All Forum Posts by: John Sayers
John Sayers has started 1 posts and replied 130 times.
Post: “Conservative UW is Dead”
- Specialist
- Austin, TX
- Posts 136
- Votes 108
@Account Closed Thank you for the input.
Post: “Conservative UW is Dead”
- Specialist
- Austin, TX
- Posts 136
- Votes 108
Originally posted by @Account Closed:
Most people don't understand how to underwrite in the first place, unfortunately. I've read through decks telling me a deal projecting 3% rent growth is conservative because the last 2 years rents grew at 3.5%. No research or data or description of supply/demand dynamics in the market. The entire thesis was 3% is lower than 3.5% and therefore its conservative. That's a pretty easy pass for me.
When looking at deals and track records, I like to ask for a comparison of projected rents vs. actuals, projected NOI vs actuals, and projected exit cap vs. actual to get a sense for a sponsor's ability to underwrite vs. getting bailed out by cap rate compression. It definitely makes some people squirm.
...Ultimately, they may wish to invest with you for a REAL 12% IRR vs. getting jerked around by some guy who used to be in marketing a year ago for a pie-in-the-sky 19% IRR.
Phil, have you normally been able to get the comparisons delivered, and what is the success rate of the requests? Timely and thorough?
It seems uncommon to see a sponsor so transparent as to boldly list the full data upfront w/o one asking: all deals, all full cycle outcomes, and all held deals WITH "Deal to date" results vs original PPM projection. Good to see, and better yet if they have a meh/dud/bad deal in the mix. A perfect record can be a warning flag or risk rating factor.
Post: “Conservative UW is Dead”
- Specialist
- Austin, TX
- Posts 136
- Votes 108
A lot of good replies here! The quote that resonated a just bit more for me on the topic (@Arn Cenedella):
"So many people tout conservative underwriting to such a degree as
to make it almost become a cliche. I can’t remember the last OM or IS
that did not have the words “conservative underwriting” somewhere. I
believe the term is mis-managed and over-used. To some degree, the term
is more about marketing than analysis."
I can't help but concur 100%. "Conservative" being mentioned in a PPM or presentation (especially repeatedly/often) with only anecdotal justifications at best, can quickly be a yellow flag. Not really a calming effect for some. Similar to "it's a good deal" from your brother's Fund Advisor. Sometimes it is a good deal, yet most often it's only a pitch of requisite words to try and install a sense of comfort. Maybe because "everyone" is doing it.
Post: Mobile Home Park Valuation
- Specialist
- Austin, TX
- Posts 136
- Votes 108
Lot rents - expenses to get to NOI.
In another related recent topic it was noted by an expert that you shouldn't count the mobile home rent but only the lot rent, as only real property" income goes towards the valuation, cap rate etc. https://www.biggerpockets.com/...
Also saw it noted recently that one should not put any value in homes if they are older than ~1990.
So it seems that if park owned ones are older ones, they may have little traditional value on the park valuation level.
Maybe a park pro can help clarify for you.
Post: Syndication Exit Strategy -- "Sell" Asset to Yourself>
- Specialist
- Austin, TX
- Posts 136
- Votes 108
Originally posted by @Brian Burke:
Originally posted by @Tushar P.:
I’m going off-topic a bit, but to address your comment about risk increasing when sponsors collect more in fees than they invest in a deal—this correlation is a common misconception. There is no evidence that sponsor investment increases alignment of interest nor decreases risk. But there is evidence that the opposite could be true. Sponsor co-investment can creat a misalignment of interest and increase risk to LPs under some circumstances. I’m not saying sponsor co-investment is bad, just pointing out that it isn’t the bright-line test of alignment that many people believe it to be.
I've seen various sides of the debate on "alignment' but yet to see non-anecdotal input from either side to support their POV as being any better than the opposite view. Always seems a stalemate of opinions. Realistically all sides seem to have holes in their POV if there are to be thought of absolute or even superior. Seems neither side clearly holds up as best, so a balance of both concepts "seems" the best compromise. It would be nice to see a live or recorded discussion/debate of such alignment POVs and the participants also be not 100% GP/syndicator on the panel. Are any of those out there that anyone has seen that might be interesting to review? Any SEC or FTC case analysis ever published?
Post: SpaceX wins $2.9B contract to fly astronauts to the moon
- Specialist
- Austin, TX
- Posts 136
- Votes 108
Originally posted by @Prash Manohar:
is the space X facility planned in Del Valle? Also would be interesting to note if thats just offices or launch sites? if its the later I'd be surprised as that is not welcome close to residential areas in 78725/78617 areas
Did not look. Maybe is SW TX where the launch testing is. Would be interesting to know.
Post: Is this Unconstitutional? Are they kicking the can down the road?
- Specialist
- Austin, TX
- Posts 136
- Votes 108
Not even sure they legally have the authority to impact court processes under pre-existing contracts. Overreach, or not? Courts can decide if someone pushes it.
One article (DSnews.com) I read today had the "kicking can" view noted (bold added); or futility. Of course one will say he has a financial interest in saying so. BUT, any less true, or not true?
"Richard Kruse, a distressed-asset auctioneer with Gryphon USA, says that although he understands the bureau's intent, "the CFPB is effectively demanding an immediate and unrealistic overhaul of lending, investment, servicing and mortgage insurance industries, not understanding that the end result will be worse with these rules than allowing the legal system work."
Kruse goes on to suggest that federal and local foreclosure and eviction bans, which have periodically been extended throughout the course of the COVID-19 pandemic, would allow for nonperforming mortgages to be further along in default status, negatively impacting the homeowner once the ban is lifted. It is the "kicking the can down the road" dissent floated by numerous experts over the past months.
"Call it what you want ... sticking another finger in the dyke, or stacking additional pressure behind a cork that must eventually pop," Kruse said. "The fact remains that throwing these new rules at the problem will not solve homeowners' financial distress; it will only delay it. "
Post: Leander Springs Development Project North of Austin, TX
- Specialist
- Austin, TX
- Posts 136
- Votes 108
Originally posted by @Account Closed:
Anyone in the loop on the syndication for this deal?
Raise was last July. No idea if they capped out.
Post: I need help assess a off market Mobile Home Park deal
- Specialist
- Austin, TX
- Posts 136
- Votes 108
Originally posted by @Neel Patel:
Originally posted by @Frank Rolfe:
Not enough information. You need the lot rent in the market (what other parks are charging in lot rent), the total number of permitted lots, and the type of water/sewer system and who pays for it.
But I can tell you immediately that it's not worth $189,000, as even best case if the lot rent is $300 per month and it's water/sewer paid by the tenants then the value would be: 7 x $300 x .5 = NOI $12,600 which at $189,000 purchase price is only a 6.6% cap rate -- far too low for a deal like this.
Remember that you can't count the mobile home rent but only the lot rent -- only real property income goes towards the cap rate.
What is the .5 number where you are counting the NOI?
Looks like taking the expenses mentioned into account - "50% just to be safe."
Post: Syndication deal analysis
- Specialist
- Austin, TX
- Posts 136
- Votes 108
Originally posted by @Mohsin Mazhar:
Hi guys I have been looking into investing in syndication deals on platforms such crowdstreet, realitymogul, cardonecapital etc.
the issue I am having is I don’t understand how to analyze the projects that they offer.
I was wondering if someone could recommend a book or website or video which educates about terms such investor IRR, Targeted IRR etc and how to understand if the investment is high vs low risk.
Thanks 🙏🏻🙏🏻
Some good one listed.
Note, many books are written from the GP view only. Pinch of salt required with any.
Might also recon:
"Passive Investing In Commercial Real Estate": by James Kandasamy
Syndicating Is a B*tch: And Other Truths You Haven't Been Told" 'by @Bruce Petersen (Free still, I think)