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January 21, 2008

How to work with an investment group?

Filed under: The Investment Source — JonnyT @ 8:50 am

At NCO we have a division called NCO Capital.We offer many financial services to our 1,300 clients.A term you here these days is bulk purchasing.What do Investment Groups look for when considering a bulk purchase?I asked myself this same question prior to sitting down with the CEO’s of some very large Investment Groups.We attract a lot of Investment Groups because we run the largest condo website in the country. From my experience they really want the inside details.Where’s the project located?What’s the owner’s position, who’s the lender and what’s the pricing look like.This information is not easy to get.It takes a lot of hard work and connections to be able to un-cover the inside story. At NCO Capital we’ve done a hand-full of bulk deals.We find out when did these past sales occur?What price the units sold for.These Investment Groups almost always want to see a rental component.What kind of shape is the local rental economy?Are their current rentals?Is there a cap on how many units can be rented in the building?A common term to ask is can I see the rent roll.This is an important question because this can determine the NOI (Net operating income).Once the Investment Group knows this, then they can adjust the offer price to determine his/her cap rate. Investment Groups analyze many deals.They can consider holding for a period of time until the market bounces back (but) they typically need much greater discounts than 30% are necessary to make a decent return. In some projects a project will only work at a 50% or a 45% discount. The Investment Groups need to get to a CAP rate that makes sense. They feel in some markets condo values are so bruised that it now becomes a rental deal. Based on these projects income/expenses, to get to a manageable CAP Rate the discount can become greater. How the question is will the developer sell to an investment group?Or will we have to approach the bank to buy the paper?

Any question’s, please email me at jt@newcondosonline.com or visit our condo site.

Jon-

December 29, 2007

What’s one reason to use an Investment Group that offers pre-sales?

Filed under: The Investment Source — JonnyT @ 8:50 am

I’ve heard this question asked a couple different ways. I’ve had clients wish to use the pre-sale syndication model in order to build a finished project and then sell. A pre-sale syndication model is bringing in 50-100 individual investors who are signing contracts and issuing deposits (at discount). The MAIN reason a developer does this is in order to get his/her construction loan (satisfy the pre-sale requirement) and go vertical. Some Developers wish to pre-sell and then build. I know some wish to have a finished product before selling. It’s a very useful tool. Yes it costs you a 15% margin and a RE commission but consider the bigger picture. Jon-


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