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anon_0k9zlfz6lz9oy
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How would performance look good if you punt the losers? It would drag down your total career performance numbers.
If you don’t sell, you don’t realize your losses. Also the GP all gets acquisition fees. That’s where they make their money. The backend stuff are just kickers.
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anon_0k9zlfz6lz9oy
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Nah. The back end is where the real money is made.
Im not being a dick here but its evident youre not familiar with syndications through our discussions itt. Just as reit’s and institutional funds arent my expertise.
When we get FHA buyers at our brokerage, I tell our buyer agents you need to find them an off-market deal. The alternative is you paying waaaay over asking price just to get the opportunity to buy the property, then the house doesn't appraise and you hope the seller will come down on their price instead of kicking you aside for the next offer in line.
If you have an off-market deal in a well off NJ town, buy it. Don't have analysis paralysis and FFS stay off Biggerpockets if you're using any of their bs.
Certainly it’s not my cup of tea. My experience is with larger investments. But the common theme is that the guaranteed income for GP is the acquisition fee. The promot is a nice kicker if it all works out.
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anon_0k9zlfz6lz9oy
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If a GP is only making money on acquisition fees, theyre not gonna be in business for very long.
Heres an example, historically real estate appreciates at about 6.6% per year from 1870-2015.
If a property is bought for $10,000,000 with a 2% acquisition fee, the acquisition fee is $200K. If the property appreciates at 6.6% annually over a 5 year hold, that would imply its selling for about $13,765,000. In a simplistic 80LP/20GP structure GP walks with $753K of that $3.765 in appreciation. Granted it will be less because there will be closing costs but you get the picture.
No Biggerpockets, just a couple of spreadsheets and whatever knowledge I’ve pieced together through conversations over the years.
Have you had many cases where you’ve had to go through the eviction process, or is it pretty uncommon but painful when it happens? (Moreso with that professional/young professional demographic vs. college kids or less qualified tenants)
Our property management company manages nearly 300 doors so yes we have done evictions. If the tenant has a history of paying before you buy the property you should be fine. Don't overthink it.
If tenants are late, we file eviction. ZFG.
IMO in very well off towns, owning multi-family isn't much of a cash flow play, it's an appreciation play. If you were theoretically renting out both units and the property wouldn't cash flow you better be living in Hoboken or JC, otherwise it's not a wise move.
I honestly suggest to buy a multi-family in a poorer area. Those cash flow. I'm not saying Paterson, but I think you get my point.
Thanks, this was all helpful. It’s not currently owner occupied so I’m guessing that’s part of the reason he’s looking to sell based on your post.
Office market is clearly headed for trouble. Depending on who you are listening to there is between $1.2T and $2.5T of CRE (commercial real estate) debt coming due by YE 2025. What those CRE owners face is a twofold problem:
First, work from home is real so a significant portion of tenant leases that come due in CRE (70%?, 80%?, higher?) are going to be with tenants looking to downsize their space. So a tenant with 100,000 RSF lease is likely looking for 70,00RSF and maybe lower. Second, the cost to refinance that CRE debt is 300-400 basis points higher than their original/previous loan. So, you have tenants that are leaving/shrinking CRE due to work from home and the cost for debt are way higher. Bad combination. I am starting to see office defaults in markets I would have never expected. The next 6-18 months will be the start of a CRE problem that takes 3-5 years to resolve (imo).
Here is a $300MM+ office default in Seattle which was unheard of for the last decade.
https://www.seattletimes.com/busine...-office-complex-mostly-empty-to-be-auctioned/
A lot of smart people out there have shifted their view from an economic recession to an "asset class recession" which makes some sense. High interest rates, bank failures, potential of the US defaulting on its debt may impact the stock market (for example) more than GDP and unemployment.
Here are some quotes from an article in Fortune on this topic today:
"An asset class recession means essentially that the economy as a whole would not shrink—and unemployment may not go up much from its recent 50-year low—but markets and asset values would take a prolonged hit, and most of the pain would be focused on those who rely on the value of their investments in addition to or instead of their salaries."
"If the market spirals once again it could lead to what Marc Rowan, billionaire investor and CEO of Apollo Management, a private equity firm, called a 'non-recession recession' in an interview with CNBCearlier this month, a downturn in asset values that does not lead to the same economic woes traditionally seen during a recession."
It is an interesting thought that may be worth paying attention.
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People keep conflating commercial real estate with office. Office is a subcomponent of real estate. And all office is not bad office. So the trillion dollar numbers are garbage.
Office market has been in trouble since late Feb. Main Street media is picking it up now.
All true and it’s click bait. But all commercial real estate will take a hit on value. Office is expensive to operate because leasing costs are high and money isn’t free anymore. But operating costs are going up on all property types.
Not all CRE is taking a hit to value but most is. Value add just won’t make the return it projected. Doesn’t mean values are down. Stabilized assets that were marked to peak values and floating rate debt, yes.
Again for stabilized yes. Not for all value add. My stabilized portfolio down 5% on 4 q marks. My value add up 3 and will be up again in 1Q
Not sure what your definition of value add is so can’t comment. But stabilized assets are more likely to lock in fixed rate financing and value add goes floating. The only way value add is up is if your original assumptions were more negative than current market. Which surprises me that anyone would still make the investment under those assumptions.
Or conservative. Not all value add is floating and low fixed financing is accretive to value today. Value add activity, in various structures Is slow to realize appreciation. So, assembly a portfolio stabilizing to a 6 cap while the market is at a 5 cap means if rates back up 100 bps the stabilized is down 20 minus cash flow and the value add is up by income. This is why this macro backdrop is different, fundamentals are generally healthy outside of office helped by a positive supply backdrop.
(Revised) White paper out today from NYU and Columbia researchers. Predict 44% decline in long run value in NYC office and $506.3B of value destruction nationally.
Don't seem to be able to post the link but if interested Google: "Work from Home and the Office Real Estate Apocalypse". The PDF of the white paper is free to download
Don't seem to be able to post the link but if interested Google: "Work from Home and the Office Real Estate Apocalypse". The PDF of the white paper is free to download
Weren’t you complaining that it’s almost impossible to build in NJ because of the fees? Lawyers , architects , etc ?
What does waive inspection actually mean ?
I always thought that is just a contractural ploy and they still inspect . Legally you can’t tell a buyer no inspection
An affordable SFH that you desired? Yes impossible. Apartment buildings much different
If a buyer puts in the contract no inspection then there is none.
Turn them into housing and hotel space.
The future of places like NYC and SF and DC and others is more like a Paris, tourism is going to play a chief role with WFH allowing more travel and less need for office space.
Do many buyers actually do this ? I thought the ploy was the Buyer would say inspection for “informational purposes”only or something like that .
So they still do their inspection
There are folks starting to do these conversions, but from what I have seen these conversions are currently limited to office building owners with little to no debt on the property. The reason is conversion costs are expensive. Think of it like this: a large commercial office building has a central core with restrooms (for example) located in one area of the building. In converting that building in to a rental apartment building or hotel you now need a bathroom in each unit, different electrical runs, new mechanical systems, etc. Plus the floor plates are generally inefficient for an apartment building or hotel.
I think you will need to see further cost compression/cost erosion in the value of office properties and maybe even some property tax relief before you see this type of conversion done at scale rather than "one offs".
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No it's rare but we just got one and it helped them beat out another offer that was 30k more.
It’s his fault that he gave us too many jobs and too high of wages?
A little off topic,, but if you own property in Minnesota, make sure you pay your taxes. Quite unbelievable this had to go to SCOTUS, but unanimously reversed.
Supreme Court sides with grandmother who lost home, equity because of back taxes
Several other states have laws that allow counties to keep the value of a property after foreclosure, a result that can have a big effect on seniors.
www.usatoday.com
Yeah and also because one man sitting in the Oval Office has complete control over the US and global economy.
Yeah lol I must have missed when we became a centrally planned economy.
It’s amazing to me how people assign praise or blame to the president of the Us. They have virtually no responsibility for what happens to the economy during their term. Even if they pass legislation in year 1 the marginal impact of that legislation will barely be felt by the time their 4 years is up. Presidents/congress could do absolutely nothing and we would still have cycles. Good and bad economic years etc.
Good time to invest in San Francisco, Oakland or Austin? Or do they have a way to go further down?
Lost home equity: San Francisco homes are selling for $220,000 less than a year ago
In San Francisco, the median sales price was $220,000 lower than at the same time last year — the largest decline by dollar amount — wiping out 13.4% in equity.
finance.yahoo.com
In a bizarre real estate twist, a house sold in my neighborhood for almost $1M a few months ago. 4/5 BR 3.5 baths on nice property. Neighbors started noticing a van coming and going and a bunch of guys hanging in the back yard. They check the real estate records and it’s owned by some shell-company. They do more digging and find out it’s a privately owned “sober house”. Anyone ever hear about something like this? The neighbors are going ballistic.
Years ago, we had that happen in Rumson, but not a $1M house. People don't realize this, but before this real estate run up, moderate houses in Rumson on smaller lots were as cheap or cheaper than in Belmar and other beach towns. Eventually, the sober house shut down and was sold as there as a least one (maybe more) overdose there. Good luck with that one in your neighborhood.
I think I know the general area you live and I’d tell you it’s very likely a sober house loosely owned by an outpatient treatment center. Happens all over NJ now. Bill people for out of network outpatient treatment at about $1500-2k per day, put them up in a “luxury” home and you’ve got yourself a nice payday.
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