If you missed it, BAM founder and CEO, Ivan Barratt, was recently a guest on the Real Estate Syndication Show podcast and talked with host Whitney Sewell about his strategy and advice for others in the multifamily industry. We recap it here. You can catch the full podcast here, and visit our Media page for more of Ivan’s appearances!
Ivan discusses with host Whitney Sewell how he currently spends the majority of his time raising capital and focused on the big strategy, high-level vision of the company. He enjoys keeping his “head in the clouds” and examining what kind of company BAM wants to be, what kind of culture they want to develop, etc. Ivan cites BAM’s great team, which he notes get to do most of the decision making these days – and how it’s really fun to watch the department leaders making decisions and see where they’re leading BAM.
Ivan jumps into explaining how they structure deals with a GP (general partnership), as well as offering other multifamily advice:
- BAM looks at it like a private equity company. They look for a deal that will deliver a certain return threshold, with a high-degree of confidence.
- BAM pays a preferred return, that started at 9 and went to 8. As the market has changed, going after newer, nicer assets can cost more but carries less risk.
- The preferred return is what investors make before BAM receives any profits. Right now the PR is 7%.
- BAM is currently looking for deals in which they can pay 7% annualized, 60 days after close – “On a monthly basis we want to send investors checks,” Ivan says.
- To do that: BAM finds ‘coupon clipper’ deals where you can fix a few problems and add value, but far less problems than a traditional value-add deal.
- BAM looks for 7% plus whatever the split is on the deal, 70-75% to the passive investor, those two numbers = IRR on 5-7 year hold be 14% or better. 17-18% is a pretty good spot for BAM.
In newer, nicer assets, BAM would accept a lower IRR.
- BAM looks to do 2.5x-3.5x what the GP invests net back to them on a 5-7 year hold. If they have to hold it 10 years, Ivan says he wants to triple it.
- BAM tries to target a 5-7 year exit, but plans for 7-10 year hold. They don’t have to sell in a buyer’s market.
- Many ways to figure investor/syndicator split: 70/30, 80/20, etc. BAM likes to keep it simple and make it clear and easy to read for investors.
- BAM looks at investor desires at this stage in the market, and finding deals that meet those desires. In the new fund, looking to accomplish monthly income stream, capital appreciation on the back end because value has been raised, etc.
- BAM is looking at 90s or newer assets, and which might benefit from new management and some minor improvements.
- These assets may not hit 20% IRR but they also won’t be a bust; that’s the position BAM wants to be in at this stage in the cycle.
- Ivan has spent time lately explaining how the fund is an advantage for both sponsor and investor.
- By right-sizing fees, BAM has been able to build a strong team and provide excellent tools for them to succeed. Fees are on one page, in bold, no surprises, and Ivan recommends being open with investors.
- Ivan recommends always building your potential network of investors. He also recommends being transparent as possible, so investors can self-select if they’ll be a good fit.
- Ivan thinks of investing as a team sport, and says to be willing to learn to keep improving.
- Ivan also recommends delivering bad news quickly, and how you’re going to fix it and move forward. In multifamily, there is always potential for something coming up, so being transparent and up front with investors is key.
Want more help from Ivan? Head over to ivanbarratteducation.com! You’ll find a free library of articles and videos featuring Ivan’s insider industry knowledge!