Using Conservative Underwriting to Get Outsized Real Estate Returns

With Percy Nikora, Co-Founder

So initially when we started to or when I started to invest in real estate, it was, of course, a real estate. It was more on the passive side just to get entry into the industry, get familiar with it. And as I started to look at different deals, analyze different deals, I got a better understanding of what what are some of the differentiators that differentiate a successful deal vs. not so successful deal. And over time, by looking at a number of sponsors and a number of deals, I started to also recognize that some of them were changing the assumptions they were making in the underwriting. The earlier underwriting models were much more conservative. And I'd say in favor of the investors. But over time, they tended to be a little less conservative, maybe more in favor of the sponsor. So I started to look at that and say, well, you know, there really needs to be a. Deals that are brought to investors that. Look at the deal through the eyes of the lens of the investor. And so we started to look for deals are set up to invest in ourselves with very conservative criteria. And that's that's when we started to also realize that, well, in order to get the biggest bang for the buck, there is sort of a minimum size or that you want to hit in terms of the number of units in an apartment complex. And that's because you can then start having your own leasing staff, your own maintenance staff, et cetera.

So as we started to look for those deals and underwrite it with our conservative approach, we we it took a while, it took about a year and a half for us to find our first, first deal. But as we started to get those deals, make sure it fit our underwriting criteria, not necessarily the ones we were seeing from some of the sponsors at the time. And when it made sense, that's when we started to acquire those properties along with our equity partners. And as we started to grow that, you know, we would come across as we would acquire more deals. Other brokers would get to know us in the in that particular market and they would bring us more deals. So, you know, the ball starts to roll and you are able to start acquiring some properties and start building a portfolio. So we have some good relationships now in several key markets. Interesting markets where we have a good deal flow in those markets. And, you know, we've come across quite a few deals. We analyzed them internally before we bring it to any of our investors. So we'll probably look at several hundred deals a year out of which we maybe pursue, you know, only only a handful of them, because we want to make sure that it not only meet our criteria, but it goes through diligence process and it's fully vetted before we can bring it to to others.

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