All Forum Posts by: Ryan Cox

Welcome to BP Nizar! 

@Hernell D.

1.  (out of state) I would focus on markets with population, job growth & a growing median income.  I would prioritize identifying the right management team in those markets which will be critical to managing the property and to give you valuable insights into the market.

2.  (Partnership) Agree with the previous comments.  Vet your partners thoroughly if you decide to go that route.

3. (Capital)  Building your capital network will be critical as you move into larger deals.  Great to get started sooner rather than later.  Share what you have done to date and what your long term plans are for real estate investment.  Play the long game.

4. (Smaller Deals)  I would focus my efforts on another small deal.  It will give you another opportunity to build your track record which will make it easier to attract capital partners.  The more deals you complete successfully the more likely you are to find a partner who shares your vision and focus.  A successful track record gives you options.

All the best, Ryan

@Joseph Sangimino  I would make sure to walk the property and each unit to assess the definition of "good shape"  There are a couple of method's that you could use to determine the value of the property which is currently unoccupied.  The replacement cost method & the net present value method.

(Replacement) The rule of thumb is to be a buyer of real estate when prices fall below replacement cost, and a builder of real estate when prices rise above replacement cost. Therefore, replacement cost is the line in the sand — the base line to assessing potential value creation opportunities.

The NPV method determines a real estate investment asset’s intrinsic value by finding the present value of future cash flows.

Future sales price. Use a capitalization rate appropriate to the asset’s location, class, and product type that conforms to trending market conditions. Forecasts for capital markets, the local economy, and real estate fundamentals should reflect a safe cap rate when modeling future sales prices.

Income and expenses. Forecasted income and expenses should be reasonable and supported by factual data. Forecast lease-up absorption on vacant properties using market standards. Also, use industry standard expense benchmarks in model assumptions.

Discount rate. The discount rate should reflect market conditions. An increase in the discount rate from 7 percent to 13 percent would reduce the NPV

Investment strategy. Modeling a stabilized property versus a high-vacancy property requires different forecasting assumptions. Use worst-case scenarios to offset potential forecasting and assumptions errors, especially on properties without a consistent operating history.

Because NPV involves future cash flow, it is critical to forecast accurate assumptions when modeling a property investment.

@Sherry Solomon Can you provide some more detail regarding make up of the portfolio?

@Michael BishopMakes solid points about how to create value for multifamily investors.  I would focus on these activities if you want to be an investor which is a different skill set than being a broker.

In my experience, it depends on the size of the property and who is representing the owner.  A number of multifamily properties sub-100 units are listed by brokers who have residential and multifamily listings and are more than willing to work on the weekends. 

Path of progress, population & job growth and...

A. Shifts in demographics - ex. What type of properties do Boomers vs Millennials want?

B. Interest rates affect the flow of capital, supply & demand for capital and required rates of return on investments. 

C. Legislation can also impact property demand and prices.

D. Investments in infrastructure - ex. major roads, highways, new schools, etc.

Here are a few things to consider before investing out of state.

A. Pricing real estate benefits knowledgeable and experienced investors -- and therefore works against people without that knowledge or experience.  Work with someone who has extensive experience in the market you are looking to invest. 

B. Liquidity can be unreliable. Individual real estate properties aren't as liquid as publicly traded investments such as stocks and bonds. In private markets, it can take months or even years to get out of some real estate investments.  I believe the old adage, don't put your all your eggs in one basket applies.

C. Cash flow can work both ways.  Consider taxes and maintenance costs to be paid. You need to compare rental levels and occupancy rates with the ongoing costs of the property to get a sense of what the net cash flow will be.  Work with an experienced operator who can show you how to evaluate the types of properties you are looking to purchase and as said before, look at a lot of properties to really understand the investment.

Good luck in your search! RC

Thanks for hosting @Joe Fairless !

I was disappointed that I was only able to make it for Saturday but I left with new connections, a shot of motivation and learned several things that will impact my business.  The event was extremely well organized, the sponsored food and coffee were a great touch & the ballroom was set up perfectly to feel connected and engaged with the hosts & speakers.

Key Learnings:

1. As part of any underwriting process, understanding population growth and job growth are critical to analyzing the market for a successful multi-family investment.  @Kathy Fettke ability to speak about these growth trends on a macro level reinforced the importance of understanding these trends.  I have been so focused in the Dallas/Fort Worth market that I have not understood the trends happening in the state of Texas or across the U.S.  I will definitely spend time weekly to understand these market trends at a macro level and investigate resources & charts that help me analyze where we are in the market cycles.

2.  Speaking of facts and figures What's the truth?  @Jeremy Roll mentioned that he used www.shadowstats.com Analysis behind and beyond government economic reporting.  What resources do you use to understand the trends?

3.   Simplicity in a digital age - Doug Roark of Regulation D Resources did a fantastic job of explaining the differences between the different types of Regulation D funding programs and the benefits and drawbacks of 506c.  I thought the technology tools that his company provide will be able to help streamline and improve the delivery of my offering's, communication with investors and generate a better investor experience.

4.  Whole Life Insurance as a vehicle for investment?  Infinite Banking?  Had an interesting talk with @jimmyvreeland and @bobscott after their presentation on 'Mastering Scale with Lease Options' about leveraging Whole Life Insurance as a source for funding.  They recommended reading Nelson Nash's book on 'Infinite Banking' - I'm curious and will investigate a little further.

5.  Connection is king! I had a great lunch with @Reed Goossens and @Brie Schmidt discussing building relationships online and in their respective communities.  We talked all things BP, Meetups, Podcast, blog, etc.  I appreciated all of their insights and how much fun they are having connecting with investors and real estate professionals across the country.

I am looking forward to making the trip back to Denver in 2018!

Thanks again! RC

Two books that I would recommend

The Complete Guide to Buying and Selling Apartment Buildings - Steve Berges

Emerging Real Estate Markets - Dave Lindahl