While passive investors may not have direct control over possible risks, they need to understand how operators analyze their deals to prepare for any potential negative outcomes. Also, it is important to bear in mind that the process of real estate deals, from start to close, is littered with tripwires and landmines. In this #Highlights episode, we look back at our conversations with Hans Box and Nicholas Moore.
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Hans highlights what passive investors should look for, including transparency, deal value-add articulation, and scenario analyses. Meanwhile, Nick details the hurdles that can be encountered early on, during financing and negotiations, and also during the closing period. Enjoy the show!
Key Points From This Episode:
- Hans’s background, his transition from the corporate world to multifamily, and what he’s up to now.
- The incredible story of Hans’ first deal, where he got thrown into the deep end.
- How Hans realized that he could not depend on a W2 as his only source of income.
- What gave Hans the confidence to ultimately leave his W2 to pursue syndication full-time?
- Sacrifices Hans made when he gave up his job at the same time his wife went to law school
- Some of the most important things to consider when vetting a potential sponsor are.
- The best questions to ask are to gauge an operator’s level of transparency.
- An introduction to Nick and his career in real estate thus far.
- Getting an attorney involved to help guide you through the important documents for a deal.
- The transactional timeline and the common pitfalls that are encountered.
- Making sure to cover bases during the vital financing period.
- The closing of the deal; relationships with lenders and finalizing the documents.
- Preventing pitfalls of post-closing; avoiding bad debt and unnecessary lag time.
“A good sponsor can turn a bad deal into a good deal and a bad sponsor can buy a great deal and destroy it. I’ve seen it happen.” – Hans Box
“Look for sponsors that are open, transparent, answer your questions, and aren’t offended by your questions.” – Hans Box
“Another important thing with the sponsors is you need to make sure that they can articulate the true value-add component of the deal. If there’s not a value-add component, you shouldn’t be investing in the deal, there always should be a value-add component.” – Hans Box
“When you go and you find interest and you underwrite a deal and you want to make an offer on it, you want to put some terms in the LOI that are not going to be such a surprise once we go to execute the PSA.” – Nicholas Moore
“Ernest money doesn’t go hard till the end of financing. Now, financing will either, historically run concurrent with the inspection period and a lot of times will run beginning on the effective date.” – Nicholas Moore
About Hans Box
Hans Box is a Principal at Box Wilson Equity and a Senior Director at Old Capital Lending, a top provider of commercial capital solutions in the Texas market. His background is in the accounting, business strategy consulting, and real estate industries. He has been directly involved in the acquisition, investment, and management of over $350MM in multifamily and self-storage assets and has asset managed ~3,700 multifamily units and has invested in or had equity in ~4,300 multifamily units and ~2,000 units of self-storage. In his role as Senior Director at Old Capital, he assists commercial real estate investors in finding debt solutions for the acquisition and refinance of their properties. As an avid investor himself, he understands how to look at deals from an investor’s standpoint. Old Capital specializes in loans from $1MM+ in all the major real estate asset types. Box Wilson Equity is a private equity firm specializing in placing equity in cash-flowing real estate. They have invested over $30MM since 2013 into multifamily, self-storage, mobile home parks, and distressed debt.
About Nick Moore
Nick Moore is a commercial real estate and corporate attorney located in Atlanta, GA. Since 2012, Nick has been involved in real estate law in various forms, including acquisitions and refinancings with retail, fast food restaurants, multifamily real estate, and self-storage real estate. Having assisted clients with multi-millions in real estate deals, Nick guides his clients from the inception of the deal to post-close business matters and everything in between. Nick is also a general partner in commercial real estate and has assisted in the formation of private equity funds, limited partnerships, syndications, debt securities, and corporate structure revisions to accomplish his clients’ complex objectives. In 2020, Nick was selected by SuperLawyers as a Georgia Rising Star for the areas of Corporate and Business which is reserved for the top 2.5% of attorneys in the practice area. Nick lives in north metro Atlanta with his wife and son and is expecting his second son in February of 2021. When he’s not taking down deals with his clients, he enjoys hiking, golfing, spending time at his church, and staying active in his faith.
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