In today’s podcast episode we interview Rob Beardsley, Founder of Lone Star Capital and Author of the book, Definitive Guide to Underwriting Multifamily Acquisitions. Rob’s firm delivers superior risk-adjusted returns through diligent sourcing and selection, vertically integrated property management, and rigorous reporting. Today’s topics are focused on the definitive guide to the underwriting process, and things that a Limited Partner should be aware of as they go through deals in the real estate markets.
The Things that a Limited Partner Should be Aware Of
According to Rob there are a few things that Limited Partners should be aware of when looking for deals in the markets.
- Looking at the sponsor’s model - A transparent and clear model is preferred over a model that is protected from plainsight by the sponsor. Hiding models only means that a sponsor is hiding something and is considered as a major red flag.
- Looking at the computations and projected rents - This is part of the due diligence as a Limited Partner. Always look at the business plan. Are the numbers and figures making sense with the business plan? Those are the questions that needed to be answered before committing to the deal.
- Returns that are on par with the risk - For straightforward play (aim around 14-15% return) and for speculative play (aim around 16 - 17% return.)
Dealing with the Debt Perspective of the Deal
Debt is a key component of the way deals pencil out. As a LP one should be aware of the risks associated with different debt structures on it. One important aspect of debt should be flexible for exiting, and does not have long-term lock-in periods. At most times, bringing the debt amount down lowered the risk of the deal. And so, in times of uncertainty using the right amount of leverage which is lesser is a great way to mitigate risk as Rob said in the podcast.
A Dive Into Rob's Book - Definitive Guide to Underwriting
According to Rob, underwriting is the financial analysis of an investment opportunity. It involves utilization of a spreadsheet and input data such as price, age of property, rents, expenses, debts, cap rates etc. When scouting for deals, it is important to know all of these things as one part of being a LP is to do due diligence especially with regards to the financial side of things in the business.
Who is Rob Beardsley?
Rob Beardsley oversees acquisitions and capital markets for Lone Star Capital and has acquired over $350M of multifamily properties. He has evaluated thousands of opportunities using proprietary underwriting models and published the number one book on multifamily underwriting, The Definitive Guide to Underwriting Multifamily Acquisitions.
- Download a free copy of his underwriting model here: www.lscre.com
- Learn more about investing with them here: https://lscre.com/invest-with-us
- Connect with Rob on LinkedIn: https://www.linkedin.com/in/rob-beardsley/
LEARN THE LIMITED PARTNER LINGO BY CLICKING THE LINK BELOW!!