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Commercial Real Estate Pro Network

Commercial Real Estate Professionals who work with Investors, Buyers and Sellers of Commercial Real Estate. We discuss todays opportunities, problems & solutions in Commercial Real Estate.
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Now displaying: April, 2023
Apr 27, 2023

Today, my guest is Ryan Gibson. Ryan is the co founder president and chief investment officer of Spartan Investment Group. Ryan has organized over 200 million of private equity for Spartans projects across the country. And in just a minute, we're going to speak with Ryan about real estate investing and development.

Apr 25, 2023

J Darrin Gross

I'd like to ask you, Ryan Gibson, what is the Biggest Risk?

 

Ryan Gibson 

Yeah, so I would say your biggest risks are external threats. Things like cap rate expansion, you know, property values declining, really can't control that. Interest rate, risk, etc. But I would say my focus that I'd like to share is five main things that I look at, in underwriting a deal. In I can do this in 10 seconds. I look at revenue growth year over year, and is it reasonable? Does the business plan, identify if that revenue is achievable based on the market study that you've done, somebody else has done or an operator's done? The second thing I look at is insurance. So insurance costs are not going down. So if you have not pro forma added, that your insurance expenses are going up, I usually don't like the deal anymore. As much. The second thing that I access risk, or the third thing is property taxes, property taxes are not going down, property taxes are going up. And if you're not planning on property taxes, at least doubling over a five year hold period, I don't think we've assessed the risk and the opportunity. The third thing I look at is expense to gross our revenue to expense income. So Egi, expense to gross income ratio, I guess there's another way of saying it Egi. That's if you make $1 of revenue, what percentage will be your operating expenses. And so in self storage, I'll look at a deal. And I'll say, you know, I expect to see between 35 and 40%, expense to gross income ratio, meaning that if you're collecting $1, I expect to see 35 to 40 cents for that dollar and expenses, and all your utilities, insurance, property taxes, all that stuff before debt service. If I see that number 20%, or 15%, I don't think there has been enough assessment in the underwriting to really accurately depict the worthiness of that deal. And the last thing I look at is cap rate. Because cap rate, you know, we love to everybody loves to think that they're the best operator, they have secrets and things like that. But at the end of the day, cap rates drive the value, they drive, the value, they drive, the exit strategy they drive, the market really drives where a lot of these assets can perform. And yeah, we can control and do our best. But that cap rate really makes an impact. I mean, one $1 on a 6% cap rate means $15 evaluation. So yes, operating income can do that. But I like to see an investment where you can stress test it. And that you can actually show the cap rate getting worse than what you bought it for. Not from your operations, but just market cap rates. So if you buy something going in cap rate at 5%. In today's market, I'd like to see that it can exit at a market cap rate of 6% and still be profitable. So when I assess risk, I look at those five things and underwriting and I and I really kind of stick to my guns on that. That's how I can look at a deal in 30 seconds. No, have they adequately assess the risk? Of course, there's tons of more things that you need to do beyond that, but those are kind of my five quick checkboxes on any opportunity.

 

Apr 20, 2023

Today, my guest is Fred Moscowitz. Fred is an educator and best selling author who has trained countless investors from all walks of life on how to create passive income streams on their own. As a fund manager Fred manages a mortgage note Investment Fund, and is considered an industry veteran within the note investing arena. But it teaches the concept that individual investors are able to step into the shoes of the lender through note investing, and effectively be the bank. And in just a minute, we're going to speak with Fred about mortgage note investing.

Apr 18, 2023

J Darrin Gross

I'd like to ask you Fred Moscowitz. What is the Biggest Risk?

 

Fred Moskowitz  

Wow, this is a great question. There's, there's many, many risks. That's a big part of what we do is known investors is get good at understanding what they are. As I said earlier, diversification is is a great way to manage risk and the note portfolio, but some other other areas, it's really getting good at doing your due diligence before purchase. As I said, I dedicate a large portion of my book to this topic because it's so important. It's prior to buying, running your due diligence and surrounding yourself with the right individuals to help you whether it's vendors its data providers, to give you the resources and information. It can be an another area super important. Is counterparty risk when you're buying a note, who are you buying from? This is a big one. You want to make sure you're comfortable with who and this goes for any any business transaction. Are you comfortable with who you're you're entering into a business transaction with with them as a person with their company, their reputation and track record industry, I feel like this is something that often gets overlooked, or doesn't get enough attention to it. Because deals can go bad transactions can have problems, they can go bad. And so what's very important is how is the other person going to respond and cooperate and work with you to solve a problem that comes up? Because we live in a far from perfect world? And so you want to know, how is the other person going to show up and resolve this issue. And that matters so much, so much, so that you're comfortable, that you can work through an issue, you can still be friends at the end and walk away knowing that everyone got a fair transaction. And you're looking forward to doing the next deal again, in the future. There's nothing worse than walking away from a transaction saying never again, am I going to deal with this individual or this company, or this client, it's so all these headaches, it's the worst feeling in the world. And so that's something you can avoid upfront. Something you can easily avoid upfront. And that that's, I would say, a huge risk that a lot of people neglect to think about or talk about.

 

Apr 13, 2023

Today, my guest is Aaron Weiche.  Aaron is the co founder and CEO of LeadFerno. A text messaging platform for businesses to close more leads faster. Aaron is an entrepreneur, founding and leading multiple companies and digital marketing agencies over the past 20 years. And in just a minute, we're going to speak with Aaron about lead generation marketing via text message.

Apr 11, 2023

J Darrin Gross

I'd like to ask you Aaron Weiche, what is the Biggest Risk?

 

Aaron Weiche

So here's the first thing that comes to mind to me. And that is not being connected to your customer. So to me, in all kinds of aspects I've talked and written about this recently, with so many people looking inside of so many industries, with a downturn slowdown, whatever that might look like. Those are the kinds of times where you need to be more connected than ever to your to your customer, so that they understand the value you still bring. As you change and adapt how you might deliver, or price or what's going on in the market, things like that. You need to have that personal connection with them. If you haven't been keeping in touch with your customers, if you're not staying top of mind, if you're not solidifying the resource you are and how your expertise helps them out no matter what the market looks like timing opportunity, any of those things like it's just slowly eroding the chance away of once that opportunity might surface for them because too much distance has built up. So I'm just a massive proponent in running your business where you really know and understand your customers and you're finding the right touch points that enrich their relationship with you keep keep you in contact and keep you connected with them. So that you're always just a text or a phone call away from what their need is. And they really feel like you you're a valuable resource in a relationship and a connection sense instead of just a transactional sense.

 

Apr 6, 2023

Today my guest is Shannon Robnett. With over 25 years of experience Shannon has been involved from start to finish on over $350 million in construction projects, and is dedicated to sharing his experience and expertise. And in just a minute, we're going to speak with Shannon about the multifamily marketplace.

Apr 4, 2023

J Darrin Gross

I'd like to ask you Shannon Robnett. What is the Biggest Risk?

 

Shannon Robnett  

You know, in my business, the Biggest Risk is taking on the project and having things like prices increase on commodities. You know, we started a construction project. And our lumber costs estimate went from 3 million to 9 million. We locked in on the way up and caught it at about five and a half million, but it was still a two and a half million dollar Upswing on that. Those are the risks that we take as developers on brand new ground up. And so there's always that question that you have to ask and it comes back to your underwriting? Do you have the runway to absorb this? Can you get from here to there so that you're not, you know, your framing is in the first third of your job? If you've used all your contingency in the first third of the job? How are you going to finish the rest without additional cash? So are you properly capitalized? Have you underwritten correctly? Do you know that three years from now when you're built out on a 200 unit apartment complex that you've you're going to be able to sell those are the risks that we take that that sometimes keep me up at night?

 

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