Masters Underwriting Deals & Acquisitions, April 1st, 2025

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Summary

The April 1st, 2025, masters class held by Massive Capital was a deep dive into the world of underwriting deals and acquisitions. Participants discussed various business strategies including marketing tactics, deal analysis, and underwriting. The session was interactive, encouraging participants to share their week's productivity. Several deals were examined in detail, such as projects on rental properties, small-scale deals, and larger investments. Insights on market trends, loan assumptions, and financial strategies were thoroughly debated. The atmosphere was supportive, with participants being coached on their deals, and celebrated for their successes.

Highlights

Participants discussed their week’s progress in business and analyzed the deals they worked on 🤓
A focus was placed on both small and large-scale deals and their market positions 📊
Insights and experiences shared on underwriting different types of loans 🏦
Discussions highlighted the importance of adjusting strategies based on market demands 📈
Peer-to-peer coaching and feedback were emphasized as tools for growth 👥

Key Takeaways

Always honor the process in deal-making 🤝
Engage with peers to share business strategies and progress 📈
Analyze deals even if they seem small, as they might offer learning opportunities 🔍
Finding the right balance between deal size and market demand is crucial for success ⚖️
Collaboration and coaching among team members foster growth and success 🎓

Overview

In this session of Masters Underwriting Deals & Acquisitions, led by Massive Capital, participants gathered to delve into the nuances of business strategies that could enhance their deal-making capabilities. The interactive format encouraged everyone to share insights on marketing tactics, deal analysis, and financial projections, fostering a collaborative learning environment.

Detailed analyses were conducted on several real estate projects, examining various factors such as loan assumptions, market trends, and deal sizes. Participants were guided on how to navigate through smaller deals, balancing time investment with potential returns, and understanding the critical role of market research.

The meeting was more than just a series of presentations; it was a dynamic coaching endeavor. By celebrating each participant's progress and providing constructive feedback, the session underscored the value of peer-to-peer learning and its impact on business acumen and confidence in the realm of real estate investments.

Chapters

00:00 - 15:00: Introduction and Greetings The chapter titled 'Introduction and Greetings' seems to involve an interaction where someone is preparing to go out. It likely focuses on initiating social interactions, potentially with a friendly or casual tone. The exact context is unclear, but it suggests preparation or a routine commonly associated with greetings or starting an activity.
15:00 - 30:00: Updates from Team Members ## Summary The chapter titled "Updates from Team Members" likely involves various members of a team providing their individual updates. Each member might discuss their current progress, challenges, and future plans concerning their tasks or projects. This type of meeting usually aims to keep every team member informed and aligned with the team's overall objectives. Due to the brevity of the transcript provided ('e'), specific details cannot be extracted, but typically such chapters feature concise sharing of individual contributions and sometimes feedback from team leaders or peers.
30:00 - 60:00: Discussion on Specific Deals The chapter focuses on in-depth discussions of specific deals, analyzing the terms, conditions, and strategic implications. Key points include the negotiation tactics employed, the interests of the parties involved, any challenges encountered during the deal-making process, and the potential outcomes or benefits of the deals discussed. The chapter provides insights into the decision-making processes and the strategic goals aimed to be achieved through these deals, as well as reflections on past similar transactions.
60:00 - 90:00: Negotiation Strategies and Considerations The chapter on 'Negotiation Strategies and Considerations' focuses on equipping readers with practical techniques and approaches for effective negotiation. Emphasizing the importance of preparation, it guides on determining goals and limits before engaging in negotiations. Critical skills such as active listening, empathy, and clear communication are highlighted to ensure understanding between parties. The chapter also discusses various negotiation styles and when to apply them, such as collaborative, competitive, or compromising strategies, and offers insights into balancing assertiveness with cooperation. Additionally, considerations for negotiating in different cultural settings are addressed, providing a comprehensive approach to achieving successful outcomes in negotiations.
90:00 - 120:00: Structuring Deals and Financing This chapter focuses on the intricacies of structuring business deals and the avenues for financing them. It delves into various strategies and methods employed to ensure that deals are advantageous and align with the objectives of the parties involved. The chapter also covers different financing options, from traditional bank loans to more modern, innovative funding solutions. It highlights the importance of understanding the financial underpinnings of deals, assessing risks appropriately, and being aware of the latest trends and legal considerations influencing deal structuring and financing. The chapter serves as a comprehensive guide for anyone looking to navigate the complex landscape of business deals and finance.
120:00 - 150:00: Review of Underwriting and Financial Metrics This chapter provides a comprehensive overview of underwriting practices and their importance in financial assessments. It covers key metrics used in the financial industry to evaluate risk and performance, offering insights into how these metrics guide decision-making processes in underwriting. Readers will learn about various financial ratios, analysis techniques, and the role of underwriters in assessing creditworthiness and financial health. The chapter emphasizes on understanding the balance between risk and reward, and how financial metrics can be used to predict future financial outcomes. Practical examples and case studies are included to illustrate these concepts in action.
150:00 - 180:00: Broker Interactions and Next Steps In this chapter, the main focus is on Broker interactions, detailing the specific communications and transactions that take place with brokers. The chapter likely explores best practices for engaging brokers, potential challenges, and strategies for overcoming these challenges. Additionally, it outlines the next steps in the process, which might include further negotiations, documentation, and follow-up actions to secure intended outcomes. The chapter aims to equip the reader with practical insights and guidance on efficiently managing broker relationships and planning subsequent actions.
180:00 - 200:00: Closing Remarks The chapter titled 'Closing Remarks' seems to be incomplete with only the letter 'e' provided in the transcript. Therefore, a detailed summary cannot be generated due to the lack of content.

Masters Underwriting Deals & Acquisitions, April 1st, 2025 Transcription

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13:30 - 14:00 hi guys good morning good morning
14:00 - 14:30 everybody hey how's it going y'all so guys tell me what did you do this
14:30 - 15:00 past week for your business what post did you make to be able to grow your following what marketing did you guys do in your business what Brokers did you talk to what deals did you analyze what presentations do you did you guys give what did you guys do this past week in your business if you would type it into the chat uh that' be be awesome love to see everyone's progress right
15:00 - 15:30 you got to honor honor honor the process so that you can get the deal the deal is the byproduct of you running your process so hey everybody good morning go ahead and type in I'm super curious what all did you guys do in your business over the past week hey guys who's going to share first Latoya I see your un no your your otter is unmuted who wants to share for okay all
15:30 - 16:00 right curly says look for deals all right awesome gzella said I made a couple of marketing post on social media and got a couple uh of Interest that's awesome uh Sharon says I have a deal I need to underwrite yeah that's awesome that's great uh let's see here um Sharon uh I'll just uh I I know a little bit about that deal but you want to maybe share like a one to three minute overview of that if you feel comfortable if not you don't have to you'd let me
16:00 - 16:30 know I can't unmute there you go so was that the deal that um Phil sent so you know what John spoke with him actually and I'm gonna let him okay I didn't mean to put you guys on the spot sorry guys yeah so it's generally H much smaller than what I like to look at okay the fell who put the business plan together he enthusiastic about it of
16:30 - 17:00 course as uh uh we'll call him the um deal finder if you will um I've got to run some deep analysis it's it's a a total rental um type of a project and we generally um don't like projects if they have all rentals that doesn't mean that it won't work um I gave uh the fow a list of things that he still needs to check out with the municip alties uh to see what is available and
17:00 - 17:30 what can be done the purchase price that's being proposed for property looks okay uh but we need to run some more numbers to see if it makes sense and to see if something this small um uh is something that we want to tackle because as many of you know it takes the same amount of time to look at a big deal as it does to look at smaller deals so we'll continue to look at it from time to time and that's the status of that
17:30 - 18:00 one and then Sharon's also found some additional deals um and we're lateraling those to the mobile home park team um we we have Lois out there and I'll let the other team members talk about um what responses we're getting back uh I I don't want to steal their Thunder because they've worked diligently uh on that as we've coached them um as team members so that's it for me I'm going to go back to my other PC and work on the
18:00 - 18:30 projects I've got on there all right awesome it sounds like somebody else might be unmuted I can't quite tell who it is but uh John Sharon thank you for sharing that update you know Sanjay um you're you jumped on so you know um I just asked everybody to just fill in and tell me what they've done in the last week to build their business um and it looks like we got still a couple people that might be unmuted so San have to find them and and them I don't
18:30 - 19:00 know uh you know what if maybe did that make a difference yeah maybe I wonder it is mine yeah yeah all right so you know um one of the things that came up is um just you know everyone's doing some U marketing looking for deals posting on social media underwriting deals and we were just talking about uh John Sharon's uh one of the latest projects looking at and they said this you know thing and um
19:00 - 19:30 I think this Rings true for a lot of us um but they said like hey it may be a little too small you know for what we're looking for um you know and I would say that a lot of us have done deals at the beginning that were too small um so um you know will you you know will you kind of put some of I I mean I know you have to have a certain number of you know um size of a project to make it really make
19:30 - 20:00 sense uh so that you can scale your business but you know how you know how and and how do you recommend someone just mentally kind of take that leap or do you recommend like some people stay you know start at that level just to get kind of you know that initial experience that will serve them on that first deal um I don't know if you want to comment on that I know you got a lot of stuff to cover today but um just want to get thoughts on it
20:00 - 20:30 too uh yeah yeah no definitely there are some deals that are you know too small and our time suck but like the one that chayu is doing you know it is on the little bit on the smaller side but um it's got decent cash flow and you know at the end of the day with the remote management is possible uh you know it'll be a little extra time but it's a good start it puts chirayu on an agency loan and
20:30 - 21:00 then you know he can have that Stak in the ground with hey I I have experience on agency law uh he can make that statement after this so so from that perspective it was a good start so we definitely look at the deals even in a $2 million range to say well if there are some highlights of this that add up from a long-term plan absolutely do it um I think uh sandep had a deal in
21:00 - 21:30 Bastrop which which I think just like between those that variety of activity that was on there you know we end up saying like hey it's just too small too much time that he will spend on it and the cash flow wasn't quite there so you know I think I called that deal a fork right because there was just so many different things going on in that one you know facility it was like you know
21:30 - 22:00 we all know that a fork is a terrible fork and a terrible spoon you know yes and then on top of that it had like an endangered species on it so uh that was pretty wild too so um yeah no I I like um that perspective of getting you know that that first agency loan um you know um you know you just kind of have to you know make some personal decisions for yourself too so and then hey guys I see suit is on today jet I just want to congratulate you on your uh Lion's Den
22:00 - 22:30 this weekend man first off and I didn't get to give you the feedback that I wanted to give you but man you looked really sharp you looked so sharp you looked so good you look so confident um but it also looked like you just finished running H an Iron Man I see some of the sweat kind of starting to drip down and I'm like you know it's ner rocking right but I mean
22:30 - 23:00 my gosh you just crushed it um you kind of you know took took uh some punches on the tech tech side and you just started to be extemporaneous so um big shout out to you for U making that happened uh you show up really strong um I wish I could have seen some of the feedback from the rest of the team but I just want to congratulate you and also big congratulations I'm not sure if Alex is on today um but Alex and uh Susan uh too who did a shark tank as well so um you
23:00 - 23:30 guys you guys really crushed it this weekend so congratulations yeah yeah you really did uh really did do well there suit so look sharp um good good guys uh 910 let's get started I know uh Sharon you wanted to review one of the ones uh would you like to go are you ready to go for that review yeah and I'm I'm glad Tiffany is here because um it's uh her
23:30 - 24:00 deal um but we did hear back from the broker um they had uh several offers um that came in and they've asked us to uh if we could possibly go up to 8.15 million on the deal so um I did take a look at the underwriting if I can uh share my
24:00 - 24:30 screen um let's it let me find it first Sharon it looks like sorry I've been at a conference and then I'm on my travel computer so I don't know I have the latest version of the synthesis but looks like their original asking price was 1.25 and now they've raised it up to 1 point eight right five yeah it was eight point [Music]
24:30 - 25:00 um actually was 8325 but it tells me that they got enough of um a uh a response and someone put in a probably a full price offer of that 1. 18258 8.125 million I'm sorry so let me see if I can go back and I can share my screen on this one I am yeah and one of the thing I always
25:00 - 25:30 say you know they can do whatever increase the price decrease the price uh you got to really look at your underwriting and what does it work or not right uh very very completely dissociate from that right the only point when their assing price becomes relevant is like well if it's too far likely they're not going to work so we're not going to spend time if it's close close enough well we might be able
25:30 - 26:00 to work and we can we can do that yeah so can you see my screen San yes okay so I did bring it up to uh the purchase price that they're now asking the you know what they want for the deal and this is an interesting it's uh agency loan uh uh assumable and the current rate is
26:00 - 26:30 3.31 um so this is there's two options that we have in this particular deal there's one that we can take on a supplemental loan and blend the rate so first I'm going to show you um what if we just did the assumable uh at 3.31 and Sharon the the principal amount left is 5134 roughly around there it could it might be I think it's actually a little
26:30 - 27:00 bit less than five million according to their om when they did it back in like November or something like that right but it's a rough number so you know we we still the down down payment would still need to be somewhere around 37 38% depending on where we are but the the problem with going up to 8.15 is that we would then have to raise
27:00 - 27:30 3.51 uh 514 million and uh the class B uh the lp returns are 18.3 cash on cash is a little more than you know almost it's almost eight annualized return 24 a half with a multiple uh uh Equity multiplier of 2.47 and so my question is is that enough for people to have interest
27:30 - 28:00 because that's a fairly Hefty um raise that's without a a preferred return of there's no preferred return yeah and the reason why we can't do a preferred return is because we go negative with the preferred return if we do a seven we did a seven we have problems in our our cash
28:00 - 28:30 flow I guess it's in the p&l yeah and you know the the G the GPS would make no money on in the beginning let's do a supplemental so in the middle yeah turn that on let's put the dollar amount let's put the interest rate that we think we'll get and see so they they talk about
28:30 - 29:00 having a blended rate in in the OM of um 4.4 something I think let me look at it I have got the thing here uh a blended rate of so so don't worry about the Blended rate let's enter the supplemental separately here in the middle that you have just the dollar amount and turn it on
29:00 - 29:30 yeah they're thinking that it's an 8.1 supplement that sounds about right okay so um if we did a thousand I mean a million and I don't know where to put the rate for that one but change that off to on that's a drop down yeah okay
29:30 - 30:00 so that makes it really attractive well let's take off the preferred rate no it's there a reason why we have to take it off maybe if we keep it on if it works with the preferred rate that would even even better deal for our investors well I think what we need to look at is what um the returns are or look at the p&l what that does to the p&l if I can yeah p&l is there yeah in the
30:00 - 30:30 middle bottom middle my uh toolbar keeps coming up and I can't click on it h because you're on Google Sheets okay all right uh no no two more down okay hold on a second oh um I think one thing you could do yeah here we go all right so and I and I did make a
30:30 - 31:00 couple of changes here in our um uh p&l to be more realistic but um this is what kind of happens in um the first year it would be a 5% return going up to 10 in the you know 8 8.75 in the fourth fourth year and 10% there is yeah yeah it's skin in the beginning for
31:00 - 31:30 sure so scroll up a little bit let me see the all the way to the top so so are they actually collecting 915 a year right now or that's the vacency should be a negative number right it's not a negative number see let me double check on their om yeah
31:30 - 32:00 they were collecting um 8 85860 right uh it was actually 818 oh gosh I hate this Google sheet here andon this is the senior uh Community right yes yes so um here it is this is the actual so I don't know why that didn't trans oh it's half um sanay the one park is 55 and over the other is
32:00 - 32:30 all ages right smaller Park um it's the smaller Park is uh there's two parks here they sit right next to each other um Lake View uh Lake View is has 92 they're the 55 plus and the Grove is 33 and they have um three fairly new uh mobile homes in there that are are vacant still that are ready to be rented out or or
32:30 - 33:00 sold um and then they have one vacant in um oh no it's the other way around they have yeah so sh so that also the um I just looked at their T12 that they gave us which was only from like December 2022 to November or no no December 2023 to November 2024 and I think they made around $833,000
33:00 - 33:30 833 okay as their as their net income yeah that's grossing yeah so go back to p&l so I don't know why that didn't transfer over yeah I I think uh sometime the sign is flipped on the vacency and concussion number I don't know why but that's that's the main reason but anyway that's that's fine your your
33:30 - 34:00 performa is correct I think yes um thank you so Sharon how confident are you of those expenses is that like you you're highly confident you can operate and deliver with those expenses um yeah I I the thing that we have to be care careful of is the the real estate taxes
34:00 - 34:30 the insurance um most of these are Park owned home I mean 10 andone homes so you're not going to have the maintenance from the homes you're just going to really have maintenance around the park um there is enough in the payroll to hire somebody to cut the grass uh plow the you know the streets salt the streets and that kind of s thing um there their they bill back their expenses uh for their water and
34:30 - 35:00 their sewer so that's going to be covered uh and then we have some general Administration which would be you know like um uh having a software program so you have high level of competence in your numbers medium level of competence I have a fairly high level confidence we can operate the park like this because it's also on top of that in addition into that um I know there's so both of
35:00 - 35:30 these parks are septic which we usually avoid but the septic if there are any septic repairs and stuff they would be comfortably covered in our capex okay okay so scroll down a little bit um so and Sharon are you guys man gonna manage this or because you have a payroll but no Property Management right the property management would be in the payroll that's Bas is okay yeah property on-site
35:30 - 36:00 property manager and a maintenance person okay okay and then like doing the pay processing the payroll and bookkeeping and all that who's doing that um we would have to hire out somebody to do that accounting so yeah and then for this one which Software System do you use we use rent
36:00 - 36:30 manager oh rent manager okay specific yeah mobile home parts okay okay I I sorry I'm smiling because I tried rent manager for multif family one time which they have that portion too and it it was a little complicated to say the least but if they their mobile home park module is good then it's good right so yeah and if you're used to it so and rent has improved itself or made it
36:30 - 37:00 more complicated in a lot of aspects so it's somebody who really loves to dig into it based systems with numerous options for websites everything else it's pretty amazing and a lot of us don't need that or want it but you're right okay that's good that's good so so Sharon you buy this thing you guys they one basically you're getting Cashwise 2,000
37:00 - 37:30 a month the asset management fees which is approximately 2,000 a month right right and then scroll down a little bit since there is no prep there is 42,000 a year which is about 3500 a month in cash flows GPS are taking three four five basically about about 5 to 6,000 a month and LPS are getting fiveish 5%
37:30 - 38:00 from year one assuming those rent increases can be done and you don't have the sale of those mobile home par uh mobile homes not baked in anywhere right uh that that's correct I well actually uh we're keeping the vacancy at about 5% here um because I don't have those in there so that would this is
38:00 - 38:30 kind of low I wouldn't want to go any lower than this uh 6% on the um concession yeah so um that's what I was gonna say is the any mobile home park own mobile home you sell that cash comes back to the project right that's not baked in here no yeah and go back go to the capex and Reserve tab for a second yeah I'm looking at um there are only
38:30 - 39:00 seven parkone homes total okay so we would be um I think the vacancy is accounting for those seven but to be honest we probably could just turn them around and do the the lease to purchase with those seven Sharon you in this one here you don't have any reserves like lender is going to want taxes and insurance reserves and some stuff
39:00 - 39:30 right that was some question I'm sure this is an agency loan I've never done an agency loan so that's maybe where we need some guidance is to kind of what the agency loan is uh agency is going to look for in our yeah t typically minimum is three months so I would put a number in the cell j4 there um like U I think your taxes and
39:30 - 40:00 insurance combined annual was about 150 so if you do three months it's it's about 40 40,000 or so put 50,000 just for lender reserves because you'll need that cash up front at closing so is is that enough I I think that should be sufficient okay and then capex wise no
40:00 - 40:30 is there any capex needed or no capex needed um the park looks pretty clean it look the roads look like they're in good condition so uh the only thing that we would be concerned about um which we would have to have a thorough inspection of is the septic system so whether and they are I believe they're individually um individual septics if I remember correctly really like 130 odd different
40:30 - 41:00 septics that's something that we need to get clarified we need to get clarity on that I don't think that that's very unusual very unusual I don't think the broker ever got back to us we did ask about it but we never got a uh a clear response okay look through your emails real quick there Tiffany and see if we did um because I thought we there were like two or three large
41:00 - 41:30 systems there are probably a few large systems um okay okay so of course no interior all exterior some okay so you know you have $170,000 which is you know it's a decent amount of money there yeah the email sorry email looking at it they don't don't really clarify so we'll just have to get that clarification from
41:30 - 42:00 them can you send that out to them right now yes that's pretty important I'm just trying okay okay that's good so let's go back
42:00 - 42:30 to show me let's go back to dashboard and do you know who who the service or lender is that we do not know either we do not know that uh the service lender is I think he sent us another email on that one moment cuz I said who's the lender he says existing lender FN ma okay that's Fanny
42:30 - 43:00 May but who is who is the actual servicer does Walker and Dunlap mean anything yes yes yes Walker Dunlap is one of the agency lenders yes okay Walker D we have really good relationship and we can start the conversation with Walker do and we can get some information from them we're doing we're doing our Veil loan with Walker donop by the way it's a do you
43:00 - 43:30 want do you want to see the term sheet the insurance term sheet that they I mean not Insurance loan proposal that they gave us or we can save that for another meeting yeah no no let's let's bring it up all right I'll share my screen quick or you can open I think you can find it in your email Sharon I i' stop sharing for a second so go ahead and share
43:30 - 44:00 okay so here is our um The Walker den laap and I don't know if you can see it yeah yeah zoom out zoom out don't zoom in zoom out okay do you are you able to see all the text yes I can see it yes
44:00 - 44:30 see the ESR it says taxes insurance and replacement Reserve collected in conjunction needs may be required based on the results of engineering report commitment fee nonrefundable application third party deposit P mortgage origination point1 okay so um 1.2 okay
44:30 - 45:00 so if if they're saying they can get up to 62 62 divided by 75 okay so even rocker dap is valuing this at around 8.3 million which is which is a good indication right that lender independently is valuing at value
45:00 - 45:30 so I think that 8.1 asking price Works um did they did they say they have other offers they did and if you submit 8.1 does that lock the deal or or uh they're still doing best and final and stuff like that I I don't know their response here's the email I can show you
45:30 - 46:00 on [Music] um the LOI which I hope you all had a nice weekend we had a few additional Lois come in and the seller is countering at 1 point or 8.15 million please let us know how you'd like to respond that's his only he didn't say what was the LOI you submitted at the submitted at um let's see this weird number of 7.7
46:00 - 46:30 23520 okay okay um so they did not say that it is a highest and best yeah no they did not did not say where other Lois are at right so did not I I would say go inch up a little bit like maybe 100,000 on
46:30 - 47:00 the original Loi and uh counter that like hey um 100,000 or okay um yeah I would say hey we we sharpened our pencil a little bit more um we are able to squeeze in this but really that's the max we can do let us know if sellers is ready to lock in
47:00 - 47:30 we have another deal that we are looking and would like to make a decision on this or the other one and okay I don't think you need to go all the way to 8.1 and what was your uh show me your Loi again yeah one moment
47:30 - 48:00 um so we'll be offering 7.8 essentially 7.8 yeah so scroll down what was our timing on this uh 30 days your diligence roll down a little bit and closing is 60 days right so you you can just say hey um we like to counter
48:00 - 48:30 7.82 uh but we are shortening our due diligence from 30 days to 25 days uh to make our offer more attractive and let me do an email to Harvey from walkeron um I'll copy you Sharon sh I don't seem to have your email okay I'll put it in the chat H
48:30 - 49:00 yeah let me do an email to Walker delab gu let's get a little bit share that uh the LOI that we have for Walker delab and let's talk to Harvey about this and how he feels and thinks about this and um may I join in on that call just to listen in I'd love to yeah let's do email first but if you do a call of course yeah yeah I I will need you guys because I don't know the full details of
49:00 - 49:30 this right so um but but if you shorten the due diligence period a little bit it's important for us to make sure um um like get a confidence on this yeah uh so let's do that but shorten just just highlight to the broker hey look we are really interested we sharpened our pencil or bringing extra 100,000 to the offer
49:30 - 50:00 that's really Max we can do but to show our interest we're shortening our due diligence to 25 days and uh let's get this going we don't need to mention that we need to talk to our Walker and Dunlop no no no well just say just say hey oh yeah yeah you want to say hey we have done loans through the Walker donl before so team has a good relationship with Walker
50:00 - 50:30 D and we are confident you know this loan would be uh you know will be able to perform on uh hit through the loan assumption easily and quickly okay oh so sorry I'm just taking notes um so when we email back with the new offer and shorten d diligence period we'll just say a team has a good relationship with Walker and D with a
50:30 - 51:00 walker and dlap agent um so we feel confident that we'll be able to work something out with them or with the supplemental loan right yeah okay um cool Sharon I believe you do have the W do of this correct y um I'm going to be starting my drive
51:00 - 51:30 back to Austin shortly uh you know you can just um we don't have to actually do the LOI you can just that in a in a email email to reply back got it and then you know we can say the um you know if this is acceptable we can send out a new one or you know do you want us submit a new Loi with that you can ask him what he wants us to do okay
51:30 - 52:00 copy um yeah just just say hey we are really excited about this we are squeezing another $100,000 right that's a lot make it like it's a big deal and we love the deal we have relationship with Walker doop so we can you know they know us we can do the loan um and in parallel let's connect with Harvey to just to get his his input okay and who do we contact to contact
52:00 - 52:30 Harvey because I know I don't have his info I just just sent an email oh I copied Sharon and you on it okay okay perfect thank you um when he replies just say keep an eye on it and share that Loi with him okay the supplemental Loi that you have okay uh oh the the document I shared with you yes yes the Walker and DL thing from that om oh I'm not yeah I guess okay got it um thank you for that one and then the second one is um I
52:30 - 53:00 think I've shown you the Anchorage Park um Robert one of our team members who's on this call wants to take a stab at um talking to the sellers and negotiating um now he's going to shoot for like the original asking price or the lowered asking price is 6.1 million um he's going to shoot for three million but we wanted to know what the upper
53:00 - 53:30 range would be when he's negotiating with the sellers um for it to work and so I was wondering if it's okay to I think we wanted to look at the numbers again real quick and get kind of your feedback on so what that number offer offer is offer based on our last review of the underwriting what has changed um so I reworked in numbers cuz I thought oh it looked really really bad um but then I worked it again with
53:30 - 54:00 Sharon and the team and like the numbers are actually kind of decent uh sorry let me share my screen real quick now the main challenge though I think with this property is that they're two owners and they seem to be not getting along um they're in constant fight on how to sell this um I'm the Brokers told me that they've had some offers
54:00 - 54:30 over the past year but that they could never end up closing because of the two owners in disagreement and so Robert wants to take a stab at seeing if we can come up kind of compromise between the two owners where they'll actually sell because their listing now has expired so it's not even on kxy anymore it's not even listed anymore um but I think we have um an advantage here because we're the only ones showing that we're
54:30 - 55:00 interested and I tried you know I showed interest last year as well and then number two there's a chance for us to try to solve a problem that other groups have not been able to solve so at 6.1 million that's asking price we put it at 40 4.2 million right now the returns look actually pretty decent um with the 29.6 IR 10% cash on cash and 45% annualized return with an equity multiple of
55:00 - 55:30 3.25 so that's a new loan you that's a new loan you have there right ish yeah I we up it um there was one bank that had a special at 6.5 but that ended yesterday um and I knew for sure we wouldn't be able to get that special um but who knows that there might be a local bank that has a yet another new yet another promo promo
55:30 - 56:00 rate okay but the numbers I had been receiving were between like seven and %. so that's why we put it at 7.75 yeah that that is that is good number may even be on the lower side but that's okay that's good the um do you think we can go a little bit higher I think our main thing to make this keep this attractive to investors
56:00 - 56:30 if we can keep it at a cash on cash on 10 now granted this particular one we took off the preferred rate I mean I guess we can always put it back in you know um which will make the the numbers better for our investors but I know that that kind of seven exit is seven exit reasonable seven exit C that was a number I worked out with I don't Sharon do you have an answer for
56:30 - 57:00 that we can make it higher you can put it put it back to an eight yeah let's do at least eight because this on conservative and safe side yeah that's fine so one of the problems with this particular Park is that it has Master Meter electric and so we will have to really make sure when we do our due diligence if we get this under contract that you know one that the system is
57:00 - 57:30 good or two we can have enough capex to um convert it to uh individual uh metering through a a service provider so that this that's the real question on this particular Park Master metering for electric is generally harder to sell in the you know for exit so that's why this guy's probably having a hard time plus it's an
57:30 - 58:00 Anchorage so I guess that's my question too is how attractive will this look for uh our investors who might want to invest in this deal being that it is in Alaska quite a distance from from Texas uh we do have some uh family members on the ground there um um you know to manage this um and actually the
58:00 - 58:30 park looks like they've taken care care of their older rental units there's a lot of Park owned homes in here that we would have to convert to tenant owned homes uh to make it you know function a little bit better because they do spend a lot on maintenance over 200,000 a year what's the ratio I I don't know i% yeah um she took it off there so uh
58:30 - 59:00 those are some questions that I have about this particular Park whether or not we can raise that 2.4 million to take down the steel in our group Sharon I also feel like we're forgetting since we have family on the ground we might be able to build some relationships with their friends and family as well who actually might be interested in investing in property in their town so there is that too like it's not
59:00 - 59:30 just our Network here in Texas you know but that there actually might be Network Beyond you know like couple degrees away from us through our own family members in Alaska who might be super interested in investing in their state that that is a possibility but um something that we do need to think about going forward in steal so sorry I was just trying to find the
59:30 - 60:00 other um because they had p&l somewhere I'm not on my regular desktop but um anyway going back to the the synthesis thoughts Sanjay at a rate I just want to give Robert a range that he can try to work with when he's talking to the seller yeah yeah okay let me see the
60:00 - 60:30 piano so they are collecting so this the actual 972 a year that's what they're colting Curr here's the caveat so last year they didn't like for example there's a warehouse and they didn't rent out the warehouse until later in the year but they the warehouse has been leased
60:30 - 61:00 for like at least five years or something like that so that's additional income they didn't have last year so this really the total net income here in this is like a combination of what they made last year and what we're proposing that you know it's like the potential M Market rent like how much where would be able to make based off of their current numbers granted that we have these leases now that fill up the
61:00 - 61:30 whole um year as opposed to just oh it was vacant and then they filled it later in the year so their own their own net income I well let me sorry let me think about this because I don't have access those are those are have to be actuals I think this is an actual this is an actual sorry sorry I've been looking at so many different Parks yes this is
61:30 - 62:00 their the their actual very close to what they actually made and gross okay so this is actual okay okay that's good so go back to Pano so you're not really you're increasing 100,000 in year one and the whole warehouse and everything else will add income so 100,000 increase in Year One should is realistic right part of this would be um for
62:00 - 62:30 example they're not billing back water and sewer and so if we end up buying these units where you can clamp onto the water lines to um sub metum we can build back water we just need to get that RCA certification so if they don't have which it seems like they don't have the RCA certification to be able to build back so once we get that certification we'll be able to realize some of the those expenses cuz they spent at least 50,000 I think on water that they never
62:30 - 63:00 built built back yeah um so we're being conservative here on how much more we can make back yeah uh okay okay so 100,000 increase in income and this is a pretty high expense ratio 50% you have a lot of repair
63:00 - 63:30 maintenance taxes insurance is low um [Music] utilities okay so Sharon you you you this seem realistic to you guys expenses wise yeah it it does seem realistic um you know if you think this is like an apartment expense ratio for a mobile home park because they do have a lot of Park owned homes so that's why we're seeing that maintenance and you know our
63:30 - 64:00 plan is to sell off some of those it's going to be a very delicate balance we're going to have to keep some rentals and sell them very gently throughout the course of time so that our maintenance expense will go down as we do that and our income will still as we raise rents for lot rent and it it's going to be a delicate balance but there's also going to be um another value ad is um Robert says he
64:00 - 64:30 can negotiate with his team and send his team up to Alaska where they can build new mobile homes on site because there's several vacant Lots um so we can also improve our rental income by building these these homes um and then providing residents with new homes to live in and to rent uh to rent the lot now those homes would be something that Robert would
64:30 - 65:00 um basically Finance out to tenant who want to buy and this is uh Robert who Robert Suarez yes Robert Suarez yeah because we did look at we did talk to like a manufacturer and it would cost like $35,000 to ship from the 48 states to Alaska but if Robert's able to negotiate with his team and they just build onsite these brand new homes um
65:00 - 65:30 that will save us a lot of money and then Robert can also make a little bit on the side with his um Builders his construction [Music] people so there's a lot of levels to this on that front yeah okay so from a uh offer perspective if go back for dashboard like I think you still have
65:30 - 66:00 half a million in capx I mean I think since it's Alaska you know Capital raising is going to be a little tough you have a solid exit cap rate of eight uh you know exit may be difficult being in Alaska and all that uh but once it's it's a turnkey type of operation maybe it's easier I mean I mean that is really the 4 4.2 is really the max I would go for
66:00 - 66:30 this okay um just to give us enough buffer um yeah I wouldn't go too much higher than this at all okay Robert you got that I got it all right thank you so much SJ I really appreciate it I appreciate it thank you guys good job think you got I don't know if you had something else sunj look like one other team had a deal in for worth I know P also
66:30 - 67:00 reached out yeah that was it that's Pon and Joe they've got a deal in Fort Worth yeah yeah let's talk about that and guys we'll stay a little over 10 I I see quite a few messages in the chat so uh yeah I get yeah and John can talk you have a land on partnering we can talk about that also have on Joe you guys want go ahead get started ju you want to share your screen sanj we've been talking to the
67:00 - 67:30 broker we're meeting uh at the asset tomorrow uh at 1 pm he'd like to review our underwriting so this is rail Ridge go ahead P San okay San San you know what the stuff the location everything huh I know this location a little bit Yeah okay this is oh no this is okay this is different this is for worth okay okay yeah so it is
67:30 - 68:00 like hey this is p here um hey P I think it is close to your Sherwood property like you know not very close but you know probably in the same kind of vicinity uh that's the reason I was asking you for all that information on Sherwood you know to just get oh oh Amberwood that's right that's right okay right so this is the property that so basically like you know they offered it as a group of three properties um all in all 748 units um they they ask like you know
68:00 - 68:30 the the uh price to be set by the market and they are open to receiving the the loois like you know for the individual units we picked up rail Ridge uh because it was in our buy box you know about 160 units so that is the property like you know we are going to review
68:30 - 69:00 okay all right so uh they like I said you know they didn't give us any uh asking price in the OM and even talking to um the Brokers they provided us like you know uh about 70 million for the whole deal like we did a we bit of an aggregation to come up with a whisper price of about $1 15 million you know for for this property uh asking price is 93 per door
69:00 - 69:30 uh we we right now like in our underwriting we we are thinking like you know that uh the offer of 10.5 million you know that's how we are underwriting this one for right now um which brings like you know the purchase price per door to 65k um they currently like you know have the occupancy of 90 6% um so we are thinking like you the stabilized debt could be an option for
69:30 - 70:00 us and we are putting you know uh from from the based on that you know down payment of 25% and rate of 5.5% so this was you one question I had like you know is that uh right trade to put or is that have to be higher sanj okay yeah to say probably higher um right now still I would underwrite six for
70:00 - 70:30 now um the exit cap it's a 86 property so yeah I would still put exit of six and now let's look at the p&l let's look at the p&l so uh looking at their income uh from their T12 it is about 1
70:30 - 71:00 1.6 um and the expenses are uh 1.3 um and their expense ratio like you know if you look at it so this this is little bit little bit weird because you know the uh information from the T12 didn't get copied over perfectly into um into the synthesis as well as into red I you there was you know one line item that got missed and that was the wages
71:00 - 71:30 uh which is about 281 207 so we had to you know work around that like you know to update this so from the p&l perspective we we are looking looking at uh you know the 55% was the expense ratio that we had put and this is the number you know that I had asked which seemed little bit lower to you you know for 1986 vintage property um so I wanted to like you know review all these expenses with you to see what
71:30 - 72:00 what exactly are we missing in the expenses okay yeah so all of these looking at each of these line items they seem reasonable uh maybe water is a little too high you can do some water conservation but mostly everything is in line I think what's driving this ratio low or or the absolute 6138 lower is the taxes look at their taxes as 250 uh typically when you buy it your
72:00 - 72:30 taxes go up but since the purchase price is lower by 5 million that's where the taxes are you know lower based on that actual purchas so sanj you know there is a bit of a story behind it so this is the information that we received from them on T12 so we looked at like you know the Teran county assessor office and looked at like you know their last year taxes you know they looked at the bills and what exactly they paid so they paid like you know about
72:30 - 73:00 197,000 right that is what at least the bills showed but their T12 you know they it came as 249 so you know not so sure like you know if it was an error on the T12 uh because the County assessors tax bills like you know showed in about 196 as uh the taxes like that got paid by by them yeah okay that's good that's good information right that's really good um
73:00 - 73:30 so yeah so I think the fact that the utilities are not all bills paid which is also driving the you know per door annual expenses lower um a lot of the older properties are all bills paid that's why you know electric is uh another, another $1,000 a door per year and repair maintenance yeah so this
73:30 - 74:00 this is actually in line seems Seems uh seems reasonable um that's good that's fine okay so then yes so then you know we so as far as the value ad is concerned you know on the property you know this is the property that's been with this owner and there is no value head has been performed on this property for for the duration of the property I mean besides like the regular
74:00 - 74:30 maintenance and things like that so we we are underwriting like you know the few value ads and uh you know try to capture those value ads in the rent as well as in the other income right so we we we looked at like you know the unit refresh you there are about 160 units we are underwriting to refresh about 32 units you know 16 units in year one and 16 units in year two uh that is going to capture about $100 uh as premium for the
74:30 - 75:00 refreshed units uh so that is that is one thing like you know that we are looking at doing the other thing was the utility fee and this is the question that I had asked you you know on Monday um so as far as the water and waste is concerned it is paid by the property the trash is paid by the property the past is paid by the property so we we are like you know looking at uh adding a utility fee to the rent which is in line
75:00 - 75:30 with the comparables that we saw in the market you know they are you know charging a utility fee so there are four types of units in there different Square fet uh for but it is one bedroom uh one bath has got two sizes two bedroom and one bath Al and and two bath so we we based on that like you know we did some computations and we came up with the util fee that we can charge that is currently not being charged you know this is what that gets paid by uh the
75:30 - 76:00 property itself so we we adding adding that the one thing like you know that that was a question like you know an assumption that we had made that uh we will be adding these utility fee to the residents like you know who are either renewing their leases or the new tenants that are coming in and we are you know assuming a 15% uh as a turnover you know for for the 160 unit so that's how we added this
76:00 - 76:30 utility fee in our pnl uh you know the other residential the in the expense reimbursement is based on based on that assumption like you know that it is only 15% and as you can see um every year like you know this number goes up because the 15% more we are charging so does that does that make sense SJ is that the right assumption does this this is really good very conservative but
76:30 - 77:00 really good yeah sanre just just quick question sorry to interrupt uh Pan um should we split out the water and the waste uh and and call it specifically rubs rather than lumping everything into a quote utility fee trash pest water I would think that rubs would need to be a separate line item entity is that am I splitting hairs or is that is it okay to lump everything together into a quote
77:00 - 77:30 utility fee sanj did you hear that uh no sorry I got sidetracked I say that again yeah I'm sorry um minor Point probably should we lump everything into a quote utility fee or should we call out water and as a as a rubs separate line item that ratio
77:30 - 78:00 because that impacts uh you know their their uh their rent uh yeah yeah no so for synthesis purposes can kind of do one one line item uh expense reimbursement but like on the rent roll and when you actually get into the operation there will be individual uh it will be the individual line item track and then you have your rubs you have your pest you have your
78:00 - 78:30 cck and you always want to make sure that rubs wise you're you're getting reimbursed for what you're spending or close to that um on renal you will have all those details but on synthesis just from a planning perspective it's okay to have it on one line okay okay thank you sorry pan go ahead that's no that's good question so the next one is the washer and dryer so right now they have the uh
78:30 - 79:00 the hookups for the washer and dryer in all the 160 units um so we are underwriting uh underwriting for the washer and dryer fee uh for about 50% of the two bed units so that is about 32 units uh you know that is that is uh where we can put the washer and dryer um and we we reached out like you know to couple of companies like you know who Lee out the appliances so we got few
79:00 - 79:30 quotes and this is the code that we using is from the Precision appliance that is $35 per month per set um so that that that Nets us like you know if you put the washer and dryer fee at $150 it Nets about $15 you know per installation you know that gets added to the other income on the pnl other residential income on pnl yeah yeah that's perfect this is
79:30 - 80:00 good make sense okay the other thing you know that we had was the pet fee and the rent so currently they do not allow pets in the units so we we want to uh we we are underwriting like you know to bring that policy in like we're going to allow the uh the Pats so we are assuming like you know about 15% of the total units will have pets we are charging a pet fee of about $120 per month and there'll be one
80:00 - 80:30 time non-refundable fee of 250 that will be charging for the P does that make sense sanj yeah y that's good that's perfect so then there was like you know there was this whole Personnel thing here uh they they had about you know the expense of about 28127 so we kind of like you know edce that by 30% and the Assumption like you know that we used here that the personal
80:30 - 81:00 cost is computed based on assumption two people per 100 unit at 60k perom um and that comes to about 195k and we use that specific number here uh to capture the Personnel so which is 1230 per door per year yeah I think their personnel is definitely higher uh 12:30 12:30 a door is a little bit on the low side
81:00 - 81:30 now um just because the wages have gone up right um but you're you're in the ballpark you have a decent amount of Contract Services so um this this is good this these these expenses are good um uh the surprising thing is you're going down on expenses by 3 00,000 from their Cur which is repair maintenance they had
81:30 - 82:00 a lot okay so it's majority of it is coming from repair maintenance correct correct so they had like you a bunch of capex expenses s like you know that they had included right you know as part of uh you know their expenses and we saw that like you know when we looked at uh their expense like the first three months of 2024 there were a lot of repairs that went on and uh you know after that it was kind of a study State uh after that so it kind of you know
82:00 - 82:30 made very clear that there was this onetime expenses that they did to you know maybe getting the property ready for sale that's good that's good so scroll down let's take a look cash um so you have 238,000 available for distribution and out of this 238 uh you have 100,000 increase on income from the current income and your mortgage is covered you
82:30 - 83:00 almost have 50% of your mortgage uh in cash available um so this is a healthy cash as such but not much cash flow for the GPS right um you know first couple years almost you're you're working and not
83:00 - 83:30 really getting paid other than that asset management fee which is about 3,000 a month right right so scroll up uh okay so that's good okay so let's go back to dashboard you know what so 65 a door is very low for that market um but so they're asking is 15 million
83:30 - 84:00 on this yeah so they're asking 93 per door actually I just got an update from the broker it's 90 per door he just contacted me so they are a little bit lower right they're just trying to Hype up uh um what is your rent is like 950 a door so the average rent is at around
84:00 - 84:30 980 so right now they're at 9 943 you know so that is24 I feel like that market like on Amberwood you saw like our rents are 1,200 like three bedroom we're get we're getting like 1400 right um of course that that is all those pay uh do me a favor do a little map where you have um the total net income divided
84:30 - 85:00 by the number of doors divided by 12 so in cell E18 yeah do the do the math there equal to total net income divided by total number of do yeah just use your cursor just use your cursor on the
85:00 - 85:30 keyboard and if cursor doesn't work press f2 first function F2 on your keyboard and then use the cursor or you can just type in equal to E17 type in E7 yeah that's what I'm was going to do divided by 12 and divided by number of doors which is on the right hand side somewhere okay that's fine hard coding
85:30 - 86:00 is fine see see your net income is 925 a door like on Amberwood it's a older almost 20 years older than this we're getting a lot higher average rents and that they we have a majority one bedroom there right um I feel like because of the demand in that area rents are a lot higher MH what do your comp show comps are comps showing higher rent or comps are you
86:00 - 86:30 know uh for for the one bedroom for the refreshed units it is definitely higher um so there was one comp you know that we were um we were looking at uh so this is this is um this is a creek side apartment you know it is just a mile away and we're looking at like you know their one bed one bath unit uh so this is their monthly rent it is showing um
86:30 - 87:00 so if you look at it you know it's about monthly cost is 1089 because it just adds all the fees the but rent is at around 973 oh they have technology package too yeah yeah uh which is other option to do um okay this is a nice website they have a nice okay so go back to your underwriting and show me the unit
87:00 - 87:30 mix so we have a lot of one bedroom and two one two one 8 so under the column n column n change that 827 to uh let's change that 2,000 and change the 21 to 1200 see see I think 1,80 is what I
87:30 - 88:00 think you can achieve rents wise okay um in that market based on Amberwood and others that I know of course support this with and and utilities are on top of this here this is not all inclusive so go back to your p&l I think you can increase the year one to
88:00 - 88:30 6% and if you start the year at 950 and end the year at let's say 150 average 8,50 at the end of the year your average for that year would be th but year two you can increase a little more and and start at 1050 and you will end at 80 so maybe you can do year two you know put like a 7%
88:30 - 89:00 there 1,70 so average for the year and then you just have a 3% increase um this is like based on that market seems like something that's doable and you have a very healthy vacancy there which is good just for conservative right right right dashboard yeah let's go to dashboard yeah see you can push a little
89:00 - 89:30 bit maybe 11 million but not a whole lot still wow yeah yeah yeah see that's really much Max you can do yeah I think you have to go talk to broker is like that's where we are penciling out you still have a $4 million raise that's a that's a pretty big rate as is right yeah right here this is yeah very little scroll down a
89:30 - 90:00 little bit for gp's total profit is oh 2.4 that's a decent profit yeah I I would go with Max 11 million so talk to broker about hey that's where we could come in what do they think and if they want to do anything that that's fine yeah Sanji the broker is texting me real time he's suggesting we look at a bridge
90:00 - 90:30 loan versus stabilized he's not giving me a lot of detail yeah you you can try switching to Bridge and take a look the bridge is same thing um and then do a refi in year two yeah there yeah change that to two
90:30 - 91:00 and do do a refi right rate cap at six also little bit lower interest rate but you know it it helps a little bit but you know it maybe half a million up in price but it make makes it a risky deal um look at the loan proceed at the refi 116 that is the attractive part um that's definitely feasible but
91:00 - 91:30 it's a little bit of a higher higher risk right so it's a higher risk from what perspective sanj just can you elaborate a little bit go yeah go back to pnl now look at your cache on the bridge oh yeah your cash is like now you earlier you you had 238,000 cash available all right now you only have cash available is 459 and year1
91:30 - 92:00 yeah right so when you don't have cash any of your plan that you are planning on executing don't go as planned you're needing cash out of your pocket that's whereas on the agency loan you had 238 ,000 in Cash correct correct yeah this was a difference in that interest rate of 6% and 8.5 yeah exactly
92:00 - 92:30 exactly the overall irr went up with bridge but look at the year one and two cash like such a low cash that it makes it a high risk that's that's all that's all that yes yes and and in current environment you know politically who knows what happens tomorrow right um and you know until we get some stabilization of the tariffs and markets and all those as a business you got to have cash without
92:30 - 93:00 cash you you cannot survive so Bridge makes it risky and interest rate environment right like yesterday I saw a news that inflation February inflation is kicking up which means fed mayre decrease decrease the rates at all so the five and a half that you're underwriting in year two may not happen and all of a sudden yeah so I I I'm very uncomfortable with the
93:00 - 93:30 bridge especially if it's a stabilized property above 90% And you know if a deal doesn't work it doesn't work and it's a seller problem we don't want to make it our problem so right so yeah I right just just yeah talk to broker like hey look we don't know the two years from now where the environment it's going to be with the bridge cash gets sucked out and technically like go back to a
93:30 - 94:00 agency and then leave the refi go back to the refi and exit tab no leave that leave that leave that go back to refine exit tab you know at the bottom there at the bottom there's a refi exit tab refi at the bottom your tab your different tabs you have oh sorry sorry
94:00 - 94:30 sorry yeah refi yeah yeah I oh I'm sorry go to closing cost tab uh on the closing C just increase the 2% in column H to 4% and now look at the dashboard so you know you do agency and then you can still do a refire SC up and you will pay a little
94:30 - 95:00 bit of the exit uh refire U penalties so um you know you can do the same thing and maybe this can inch up the prices a little bit uh but Cashwise you're still in a comfortable position so I would I would really negotiate at 11 uh you know start at 108 each up to 11 111 maybe but not much
95:00 - 95:30 higher you know just just with the uncertainty that's out there you don't want to take our RK thank you thank you San yeah we are meeting with broker tomorrow at at location so we'll definitely like you know have that conversation yeah so when you meet with the broker and go visit the comps and if you see the can be increased a lot more than what we have here that's the only thing that we could
95:30 - 96:00 potentially get a higher uh higher offer otherwise it just doesn't work correct okay yeah okay good job good job P for your first this is a really good job and and the team behind you so good job guys yeah I want to give a shout out to Alo like you know he I picked up a lot of his brain so oh okay okay so oh Alo is a Powerhouse Al has done a lot so okay good good thanks thanks to Al for
96:00 - 96:30 helping that's good um okay John is John still there yeah I'm still here yeah hey John go ahead your question on the land so um we're still trying to gather a little bit more information for the detailed underwriting uh but I was trying to figure out how do we account for the equity that the land owner has that he's bringing to the table in the underwriting without showing you know
96:30 - 97:00 having pay it back as a return or you know what I mean what I would do is when you you underwrite the total price total construction uh all those expenses and then the model tells you oh I need an equity of 2 million 5 million whatever right and then you say well 5 million equity if owner is carrying three million from the land as Equity you basically reduce that right and if
97:00 - 97:30 you're doing the detail underwriting I usually will put that as a supplemental at whatever the whatever the seller terms you think you can negotiate and that lowers your Equity requirement that you need to raise and that's how you kind of underwrite it uh okay so put it as a supplemental put it as a supplemental yeah do you have some sort of initial
97:30 - 98:00 underwriting that we can play and I can show you yeah I do but again we're still gathering information that's fine I mean numbers will be off but at least model I can show so the the way I did this was I used the uh the cost of the three acres broken out as the purchase price and then under
98:00 - 98:30 capex I put our first year holding cost construction admin interest carry all other that's perfect that's perfect perfect yes and then you have the loan and whatever the lender will carry that's good so so let's say go back to dashboard so let's say you say well the seller is bringing that 430 as an equity in the deal right so just in supplemental turn on
98:30 - 99:00 the supplemental and put 430,000 there and and are you going to pay seller a fixed fee or some sort of equity it it we're going to partner on the deal um okay he he owns Self Storage already uh he just owns the land and he's out of capital so yeah yeah so so so seller is going to get equity in the deal yeah yeah we were going to
99:00 - 99:30 partner with him on the uh the actual asset okay and that's where it gets confusing yeah so you can put it as a Class C share also if it's Equity because then it doesn't take out the cash up front if you put it a supplementally taking out cash in year one um but but go ahead and take out the
99:30 - 100:00 supplemental um technically seller is just bringing you just don't have to bring 431 at closing right um so you can just say hey I I need to raise 1.3 million but if seller is partnering the IR and everything else stays the same right yeah so take out you can take that take that out take out the
100:00 - 100:30 supplemental and remove the dollars so so the way you can think is well from a IR perspective since seller seller is partnering it is going to be this this way uh 14 14 and a half uh and quite honestly this is not doesn't seem like a great deal you're doing a threee exit no and and the 431 is just what he paid for that portion of
100:30 - 101:00 the land that we're developing I'm still trying to get how much he owes but he he bought at like 330 a square foot and the market value is so much higher that it kills the deal if we don't partner with them and we just buy it yeah yeah yeah so and if he owes something on the land that means you have to bring that as Equity so doesn't really help a whole lot meaning you will need to bring
101:00 - 101:30 almost 1.7 of that whole deal uh of whole Equity to the table so from from what he's told me uh the cost of these three acres is about 431,000 uh he's got it listed on the market with the market value about 1.9 which is like 1.5 Equity so there there may be substantial amount of equity in the land that we could use towards the
101:30 - 102:00 15% uh down payment for the construction loan oh I see I see so okay go back go back to dashboard so the total total cost is 9 9.2 right yeah roughly the estimate we have
102:00 - 102:30 is from 2023 so we have to update that uh yeah so the lender will do somewhere okay so the total loan you have here is in a good good position to what the lender will do um maybe a little lower than that so you're required there is is what you're going to need at least 1.7
102:30 - 103:00 uh right yeah because if you do 9.2 time7 it comes to 6.4 so you may want to bump up your rehab uh or lower the rehab basically that the lender will fund you probably will need more a little more than 1.7 yeah change that to 80 something seems a little
103:00 - 103:30 long 6.8 no I'm looking at like if the total all-in cost is 9.2 then 70% of 9.2 is 6.4 the the down payment is off it's missing a one that's why because that would be 15 15% roughly of the the total
103:30 - 104:00 cost because 15% of 9 9.2 million is uh 1380 so I think I was toying with it no you're not going to be able to do 15% so the to A lender willing to do it oh you do have a lender okay yeah we we' have we have a longterm relationship
104:00 - 104:30 with them he's will to do 15 or 85% LTC for new construction so 15% of the construction cost not the not the land right and and use land as Cal yeah and you use the equity in the land to help cover that
104:30 - 105:00 sorry so the lender will cover 85% of 8.4 million um I'm pretty sure it's the total total cost uh lender is never going to cover your acquisition fee closing cost and those things mostly what they're going to
105:00 - 105:30 cover is that's a good point what whatever your construction cost is yeah which is 8.4 um so they will cover if if you they're saying they'll cover 85% of that 8.4 so you will need to bring 15% which is is 1.26 of 8.4 uh plus whatever the seller payoff on the land
105:30 - 106:00 is plus your acquisition and closing cost and stuff gotcha we break that down then yeah so but your Equity required goes down basically because your Equity required becomes really like around two what you had earlier which which your total loan amount 8.4 million
106:00 - 106:30 times 8.4 million time .85 is 7.1 so lender will do somewhere around 7.1 million so change that your rehab by bank to higher the way you had it before
106:30 - 107:00 7.4 yeah I think some of those numbers are hardcoded so I think it messes up this uh go down sources and uses table is there I think we need to look at it on sources and uses scroll down a little bit more yeah I'm missing a lot of these references I'm not sure why capex maybe linked up to the capex but if you balance out on
107:00 - 107:30 this sources and uses which really should link to all the other cells scroll up scroll back up uh but let's do this right like 9 9.2 alln what is the what is the exit you think on this and what is this construction this retail multif family uh climate control Self Storage oh Storage storage okay so what is the exit
107:30 - 108:00 look like exit price so the the actual plan um is going to be for the GPS to hold back whatever returns they make to buy out the lp sooner to own the asset outright is kind of the goal okay does that make sense yeah I mean yeah a lot lot of the GPS want that but it can be hard to get
108:00 - 108:30 Capital raise the capital uh but really you're probably trying to do is not have to raise much if the seller Equity is sufficient to cover lender requirement basically right so and whatever the equity required don't even rate it try to just borrow that also right so uh so go to capex capex and
108:30 - 109:00 reserves so this is 8.4 so you need 8.4 will the lender will the lender do full 8.4 if you use land as the equity 1.5 million and have talk to him but I mean he's pretty flexible so yeah so what you do is talk to the seller and say hey look let's pay
109:00 - 109:30 off your loan now land is owned into a new entity it's basically sold to the new entity uh seller doesn't get any cash but they're they're getting equity in the project but with land if the land is valued around 1.5 1.6 then you go to the lender and say hey we own the land outright will'll pledge the land and you find a full 8.4 now you really need two 300,000 that
109:30 - 110:00 you need to pay off the sell's obligation and then you barely need any Equity to raise and and then it will go out and execute with the draws with the lender and as long as the exit makes sense meaning EX value you have you have a asset you own outright you and of course the
110:00 - 110:30 seller so how many units is it going to build uh we counted 567 hey John real quick hate to interrupt y I just got off the phone with the uh with the lender uh that we use for Urban Air and uh told him about the Self Storage he's willing he could do 90% LTV including the land uh he's at
110:30 - 111:00 six and a half to 8% construction six to 7% longterm and he could do a 30-year am with one to three years IO oh nice yeah oh being that the uh the landowner already has existing storage yes so with that type of a loan this would uh John you can structure you don't need any any any Equity at
111:00 - 111:30 all right because you just you just need equity for you just need cash for whatever the pay off for salaries and and if it's like 300 350,000 you know just Roundup money amongst the partners and then you own an asset outright at the end agree up front uh with the seller the ownership at the end right and and then then you
111:30 - 112:00 underwrite the stabilize operation make sure it cash flows and you'll have to do a new loan at that point too because this lender well this lender is willing to do 30-year amortization for for how long of a turn 10 year sorry how much it'll be a 30-y year am 10year term uh he said up to three year 36 months
112:00 - 112:30 IO wow that I mean if you and then as long as the once you're finished so okay so how many units total uh JJ what' you count 189 per floor corre all right so that' be 567 total 567 and what would be your average r r uh he said $170 a square foot so we we used 165 a square foot
112:30 - 113:00 um just to be a little conservative okay so what would be the Dollar rent per unit average about 165 bucks per unit average yeah that's a 10 by 165 okay so you have annual 1.1 million in rent and your expense ratio should be fairly low like 20ish per on this
113:00 - 113:30 right no you have climate controls you'll have utilities yes so let's just say you have 30% expense ratio to 70% on this so 785 annual noi and known as seven C it comes in at about 11 million value so and yeah so this should be you
113:30 - 114:00 should be able to afford on those rents the the loan and there should be enough cash flow which city is this this is in Mount bellw all right can you see my screen yes so right here bellw fm1409 they just put in this over past couple years ago and they're about to swap out this uh on ramp or an
114:00 - 114:30 offramp and so we are east of Houston if you're not familiar with the area oh I see is there enough demand over there there is quite a bit of uh development in the area there is a master plan Community you can see where they're moving dirt down here this is just south of there there's another master plan
114:30 - 115:00 Community going in here three phases and then a small one here so there's a lot thousands of homes uh planned for construction in this area okay okay we live here so we we've watched it grow the last 10 years so you know the market you know yeah quite well we we have businesses here and we live here okay you know I get a little skeptical of Baytown and those areas because uh
115:00 - 115:30 but no m b off of 10 is a little different we we won't we won't invest in in uh Baytown uh Mt bellie has a median household income of like 156,000 a year um anybody that has money on the east side is in this area not not Baytown yeah yeah uh um I think the way I would do this is um you can do this whatever the land
115:30 - 116:00 land payoff is and then have the lender use the land Equity so you don't have to bring any other Equity yeah that sounds like the best way to go um and and then as long as the finished product can support the operational expenses and the loans uh loan payments you have some cash flow it's a great deal yeah we just want to break even with with the this is just phase one there's
116:00 - 116:30 a plan for a second building behind it that's where the the actual money starts to come into play so so first do a stabilized synthesis for this like 567 unit the rent operational expenses and then carrying that note and see if it will cash flow okay if stabilized cash flows I I think then you can structure the up front with minimal to no cash just a payoff on the
116:30 - 117:00 land and then it's just a matter of agreeing with the seller the equity ownership and then you have a great project on your hand good deal appreciate so yeah do do the stabilized um synthesis and then let's talk again all right I'll take care of it thank you okay good good um okay I know we went quite a bit over um suit you wanted to talk
117:00 - 117:30 Infinity I think they have a little bit time on the there is sjit still here or he live sjit um do you have the underwriting for this yes I can share it okay let's share let's have a good conversation uh C CCH um when is your uh
117:30 - 118:00 boot camp meeting next uh well Thursday and so obviously tomorrow we're going to get together and then Thursday we're getting together too but mine is kind of really tough deal I just just wanted to show you just to share with everybody I can make it either quick or we can do it like Thursday or something it's just up to you let's see tomorrow uh we we will have a separate rooms tomorrow at 5:30
118:00 - 118:30 right yeah we can we can talk there yeah let's let's do that yeah yeah yeah yeah yeah perfect than you thank you for that perfect um Joe broker wants to see our underwriting we meet with him tomorrow uh Joe yeah that's fine fine you can discuss the underwriting your assumptions if if broker differs with your assumption you know ask for more details and and explain how you're
118:30 - 119:00 coming out with it um completely fine if he has any input bring that unless discuss that and that's good okay that's good okay so yeah let's do this so this is infinity on Mark um very good area um located North Dallas very close to Top Golf
119:00 - 119:30 and our North Park Center so all in all it's a 1986 build asking for door is 130k um with a loan Assumption of 177% um from from what I referred in the notes from Monday so asking 48.5 I put has 42 purchase price and down payment is 177% at 6.5 uh rate the current current loan is
119:30 - 120:00 lower right uh it is about 6.46 oh really yes and I thought the loan amount was 41 40 million um what is their actual loan amount 40 40 right yeah 40 and then the interest is 6.46 okay let's scroll down let me see
120:00 - 120:30 is there is that a variable or that's a fixed that sounds like a variable uh scroll up the interest rate is 6.46 is this the only statement or do you have one more statement they have another one yeah let's look at is the interest rate same between the two or interest rate is that different that's the original term
120:30 - 121:00 sheet so maybe this one 4.7 estimated initial interest rate yeah see the spread is 2.14 uh the two rows above 4.77 the spread is 2.14 M and maximum interest rate is six I see um do they have a Freddy oh Freddy ma it is a sorry
121:00 - 121:30 SC yeah okay e either way the loan amount is 40 and a half million so they have a interest only one um fiveyear interest only and this is originated when uh two years ago this was dated uh 22 22 so it's interest only for three more years okay go back to your
121:30 - 122:00 underwriting so change the uh yeah change increase your purchase so change your loan amount to 40.5 million not the interest rate loan amount change the loan amount hard for the loan amount to 40.5 and now change the down payment to
122:00 - 122:30 purchase price minus the loan amount not the down payment not the percentage the actual down payment yeah this change it to the formula change it to yeah purchase price minus the loan amount and now do a calculation of down payment do this as the down payment divided by purchase price for the down payment
122:30 - 123:00 percent yeah so change this formula here to down payment divided by purchase price so now what you did is you kind of fixed the now as you change the purchase price see your IR and everything change drastically yeah uh because that is the truth right this is the accurate and now as you change the purchase price your loan amount stays same but your down payment goes up or down oh um right um do you need you
123:00 - 123:30 don't need 3.8 million cacks that property is clean I've actually visited this a couple times yeah and and from the OM what they suggested was uh 77% of the units are upgraded okay um no sorry uh there is an opportunity to have that 77% units from classic 2 upgrade and that's why we have those
123:30 - 124:00 capex reserves um from the OM so they they estimated 12,000 per unit for interior capex and they also said we can include parking spaces as our as um we can build additional parking spaces okay okay um yeah so 12,000 is a little on
124:00 - 124:30 the higher side quite a bit on the higher side but um what all are they including in 12,000
124:30 - 125:00 okay so full renovation kitchen bar top has been knocked down cabinets above the ground have been removed oh so they're doing four cabinets okay okay okay so let's leave 12,000 um go
125:00 - 125:30 back so show me your p&l you are increasing the rent $100 in year one operating at 9% why is your year two onwards such High economic shouldn't that be I feel the average rent can go up like 13
125:30 - 126:00 $1,300 is quite low for that area it it is it is but your vacancy is 10% in year two onwards yes and we haven't played with vacancy their current vacancy is about 95 um but but yeah um the resultant of vacancy and loss to leases comes about 9% vac cancy yeah so for year two onwards you have 14% true yeah change that to 10 to
126:00 - 126:30 five yeah yeah now you have see oh wow so year one you're going up million dollar in income that's quite a stretch uh how does it compare to T1 T1 yeah C see the on a T12 they have
126:30 - 127:00 a 177% economic loss right but on a T1 bases um let's look at this this way so when you start getting into these bigger deals like red IQ is is is good so let me let me take a look at Red I real quick and I'll share my screen let me share my
127:00 - 127:30 screen so suit your year one your year one income was 7 7.8 7.3 million or 7.8 um are we talking about noi or just the net income the net net income after all the deductions after all the deduction it's
127:30 - 128:00 about 3.46 million removing expenses sorry how much eight 3.4 million 3.46 okay might I oh there it is let's
128:00 - 128:30 see okay so so there t see their T1 T12 is 5 point uh 5.2 see they had a very high vacancy earlier in the uh in T12 but recently
128:30 - 129:00 they have had lower vacancy but they're doing a very heavy concession but then they have burned the concessions also right they did did concessions to lease up and the vacancy went down and then as they start to burn the concessions vency went up again [Music] uh sorry there it is so what is your year one gross
129:00 - 129:30 revenue gross revenue 6.3 million 6.3 so you're starting at 5.5 and going to 6.3 that's quite a big increase um they may be look on on
129:30 - 130:00 February they have 11% vacancy so they don't have 97 95% occupancy right sorry sanj my internet got cut off what was the last thing you said on your underwriting you have you said they currently have 95% occupancy that's right yeah but what I'm
130:00 - 130:30 seeing here is they have in February rent roll they have 11.7% vacancy yeah and I was just refering the notes from monday.com and the communication from broker was hey uh according to the OM and T12 uh we are at 90% but we are headed
130:30 - 131:00 towards 95 okay okay so Brokers will say whatever um their rent what is your year one rent per square foot dollar per [Music] square how do I see that oh yeah it's 1.73 looks like they are they have never gotten 1.73 they're getting
131:00 - 131:30 1.54 so you will really have to increase the rent quite a lot um that's very aggressive yeah when is there a call for offers for this um I'm not
131:30 - 132:00 sure I will need to reach to the broker because all this time I was just looking at the communication on Monday okay okay okay yeah yeah reach out to broker I think I think it's like in another two weeks if they call for offers but occupancy wise look they were 93 they dropped dropped dropped and yes they may be heading up
132:00 - 132:30 but it's it's not not looking good right not looking in the right direction um so that 95% occupancy that you're underwriting to probably not going to be very realistic but right let's reach out to
132:30 - 133:00 broker get the call for offer date and then let's look at this again on Friday all right that's yeah um but that that that rent increase is very aggressive with occupancy we need to optimize that properly to get to a good PR okay I'll adjust the numbers to bring it to 1.54 because seems like that's what they got the
133:00 - 133:30 max okay and then see how it model up yeah yeah okay okay sounds good sounds good let's redo that um hey long call today two hours that's good good we got a lot of good stuff so happy we'll wrap up here guys any other questions quick questions before we set out if not thank you very much and we'll
133:30 - 134:00 connect later okay yep thanks SJ thank you guys bye by good morning