Ep. 52: Analyzing Your Multifamily Spreadsheet with Omar Khan

That underwriting spreadsheet you just downloaded is not all it’s cracked up to be, according to Omar Khan. He shares some controversial opinions on how many gurus are educating students on multifamily underwriting and syndication. Omar is a CFA charterholder, who has advised on $3.7 billion of capital financing. On this episode, Omar shares some great tips to step up your underwriting and helps passive investors identify conservative underwriting.  

Key Market Insights

• Family always owned office buildings
• Hard work begins after you have the deal
• Many investors acquire properties and quickly hand it over to a 3rd party property manager
• $90 spreadsheet can’t replace a $150,000 analyst
• Be sure to look at monthly cash flow analysis, not just annual
• Few gurus are sophisticated, many are salespeople
• What to look for in underwriting: Pace of the rent growth, operating expenses per unit, exit cap
• Pace of rent growth – usually between 3-6%, ideally should be 2-3% for conservative projections, 4-6% is aggressive
• Estimates $5,000-$6,500 of operating expenses per unit (will vary by market)
• Exit cap should be 100+ basis points higher for a conservative estimate
• Opposed to straight profit splits, as sponsors should get paid when they exceed projected targets
• Preferred return between 8-10%
• Retail investors ask, “How much return can I make?”
• Institutional investors ask, “what are risks involved with this deal?”
• These institutional investors are seeking sharp, concise presentations with a sensitivity analysis
• Your marketing matters and many syndicators have crappy marketing materials
• Focus on Dallas, Houston, San Antonio, Atlanta
• Likes markets that favor landlords, attractively priced, job growth, job diversification

Bull’s Eye Tips:

Winning Your Market: Hire the best people you can afford for marketing

Tracking Market Changes: Read; shake hands and kiss babies

Daily Habit: Wife tells him what to focus on

Resources:

Ep. 7 with Reed Goossens

  Ep. 46 with Michael Becker

Best Business Books:

Black Swan by Nassim Nicholas Taleb 

Thinking Fast and Slow by Daniel Kahneman

Digital Resources

Excel

Tweet This:

“Hard work begins after you have the deal” “$90 spreadsheet can’t replace an analyst who makes $150,000 to evaluate deals” “Be sure to look at monthly cash flow analysis, not just annual”

Places to Grab a Bite:

Pecan Lodge

Connect with Omar:

omar@boardwalkwealth.com

boardwalkwealth.com

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