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.
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
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!
@@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!
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.
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
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?
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?
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!
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What kind of exit cap rate expansion are you underwriting on deals today?
Nah I just drop the exit cap 150-200 bps to make the IRR over 15%. Anything to make a deal pencil ;)
Hahaha
Great video as always
This is helpful, but underwriting a deal is not my strong point. 😭..Thanks for the upload Justin.💯🙏
No worries! Not an easy task and takes practice. Thanks for the continued support every week!
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.
Nice video. I like it
gotta drop that exit cap by 100 bps to achieve the 35% IRR...
Haha too real, too real.
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
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!
@@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!
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.
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
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?
What kind of cap rate expansion are you underwriting on your deals?
Awesome video, Justin. Could you please do one but for refinancing? I don't like disposing my assets 😁.Thank you!
Great feedback, David - thanks for the video suggestion!
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?
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!
@@BreakIntoCRE Sure. I'll go there and put more detail into the text. Thanks!
Hey Justin I know you made a video on how to underwrite rent growth for CRE but how would you for multi family?
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