What kind of exit cap rate expansion are you underwriting on deals today?
@kenji_ignacio2 жыл бұрын
Nah I just drop the exit cap 150-200 bps to make the IRR over 15%. Anything to make a deal pencil ;)
@BreakIntoCRE2 жыл бұрын
Hahaha
@Tazangamoz2 жыл бұрын
This is helpful, but underwriting a deal is not my strong point. 😭..Thanks for the upload Justin.💯🙏
@BreakIntoCRE2 жыл бұрын
No worries! Not an easy task and takes practice. Thanks for the continued support every week!
@spencerjeremy64382 жыл бұрын
Hi Justin! Great stuff as always. I know you focus a lot on the technical side and market side of things but I was hoping you could one day consider making a video focused on professional and soft skills which you strongly possess and is just as important as the technical and market side of things.
@thelifeofeliiii2 жыл бұрын
Great video as always, Justin! You mentioned in the exit cap analysis that it’s common to use forward 12 assumptions. I’ve seen some criticism of this (as opposed to using T-12 or T-3 for exit cap) and was curious to know how you defend the point when the question arises. Right now given a 5 year exit, we use the T-3 or the last 3 months of year 4 for our NOI calc. But would love to use forward 12 if we could defend it
@BreakIntoCRE2 жыл бұрын
Great to hear you found the video helpful, Elijah! Your situation is interesting - I very, very rarely see historical figures used to determine exit value. The rationale behind using the forward 12 months is that this is going to be the next buyer's first year of NOI, and the seller's NOI in the final year of ownership isn't necessarily relevant to the cash flows the deal will generate for the next buyer going forward. In today's crazy competitive market, most investors are baking in some heavy rent growth assumptions in year 1 of their underwriting just to a make a deal pencil, and that will factor into how they value the property directly (which makes the forward 12 months of NOI the appropriate valuation benchmark). Good question!
@thelifeofeliiii2 жыл бұрын
@@BreakIntoCRE And a great answer! I'm thinking what we'll try is using the forward 12 on the back end when exiting, as you suggested, but start using the forward year 1 NOI as our entry cap as well. And when calculating the exit cap, increase over that forward 1 NOI instead of the t-12/t-3 like we do now. That way, we're using the same logic on the entry as we are on the exit. Interested to see how this affects the numbers!
@BreakIntoCRE2 жыл бұрын
What kind of cap rate expansion are you underwriting on your deals?
@nagahamaekenta2 жыл бұрын
Hey Justin, This video is very insightful as always. I'd like to watch the video how do you estimate expenses for the valuation. How do you get data of similar properties regarding to building maintenance cost, utilities and insurance etc.
@LGoromonzi2 жыл бұрын
Great video as always
@TrueWojak2 жыл бұрын
gotta drop that exit cap by 100 bps to achieve the 35% IRR...
@BreakIntoCRE2 жыл бұрын
Haha too real, too real.
@visitdesa2 жыл бұрын
Nice video. I like it
@davidroldan60072 жыл бұрын
Awesome video, Justin. Could you please do one but for refinancing? I don't like disposing my assets 😁.Thank you!
@BreakIntoCRE2 жыл бұрын
Great feedback, David - thanks for the video suggestion!
@yitzparnes743 Жыл бұрын
If I am buying a property at a significant discount to market price AND I am buying at a time when interest rates are historically high, can I underwrite a lower exit cap 5 to 7 years down the road?
@brianwise55862 жыл бұрын
Hey Justin, great video. I'm a member of Breaking into CRE and there's invaluable courses on there. I wanted to know if they'll be a course on if a a seller stays in a Development deal as either LP or even on the GP side or would the current waterfall model be used for this?
@BreakIntoCRE2 жыл бұрын
Hey Brian, would you mind sharing more details on this scenario via the coaching email in the program? Happy to try to point you in the right direction, but want to make sure I understand the context better first. Thanks!
@brianwise55862 жыл бұрын
@@BreakIntoCRE Sure. I'll go there and put more detail into the text. Thanks!
@mitchellmorris47852 жыл бұрын
Hey Justin - I’m currently going through some of your modeling courses and I’m wondering if these courses will give me tools/basic modeling skills needed to start applying for analyst roles? OR do you suggest perfecting the “advanced” levels of your courses prior to applying for jobs? Thanks! - currently a corporate FA looking to transition to acquisitions/asset management
@ajverardi33672 жыл бұрын
Hey Justin I know you made a video on how to underwrite rent growth for CRE but how would you for multi family?
@ajverardi33672 жыл бұрын
I see some people using compounding rents and simple interest for some value add and I’m just curious like when you would use each