- Pixels & Properties
- Posts
- An Underwriting Tool, For You
An Underwriting Tool, For You
Plus: Venture Capital Meets Real Estate
Anish Patel & Harman Nagi
March 02, 2024
By Harman Nagi and Anish Patel
Forwarded this email? Follow this link to join the only platform for tech professionals seeking financial transformation through real estate.
Ian Cruz | Venture Capital Meets Real Estate
Ian Cruz is a Finance Manager from the Bay Area with a passion for real estate. He's built a multifamily portfolio of over 30 units across the Bay Area and Cincinnati, Ohio, showcasing his extensive experience in property investment. In addition to his corporate role, Ian hosts immersive real estate field trips, sharing his insights into the industry's nuances. He emphasizes the crucial link between finance and real estate metrics, offering valuable guidance to both seasoned investors and newcomers. Tune in as we explore the dynamic world of real estate with Ian.
I say that everyone’s financial education begins when they are a child, whether it’s conscious or subconscious. Everyone’s parents have different attitudes towards money and even if they’re not teaching you…their spending habits rub off on you.
When you start, you’re gonna make a lot of mistakes and every mistake comes with a learning lesson. So nothing I particularly regret. The biggest mistake someone can make is not getting started.
Venture capital has its own structure, which is very similar to syndication…there are limited partnerships and GPs. GPs get get carried interest, which in real estate are called promotes. There are waterfalls that determine how much to allocate to limited partners and general partners. It’s all very translatable, it’s just investing in a different asset class.
U.S. Home Prices Hit Record High in December
»Implication: Interest rates a big part of the story but only a part of the story. Diminished supply is enough to counter elevated rates, so long as there is demand for housing.
Core Personal Consumption Expenditures (PCE) index logs lowest rise since March 2021
»Implication: The PCE is the Fed’s preferred inflation gauge and given the increase was in-line with expectations, gradual rate cuts are still on the table this year.
In your American dreams
Visual capitalist created this start visualization of the accelerating spread between home prices and income. This coincides with an increasing shift toward rent-for-life among the population. Read: Greater demand for rental properties.
An Underwriting Tool, For You
By Anish Patel
Today’s deep dive is going to be a little different. We spent a lot of time developing a single tab underwriting tool that can be used for virtually any real estate transaction and strategy, including real estate syndications. Totally free. Check it out here. In this deep dive, we’ll:
Walk through the tool at a high level
Demonstrate how this tool can be used to evaluate a standard buy and hold
Demonstrate how this tool can be used to assess a BRRRR deal
Let’s dive in.
Overall Walk-Through
1 tab, everything you’ll need.
Too many underwriting tools overcomplicate what is really one of the simplest business models to understand. Multiple tabs can be tricky to keep track of and aren’t really necessary when you’re just trying to quickly assess whether the numbers pencil on a given deal. When an underwriting tool is more complicated than it needs to be, it prevents an investor’s ability to see the forest through the trees. Diligence is the mother of good luck, but over-precision on assumptions regarding the future is a fool’s errand, especially when there are data availability constraints. A sophisticated investor finds the right balance between the two ends of that spectrum.
With all that said, click on the below image to see our walk through!
Demo of standard buy and hold investment opportunity
Below we evaluate a standard buy and hold investment opportunity using this tool. Enjoy!
Demo of a BRRRR investment opportunity
Here we review the same property, but as a BRRRR deal. Check it out!
Conclusion
This same tool can be used to assess a flip, a deal where you intend to bring in outside investors, or a deal that a syndicator is bringing to you as an LP opportunity. If you’d like a walk through of how the tool can be used for those cases, please don’t hesitate to reach out.
That’s it! Hope this tutorials and the tool are helpful for you. Here’s a link to the tool. If you have any questions or feedback around how we can make this better, please let us know!
You can also respond to this email and tell us what you thought! Was it too long, too short, or missing something? Anything you would like us to cover in future newsletters? We’d love to hear from you!
The views and opinions expressed in this newsletter are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Please contact your legal, tax, and financial professionals before considering any investment.