thomas Loggins

Because my experience is primarily with larger, institutional-quality MF real estate, I cannot provide a lot of guidance on what to expect regarding typical loan structure on such a deal. However, don't let your lack of familiarity with the commercial loan process hold you back IF THE DEAL MAKES SENSE.

1) I agree with @Erik Whiting in regards to a few simple ideas. The rate will be higher and the term shorter because you are purchasing commercial investment property, and it sounds like it's probably not institutional quality based on the number of units. Nothing wrong with that if the deal fits your investment criteria. Understand any provisions within the docs that impact how and when the interest rate can change.

2) You do not want a note that can be called for anything other than standard, typical events of default. Make sure you read your loan agreement and have a closing legal counsel review it as well. It's worth the legal fees. Usually commercial loan docs include multiple default provisions that allow the bank to call a note. But the bank doesn't want to do that. It's a hassle. Just understand your default provisions.

3) Regarding rents, any local broker should have a reasonable idea on rents in the neighborhood. In addition, your bank should require an appraisal of the property that will include an assumption of rents. Usually during the appraisal process the appraiser will ask for a rent roll for the property and then compare it to local market rents, too. You can also just ask for a rent roll yourself during due diligence.

It sounds like you are starting to expand and scale your investing portfolio. Good luck!

As a career real estate professional on the debt side who is just now exploring the equity side of multifamily real estate, this discussion has been very helpful. At the very least, I realize I still have a lot to learn about how the equity side works before I decide to place any of my personal capital.

Thanks to everyone who contributed.

Understanding markets are local, the train of pricing increases continues to slow down based on the home sales reports released this morning 

S&P CoreLogic Case-Shiller Index reports 4.0% annual gain in February, down from 4.2% in the previous month.

Case-Shiller

March pending contracts increased 3.8% from February (primarily due to interest rate decreases in 1Q19), but fell 1.2% YoY.

Pending Sales

Buy real estate in 2011.

@Frank Patalano Lack of experience in identifying opportunities that include both value and cash flow combined with the fact that such opportunities are more difficult than ever to find these days.

Just FYI - Last weeks' BiggerPockets podcast with Chad Doty of 37th Parallel Properties was full of good, educational info in regards to markets, demographics, the current RE cycle, equity raising, the value-add strategy, and much more. I listened to it twice.

Thanks for the comments, Mike. Yes, I agree with networking. I am working on that. 

@Ian Ippolito, absolutely. I agree. Fair point on understanding the author of what one reads. That stated, given the failure of RealtyShares (investors will lose $) and the experience (lack of disclosure) I had with another platform, I believe my "beware" comment is valid. 

As an experienced lender and RE portfolio manager I knew the questions to ask, and was not satisfied with the answers I received. Understanding that there are a lot of inexperienced investors who are excited about starting their RE investing journey (this includes myself) at some point in the future, it was clear to me, as someone with experience in analyzing RE deals ( pro forma property performance, markets, submarkets, capital stacks, investment and exit strategies, etc.), that your average, "just-starting-out" non-accredited investor might not get the full picture of the risk associated with some of the investment opportunities offered on this particular platform.

But again, yes, you are right about understanding the author / writer.

Thanks.

My original comments do not implicate a specific asset class. My comments are about understanding the overall risk associated with these RE investing platforms, suspecting a lack of focus and attention to the fundamentals of real estate analysis and underwriting, which can be included within the framework of the overall business model. My comments regarding an expected market downturn are simply additional support to the  suggested risk.

Good morning, folks.

Disclaimer: I am not a real estate investor. So obviously take my words with a grain of salt. However, I have underwritten real estate deals and managed portfolios of real estate loans for over 20 years.

We see a handful of RE crowdfunding sponsors advertised on RE websites and blogs. It's the hip and exciting avenue for individual investors to get a piece of the action when they don't have the traditional relationships with experienced sponsors and other accredited (or not) investors. This source of capital has grown significantly over the past 5 - 7 years due to a combination of improvements in technology, changes or easing of regulations, and a real estate cycle upswing that has outlived the norm. 

For someone who is just beginning their journey into the existing world of real estate investing, these RE crowdfunding platforms make it easy to get into the game and create excitement. However, if you are considering investing in RE via one of these vehicles, please make sure you do your research. There is no substitute for underwriting based on sound, fundamental real estate principles, including local market and submarket research. 

Recently, just reviewing one of the RE deals offered on an existing crowd funding platform, I provided a few questions about the deal. I wanted to see the sponsor's construction budget, the certified independent appraisal, the project sources / uses, and a few other items. I got the "run around", so to speak, when the response was that they don't make that information public.

Researching this one specific project / property, there is no way I could justify the projected ARV this platform was advertising on the project summary page. And given that we are about 10 years into a 7 or 8 year real estate cycle, it's hard to believe this ARV, in addition to industry-wide ARVs in general, are going to hold up (understanding that RE is local). Just look at the Case-Shiller historical index.

I had already opened / signed up for an account. I'm glad I never funded it.

Just my $0.02. Take it for what it's worth. See link below if you wish.

https://www.nreionline.com/finance-investment/examining-first-crack-real-estate-crowdfunding-industry-s-fragile-foundation