All Forum Posts by: Chris Grenzig

Hey guys, we're in the process of revamping some of our email marketing processes and one of the ones we're focusing on is for leads that fill out our investor questionnaire on our website.

Right now we are compiling a list of emails to send out every 2 weeks or so with information we think would be valuable to the potential investor that would help educate them on not only how we conduct our business, but the business in general. I feel that this will lead to a more educated investor, which will not only benefit them, but also has the benefit of speeding up the process of getting commitments when we do have an active deal for people to invest in. 

So far the emails we have come up with are:

1. intro email to set up an intro call/meeting

2. follow up email with a link to our case study from a completed deal

3. email with an example of one of our investor updates we send quarterly

4. email with an example of the legal docs we have used in the past

5. email with an example of one of our past investor books we put together for a new deal

6. email with our top 5 books we recommend to everyone

Would love to everyone's feedback not only on the listed emails, but other potential emails to send, and what they think about the idea of providing the resources to help educate potential investors

Thank you so much for any feedback in advance!

@Marielva Estevez Hey fellow NYer and out-of state investor here. I currently rent an apartment in Williamsburg and I'm invested in the stock market, equity funds, bonds, flips, and our own multifamily investments. The way I look at it, is the difference in rent vs my mortgage potential would be the principal pay-down I would be getting on my loan and I personally think all my investments are going to provide a much higher ROI than paying down the loan. I plan to continue to rent for several years because of this reason. However, purchasing a home is obviously attractive for people who want to save money and build equity and may not have the financial sophistication to feel comfortable doing otherwise. I don't think one way is better than the other and is all based upon personal choices and preferences.

@Ioannis Babatsikos hey great to meet another Long Islander! I grew up in Smithtown and went to Hofstra but I live in Brooklyn now and work in Jericho!

We almost exclusively invest out of state and in the southeast and midwest, so I'd be happy to help with some questions or concerns you have.

We also host a free monthly meetup in Westbury if it's something you're interested in. We're gonna talk about how to pick a target market in the next one on Apr 17th. I put the link below, but feel free to also shoot me a PM if you want.

http://meetu.ps/e/GyBrB/zNqhq/f

To answer your questions

1. Possible but very hard in my opinion. I would encourage you to factor a manager into your cost and only buy deals that make sense with it. Way less stressful and you won't have to be the one getting the call at 2 AM when the pipe burst or the toilets overflowing lol!

2. Picking a market, you have to understand what your goals are. How much do you trust someone else to run it, are you looking for cash flow or appreciation, how expensive is it to get to the property, how long does it take to get there, is it place you won't mind going if **** hits the fan, etc.

3. Again it's all about what you want, buying a distressed property for an investment is tough, because an end user is typically willing to pay more than you or a contractor that can do the work themselves or for cost can afford to pay more than you. But definitely not a bad option if you can make it work

I always recommend listening to podcasts during commute, gym, walks, lunch etc because you can multi task and also I struggle to read business books but love listening to discussions on business topics.

@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.