026: Underwriting Essentials: How to Vet a Deal Quickly and Effectively with Rob Beardsley

Real Estate Runway

Oct 27 2021 • 33 mins

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
    • Bio
  • 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?
    • Links below
  • Connect with Rob!
    • Links below
  • Final words

Tweetable Quotes:

“By narrowing down and looking at less deals, you’re more likely to get MORE deals.” - Rob Beardsley

Resources Mentioned:

Want to connect with Rob? You can reach out on LinkedIn and Instagram. You can also email rob@lonestarcapgroup.com. Check out https://lonestarcapgroup.com/ and start creating more investment opportunities.

Check out https://syndicationpro.com/ and learn how you can raise more capital in less time!

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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.