Regular readers know we’re not sellers; once we complete a renovation and lease the property back up, we refinance, return capital to our investors, then hold. The downside of this strategy is that it can take some time before Adaptive gets to participate in the cashflow generated from the property. Even when we are able
Had someone write in and ask me why we focus on unlevered yield when we look at deals. To be clear, unlevered yield is calculated by dividing the forecast annual net operating income from a property by the cost total cost of buying and renovating it… in other words, treating the project like it will
We’re currently in the process of refinancing three properties, with another due to begin shortly. Think we will end up refinancing another 8-10 during 2018. Over time, as our portfolio grows, I expect we’ll be rolling refis constantly. And, I have to tell you: The prospect terrifies me. The financing process is broken. It’s totally
At this point in the cycle, when we consider a new deal, we spend a lot of time thinking about leverage. Mainly, we’re looking at how our pro forma unlevered yield (eg the cap rate we’re trying to hit post renovation) compares to the projected interest rate on the refinance we’ll do at that point.
We just closed on the refinancing of an 11 unit apartment building. We bought the building two years ago for $2.65MM, then spent another $900k renovating it, bringing the total investment to ~$3.55MM. Our net loan proceeds on the refi are $3.54MM and we’ve accumulated ~$250k in cash from operations since lease-up. So, today we’re