Lots of new followers, so I thought I would introduce myself.
I run Tekton Group, a REPE boutique, in Denver CO.
We invest in B/C multifamily properties on the Colorado Front Range. We have bought over 500 units here in the last 7 years.
I have been a professional investor for 25 years. I was taught early on that there is no reward without risk and that a true investor INTENTIONALLY manages the risk that she takes. 7 years into my real estate investing career here are a few of my risk management steps.
Traffic on the drive to the mountains - 2 hours
Parking 10m from mtn - $25
Getting gear on - 1 hr
Slice of Pizza - $14
Finding out your 4yo son loves to ski and will be better than you in the next 3 yrs
Priceless
Real estate investors are yield obsessed. Our core valuation metric, Cap Rate, is literally unlevered yield on purchase price.
I have gotten a few questions on the difference between cap rate and Unlevered Yield to Cost (UYtC).
A thread on the differences👇🏼
Between 2016 and 2018, we bought 448 apartment units across 17 buildings in one of the worst neighborhoods in metro Denver. We paid an average of $91.6k / unit for the properties (all market rate), and were reportedly the largest sub-institutional landlord in the submarket.
I rarely pay attention to follower count (too old to care).
Just noticed I am <125 from 10k, so I thought I would try out some engagement bait to get there.
If I get to 10k next week, I have a banger of a thread brewing on being a C class landlord.
Hint: before/after
I recently helped a friend buy a house in an incredibly competitive home buying market.
I am not a broker, but this seemed to help her get it for $50k less than her max price.
She beat out 19 other offers (many of them all cash) even though she was getting a loan.
Pro tip (from a former stockpicker) for sub-institutional scale RE investors:
4x per year, I spend half a day reading earnings releases and transcripts from the most active REITs in my markets/asset classes.
They have a wider (and sharper) macro lens than I will ever have.
We just renovated and re-rented the first 2 units on the first deal in our new fund
Old Rent = $1075
New Rent = $1895 (rented before the unit had been finished, w/o pictures)
Renovation cost = ~$25k
ROIC = 37% unlevered (820*12*.94/25k)**
IMO, my partner is a magician!
For those that have not yet seen the Jon Gray interview on Bloomberg.
Man, is he impressive. I was particularly blown away by his macro approach to investing in real estate with tailwinds.
In multi-family investing, leverage is good. Max leverage is bad (and potentially ruinous) imho.
Here are some of my thoughts on how we (sub-institutional scale multifamily) construct our capital stack.
🔻
Me: I am looking at a new loan, what is your best rate with X features?
Lender (I have done 8 figures of business with): Best we can do is 6.25%
M: really? You sure that is the best you can do?
L: yep
M: bummer, I have another lender quoting me 5.75%.
L: well, maybe we can
I have no idea if the broker shared any of the double-ended commission with the seller, but theoretically could/should have.
The game seems rigged unless you know how to play it.
Don’t hate the player, hate the game.
This is 50!
Another year older, another year wiser.
Eternally grateful for my family, wife, son, health and team.
We are just getting started and the future is bright!
Let’s go!
If you are newer to real estate investing and would benefit from a 30m consult, DM me.
Every Friday, I have been doing 30m consults with younger investors in trade for a modest ($50-$100) donation to a charity that I work with
@ResidentRelief
.
Heard a slightly scary story yesterday.
A friend of mine has a performing loan with a local bank at 3.5% rate. 60% LTV, ~1.5x DSCR.
Been getting ominous emails from bank about sending in insurance and PFS forms or risking technical default. First time in 5 yrs.
I am the first one to go into real estate in my family. Several generations before me were in oil/gas and my Great-Grandfather was the reason:
RW "Dick" Burnett made an oil fortune in Arkansas and then owned the Dallas Eagles baseball team (TX League).
Broker to me, 2021: “you even attempt to retrade, you are dead to me”
Broker to me, ‘23: “just get it u/c at asking and then retrade to your # during DD”
🤯
Happy thanksgiving to all!
Grateful this year to be able to celebrate with family.
This year is particularly special as we get to celebrate 50 yrs of marriage for my parents, who society told they would never make it in 1973.
2021 Yr in Review for Tekton Group:
- Raised our second fund, roughly $9mm of equity (I know this is peanuts for most, but I am really proud of this)
- Found 4 deals to acquire without sacrificing our underwriting one bit (my proudest accomplishment for the year)
Day in the life of a Real Estate GP
(I get asked a lot what a typical day looks like, so while it is fresh in my mind I will review today)
8am review OMs for 2 deals I am touring today. Review refi term sheet.
9am 45m call with potential investor while driving to job site
In an Uber on the way into NYC from LGA. Must have done this trip hundreds of times when I lived here in my 20s.
Same feeling of adrenaline rush mixed with amazing food smells.
Greatest city in the world!
I hope my son does a tour of duty here in 15-20 years.
We closed on our first Twitter JV this week. Excited to partner with
@mstillwell8
on a workforce housing deal! Even have a few Retwit folks that invested in the deal with us.
Now the hard work / fun starts!
This platform never ceases to amaze me.
Have a great weekend!
As a boutique REPE shop, our most precious resource (by far) is time.
The lifeblood of our business is doing good deals. To find good deals, you need to look at A LOT of bad deals.
How do I balance allocating precious time with looking at a ton of deals?
👇🏼
I rarely pay attention to follower count (too old to care).
Just noticed I am <125 from 10k, so I thought I would try out some engagement bait to get there.
If I get to 10k next week, I have a banger of a thread brewing on being a C class landlord.
Hint: before/after
We are hiring!
COO/Asset Manager Role
Looking for an experienced multi-family operator to help us grow. Passionate about real estate, operations, processes and looking to build equity over time? Could be the right role for you.
I’d appreciate r/t to cast as wide a net ap
One other thing I forgot (but was in my notes). These properties are magnets for PI attorneys.
We had no fewer than 5 frivolous lawsuits across this portfolio. Most settled.
Insurance costs will eventually reflect those risks.
Comment from a broker today:
“In the current market, we are seeing incredible money come into Denver. Our XXXXX deal is most likely going to be sold for a sub-3 cap. If we tell them to get to $50M, they’ll come up. The out of state buyers don’t care about cap rates.”
👀😬
These are my folks.
Married 49 yrs last Friday. Got married 6 yrs after Loving decision. Living the American Dream.
Happy anniversary you crazy lovebirds!
@Mayathe87688351
This is Richard + Mildred Loving. They helped legalize interracial marriage.
Someone told me
@SaraSodineParr
and I look like them.
Better than the other folks they say I look like:
- Napoleon Dynamite
- Grown up Bart Simpson
- Uglier Blake Griffin
- kid from Jeremy McGuire
I am 100% convinced that the only reason my friend got the house was because she let the listing broker double-end the deal.
Having the listing broker motivated to get my friend’s offer accepted was key.
Given the recent tenor of Retwit, I thought I would borrow the “gratitude corner” concept from my friend
@SkolCapital
.
I am grateful for Matt because he is a wonderful supporter and deep thinker that I can talk about markets with.
We updated our track record at the request of an LP recently and I was surprised at how much we have accomplished.
We have bought/built 54 buildings / 624 units in the last 8 years! This is a testament to what happens when you put your head down and grind for an extended period
1) cont'd
Be intellectually honest about the inputs to your underwriting model. How do you know you can achieve those rents? is $500/unit/yr enough repairs and maintenance? how big of a contingency is in your rehab budget? "more fiction has been written in excel than word"
2 weeks ago I was able to honor my parents’ sacrifice and pay it forward to other needy kids who learn in their own way with a donation to that school.
#blessed
Last week we closed the largest (and significantly most stressful) sale of my career.
Market is changing, but we were lucky enough to have a persistent and committed buyer.
Dear Twitter friends: My apologies for being AWOL. 11 days ago I was diagnosed with COVID and I am finally coming out the other end. I was very fortunate to have had a mild course of COVID, but it still knocked me on my butt.
Broker to me, 2021: “it doesn’t matter what seller paid 2 years ago, it is worth a 4 cap today”
Broker to me, ‘23: “I can’t possibly take that offer to the seller, that is less than they paid 2 years ago”
🤯
Broker to me, 2021: “you even attempt to retrade, you are dead to me”
Broker to me, ‘23: “just get it u/c at asking and then retrade to your # during DD”
🤯
5 years ago today, I married my best friend and the love of my life.
Everything I have accomplished and everything that matters most to me has been born of your undying support, faith and love
Happy Anniversary
@stephaniebodhi1
!
I am giving a guest lecture next month for an MBA level real estate class at a local University. What do you think ~25yos interested in Real Estate would like to hear about? Any suggestions would be much appreciated.
We closed yesterday on the single most challenging real estate transaction I have been involved with.
Took nearly 8 months from contract signing to closing.
We fell out of contract once and seller threatened us with lawsuits multiple times.
Fellow boutique RE GPs,
Here is a slide that I used in a recent presentation about growing our business.
The genesis of this was
@fortworthchris
’ podcast a few months back and
@atnissly
’s post on the progressions w/I the
#retwit
community.
I have been preaching the gospel of the FHA house hack to many of the younger folks in my RE circle.
I just heard today that one of my mentees has closed and begun the rehab on a 4-plex, and he is killing it.
Gives me immense joy!
I am humbled that more than 3,700 (mostly) strangers care what this middle-aged Coloradan thinks about Real Estate! Thank you!
I am going to start a new series-
#AOAD
- Anatomy of a Deal.
👇🏼
I can’t speak for others, but I spent my 20’s / 30’s on a miserable treadmill competing against my peers
At 37, I adopted an absolute, not relative, mindset and I am infinitely happier
My goal is simple, $x of monthly passive cash flow. I now root hard for my peers’ success
Wealth is relative, dollar amounts don’t matter. Million bucks is only considered a lot because it's a relatively higher amount than average
Everyone you’re competing against also puts $$ into the S&P. Making the same return as people you’re competing against = running in place
I was 7 in 1982, the last time inflation was as high as it is today.
Unless you are 60+ (or from Venezuela), it is unlikely you have any professional experience investing in an inflationary environment.
No one knows how to navigate this market. Tread carefully out there.
#DFTF
I believe the holy grail of real estate investing is (somehow) paying market prices and generating above market returns.
(I will let you know how to do that once I figure it out)
It doesn’t take a genius to have conservative underwriting and to pass on deals
What makes one special is finding opportunities on deals that everyone is passing on
Scrap walnut, cherry and a mystery wood … $0
0.1 board feet of padauk for visual interest and color … $11
Woodworking classes at my local cc … ~$1k
A garage full of rarely used tools … several $k’s
Uninterrupted hours in the shop with my aging father and a happy Jewish
Reminder to self of what matters most in this life (lil man at 2yrs old).
(Nothing concerning in our RE portfolio, other than not being able to find anything to buy, but this is what I work so hard for)!
These are just the ruminations of one operator in one market. I do not have all the answers to housing affordability or how to be the best C-class landlord
But, I certainly tried and would need to be VERY well paid to do it again.
We use a two-step loan process on our value add projects. A bridge loan from a local lender to acquire and renovate and then (generally) we refinance into an agency loan once the property is stabilized.
Why? 👇🏼
@moseskagan
This hits home so hard.
My parents fought about money non-stop and my juvenile brain equated having money with peace
Defining factor in my motivation to succeed
Gratitude is a superpower.
On one side, my great-great grandparents were born slaves in Georgia and Louisiana.
On the other side, my great grandparents escaped the Russian pogroms at the beginning of the 20th century.
My success, and my family’s future, is unlimited,
Periodic reminder:
Everyone has an opinion about what you should buy/sell/invest in.
I put the most credence in those who need to live with the consequences of their opinions being wrong.
We weren’t poor when I was growing up, but man were we cheap.
Lots of amazing lessons about living within your means that I still benefit from today, but also some limitations.
You can take the boy out of the cheap, but can’t take the cheap out of the man!
#raisedcheap
I have thought of Sean’s missive almost every day for the last 6 weeks (as a much newer/smaller ground up developer).
Proud to say we have our final CO and are 88% leased (62% occupied) 6 weeks after first move in.
Never overestimate the importance of good banking relationships.
I received a term sheet from my lender on 9/12 and they are funding and closing tomorrow 9/30.
If you believe, as I do, that the best deals often require a quick close, then having a bank like mine is key.
I sat down to watch Tiger, and his son Charlie, on TV today. Asked my son (4) to join me.
After watching Charlie stripe one on 1, my son grabbed his clubs from the closet and asked me to go outside and “practice”.
Heart is so full. 🙏🏼
@TigerWoods
@PGATOUR
@PNCchampionship
Today, I heard a plausible, and somewhat troubling, explanation of why so many deals are getting done <4 caps.
A prevalence of fee-heavy GPs, who are great at fundraising, and don’t ultimately care how the deal performs.
Heads they win, tails you lose.
Caveat emptor
@BackpackerFI
1) get comfortable in your own skin ASAP (got there in my late 30s)
2) stop comparing yourself to your peers. Set absolute (not relative) goals, make a plan to achieve them, execute.
This is 49!
Range time with little man, embarking on a new heavy value add project and lifting heavy weights to hold Father Time at bay.
#BlessedAndGrateful
1) Buy Right
"You make all your money in real estate on the buy" is a common refrain. We are VERY picky on the deals that we do and buying below market can solve a lot of operational mistakes. We refuse to overpay ex ante.
2) It is hard to be too conservative in your underwriting.
Economic vacancy is 2-3x physical as many tenants don’t care about their credit and will simply stay in a unit until they get evicted.
we evicted 60% of the tenants in the first year of ownership on 1 Bldg.
Denver Friends:
@mstillwell8
and I are hosting an informal retwit/fintwit hang in wash park on 6/5 at 3:30pm. Beer on us until the keg runs out. Feel free to swing by and chat with other Colorado locals.
As we get closer we will send out details on exact location.
Work in this business long enough and you are forced to develop a thick skin. You learn to live with disappointments (delays, cost overruns, losing out on deals).
Every once in a while you have a week that makes you smile ear-to-ear. This was one of those weeks.
I, respectfully, disagree with the premise that no one is going to hand money back to their investors.
I just did.
I promised our fund (21-23) investors I would only invest in deals that met our u/w criteria. Only found 3. Returned the remaining commitments.
Also, know a
Need to sell a property?
Find a Fund whose investment period is ending soon
Assume that period is 5 years (see Michael's post)
There were legitimate reasons not to invest in '20-'24
And no one is gonna hand money back to their investors
Result? Aggressive Buyer in '24-'25
Parking: $40
Hot Cocoa: $9
Fresh Snow: 9+”
Illegal tackles by the powder monster: 11 (see video)
3 hours of father/son time with epic snow and short lines: priceless
@vailmtn
@VailResorts
#SpringBreak2023
We just finished a renovation of a unit in a property that we recently bought. 18% yield to cost on our renovation dollars. We try and *add value* to our projects in a number of different ways, but unit renovations have been the most consistently profitable.
This is the first picture in the history of our family to have three generations of Bodhi men.
(To be fair, my Dad changed his last name from Smith to Bodhi, so my son is the first Bodhi grandson).
6) I found it very hard to balance being a good human with my fiduciary responsibilities to my investors
I officed out of 2 of our buildings (bad idea!) and was regularly on-site at all of our buildings. Despite my claims to “work for the owners”, tenants figured out who I was.
I get asked frequently for my f’cast of the Denver real estate cycle
We don’t have one
The key is to maintain consistent underwriting discipline through the cycle.
When it is a buyer’s market, a lot of deals will pencil. When it is a sellers market, like now, few will.
Sh*t’s getting real-er.
Project is progressing nicely. Framing should be done this week and builder is telling us we’ll be dried in by the end of July.
Mtn views on one side and city on the other side. B+ part of Denver, 600’ from a light rail stop, in an OZ.
#TuesdayOAC
Hypothesis (potentially controversial?):
While it is more profitable to build 200+ unit heavily amenitized apartment buildings
tenants prefer to live in boutique-size (15-50u) less-amenitized new builds in the same location
and will pay more for an identical unit
I just spoke to a friend who attended a conference panel recently with 3 MF sponsors representing about 40k units across the country.
Those sponsors are expecting, on average, across the country, 17% rent growth in 2022!
I guess that is how you get comfortable with 3caps!
Anyone know what is going on in the FL property insurance market?
I just read that 3 insurers are no longer writing homeowner policies in FL
Tip of the climate change spear?
Some misguided legislation?
Something else?
TIA
@EdelkopfYossi
Our business model is based on looking at every deal that fits our buy box, but waiting patiently for the “fat pitches”. Not a sexy business model and certainly not (personally) wealth-maximizing, but this is a model that makes sense to me and fits with my inv philosophy.
I believe strongly that behavioral discipline is a source of alpha. One of my personal strengths is being patient enough to wait for the fat pitches. I have structured a team and a biz that doesn’t force us to do mediocre deals - so we don’t, as we have skin in all our deals.
@JoeCassandra
A 3.5% loan in a 6% world might be worth 85-90. Regulators might be pushing on the bank to recognize that loss and shore up their capital. Intimidating the borrower into refi-ing and getting back 100 cents on the dollar helps the bank.
They def don’t want the asset.
A *challenge* of having children later in life is that there is a narrow window when your kids are old enough to appreciate experiences and your parents are still young enough to create new ones.
My family went to NW Louisiana 2 weeks ago to explore our Creole heritage.
When dealing with unethical people (newsflash: nontrivial number of them in RE), a good lawyer is worth their weight in gold.
We are fortunate to have a good one.
That is it. That is the tweet.