Multifamily Underwriting is full of opportunities to over or under analyze numbers to determine if a deal is a winner or not.
Michael Becker with Strategic Property Advisors has been both a lender and investor. He has seen the cycle of ups & downs and shared his thoughts on what investors should look for when underwriting a multifamily real estate opportunity.
Value add deals are what every real estate investor is looking for. When you look at rent comps, make certain you are comparing like product. Are you comparing a C class property to a B class property or are you comparing C vs C? If the comparable property not the same class or in the same neighborhood, find a different property.
Taxes are an easy way to upset your deal. You must understand how the local taxes work and will affect your deal. Using the seller tax expense is not reasonable regardless what the selling broker prospectus says.
Cap rate is the measure of market supply and demand. If there are more buyers than sellers, the cap rate will compress. When the reverse is true, the cap rate will expand. What will our exit cap rate be? A conservative estimate is to increase your purchase cap rate by 10 basis points per year held.
Expecting your exit cap rate to be the same or lower than your purchase is unrealistic, but a nice benefit if it happens.
Rent growth is what every real estate investor wants. It is not uncommon to find a property that is under rented with substantial room for rent growth in year one. However, it is unwise to project subsequent years rent growth beyond national averages of 2 - 3 percent.
Expenses should also be projected to increase at similar 2 - 3 percent.
These are some basic underwriting points every investor should consider when underwriting your next multifamily deal.
For more go to:
Attract investors & raise capital, and grow your real estate portfolio.
It’s been said that you are not a true real estate investor until you run out of money. Because it is only then that you are forced to find willing partners with money if you want to continue growing. The alternative is to go get a W-2 job.
When you run out of your own money, you have to change your real estate investment strategy. Most investors turn to their intimate circle of influence, family and friends, for their initial capital raise. Unless your uncle is Sam Zell, you are going to need to reach beyond family and friends to find more investors to keep growing.
For experienced investors, there is help. InvesTechs.com is a marketing firm focused on helping real estate investors / sponsors attract, find, market to and raise the capital you need to grow. They know your business and how to help you attract capital.
First, build the platform. Investechs meet with sponsors to learn about you and your offering. Then they help you tell your story to attract investors with the capital you need.
InvesTechs will create your professionally branded webpage and all the content pieces you need; written, video, webinars, etc., to clearly communicate your offer and attract potential investors.
Once the material has been created, InveTechs use target marketing to put your information it in front of your ideal investors in your area. These are people with money looking for investment opportunities like yours. By automating this initial communication, you are able to focus your limited time on those investors who are truly interested and more likely to invest.
For these interested investors, you can schedule some calls and face to face meetings to gain further understanding of each other to confirm your offer is a good fit for the investor.
For accredited investors who are ready to commit, Investechs has partners that will qualify and collect the money online. This proven system will make you stand out to potential investors and allow you to continue to grow your real estate portfolio.
For more go to: www.investechs.com
Real Estate Investors must know how to create a successful 1031 Exchange strategy in order to keep their profits.
Karen Templeton with Emerson Equity, is a 1031 strategist. She specializes in Securitized Real Estate Investments (DSTs, TIC, NNN) and the 1031 Exchange to build Real Estate wealth.
The Internal Revenue Service code section 1031 allows investors to sell one property and replace it. Provided the requirements are met, the seller can defer the taxes due, capital gains and recaptured depreciation, on the sale of the property. tax and due upon sale if they reinvest into a “like kind” property.
The 1031 Exchange provides real estate investors one of the most powerful benefits available to real estate investors. Investors can defer the tax due upon sale if they reinvest into a “like kind” property. Regardless of the real estate property type; single family home, duplex, triplex, apartment building, self storage, retail, office, warehouse, etc.
The easiest way is to contact a 1031 exchange qualified intermediary prior to the sale of your property closing. The qualified intermediary will hold the sale proceeds in escrow. When the sale is completed, you have 45 days to identify a replacement property and a total of 180 from the sale to close on your new property.
In order to defer all tax from the sale, you must replace the equity from your sale and the debt you had in place on the prior property.
Like most things in life, exit strategies are rarely considered until they are upon us. Failing to understand the steps of a complicated process can leave you without enough time and cost you dearly. One of the most compelling reasons to invest in real estate is the ability to defer capital gains when you sell.
Plan your sale, and consult with your trusted real estate professionals to create a successful 1031 Exchange.
For more go to:
Solar Energy is now a legitimate alternative to fossil fuels providing the opportunity for users to reduce their energy cost.
The financing of small to medium solar energy projects has been challenged, until now.
Bryan Birsic combined his finance background and technology to co-create the solar energy financing platform Wunder Capital.
Solar Energy has come so far since the 1970’s. More than just a nice idea to save the planet, today’s solar energy can produce enough power to more than replace a commercial buildings energy needs.
An additional benefit is that the product is warranted for 25 years to produce at least 80% of what it did when initially installed. While this may be enough for the greenest property owner to convert, for most buyers, it’s about the money.
For most projects, the opportunity to save 15% on their energy bill is what drives property owners to make the move to solar.
Unfortunately, traditional financing is not as receptive to small and medium size projects.
Banks fundamentally want to know they will get paid back. Decisions to lend are based on the understanding of the borrower and what the money will be used for. That’s underwriting.
For large projects with credit rated borrowers, there are plenty of lenders willing to lend on the project. The loan is large enough to support the layers of fees for traditional underwriting.
For small projects, there are two hurdles for financing.
The demand for solar energy is strong in areas where energy cost are high. Wunder Capital has partnered with 150 installers in 30 states to provide financing for projects.
The Wunder platform leverages technology to underwrite the project and borrower. This provides quick approval wich Installers like. The platform because it is easy to use and provides fast approval for the project owner.using its understanding of the market and the key indicators they have identified for qualifying borrowers.
Installers like the platform because it is easy to use and provides fast approval for the project owner.
Projects under $2million is Wunder’s target borrower. The average project values is $500,000 and will be installed on a school, municipal or commercial building.
For accredited investors, Wunder Capital provides the opportunity is to invest as little as $1,000. You receive a payment dependent note with a projected yield. Projects average between 6-8% interest for 5 to 10 years depending on the project.
The product can generate enough energy to more than pay for itself. This plus building owners and investors want to promote green energy have made this a viable investment opportunity for investors looking for something different.
Opportunity to save on electricity and own their primary electrical generation guaranteed for 25 years.
Wunder focuses on Solar Energy exclusively.
For more go to: