All Forum Posts by: Lee Nestlerode

@Ike Njoku

From a few deals I taken a look at as an LP in DFW, the cap rates are in the 5’s (mostly B’ish). There is a running joke one sponsor has that everything is a 5 cap in DFW, a bit of an stretch but you get the idea. I would be careful of lumping all DFW together.

Houston is very different.

@Patrick Reagan it depends on how well the building has been kept up and settled over time. Mine was ~120 year old Brick foundation. I had some of the brick replaced on the exterior layer (there were 3), with few issues. However, some folks in my neighborhood had issues with the exact same build materials.

What material is the foundation?

@Omar Gonzalez

You may want to check out events put on by Old Capital, they help with Multifamily financing. They are local to Dallas, so you wouldn’t have any travel expense.

What do you find to be the best meet-ups in the area?

One guy I was talking to sends out mailers and goes door to door, not my    thing but works for him.

I looked for several months and couldn’t find anything that really made sense to me. I started looking at LP syndication opportunities in other markets.

@Russell Brazil

Interest rates are composed of more than just inflation.

1/real risk free rate

2/default risk (even on treasuries)

3/inflation premium

4/liquidity premium

Mortgage rates tend to follow treasuries, so below are a few scenarios that impact rates other than inflation...

If people decide to move money to stocks from treasuries, then rates will go up. If other counties are concerned about the US dollar and sell treasuries to move money back to there home country, then rates will go up. If the fed decides to sell part of the 3 trillion of treasuries and MBS then rates will go up.

I would not assume that rent follow interest rates but do generally agree that rent can follow inflation.

There are also interest rate derivatives that could be used but that would likely not make sense for most folks, as the transaction costs would outweigh any benefit.

@Steven Gilbert

Perhaps consider participating as a limited partner first.

not all agents are created equal, I would guess 50% (probably less) actually add value, the rest get a property up on MLS and provide little value otherwise.

On the other hand, find a great agent and they are worth their weight in gold.

That is a super interesting perspective and had not really though about the Real Estate market with higher liquidity around new construction and lower liquidity as you get further away. I was actually thinking it was the opposite. All the investors after lower quality homes looking to add value and renovated homes as less liquid because primary home buyers make emotional decisions so need to find the right buyer. I'll need to think about that one more.

I was not speaking to the specific house at all, as I don't know the property or area. I just know contracts i have been involved with historically, the best deals have come from sellers who really wanted out now, not in 1-3 month. It was a very different market then so perhaps that does not work today.

While I do believe the MLS is getting the property in front of all potential buyers right now. I would question the demand in February. If there is much pent up demand in the market already, then I agree completely that it is price related. Then I would ask how far of is the price? If i was ready to pay $125K for a house I would be looking at everything between $100K and $150K.

Thanks for your perspective.