When modeling the equity structure in a real estate deal, flexibility is important, as there are countless nuances to consider. Here, I will expand upon two common but different ways to structure the profit splits between general partners (GPs) and limited partners (LPs): IRR Hurdle Waterfall and CoC Hurdle + Promote.
In the realm of multifamily investments, sound underwriting lays the foundation for success. As a multifamily investor and underwriter, I understand the critical importance of avoiding common pitfalls in underwriting to achieve profitable outcomes. In this article, we will explore five common underwriting pitfalls and provide practical insights to help you navigate them effectively.
Cap rates, a key metric in commercial real estate, often miss vital aspects of an asset’s potential, especially in value-add scenarios. Metrics like Yield on Cost (YOC) offer a more comprehensive view by considering stabilized performance, project costs, and development spreads, providing a richer understanding of an investment’s true value beyond cap rates.
It is only when these principles are understood and implemented that GP teams can identify those assets which provide strong returns to investors and weed out underperforming assets-protecting LP investments and boosting investor sentiment.
Simply put, this strategy includes acquiring a property with a significant opportunity to increase its valuation to then be able to extract it either through a refinance or sale.
…This is why having a defined aim, or goal, is so important. It determines how the world reveals itself to you.