The Best Ever CRE Show JF 3871: Vetting GPs, Stabilized Yield, and Hidden Risks Every LP Should Know ft. The Real Estate God
Apr 10, 2025
The Real Estate God, a private equity investor with significant assets under management, shares invaluable insights into real estate investment strategies. He breaks down the vital differences between stabilized yields and market cap rates, stressing the need for LPs to understand these concepts. The conversation highlights the importance of due diligence, including verifying market rents and assessing risks, especially with bridge loans. Listeners gain practical strategies for navigating hidden risks and enhancing their investment decisions.
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Michael's Real Estate Journey
- Michael started working in real estate private equity right out of college and gained experience on $20 to $200 million deals.
- He shifted focus three and a half years ago to smaller sub-institutional deals in tertiary markets with success on exits.
Size and Market Affect Risk
- Larger asset deals face more competition and have a lower cost of capital, making it harder to find an edge.
- Smaller, tertiary markets often have better aligned incentives and less competition, potentially yielding more returns.
LPs Should Underwrite Like GPs
- LPs should underwrite deals like GPs do, focusing on stabilized yield over market cap rate.
- Evaluate supply constraints by checking replacement costs vs. current pricing to avoid markets with oversupply risk.