All Forum Posts by: Chris Grenzig

@Vlad Denisov there was just an article posted the other day about the inability of economists to correctly predict recessions/downturns/depressions etc by examining claims and market cycles over the past 100 years or so. 

I'll save you some time and just it was abysmally wrong and basically a joke. I think as long as you have deals that are not over levered, stress tested so it would be very tough to go into default, you/your investors understand that if things go south it is very possible extra capital could be required, and you did everything reasonable to make sure the business plan gets executed, there's not a whole lot anyone else can do. 

Someone talked about credit in the bottom of the recession (they were spot on), the problem with trying to buy at the bottom is getting loans is 100x harder than it is today. I was talking to our manager and she would tell me about how she could've bought deals for 15-20k a door that are worth 60-80k a door today, but there was no financing available then! You basically had to buy all cash, freddie and fannie weren't lending like they are today. 

Also, we are in a time where investor dollars are extremely high, it is going to be significantly harder to raise capital when everyone is clinging to their dollars and people start to lose jobs. 

So my advice is lower return expectations, stress capital preservation with solid returns to investors, because not making 100%+ return in 2-3 years is better than potentially losing everything in 2-3 years in my opinion.

@Sam Askar your first point is a great advantage then that I missed or wasn't covered. Basically I was just asking the rhetorical question that if all things being even between being around crappy buildings or being around nice buildings, there has to be some discount associated.

I say this because a lot of people will see the other building only a couple blocks away getting x and think I can get x, but my building is next to a slumlord of a property and there are people that my tenants won't want to live near for the same price. 

I probably went through it too quick and if you have a really intimate knowledge of the area than it will help tremendously, I just see it time and time again, people don't consider the immediate properties, retail, property, etc that could impact you achieving the same as some other property even though its only a few blocks, miles, etc.

@Sam Askar two quick points, equal bed to bath ratio will always get more rent for student housing and more demand

Also, if you are surrounded by old buildings that are crappy, you will be capped on rent and I don't think you should project as much as the other new construction projects. Just because you are new, doesn't mean the type of tenant in the new building wants to live around the type of tenant thats surrounded by old buildings. This I know personally when I look to rent, as well as when renting our apartments. You have to be very careful when you are the best option in your little area, that you don't overestimate the desirability of the area.

Why would I live in your building surrounded by crappier buildings, when I can live in the same style new building surrounded by new buildings for the same price?

There has to be a discount associated there or there has to be a real over demand for new buildings that the demand is massive. And if there is that much demand, the buildings will raise rents until the demand evens out (got to love free marker capitalism), which will eventually end up in you again having to be a discount to the other buildings.

@Zachary Bellinghausen I'll tell you right now I think our average return over the past 5 years is like a 25%+ IRR to investors and every projection is usually between 15-18%. We've underperformed on projected P&L, been spot on, and also over performed, but in every scenario we have been helped by the market on exit, just like everyone else over the past 5 years.

My advice to you when vetting sponsors, look for the deals that underperformed (everybody has one, don't be fooled), figure out why the deal underperformed, and see how badly they underperformed. Did they get foreclosed and everyone lost their equity, did they have to do a capital call, did they break even, miss on returns but still make money, how much did they miss by? And then have a frank conversation of what happened and why and what they are doing to prevent that in the future. 

I don't care what deal you are buying, there is going to be something during ownership that could not have been accounted for during the acquisition period, and the operators have to adjust to account for that. Some are big, and some are small, that's why it's really easy to buy a deal, but not nearly as easy to execute and adjust. Have a conversation because as much as you're investing in the deal, you're investing in the operators too.

@Kyle Gilbert a thousand times yes, walk every unit and take photos, especially of all the mechanicals!

If there is a broker request financials, and during due diligence request tax returns, general ledger, bank statements, etc. If they don't match up you go back and and ask for you deposit back and walk away from the deal, or you request a price reduction due to stated reasons. They'll either accept, negotiate or decline and you go from there.

@Kusha Karvandi just to speak from the other side of the crowdfunding side, coming to them with deals and getting funding. It is definitely a great option, just know that they charge fees on top of our fees which will dilute your return. You will get greater exposure to companies you may not have otherwise found, but there is obviously a cost to everything. 

With the internet now, if you wanted to avoid the middleman, you should easily be able to find tons of companies like ours or the ones on the crowdfunding websites and go direct. However, the crowdfunding sites do provide an extra layer of due diligence, but at the end of the day they need to place deals also to make money. They definitely do a pretty decent job underwriting and analyzing, but I wouldn't say it is anything overly extensive in my opinion.

If you want my opinion on a couple of the ones we've spoken with from my end, the sponsor side, I'd be happy to discuss with you.

@Derek Morrison I actually think neither is better than the other. Yes you want to sell at a lower cap than you buy because instant value, but there is a reason people buy 3 and 4% cap rates in NYC. 

Lower cap rates tend to be less risky investments because they are in high demand areas and, in theory, should have a much better ability to preserve capital

A higher cap rate are in areas of much lower demand or are seen as more risky in terms of interest from tenants; whether its apartments, office, industrial, etc

There's always going to be demand for apartments in NYC no matter what, just at what price

There may or may not be demand for apartments in a town of 10,000 people, which is why that may go for a way lower cap rate.

At the end of the day you have to have a strategy that you feel comfortable with, and weigh the risk vs the return on every investment. 

Hey guys @John Cohen and I are excited to announce our latest monthly meetup is officially scheduled for April 17th at 7:00 PM in Westbury, NY. We had to miss a couple months here and there due to some personal reasons, but we are determined to get it back on track every month.

Like the title says this is a free event, where we focus primarily on different facets of multifamily investing. However, many of the things we talk about can be directly used for other types of investments. This month's topic is a good example of that.

We are going to focus the discussion/informal presentation around how to choose a target market(s) when looking to invest. We primarily invest out of state, but we continually analyze and adjust what markets we look to target to buy new properties in, and these principals can be used broadly for metro areas across the country, or in the micro like local neighborhoods. We're going to speak on how our targeted areas have changed over the years, why the changes, a couple of ways you can start to choose your own areas, and things to consider when picking one.

We try to keep the information session short and sweet, open it up for some Q&A, and then leave the rest of the time for networking with everyone there.

We'll start at 7:00 PM sharp so try to get there a little early. There will be complimentary food and coffee, but no snacks, so make sure you eat something beforehand. Dress is business casual/casual and we hope to see everyone there!

If you do plan on going we would also appreciate it if you could RSVP on our meetup page as well. That's where we try to push everyone and keep the best track of numbers prior to the event.

If you know someone who you think would like to go, we would greatly appreciate if you could share this link or tag them in the comments below!

Meetup Group Link

@Max Abend always great to meet someone else from the same area. I do the reverse commute, love in Brooklyn and work in Jericho.

I tried flipping on Long Island and really struggled for 8 months give or take without getting a deal done. Seriously looked into tax auctions in hilly and then went over to the multifamily space first as an investor and now working full-time. I would be happy to meet up or jump on a call and see if I can help in anyway.

Also, we have a meetup that we do in Westbury that should be starting back up again on the 17th, just waiting for the hotel to get me the revised contract and then we're going to blast it out. We tend to pick a topic around multifamily and discuss or present, do a Q&A and then networking. Even though it's MF focused, still a lot of people there to meet that are doing flips, wholesaling, small multi, etc.

Let me know if you're interested in either and we'll see if we can make it happen.

@Jay Hinrichs we still own the deal, but there will definitely be a healthy bonus for performance. I've also seen poor management basically steal blind, which is why we take such an active hand in asset management. Another deal we're buying now that is 288 units had about $500k in outstanding payables 2 years prior before a new management company came in, so it definitely happens.