All Forum Posts by: Zac Smith

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Does anyone have insights into Class C sales comps ($/unit and cap rate) for 77093, 77055, and 77018? 

77093: Costar had 0 comps.

77055: ApartmentData has no sales comps 

77018: I've only found things from a few years ago or longer

I'm trying to determine what a good $/unit and cap rate would be for a few Class Cs I'm evaluating in these areas. 

Thank you!

Hey Everyone,

Is there a set limit on seller credits for multifamily (5+ units)? I'm interested in structuring a commercial deal with 5-6% of seller credits to use for my equity in a partnership. For example, asking price: $2M, closing costs: $25k, down payment: $500k. With seller credits, asking price: $2,120,000, closing costs: $25k, down payment: $410k (530k - 120k).

 Thanks, @Chris Seveney.

I think the issue I'm running into is I'm the one networking and finding deals, evaluating them, and then will be the one implementing the value add strategies. However, lenders see that I have no CRE experience and don't want to play on the playground with me. Which I understand. But I do still have consulting experience in advising senior leaders of companies on how to reduce OpEx and increase profits, so to me, this isn't foreign.

I'm curious if there is a way I can position the purchasing entity where the experienced sponsor can be the one evaluated by the underwriting team, while myself and the equity investor still have a payout that is different from the equity ownership. I'm thinking a Series LLC may host an opportunity for this?

Hey everyone,

I recently left my W2 consulting job to pursue CRE. I have an LP financially backing this venture, but since I don't have the assets or experience, finding lending has been a challenge.

What I'm thinking:

Bring in someone with CRE experience to the partnership and make them the sponsor. The idea would be to use them for funding and pay them X with a buyout clause. 

Brainstorm #1

Is there a way to structure the entity where I might own 20% of the entity, the LP backing this venture would own 20%, and then the new sponsor would have the remaining 60%, to ensure underwriters are focusing just on the new sponsor? But, still have a waterfall where the payouts would be completely different than the ownership. Is there a way to do this? Maybe 60% ownership for this new sponsor is common stock, but have mine and the LP as preferred? 

Brainstorm #2

Create a trust to own the entity purchasing the CRE, with me as the trustee. Can I appoint a sponsor to represent this transaction, while myself and the investor stay out of view of the underwriting team?

Open to other ideas! Thank you

 This number came from the last P&L the [foreclosed] owner sent to the lender 6-7 months ago. I would probably foreclose too with that heavy of an expense. I think I may just factor a little below market rents (say $920/mo, instead of $950/mo) and plan to structure the new leases around tenants paying for them. Doing so brings the Operating Expenses to about 40%, which is a lot more realistic 

Hey everyone, I'm evaluating an apartment complex in Central Texas. After going through the proforma I made, my NOI seems way low. I can't base the expenses on real numbers, due to not having anything that's current (foreclosure that's still operating under PM).

EGI: $654k

Operating Expenses (annual)

Adv. & Marketing: $38/unit (3.6% of EGI)

G&A: $40/unit (4% of EGI)

Utilities: $4,280/unit (42% of EGI o_o...other comparable apartments are including rents at higher rents. I could probably do that and the EGI would go up by $69k)

Repairs & Maintenance: $767/unit (7.5% of EGI)

Service Contracts: $125/unit (1.2% of EGI)

Management fee: 7% of EGI

Make Ready and rollover: $310/unit (smaller units and this is accounting for a 60% renewal rate)

Property Taxes: 2.13% of future assessment value 

Insurance: $753/unit (7.4% of EGI...the building was built in the 60s and rehabbed in 2012) 

Total OpEx: 82.8%

Thoughts?