All Forum Posts by: Arn Cenedella

@Craig Pillay

Ok, next question. 😀

What monthly income do you need to be financially free?

Start there and work backwards. 

Arn

@Whitney Hutten

I’d be available at that time. 

Arn Cenedella

Spark Investment Group 

Greenville SC

@Craig Pillay

You face the same issue many investors face. 

Sorry to say, there is NO answer as it depends on so many factors. 

If you were to sell a property, what’s your taxable capital gain?

Do you have time to sell via a 1031 exchange?

Off the top of my head, refi than sale doesn’t make sense. You are just increasing all your transactional and closing costs doing it that way. 

I would also caution against getting too leveraged. It can create a dangerous situation. This might lean towards the sale option. 

Your decision should be based on where do you want to be in 5 years 10 years etc. What’s the ultimate goal? That should drive the decision. 

Good luck. 

Arn

@Andrew Freed

Agreed. I would rather under promise and over deliver than vice versa. The thing with long term hold approach, there is generally a real boom that last 2 or 3 years every 7 to 10 years. So if you hold long term you will probablY catch the wave and reap higher rewards than anticipated. 

@Michael Plaks

Thank you for sharing your expertise. 
I learned something this morning. 

🙏

I imagine one has to do a cost benefit analysis. 

Complicated usually means expense. So I imagine the benefits of the cost seg have to be weighed against the legal and professional fees to get it done. 

If I had to guess it might require revision and re-file of prior year returns. 

@Kristafer Nicaj

I’m skeptical you can now use cost seg on a deal bought in 2018. 

The former 100% 80% in 2023 and 60% in 2024 bonus depreciation rules were for the year the asset was first placed in service.

Get CPA advice. 

I’ll be interested to learn if one can retroactively get bonus depreciation. 

PS Gettinf REP status is difficult. Meticulous time records must be kept. If one has another job almost impossible to get REP. 

@William Coet

The returns you mention WERE fairly standard returns for MF syndications before say 2023. 

$100K turning into $200K total is a 2.0x Equity Multiple. 

$100K of that $200K is returning the original $100K investment.

So $100K is “profit” or “income”.

The $100K income will come from total investor distributions over the 5 year hold plus a shares of the profits due to an increase in value. 

Typical might be average $6,000 a year in distributions a total of $30,000 with the balance of $70,000 from increase in value.

So you might look at that breakdown, the more cash flow the less appreciation dependent the deal is. 

Also look at exit cap which is used to determine exit sales price. Should be 6% or higher. 

At the present time, Spark is presenting lower risk acquisition of completed new build MF (so not involved in construction no construction risk). We buy when the buildings are finished and certificates of occupancy are issued. 

At the present time we are projecting a 1.8X Equity Multiple. Invest $100K get back $180K. 

These are NEW builds so no value add risk or major cap ex expense. Long term fixed rate debt with low leverage 55% LTV.

Returns should track risk. 

New ground up development should offer higher returns but lower probability of success. Same with heavy value add. 

Hope this helps. 

Arn

@Justin Goodin

Good point. 

I transitioned from SFR to MF in Spring 2020.

I am currently a GP on 6 deals totaling over 400 units. $50M AUM. 

I have NOT exited any of them. We got long term fixed rate debt on all acquisitions at an average interest rate of 4% +-  and with on average 4 to 5 years left on the note.

All properties are proforming well at or above proforma. We have paid every distribution on time in the amount projected or more. Many of these have increased in value due to increasing rents and NOI significantly.

I could sell these assets today and BOAST of a high IRR and equity multiple not to mention receive about $1M in GP promote for doing so.

But I won’t sell………

Because it’s not in the best interest of my investors to sell at this time. 

So I will skip the social media chest thumping for now and continue to do right by my investors while I am building a team of investors and partners for life. 

I’ll give up the short term thrill for long term benefit. 

@Cassidy Klundt

Assuming you are new or newer to MF, it would surprise me if you were in the market for $20M to $50M properties right out of the gate. If your price point is lower, hedge funds and large investors will not be competition for you. So wouldn’t rule out Dallas for fear of completion from big investors. 

I agree with of the factors previous commenters have stated. 

I’ll add another one - it’s logistics. How easy or hard will it be to get to your market. I would only select markets where you can get too easily and often if need be. All investors need to get to know their market and the players in that market. That takes time and a physical presence. 

I would submit market knowledge and easy of access outweigh the advantages of investing in the “best” market. 

If your price point is $1M $2M or less, my suggestion would be buy in Las Vegas because you live there and you theoretically know the neighborhoods. And you can be on site as often as needed. Las Vegas is growing no doubt. It’s perhaps not ideal due to its reliance on tourism. 

Dallas is a great market and there are plenty of others. But if you don’t know Dallas and buy a property thinking it’s a B area and it turns out to be a D, you have a problem. 

I am an Old School investor and believe in the fundamentals. Local market knowledge (more than what market) is the key to investing success. You need to know your market - where neighborhoods are trending and you need to be able to keep an eye on your property. Driving 20 minutes to be on site is far different than needing a 2 or 3 hour plane flight to get there. 

I have 45 years experience in REI and I only invest in my home market Greenville SC It's a strong market but it's not Dallas or Charlotte- but I live here I know it. My team is here. I have strong relationships with brokers PMs and vendors. Whatever I give up in "market" I gain from local market knowledge and easy access to the assets all within 30 minutes from my home.

As a newer investor, my experience tells me you will be better off staying close to home. 

@Rashawn Lewis

As @John Underwood indicates UCREIA is a great place to meet investors in this market. 

Most of the best SFR deals are done off market often via wholesalers.

Find some Greenville investing Facebook Groups to join. Network like heck and get to know the players. 

I'm no longer in the SFR space - now doing apartments - but either way Greenville is booming.