Malibu said:

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The guys I work with are ex-BB investment bankers. We sat around and tried to come up with a view, and in the end we just said, we dont know. The plan is to raise new funds that dollar cost average by having presetish capital calls over the next 2-3 years. The business model calls for a 5 year hold that we underwrite to a 20% IRR hurdle. If the hurdle is met, we invest. If not, we pass.

Our educated guess right now based on current acquisitions is we are buying from distressed sellers, not necessarily distressed properties. Restauranteurs, dentists, etc. that have an investment property and need some immediate liquidity due to the crisis. Distressed properties are still breathing with stimulus, forbearance, and deferrals. To the extent there is a deluge of new distressed supply, we dont expect to see it until Q4 or Q1.

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Checking in. Is your group still actively searching for new properties to purchase if they hit those Mark's? Or are you hunkering down a bit? I ask because I've been made aware of 2 opportunities with that similar expected return unless there's a big shakeup of course. I am considering investing in one but skipping the other just to lay off the gas a little for the next 6 months as far as this type of investment goes. At least until we have a little more clarity as far as how things are going to shake out in the short to medium term.

If you are interested in investing in multifamily, shoot me an email. We have several deals we are working on, and always looking for interested investors.
Bobby@fratrisholdings.com

Is anyone investing in or raising funds for self storage?

Bob Knights Liver said:

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Malibu said:

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The guys I work with are ex-BB investment bankers. We sat around and tried to come up with a view, and in the end we just said, we dont know. The plan is to raise new funds that dollar cost average by having presetish capital calls over the next 2-3 years. The business model calls for a 5 year hold that we underwrite to a 20% IRR hurdle. If the hurdle is met, we invest. If not, we pass.

Our educated guess right now based on current acquisitions is we are buying from distressed sellers, not necessarily distressed properties. Restauranteurs, dentists, etc. that have an investment property and need some immediate liquidity due to the crisis. Distressed properties are still breathing with stimulus, forbearance, and deferrals. To the extent there is a deluge of new distressed supply, we dont expect to see it until Q4 or Q1.

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Checking in. Is your group still actively searching for new properties to purchase if they hit those Mark's? Or are you hunkering down a bit? I ask because I've been made aware of 2 opportunities with that similar expected return unless there's a big shakeup of course. I am considering investing in one but skipping the other just to lay off the gas a little for the next 6 months as far as this type of investment goes. At least until we have a little more clarity as far as how things are going to shake out in the short to medium term.

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Yes, we're still actively searching and still finding opportunities. We're sticking with our view that dollar cost averaging will be the most effective strategy in the long run. We have more of an idea of how a project will pan out in 5 years vs. 1 year, and even if we're buying close to a top now, our time horizon will still more likely than not make the deal work out. If there's a huge bottom in 3-6 months, we'll be buying properties then too.

Lending has been a bigger challenge lately, and we've had to pivot away from agency debt and towards smaller credit unions. We're getting very attractive terms, but the teaser rates expire in 3 years and the loans are all recourse. Hopefully, by the time we need to refi agency debt will turn back on and we'll be well positioned to move there.

Wouldnt be to interested in recourse.

Thanks for the feedback. It's extremely helpful for me as a non-professional investor to get different viewpoints. I think a dollar cost averaging mindset is probably a good place to be mentally. Maybe my thought process will be to look for 1 to 3 investments every 6-months, but to be cautious of over-investing during any one time period. Most of the ones I've looked at are planned as 3 to 7 year investments. My personal plan, at least for now, is to start paying myself back 75% of the profits beginning five years from now and continuing to to reinvest the rest.

Seeing the same thing regarding debt.

Do you have any experience with private debt?

I have a ton of experience w private or non-standard debt in other areas (namely O&G). Going to be non-recourse but provisioned to be loan to own if you do not do what you say.

We're currently having pretty good luck getting <4% interest rate on purchase and rehab loans from credit unions at 80% LTV and interest only during the rehab portion. 30 year amt. The drawback of course being the recourse financing.

If you are aware of private MFH non-recourse products with similar terms, we'd of course be very interested.

Non Recourse in my experience adds atleast 300 bps and a few other fees compared to commercial paper. 600bps + is absolute floor.

Business Time said:

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Is anyone investing in or raising funds for self storage?

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My son and I and two other guys are looking at a building self-storage (part climate controlled, part not) along with RV and boat storage. Each of the people brings some significant things to the table and I hope we can get the project underway in October.

Why are y'all having issues obtaining agency debt and at attractive terms right now? I'm an agency lender and we're doing tons of business right now...

Not talking Real Estate. Experience is mainly O&G

Malibu - I assume you work for a private equity company specializing in multi-family? If so I'd like to connect with you as a potential investor.

Thanks!

As an investor, what kind of taxes would you pay when it's time to sell the investment?

Sure, you've been making good returns while you owned it and getting a high tax deduction but at the end when it's sold, depreciation removed, etc. how much are you on the hook for and will it be less than the distributions?

From my experiences, you don't pay taxes on gains until you recoup your initial investment and plan for the final selloff to be at least your investment amount. By then it's a long term investment and you have plenty of cashflow to pay taxes on your earnings.

Business Time said:

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Is anyone investing in or raising funds for self storage?

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We have 4 acres next to HEB in lytle Texas next to our 26 unit apartment complex.

I'd love to explore it

Cap rate = Risk level

We bought 57 units for 800k

Injected 400k

Now have gross rents at $32,000 a month.

Remote management in rural Texas was what made the deal risky. So we built a property management company.

There's a huge upside to this model. Although the exit is most likely death, because buyers are scared of rural markets.

We bought 32 units we may syndicate because they are in an opportunity zone and we can easily double our base.

Anyone interested in lunch email me at corey at roughneck2realestate.com

Mazag - I'm an accredited investor and would like to link up with your PE firm. Cjurica00 at yahoo.com

Business Time said:

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Is anyone investing in or raising funds for self storage?

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My wife's grandfather and uncle have both done it at different times. It's generally a very good business to be in, especially with boat and RV storage. They both got out for different reasons, and neither was because they weren't making enough. Her grandfather only ran it as a semi-retirement gig/hobby after selling his auto shop, and her uncle recently sold his because he was made an offer he couldn't refuse for the property.

Bob Knights Liver said:

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From my experiences, you don't pay taxes on gains until you recoup your initial investment and plan for the final selloff to be at least your investment amount. By then it's a long term investment and you have plenty of cashflow to pay taxes on your earnings.

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Thanks - that's sorta what I was thinking.

Also another question, is doing this for a tax deduction only worth it if you're in the 39% tax bracket?

I would say you have to do the math to compare it against whatever returns you think you will get elsewhere. If it's comparable gross return, then the deferred tax payment can make almost as big of a difference as the lower tax rate. So it can be very helpful even if you aren't I'm that upper tax bracket.

Hey, just to get back to you I sincerely appreciate the interest. Right now, our entire investor base is our personal network, and we are oversubscribed at the moment. If/when that changes, I can let you know. Additionally, if you ever come to LA Id be happy to meet up so you can become part of the personal network.

Another successful Texags hookup!

Rice and Fries said:

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Looked at a 1031 acquisition in San Antonio, purchase is on a 4.75% cap for a 1970s vintage product. Insane. And they were pencilling in a 80% of Purchase price for real estate taxes when Bexar county is aggressively valuing deals, some at 90 - 100% of purchase.

Just surprised by the cap rate.

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4.75% Cap on 70's vintage apartment complex is out of my comfort zone and if that sale hits costar they will pick it up at the new value. But they don't sales chase (face palm).

30wedge said:

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Business Time said:

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Is anyone investing in or raising funds for self storage?

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My son and I and two other guys are looking at a building self-storage (part climate controlled, part not) along with RV and boat storage. Each of the people brings some significant things to the table and I hope we can get the project underway in October.

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Curious: have you already Consulted or done a feasibility/demographic with a storage person? What mixture climate vs non, storage etc?

HoustonAg_2009 said:

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Great info! Typically what I've seen on offered (projected) deals in the Multi-family renovate, refi, improve rent, sell:

* IRR ~ 18-22%
* Cash multiple ~ 1.9-2.3x (Based on 60 month hold)
* Cap Rate ~ 5.5% (Before COVID)
---- I've seen 2 deals lately with cap rates at 8% -- Is this due to current market situation? These were on 1960-1970 vintage apartments
* Preferred annual returns of 7-10%

Houston, Georgetown (TX), Oklahoma City for me.

Ideally I'd like to invest in 2 deals per year and that way after a few years I'll be receiving a decent cash flow continuously while reinvesting most, if not all, into more deals.

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Where in Georgetown TX do you invest?

New multifamily under construction @ Rivery Park.

HoustonAg_2009 said:

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New multifamily under construction @ Rivery Park.

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Great area. I invest in Georgetown as well. Do you live there or ever make it up? Would love to meet up.

I live in Georgetown. I just moved back here (grew up here) after a stint in East Texas for the last 10 years. While in East Texas I built up a small portfolio of mixed SFH, multi-family. Looking to potentially divest up there and reinvest down here. If you or HoustonAg ever need a local contact to check up on anything in Georgetown I'd be happy to help!

I'm out of Houston. Passive investing in Georgetown through a PE out of Dallas.

HoustonAg_2009 said:

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I'm out of Houston. Passive investing in Georgetown through a PE out of Dallas.

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Would you mind sharing the name of your PE firm? I am accredited.