Commercial Real Estate Investing From A-Z podkast

Everything You Should Put in Your Pro Forma Calculations

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What should you include in your pro-forma when calculating all of the details of a real estate deal? We deep dive into a pro forma for an office development. Renat Yusufov, Managing Partner at Bullpen reviews every item, how should you think about it, and why.

Watch the youtube deep dive here: https://bit.ly/3k6Wp3Y
Watch Part 2 here: https://bit.ly/3y9SHuk

Read this interview here: www.bit.ly/2VCl8TB

Why don't we dive into an example of what you guys are doing for this particular side of the business.
I created a template so to speak for an office development of what it would look like in today's day and age, I come from the philosophy that no two deals are ever going to be the same. Naturally, you will have certain changes. But the core of the model should more or less look alike, it's not just a financial model, it's really a weapon for when you go into battle for a project. It should be flexible, it should be something that you can present relatively simply to either your lender or any kind of investors or limited partners, etc. It should be able to adapt to whoever your audience is, the structure of a model, in my opinion, regardless of what asset class, regardless of what the business plan is, I like to always start with the dashboard. The dashboard is where most of the toggles will be, anything that's an input. And the reason for this is as you're going through the project, regardless of where the onset underwriting starts, along the way as you're talking to GC's, as you're talking to other contractors, architects, lenders, investors, business plans will be adjusted, they will be tweaked, they might be entirely revised, so it's easier for any kind of user, whether it's the partner, the principal, all the way down to the analyst, and company, or even if it's a third party looking at this, to be able to see it all in one place, the Summary tab.

Does it typically end up being more expensive and a longer timeframe, or the opposite, when you say that none of them end up being the exact same numbers?
In this environment, it's a mixed bag. I've been on the advisory side where people would send me a model of what they want to get done. And I'd go to the market for both a loan and the equity to figure it out with them. I've been on the private equity side, on the buy side, where somebody sends me a model, or I build it initially, and then I say, This is what we want to get delivered, this is the returns we're looking for. I would say, generally speaking, and this isn't true of everyone, people's underwriting tend to be on the aggressive side. Whether you're on the buy or the sell side, whatever model you receive, you're probably reining it in, in the sense of you think the rents may be too aggressive, or the rent growth is too aggressive, or the expenses need to be buffered up a little bit.

One place where a lot of things might be hidden or misinterpreted, is any kind of capital expenses. People underestimate what it costs to repair or repaint the hallway, or common space in an office building, if they're buying it already built. The best way to go about this, whether you're just in the beginning of building your model, or you're trying to flesh out your business plan and get it to market, I would say is contact as many professional as possible. This is obviously a networking business, talk to the brokers about the rents what they can reasonably achieve, as you're going through your process of selecting a broker, talk to several GC's about your costs, what they can reasonably get you as far as a budget, and where you could land in terms of construction costs.

Renat Yusufov: www.linkedin.com/in/renatyusufov
www.bullpenre.com

--- Support this podcast: https://anchor.fm/best-commercial-retail-real-estate-investing-advice-ever/support

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    5 Syndication Questions From a Podcast Listener

    24:22

    What are some good numbers to syndicate? Do you need experience? How would you go about it? We are answering questions from one of our podcast listeners about syndications and Billy Keels, a long distance real estate syndicator and investor, who syndicates US properties from Barcelona, Spain answers her questions. You can read this entire interview here: https://bit.ly/3ynC4vo When it comes to the number of partners in a limited partnership, how many is too many? There are two questions that you want to ask yourself. Number one, who is it that you want to serve through the syndication? And number two, what type of systems do you currently have in place, because that's going to have a direct impact on the number of partners that you have. You want to be able to have the right people that you're serving. Sometimes you may want to serve people that are only accredited investors. And that is going to make sure that you're serving someone with a specific type of syndication tool. If you want to be able to serve other people that are more sophisticated investors, then you will want to use a different type of tool, you have specific names. And I know you've talked a lot about 506(c) for accredited investors or a 506(b) for sophisticated and accredited investors. I am in my mid 20's, and experienced only on the brokerage side of commercial real estate. However, I am taking a commercial real estate financial modeling course to thoroughly understand the numbers, what kinds of qualities, experiences, achievements would make you feel confident enough to invest your money with someone like me, and is direct investment experience an absolute must? It sounds like you already have lots of experience, even in your mid 20's! I think this is such an individual question. You want to ask yourself what is the right experience for the individual for the person? At the end of the day, each one of us are very different. And we need to make sure that you as a syndicator and your team, you need to be able to understand exactly what each potential investor is looking for. As far as having direct investment experience, I'm more interested in her and her team. I want to understand if the team that she is representing has the experience on that asset class. It's not just about the individual, it's more about the team and their overall experience, to make sure that if I'm investing time, energy, capital, that the team will give me as the investor the highest probability of getting the return on whatever it is that I'm looking for. And that could be an ROI, it could be tax benefits, or whatever the case may be. When you consider your most successful deals, what was different? As a syndicator, it was being able to spend the appropriate time with each of the investors getting a very clear understanding of what each of the motivators were for the individuals that were part of the syndication. And being able to help them get a very clear picture of not just what the project was, meaning buying a certain asset. But what were the benefits and the impact, that that particular investment of their time, energy and capital was going to return not only to them, but also to the communities in which they were investing. And the impact that it was going to make on the syndication's team. And some basic things like making sure that there's a return on their trust and energy, which means that the transfer, the ACH, or the checks were arriving to them on time, so that they advocate to others about the positive experience, and invest again. Join our Goals accountability calls here: https://www.paypal.com/paypalme/regoals Billy Keels www.billykeels.com www.linkedin.com/in/billykeels Podcast: https://apple.co/3A47Fmu --- Support this podcast: https://anchor.fm/best-commercial-retail-real-estate-investing-advice-ever/support
  • Commercial Real Estate Investing From A-Z podkast

    Pro-Forma + Most Profitable Asset Classes + Best Markets to Be In

    22:20

    What should you include in your pro-forma when doing a real estate development? Renat Yusufov, Managing Partner at Bullpen shares his detailed pro-forma, how should you think about it, and why. He also shares his top asset classes and markets to be in. Watch this deep dive here: https://bit.ly/3y9SHuk Watch Part 1 here: https://bit.ly/3xWrZ8p Read this entire interview here: https://bit.ly/3wRbFVi We have a non pro-forma here for stabilization. This is where it's dealer's choice, being an office product, being multi tenanted, chances are you're going to go through Argus software, you plug in your assumptions, you plug in your rent roll or your expected rent roll, and it basically does the pro-forma for you. Some people have an aversion to it, because it doesn't allow for more flexibility, however, it does allow for more detail, it's the double edged sword. My personal opinion, the more complex your office product is, meaning the more tenants you have, the more nuance you have about leasing, and staggering timelines, the more likely you prefer to go with Argus. It's a little more painful in terms of editing on the fly. But the flip side of it is that it's definitely more accurate than anything you would probably be able to build an Excel. This is a summary of where you expect to land. And a lot of this is actually pulling from Argus, Argus lets you pull in Excel tabs basically as outputs so you can integrate it back into your Excel on both the assumptions, the leasing summary, and the base rent. And you can change all of these numbers based on various specific locations of each property? Exactly. And that goes back to your building, and the south side of a certain city and state, you'll talk to the brokers who have experience there, and they'll tell you what the rents will be, they'll tell you how long it'll be on the market before you'll find a tenant, what the terms are, and the big terms being free rent, TILC, so that's tenant improvement leasing commissions, and the time it'll take to find a tenant, as well as the credit. This is really a summary. You'll have different audiences for this model, it's better to have it here than for them to have to run around the tab looking for the specific month, when you stabilize, and what the rent looks like then. I show it as a total dollars per net square foot, and dollars per gross square foot, because this is a construction project. You're building grows, regardless. But you want to show how that rent looks both net and gross. The goal here is, if I want to exit as an investor or as a lender, what is my risk of waiting until before stabilization? At what point during lease up do I hit the yield that I need to be? Or at what point am I operationally profitable? And the last part, the exit, the biggest toggle here is obviously cap rate, you're stabilizing a property and you're selling it for a certain yield. I put at least 6%. In a post Covid environment that we're living in, office is an interesting subject. A lot of opportunity, and a lot of hurt in some cases is happening in the office space. We're seeing a cultural revolution, frankly, on terms of office. The project I picked here is an open layout, high ceiling, shared amenities. I think this is where office is going, and we are just showing what kind of concept you'd probably be wanting to build today. I was reading the news today and I think 19% of New York City offices are on the market. It's a double edged sword. Renat Yusufov Bullpen renat@bullpenre.com --- Support this podcast: https://anchor.fm/best-commercial-retail-real-estate-investing-advice-ever/support
  • Commercial Real Estate Investing From A-Z podkast

    Everything You Should Put in Your Pro Forma Calculations

    20:20

    What should you include in your pro-forma when calculating all of the details of a real estate deal? We deep dive into a pro forma for an office development. Renat Yusufov, Managing Partner at Bullpen reviews every item, how should you think about it, and why. Watch the youtube deep dive here: https://bit.ly/3k6Wp3Y Watch Part 2 here: https://bit.ly/3y9SHuk Read this interview here: www.bit.ly/2VCl8TB Why don't we dive into an example of what you guys are doing for this particular side of the business. I created a template so to speak for an office development of what it would look like in today's day and age, I come from the philosophy that no two deals are ever going to be the same. Naturally, you will have certain changes. But the core of the model should more or less look alike, it's not just a financial model, it's really a weapon for when you go into battle for a project. It should be flexible, it should be something that you can present relatively simply to either your lender or any kind of investors or limited partners, etc. It should be able to adapt to whoever your audience is, the structure of a model, in my opinion, regardless of what asset class, regardless of what the business plan is, I like to always start with the dashboard. The dashboard is where most of the toggles will be, anything that's an input. And the reason for this is as you're going through the project, regardless of where the onset underwriting starts, along the way as you're talking to GC's, as you're talking to other contractors, architects, lenders, investors, business plans will be adjusted, they will be tweaked, they might be entirely revised, so it's easier for any kind of user, whether it's the partner, the principal, all the way down to the analyst, and company, or even if it's a third party looking at this, to be able to see it all in one place, the Summary tab. Does it typically end up being more expensive and a longer timeframe, or the opposite, when you say that none of them end up being the exact same numbers? In this environment, it's a mixed bag. I've been on the advisory side where people would send me a model of what they want to get done. And I'd go to the market for both a loan and the equity to figure it out with them. I've been on the private equity side, on the buy side, where somebody sends me a model, or I build it initially, and then I say, This is what we want to get delivered, this is the returns we're looking for. I would say, generally speaking, and this isn't true of everyone, people's underwriting tend to be on the aggressive side. Whether you're on the buy or the sell side, whatever model you receive, you're probably reining it in, in the sense of you think the rents may be too aggressive, or the rent growth is too aggressive, or the expenses need to be buffered up a little bit. One place where a lot of things might be hidden or misinterpreted, is any kind of capital expenses. People underestimate what it costs to repair or repaint the hallway, or common space in an office building, if they're buying it already built. The best way to go about this, whether you're just in the beginning of building your model, or you're trying to flesh out your business plan and get it to market, I would say is contact as many professional as possible. This is obviously a networking business, talk to the brokers about the rents what they can reasonably achieve, as you're going through your process of selecting a broker, talk to several GC's about your costs, what they can reasonably get you as far as a budget, and where you could land in terms of construction costs. Renat Yusufov: www.linkedin.com/in/renatyusufov www.bullpenre.com --- Support this podcast: https://anchor.fm/best-commercial-retail-real-estate-investing-advice-ever/support

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