In this episode, Wayne talks to Rob Beardsley. Rob oversees acquisitions and capital markets for Lone Star Capital and has acquired over $350M of multifamily properties. He has evaluated thousands of opportunities using proprietary underwriting models and sold over 10,000 copies of his book, The Definitive Guide to Underwriting Multifamily Acquisitions. He has written over 50 articles about underwriting, deal structures, and capital markets and hosts the Capital Spotlight podcast, which is focused on interviewing institutional investors.
Rob’s areas of expertise include:
- Multifamily Underwriting: Basic overview, key metrics, sensitivity analyses, stress tests, comparables, cap rates
- Partnership Structures: How to structure deals with investors, waterfalls, preferred equity, matching your strategy
- Raising Capital: How to partner with institutional investors, how to form joint ventures and co-GPs
- Financing: Overview of debt options for multifamily, matching debt product to investment strategy, loan term nuance
Topics on Today’s Episode:
- Rob got an early start in real estate through his parent’s brokage firm that focused primarily on construction and fix and flips. This led Rob to dive into multifamily as the best way to accumulate wealth and assets.
- At 20 years old Rob, alongside his partner Kent Piotrkowski, started Loan Star Capital about 7 years ago. In that span of time, the firm has acquired close to $400M worth of multifamily properties.
- Growing up around real estate and his father’s mature conversations contributed immensely to Rob’s entrepreneur mindset and his ability to lead and inspire others.
- You really do not understand business until you are in business. Higher education is only textbook knowledge, real-life business is the best teacher.
- Risk factors are so important when starting a business, however the stakes become higher when you have a family and other responsibilities. The best time to take a risk is early in life when liabilities are less.
- Being Bullish on Houston makes sense because it's a diverse city. Houston is not only an oil city, but also the largest medical center in the world and the busiest port in the US in terms of foreign tonnage. It is often overlooked, making it one of the most accessible large markets to penetrate.
- Insurance is one of the biggest obstacles in today’s Houston market. Not to mention that interest rates have affected all markets.
- Rob and Wayne discuss the main factors behind high insurance premiums. The spike of property insurance in Houston has been caused by:
- 1. Many hurricanes have made landfall, and repetitive major losses have followed.
- 2. The number of carriers that are willing to insure in Houston has decreased.
- Rob talks about what the risk is in today’s market. Being mindful of risk is key. Consider whether a value-add deal will yield the same return as a clean stabilized deal. If you are not getting paid for the risk, it's better not to take it. There are cycles in the market that will recenter prices and insurance costs.
- Operational headwinds are likely to approach in the near term, such a recession which will impact collections, rents, occupancy. This makes it critical to be tighter on proforma rents, growth assumptions and wider exit cap rates.
