@Russell Beach
Hi. I like Michael Blanks' spreadsheet, but also use a few others for underwriting. You should run your numbers in a variety of spreadsheets so that you get comfortable looking at numbers and understanding other investors techniques/points of view.
One of the best way to get started is by you joining with a more experienced team in your market. Yes, you will more than likely have to give away a lot more of the deal than you want to on your first deal, however the network you build and the skills you develop will make that cost well worth it. At the end of the day, it's all about leverage.
With all that said, try this:
1. Start with how much income you want to pull in annually in the form of distributions per unit (net monthly rental income x 12) PLUS the net profits on resale you want to realize.
2. If you want to participate in fees, take some time to calculate how much you need to pull in and in what form (acquisition fees, asset management, etc)
3. Do some basic algebra and calculate what the deal size in dollars and the number of apartment units needs to hit your numbers, while keeping in mind that you have to share the fees and profits with the other members of the GP as well as the LP investors. You also need to keep in mind the types of returns each would expect, the desired ratios, profits, etc. For example the GP team has a 30% stake, 2.3% Acquisition fee and 1% annual asset mgt fee. Calculate the numbers with you having stakes at various sizes in the GP (50% of the 30% or 25%of30%, 10%of30%, 5%of30%)
4. On top of all this there are also the debt considerations. DSCR, interest rates, LTV and more. It's an interesting exercise that will give you more clarity.
5. Once you have this all in place, do a market survey to find out which market has the inventory in sufficient quantity, what they cost on average and the potential for 2-4%+ annual rental increases for making all this work in a reasonable time frame (5-7 years) and start working your plan.
So, maybe in the class C category in a market there are properties currently renting for around $930, but per the comparables have an upside of $960/month within a year with simple renovations and up to around $1,120 in 5 years with a more extensive plan. If you want to pull in $12,000 per year from distributions in the first year how many units does the property need to have with the constraints of lender DSCR requirements, your GP split, LP Split and your income goals? 70 units? 100? 200? If you want to pull in $300k in profits on resale for yourself, what is the minimum value of the deal going in and coming out? What are your cap rates, IRR, etc?
Hope this helps. Please let me know if this makes sense or if there's something I need to elaborate on.
