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Investors vary in their level of understanding of real estate and at JP Acquisitions we’ve spoken to everybody from people just coming out of college to multifamily owners/operators. We realize that not every investor has the same wants and needs. Some investors are simply looking for passive income while others are more aggressive and want shorter business plans. More experienced investors may ask a few questions and simply request the PPM, subscription agreement, and wiring instructions thereafter so they can lock in their investment. A recent graduate on the other hand may be completely overwhelmed and ask 1,000 questions (obviously exaggerating here). What’s interesting is that there are several questions that always come up during investor meetings. The following are some of the obvious questions that come up:
- What are the projected returns and time horizon for the deal? (Assuming you are pitching a specific deal and not having a general conversation)
- What is your track record? (i.e., number of exits, assets under management, etc.)
- How do I know my money is safe? Or in other words, how do I know you won’t run off with my money?
Note – The definitions of the technical terms in any of our posts can be found in the glossary section of our website.
Note – I (Tedi) will use “we” when referring to the JP team and myself as well as speak in the first person throughout this blog post.
How was your strategy developed?
This question is one we love to answer because it sets us up to tell a story. Stories make it easier to remember and grasp ideas so we know when answering this question the investor we are talking to will be able to dive into our thinking process. That said, we have to go back in time to when JP Acquisitions was just an idea to tell the story. Prior to our first acquisition in September of 2022, we spent a ton of time thinking about where we want to invest and in what kind of deals. Jay (The President of JP) was open to the idea of taking on a value-add multifamily project in a number of markets so long as the numbers (i.e., underwriting) made sense, the business plan was carefully thought through and conservative, and the risk/reward was in our favor. I on the other hand thought similar although was slightly more conservative and directing us toward looking at high cash-flowing properties in our immediate market (i.e., the Chicagoland area) that we could self-manage to gain hands-on experience and build out our property management systems and processes. Long story short, we were under contract for 20 units on Chicago’s westside and only ended up with 8 units after one of the sellers backed out. The 8 unit property we bought happened to have all Section 8 tenants and it was after a few months of owning and operating the property that we realized we were on to something. There was (and still is) a huge discrepancy between Section 8 rents and market rents in that part and other parts of the city. We realized that the headache of the inspections and the long leasing process of the Section 8 program kept us on our toes by being forced to take care of deferred maintenance. More so, the rent upside was well worth the headache. Fast forward to today, we’ve utilized the Section 8 program and incorporated what we know about the program into our strategy to be confident not only in the rents we can achieve but in the time frame we can execute our plans.
How does your property management team operate?
Our property management (PM) team is a small group consisting of three people (Shray, Michael, and Djordje). Shray will typically handle rent collection, tenant communications, managing maintenance requests, and making sure the property stays looking good. Michael and Djordje on the other hand mainly handle maintenance work and select renovations. However, depending on scheduling and other factors, they will swap responsibilities. I help out the PM team by overseeing asset management and making sure that we’re hitting our goals.
Overall our PM team has done an impressive job as indicated by tenants expressing ever-increasing amounts of gratuity for the work they do. If it wasn’t for them, our expenses would be higher, tenant satisfaction would be lower, and the control over our business plan would suffer. Big shoutout to those guys for all of the work they do. As our company grows and the amount of work increases, we will undoubtably need to look to hire more people with the same work ethic and drive as them.
How will I be updated about my investment?
Real Estate isn’t like the stock market where you know exactly how much your investments have grown or shrunk and as such it’s common for investors to ask us how they will know how their investment is doing. Every month, I send out investor updates that are broken down in 5 sections including occupancy and revenue, expenses and cash flow, cash flow tables, capital expenditures, and final thoughts. The cash flow tables show the trailing 3 and 12-month actual financials and compare them to the proforma for complete transparency. Depending on the project, the capital expenditures section may be left out but is normally included and talks about the status of renovations at any given property. Aside from the monthly investor updates, investors can always text, call, or email anyone on our team to get an update or ask questions. At JP Acquisitions we strive to be as transparent as possible such that everyone is up to date.
Conclusion
This post dove into the details of our operations at JP Acquisitions while highlighting and answering common questions that investors ask us. I covered how our strategy was developed, the structure of our PM team, and how we communicate with investors and focus on transparency. Of course we expect these questions to arise time and time again, but by answering them in this blog post, the answers are memorialized for other people so they can understand our strategy and mindset.
If you have any questions regarding the terms and concepts in this post or previous ones, please reach out to either me (tedi.nati@jpacq.com) or someone on our team so we can help explain further. If you’re interested in investing with us at JP Acquisitions, you can contact us via our contact form, by emailing a member of our team, messaging us on LinkedIn, or signing up for our investor portal to set up a meeting.
As always, I hope you enjoyed reading this post as much as I have writing it. Best of luck!
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About the Author
Tedi Nati is the Managing Partner of JP Acquisitions. In his role he is responsible for broker outreach, establishing deal flow, underwriting, marketing, investor relations, and assisting in the closing process. In addition to his role at JP Acquisitions, he is an Assistant Equity Underwriter at Cinnaire, a non-profit Community Development Financial Institution (CFDI). In his role at Cinnaire, he is responsible for assisting the underwriting team in evaluating and structuring real estate equity investments and assessing the risks and mitigants associated with such. Tedi earned his Bachelor of Science in Finance from DePaul University, where he graduated Summa Cum Laude. In his free time he enjoys reading, looking for multifamily deals, and working out.
Make sure to always do your own research before making any final decisions on buying/investing real estate, stocks, or other securities. I am not a CPA, attorney, insurance, or financial adviser and the information in this blog post shall not be construed as tax, legal, insurance, construction, engineering, health and safety, electrical or financial advice. If stocks or companies are mentioned, I sometimes have an ownership interest in them – DO NOT make buying or selling decisions based on my posts alone. If you need such advice, please contact a qualified CPA, attorney, insurance agent, contractor/electrician/engineer/etc. or financial adviser.
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