Is a 20-30% ROI possible when investing $30M?

Question

If I can provide a Real Estate Investment plan that will generate a 20-30% ROI depending on what's possible, then a private lender will provide $30 plus million to accomplish this.

Question:
Does one buy multiple commercial units?

Looking for someone who wants to partner with me. I do not want to take a finders fee or acquisition fee.  Is there anyone who would be interested and who knows and can prove to me that they know how to achieve these kinds of returns and in what way?

Thanks in advance,

Bryan Hancock · Answer

Luckily we have principals across the country with a lot of experience Joel.  One of our principals has done over 1000 real estate deals.  We are structured differently than most funds so we can source great deals in different areas of the country.

30%+ deals are very, very rare from what I have seen though.

Joel Owens · Answer

One word comes to mind "UNREALISTIC".

Get these calls multiple times a week.Looking for a new shopping center with a grocery anchor where we can close quick and pay cash and want to buy 50 cents on the dollar for present value.

A investor will look all year to MAYBE find that needle in a hay stack ONCE.When they find it multiple offers will come in and the chances are slim to none of them getting it.I don't work with time wasters like this.

Think about it this way.If I have hundreds of cash investors waiting to buy for cash at going in CAP rates of 10 to 14 percent then why is a seller going to sell for a 20 to 30 cap going in?? THEY ARE NOT.

There are many investor funds that were started out to deploy money hoping for the S and L crisis of the 90's.That scenario never happened so you have a bunch of money waiting to be deployed for unrealistic returns.

The fund parameters have to be adjusted if they are going to purchase anything or will just have to return the money.Some fund managers are going from prime urban core markets to secondary suburban markets and tertiary rural markets to hit a higher return.

I haven't seen 20 to 30 percent going in so in my area that is a pipe dream.

Jeffrey K. · Answer

Save your money, fix your credit, and start small.

Steve L. · Answer

I think it would be pretty difficult without making some risky investments.  Especially if you need to pay 20-30% to the private investor without your cut.

Joel Owens · Answer

Haven't had a vacation in years.After awhile the numbers all blend together in your head .............. :)

Bryan as another commercial broker said to me.He has a stack of buyers.The ones looking for a needle in a hay stack go to the bottom of the list.

My mantra is if I am going to look that long and hard for a deal like that then (I) will be buying it and realizing the returns.

I think what happens with funds is that they are getting beat out by local investors willing to buy at a lower return.These local investors usually have decades of knowledge on the areas compared to the outside investors.They are comfortable paying more because of local knowledge whereas an out of county or state investor wants to price in the risk resulting in a lower offer.

This is what I find with my listings.Investor A that is local will pay Y and then investor B comes in with a 20% lower offer because they don't know the area.Investor A wins out and closes the deal with more net to the seller or bank.

A fund could partner with investor A to get the inside track on the area.This is what my developers would do to get a project pushed through.You use the locals that have the political ties.Nobody likes to see the big boys come in and push them around in their towns.

Much easier using locals to cut through the red tape.

Bryan Hancock · Answer

Great posts Joel...I am seeing the same thing.

The funds that are blind pools have a harder time raising capital, but they are certainly more nimble.  Competing on price for MFD product in major population centers right now doesn't seem to be worth the effort.  You have to source other types of projects to get better yields.  Chasing dumpy buildings in tertiary markets is not my idea of a prudent and safe use of investor funds for the level of yield you can obtain.

To get really great yields you also need to source deals on your own instead of going through a broker because of what Joel says.  Why would a CRE broker spend all of their time on something that is unlikely to produce a commission?  You need many, many deals finding you so that you can be very selective about where you place investor funds.  Getting to that point isn't easy and that is why LPs place their dollars with people that have already done the hard work to get there.

J Scott · Answer

Unless I'm missing something, assuming they're not planning to leverage the portfolio, ROI and cap rate are going to be equivalent...

Joel Owens · Answer

Sorry just saw 20% to 30% ROI not CAP rate.I slept in today so I haven't woken up completely yet! LOL

James Martin · Answer

Welcome!

Is a 20-30% ROI possible when investing $30M?

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