All Forum Posts by: Omar Khan

@Bryan Krinzman Assuming this property is not 100+ units. 

You will not be getting the cream of the crop below 75-100 units as there are hardly any economies of scale. Also, you PM fees will be astronomical (8-10%) compared to the fees paid by 100+ unit owners (3-3.5%). 

Best bet: Connect with local investors, brokers and lenders to get referrals. You know you're on to something if the same name keeps coming up.

I literally lol'd when I read about the tax accountant part! I have a similar but different story where an "experienced" finance guy wanted to be the asset manager all the while contributing less than $150K. His rationale: He was way more experienced in finance (not real estate) and would "open doors" for us. 

Suffice it to say, we thanked him for his time and passed on the opportunity. 

Taking annual #s and dividing by 12 is going to give you the wrong answer and cause a ton of problems.

This is because value-add project are heavily weighted in the first months and stabilize over the year. Hence, 9/10 you will run into issues where you grossly over-estimate your liquidity in the first few months and vice-versa. 

Liquidity management will be your (and everyone's) biggest challenge. You have to be maniacal in making sure you never face a cash crunch because no lender, property manager, contractor etc is going to wait months on end (and continue doing the work), while an investor sorts out their problems. 

This isn't as big of a problem if the building is adequately cash-flowing and you have minimal value-add rehab. In the case of value-add, your lender will expect to see monthly #s to ensure you are staying on track. 

A lot of this work gets done in the background and, most, capital raisers only see the smoothed out #s. You will have to dig deeper if you're the operator. 

Plus, once an investor gets behind the business plan, then they're just playing catch up as it gets hard to not drown as you are trying douse multiple fires.

Happy to continue our conversation over PM.

@Mark S. The simple answer is: it's market dependent. 

E.g. in our latest deal in NW San Antonio, the market s very attractive but the existing ownership decided to self-manage and completely messed up everything. In that case, coming in and turning around the property is not as hard of a play. 

But in a sideways/declining market, even a solid operating team would have a hard time turning around an asset. 

Generally, you should be banking on 2-3 year but tracking #s monthly to ensure that everyone is staying on track.

@Hament Raju Mahajan As always, @Brian Burke is bringing real-world advice backed by his decades of experience. 

You are correct in your assessment. But in today's world where everyone - even newbies - are looking to 10x every single thing, what do you expect? 

I cringe when I see 80% of the proformas from some semi-experienced folks as well. They grossly over-estimate revenue growth and under-estimate any bad thing that can ever occur. My biggest pet peeve is when folks with little to no background in underwriting suddenly become expert authorities on valuation based on a $100 model they downloaded online. 

The good news is that a correction will present more opportunities for smart investors. You can continue to develop your knowledge and relationships. Only pounce when there is blood on the streets. 

@Scott Innocente I would heed @Roy N. advice. He's an experienced investor even thought he's not really down with the GTA ;)

Most of the advice (financial analysis) is similar across the US and Canada with the exception of legal/accounting issues. I would try to consult with local investors as they will be your best source of market knowledge and advice. 

@Divya Pratap Each jurisdiction comes with its own set of challenges. I know a lot of South Asians (Indians/Pakistanis/Bengalis) invest in their own country but that is because they either go back frequently and/or want to maintain ties to their home country. 

As lucrative as Asian markets are, you don't see a lot of retail-level investors who do not have local knowledge investing (unlike the US), because the markets are not mature and there are minimal, if any, checks and balances in place. Another big reason is that a lot of Asian markets are not as open as the US and still have currency control and ownership issues. 

E.g. I doubt there are many American born-and-raised, retail-level investors buying real estate properties in India/Pakistan (assuming they have no ancestral link to either country). But I personally know a ton of successful Indians/Pakistanins with property holdings in the US, Canada, UK, EU and Australia.

@Kobi Walsh I would question the #s provided by the seller. Hardly any Class C property is yielding double digit cap rates. Usually these are either properties in war zones or with some serious issues (rent control, structural damage, bad tenant profile). 

I would try to get comps from a broker (independent to the selling one) and verify all information from multiple sources. I would also increase your vacancy, capex and repairs # at the minimum as they are very low.

@Edward Rueca It depends on the size of your portfolio. You can always acquire in your own name and then buy umbrella insurance (very cheap) to cover for any liability-related costs. 

Once you pass a certain threshold, you can look into incorporating.

@Maria Luna I gotta agree with @Joe Villeneuve. There are deals to be had in most types of market. Plus, there are still a lot of affluent communities in the suburbs and all over Michigan. 

Detroit has gone through tough times but not everyone is skeptical about it. Dan Gilbert is spending a fortune (multiple BILLIONS of dollars) plus small-to-medium scale manufacturing (e.g. Shinola) is expanding. 

Best to do more research and do actual tours of the market/properties.