High IRR Multifamily Funds

Multi-Family and Apartment Investing
3yFollow

High IRR Multifamily Funds

Ian Davies
Investor · Jacksonville FL · Member since 2022 · 3 posts · 0 votes

Hi there

Does anyone know of any good funds or projects with high IRR apart from the ones on crowdstreet and realtymogul?

Thanks!

0Reply
124 views

Most Popular Reply

Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y
Quote from @Ian Davies:

Hi there

Does anyone know of any good funds or projects with high IRR apart from the ones on crowdstreet and realtymogul?

Thanks!


Can you define what High IRR means to you? You can invest in class D areas that on paper will show a high IRR of 20% but I would not touch it with a ten foot pole, but in same breath I would consider a 10% IRR where there is no leverage and low investment to value.

7e investments53 Reviews
WebsiteView Page
2Reply
See this reply in the discussion

21 Replies

Jump to latestLatest
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y
    Quote from @Ian Davies:

    Hi there

    Does anyone know of any good funds or projects with high IRR apart from the ones on crowdstreet and realtymogul?

    Thanks!


    Can you define what High IRR means to you? You can invest in class D areas that on paper will show a high IRR of 20% but I would not touch it with a ten foot pole, but in same breath I would consider a 10% IRR where there is no leverage and low investment to value.

    7e investments53 Reviews
    WebsiteView Page
    2Reply
  • Jay Ben
    Member since 2019 · 72 posts · 21 votes
    3y
    Quote from @Chris Seveney:
    Quote from @Ian Davies:

    Hi there

    Does anyone know of any good funds or projects with high IRR apart from the ones on crowdstreet and realtymogul?

    Thanks!


    Can you define what High IRR means to you? You can invest in class D areas that on paper will show a high IRR of 20% but I would not touch it with a ten foot pole, but in same breath I would consider a 10% IRR where there is no leverage and low investment to value.

    If the class(a,b,c,) of an apartment building is based on the year it was built than what specifically determines the class of the area? And is the year built how you determine the building class? 

    If the class(a,b,c,) of an apartment building is based on the year it was built than what specifically determines the class of the area?

    0Reply
  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    3y

    @Jay Ben, the class rating system is generally subjective.

    For properties: things like age and amenities drive the rating.  'A' is relatively newly built with a full amenity package: typically resort level pool, fitness center, dog park, in unit washer and dryer, playgound(s) if mostly family area, maybe covered parking/garages, etc.  Class B would be older (maybe 10+ yrs old) with the same amenities, or you could argue that new construction, but with cheap finishes and "bare bones" amenities, would also be B.

    For area: it commonly comes down to crime, schools, and convenience/entertainment access.  Good schools and low crime, near interstate access but 15-20 min drive to major employment hub may be a Class B area.  

    Again, there is no definitive way to break this down.  I seen deals marketed as Class B properties that I would certainly classify as C-ish, and yet have also described things as B, that others say "that's an A or A-".  I like walkable areas, so anything that requires full car use is Class B to C, to me, but others don't mind driving 20+ minutes for everything, so they think of those areas as A.

    @Ian Davies, to echo Chris: I would be very cautious of "high" IRR deals in today's market. Personally, I perceive a fair amount of risk in the market. And if a group is out there projecting that 20% IRRs are still achievable for a typical value-add play, I get very suspicious, and ask for a lot of "projections vs actuals" on current deals to confirm their assumptions.

    1Reply
  • Jay Ben
    Vendor · Beverly Hills, CA · Member since 2015 · 12 posts · 2 votes
    3y
    Quote from @Evan Polaski:

    @Jay Ben, the class rating system is generally subjective.

    For properties: things like age and amenities drive the rating.  'A' is relatively newly built with a full amenity package: typically resort level pool, fitness center, dog park, in unit washer and dryer, playgound(s) if mostly family area, maybe covered parking/garages, etc.  Class B would be older (maybe 10+ yrs old) with the same amenities, or you could argue that new construction, but with cheap finishes and "bare bones" amenities, would also be B.

    For area: it commonly comes down to crime, schools, and convenience/entertainment access.  Good schools and low crime, near interstate access but 15-20 min drive to major employment hub may be a Class B area.  

    Again, there is no definitive way to break this down.  I seen deals marketed as Class B properties that I would certainly classify as C-ish, and yet have also described things as B, that others say "that's an A or A-".  I like walkable areas, so anything that requires full car use is Class B to C, to me, but others don't mind driving 20+ minutes for everything, so they think of those areas as A.

    @Ian Davies, to echo Chris: I would be very cautious of "high" IRR deals in today's market. Personally, I perceive a fair amount of risk in the market. And if a group is out there projecting that 20% IRRs are still achievable for a typical value-add play, I get very suspicious, and ask for a lot of "projections vs actuals" on current deals to confirm their assumptions.

    thanks Evan Can you give me an example of ”projections vs actuals”?

    @Evan Polaski

    0Reply
  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    3y

    @Jay Ben: Asking a syndicator how they are performing relative to their projections.

    The question I ask is, just that: how are your deals performing today relative to where you projected to be at this point?

    So if the sponsor bought a deal 8 months ago, they should know what they projected for month 8 in their underwriting.  Let's say they assumed they would have 48 units renovated by now.  They projected revenue would be at XXXXX for the month and expenses would be YYYYYY.  I ask them how that compares to how they actually executed for that month.  For the last 3 months, etc.

    Per the original post, if you are only looking for syndicators that project the highest return, you are likely to end up with groups that are great salesman, but likely not the best operators.

    2Reply
  • Jay Ben
    Vendor · Beverly Hills, CA · Member since 2015 · 12 posts · 2 votes
    3y
    Quote from @Evan Polaski:

    @Jay Ben: Asking a syndicator how they are performing relative to their projections.

    The question I ask is, just that: how are your deals performing today relative to where you projected to be at this point?

    So if the sponsor bought a deal 8 months ago, they should know what they projected for month 8 in their underwriting.  Let's say they assumed they would have 48 units renovated by now.  They projected revenue would be at XXXXX for the month and expenses would be YYYYYY.  I ask them how that compares to how they actually executed for that month.  For the last 3 months, etc.

    Per the original post, if you are only looking for syndicators that project the highest return, you are likely to end up with groups that are great salesman, but likely not the best operators.

    Can you verify what they say or show?  
    0Reply
  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    3y

    @Jay Ben, given these are private companies, typically, no.  You have to take their word for it.  But, if you are getting pushback when asking, that will likely tell you most of what you need to know.

    If the operator performs audits, then you can compare the audited financials to the marketing packages they send you.

    1Reply
  • Jay Ben
    Member since 2019 · 72 posts · 21 votes
    3y

    @Evan Polaski I asked for projections VS actuals and got a break down of the last 5 deals the operator completed but anybody could just write that on a spreadsheet and paste it, how would i verify? what should the audit include and would they share it? what else would you ask the operator as a potential LP? Looking for effective operator due diligence / risk mitigation methods

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Jay Ben

    If they have audited financials then you could ask them to authorize the cpa to send to you. You are correct anyone can just put numbers down in past deals.

    Other ways is to ask in groups like this if people have invested in the company and name the company.

    7e investments53 Reviews
    WebsiteView Page
    1Reply
  • Justin Moy
    Investor · Kansas City, MO · Member since 2020 · 400 posts · 278 votes
    3y
    Quote from @Ian Davies:

    Hi there

    Does anyone know of any good funds or projects with high IRR apart from the ones on crowdstreet and realtymogul?

    Thanks!


    I think 'high IRR' is subjective but also linked to the business plan. We're raising for a STR fund (506c) that is projecting a 15 - 17% IRR with an 8 pref and 85% LP split if that's something interesting to you.

    I agree with some of the other posts that some of the higher projected IRRs (20+) I'm a bit skeptical on at the moment.

    0Reply
  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    3y

    @Jay Ben, eventually you need to have a little faith in humanity.  This is true for syndications, buying a stock, buying a single family home, or depositing money in a bank.  

    At the end of the day, projections vs actuals are only relevant if you have some faith that the syndicators are not lying to you.  Any professionally run syndication will have an accounting software that should generate that report for any deal within seconds.  

    But if you are questioning if they just put numbers on a sheet...  well I have bad news for you: Arthur Anderson and Enron did the same thing.  Publicly traded companies falsify financials, SEC regulators missing fraudsters, etc.  Doing due diligence is very important.  Can you get people on the phone, are they confident in their answers, will they provide track record, referrals, etc.  Does the information provided seem realistic?  

    At the end of the day, you should have a lot of conversations with a lot of syndicators. You should ask similar questions of all of them.  Which of those is coming across most trustworthy?  Presumably, at least several will.  From there, you ask more detailed questions, like will you provide budget versus actuals on current projects?  And by the way I am NOT talking about investor returns on completed deals.  I am talking about current operating assets: what did they underwrite for rent, other income, RUBs, taxes, maintenance, turn over, etc.  

    Completed deals over the last few years do not mean much in today's market. What matters is positive and growing NOI, controlled interest expense, and controlled capex and improvement costs. The bull market we have now left made a lot of syndicators look good. I know of a deal that returned 30% IRR to its investors, but was about 30% behind projected NOI. The syndicator had good timing in a good market (bought in 2019 sold in early 2022).

    But in the slowing economy, operations matter and buffer the investment from market swings.  So, again, don't take their track record over the last few months, in terms of investor returns.  Look at what their P&L is showing relative to their projections.  And at the end of the day, you will not be able to verify everything, so you need to look at the detail and determine if it is likely they are sending you falsified statements or not.

    0Reply
  • Andres Murillo
    Real Estate Agent · Los Angeles, CA · Member since 2022 · 137 posts · 106 votes
    3y

    Mogul.ooo is using blockchain to revolutionize REI. Their investments are opportunistic, and not necessarily limited to one type of asset. They're just starting up but have a ton of momentum and great backgrounds.

    0Reply
  • Brock Mogensen
    Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
    3y

    In the current environment, a 15%-17% IRR is respectable/realistic on a value-add ~B Class deal.

    If you are seeing 20%+ IRR deals currently, I would thoroughly review proforma and back-end assumptions.

    It certainly is possible to hit 20%+ IRR deals (we've done it several times). But conservative underwriting in today's economic climate should not be penciling IRR's that high.

    0Reply
  • Jay Ben
    Member since 2019 · 72 posts · 21 votes
    3y

     Are these third-party audits? can you name some providers that perform these audit services? 

    @Chris Seveney  @Evan Polaski

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Jay Ben

    Yes third party and any cpa firms do audited financials for investors.

    7e investments53 Reviews
    WebsiteView Page
    0Reply
  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    3y

    @Jay Ben, as Chris noted, most CPA firms will perform audits.  Depending on the scale, a local CPA may not be able to perform a full audit.  Your household names: Ernst and Young, Deloitte, KPMG, etc all offer audit services, as do your regionals like Grant Thornton.

    A full audit will typically consist of spot checking everything from invoices/receipts tying out to specific checks paid by accounts payable, and down to leases being input into the system, and tying rent payments to cleared checks.  No auditor will look at every transaction, but they pick a fair number to try to find any issues, as well as review the General Ledger entries, bank reconciliation reports, etc in an attempt to find any wrong inputs, or worse, blatant fraud.

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Ian Davies:

    Hi there

    Does anyone know of any good funds or projects with high IRR apart from the ones on crowdstreet and realtymogul?

    Thanks!


     This is wrong question to begin with.

    The right question: do you know any good fund manager that has proven track record with 15-20IRR in the last ten year ?
    Everyone can promise you 30 IRR but it doesnot make sense especially in 2023.

    0Reply
  • Matt Evans
    Member since 2024 · 3 posts · 3 votes
    2y

    Like Evan said earlier, if they won't show you the numbers and very quickly answer ALL of your questions, then it's better to get 5% in money market than lose part or ALL of your investment.

    I've recently been informed of capital call requests of up to 150% of original investment, others such as invest another 10% to save 80% of your investment.

    Anyone who attended the real estate investing or syndicating courses should seek a refund. Using floating rate debt at very high leverage and with little to no experience operating a complex property such as multifamily is a recipe for disaster. The big IRR's folks saw is because of COVID's effect on rental rates and the all-time low interest rates...both fleeting and abnormal.

    1Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    2y

    all these courses with floating bridge loan is used to bankrupt you folks

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Carlos Ptriawan

    This post aged well… it’s been a year when we were talking about what was going to happen

    7e investments53 Reviews
    WebsiteView Page
    0Reply
  • Gino BarbaroPro Member
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    2y

    @Ian Davies

    I would go check out Perry Zheng's platform Cash Flow Portal

    Gino

    Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free