Honing in on your deal structure can help you win more deals, so let’s learn some of the best techniques. Robert Beardsley, as Founder and Principal at Lone Star Capital, oversees acquisitions and capital markets for the firm and has acquired over $100M of multifamily real estate. He has evaluated thousands of opportunities using proprietary underwriting models and published the number one book on multifamily underwriting, 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.
Let’s dive right in and learn some underwriting essentials from the Lone Star model that will help you vet deals quickly and effectively.
Getting to know Rob Beardsley - [00:01 – 03:55]
I introduce Rob Beardsley to the show
Rob gives a bit of his background
Born and raised in Silicon Valley
Born to a family of real estate investors
Background in numbers and analytics
The mindset of creating passive income
Underwriting Essentials: How to Vet a Deal Quickly and Effectively- [03:56 – 15:16]
Rob’s process of acquiring deals
Mostly with Lone Star Capital
Building out management - a people business
A look at how Rob underwrites deals
Focussing on the criteria first
Pick your market
Take vintage and location into consideration
Diving in head first on the preliminary phase
Refine the numbers as you go along
The importance of consistency
Approach to income realization time
Models differ on stabilization periods
How Rob breaks it all down
Determine the number of months from A to B
Trend the in-place GPR to the Pro Forma GPR based on that
Occupancy vs. number of units you can renovate
Baking in margin within a stabilization period
Dealing with the operating expense range
How to get creative with it
Approaching Renovation and Deal Structure - [15:17 – 29:29]
Adjusting for renovation periods
Structuring the private equity side of a deal
Fees, prefer of return, and promote
Example of Rob’s more complex structure
Tailoring the deal towards sale vs. investor and sponsor
Rob talks about his preferences as an investor
Final advice from Rob
Covering the debt side of the underwriting
Thoughts on bridge loans creating more risk
Preference for floating rate debt
Floating vs. fixed rate debt
The Quattro Trio - [29:30 - 33:45]
What is your superpower?
Taking the complex and making it simple
What was your biggest failure?
Learning the lesson of due diligence on partnerships
Network and date first, don’t marry right away
What resources do you have for listeners?
Connect with Rob!
“By narrowing down and looking at less deals, you’re more likely to get MORE deals.” - Rob Beardsley
Want to connect with Rob? You can reach out on LinkedIn and Instagram. You can also email email@example.com. Check out https://lonestarcapgroup.com/ and start creating more investment opportunities.
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Real Estate Runway Podcast is all about alternative business and investment strategies to help you amplify life, and maximize wealth! Click here to find out more about the host, Chad Sutton.