Analyzing multifamily apartments can be overwhelming for new investors. It can even be a challenge for some seasoned investors. As Rob Beardsley was starting out, he could not find good resources on the multifamily underwriting process. This led Rob to pen The Definitive Guide to Underwriting Multifamily Acquisitions to help others.
Rob Beardsley oversees acquisitions and capital markets for Lone Star Capital. They have over $100 million in units under management. Rob shares some of the key inputs to review when considering passive investment opportunities. In this episode, he shares his thoughts and guidance on underwriting cap rates, rent growth, rehab schedules, and lending.
Always running into his competition in Texas, he decided to partner with him and they founded LoneStar Capital together 2 years ago
Details on the Texas market today
Understanding the risks in the Houston market and how to work around them
Underwriting approach within the Houston market vs. Dallas
Rob wrote The Definitive Guide to Underwriting Multifamily Acquisitions as there were no resources for understanding underwriting when he started out
Underwriting is more art than science and is the most complicated part of real estate investing
Ensuring that you’re being conservative in your passive investing
Details on the key inputs to look for in a proforma: What is the rent growth assumption, the exit cap rate, and the stabilization assumptions
Entry Cap Rates, do they matter?
Going in cap rate vs. exit cap rate
Factor in the variables that impact your construction timeline (including COVID19)
How to adjust underwriting due to greater economic vacancy
The biggest underwriting questions answered (market data, rent and sales comparables, and rent projections)
Bridge lending vs. traditional banks or agency debt
Rob’s unique and effective way to stress test a deal
How to stress-test an agency deal
Why Rob’s industry newsletter makes an impact (Sign up for the newsletter here)
Partner: Download our Sample Deal Package
Bought a poorly occupied deal that needed a lot of work which required a repositioning of the tenant base. He underestimated the fact that when you change the demographics, you’re not going to go linear from 70% to 90% occupied. It will be more like from 70% to 50% and then up to 90%.
Most Recommended Book:
Investing in Real Estate Private Equity (Sean Cook)
Writes in his journal: What he is grateful for and his goals and tasks for the day.
Wish I Knew When I Was Starting Out:
Do your due diligence, and do it exhaustively.
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