Key Takeaways:

- Understand what each tier means.

- Know the difference between a waterfall and an LPI model.

- Use your knowledge to negotiate more equity into your investment or fund.

It’s is crucial to understand what goes into a project’s pro forma. This necessitates a fundamental knowledge of the soft costs and hard costs associated with the development project. These costs can be challenging to determine. Still, it always makes sense to have high confidence in the budget before moving forward.

The big takeaway is that multifamily apartment managers should put more consideration into their utility systems. A few strategic decisions can result in significant cost savings that, in turn, improve an investor’s ROI.

Sometimes, term sheets are clear on intention, but a quick and cursory review might often point to the wrong conclusion. The exercise here is to be accurate, explicit, and precise with syntax. Managing proper real estate terminology, especially in drafting term sheets or negotiating joint venture structures, is crucial to professionalism and successful deal-making.

All else considered equal – such as the interest rate, LTV, and other loan terms – most borrowers will want to opt for a non-recourse loan. The only time a borrower will want to take on a recourse loan is if the deal and/or marketplace requires it.

In some ways, choosing a general contractor is like choosing a spouse – choose wisely, and things will go well, but chose poorly, and you could be in for serious trouble. Like a spouse, you’ll typically have to communicate and negotiate with your contractor regularly. A good GC needs to be reliable, trustworthy, communicative, and financially responsible since you’ll be trusting them with hundreds of thousands (if not millions!) of dollars. In addition, a GC should be able to negotiate the complex relationships between city officials, architects, lenders, and subcontractors in a way that makes your project go as smoothly as possible.

Private equity real estate is an attractive way for high-net-worth individuals and accredited investors to produce passive income. They also present a unique opportunity to expand one’s portfolio without taking on the day-to-day management of direct ownership.

It might make sense to evaluate whether or not to become a Real Estate Professional. It’s undoubtedly not the right move for everyone, particularly for already high-income-earning people who are better off concentrating on their day jobs than their real estate portfolios.

Are you intrigued? Thinking about becoming a real estate professional? We don’t blame you! Now we’ll need to address how to go about acquiring this coveted designation.

If everything at the property is in as-expected condition, now is your time to seal the deal! Finalize any negotiations with the seller and bake the final numbers into your underwriting. If the numbers still work, including the cost of any capital improvements, you could soon be the proud new owner of a larger apartment community – a great way to grow and scale your real estate portfolio.

The Gross Rent Multiplier is a useful scanning tool for the investor in recognizing where opportunity may lie. When utilized with an assortment of other similarly broad, indicative metrics, it helps distinguish properties worthy of more in-depth investigation.

Author’s note: Yardi Matrix covers all multifamily properties of 50-plus units in size across 133 markets in the United States. This ranking reflects properties that are under construction within that sample group. This article was originally published in Multifamily Housing News on Aug., 21, 2020.

The COVID emergency has necessitated the discovery of unique and innovative approaches to market multifamily housing. We believe these new methods have demonstrated their value and genuinely are here to stay. The future is here, and it is unlikely that we will go back.

These considerations are notwithstanding, the nature of the deal – including the conditions imposed by the senior lender – will principally dictate which of these financing tools, Preferred Equity or Mezzanine Debt is most appropriate. Like all savvy shoppers around, talk with many different bankers to distinguish which products are best for you or your group.

In today's day and age, eye-catching images are critical to a successful leasing strategy. These tips will help property managers take their pictures while still professionally presenting the property. The more photos, the better, and ultimately, the faster you'll rent your apartments as a result.

Commercial real estate, once deemed an alternative investment, is growing more mainstream. Opportunities that were once only accessible to institutional investors and other high-net-worth individuals are now advancing their way to the masses thanks in part to REITs. We foresee this trend to continue as more people look for ways to broaden their investment portfolios.

Before considering any deal, in commercial real estate or otherwise, an investor should reflect on how various circumstances will impact their time horizon to help decide the types of assets they should invest in, including the risk profile of each.

Crowdfunding for commercial real estate projects is increasing in notoriety. Although still a niche market, it is unquestionably shifting to a more mainstream way for sponsors to finalize both equity and debt for their multifamily apartment projects.

We will see how this coronavirus pandemic will reshape the housing market. To date, the impacts have been limited. This could change, mainly if there’s a retreat in lending. But most investors continue to be bullish on the U.S. housing market, with good reason. Evidence of substantial rent collections, few defaults, limited inventory, and historically low interest rates will bolster the industry.

The positive news is that overall capital markets appear to be healthy. Like those in the past, this recession will weed out the less experienced sponsors to the benefit of the patient, well-capitalized buyers who are now in a great position to invest.