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NSpire sells Townhouse: 29% IRR, 193% profit

Written July 11th, 2017 by

NSpire Assets is pleased to announce that it recently sold Townhouse Apartments, a 112-unit complex it acquired February of 2013 in Ennis, TX.

Investors achieved a total 193% profit, nearly tripling their money in less than four and a half years.  This resulted in a 29% annual IRR, when calculated using the schedule of distributed cash. (Note, these calculations make assumptions on the future sale of vacant land that was retained.)

NSpire Assets upgraded the property, including new roofs, a renovated pool, new stainless steel grills and pavilion, repaired exterior wood with full re-paint, new laundry room and machines, renovated office, interior unit upgrades including faux wood flooring, and a new property entrance sign. Pictures are available here.

Through improved property operations and upgrades, NSpire Assets was able to increase NOI by >60% and sale the property at >2X the purchase price.

Special thanks to our broker, Jakob Andersen of ARA, who helped make this sale happen.

NSpire Assets, LLC is an experienced real estate investment organization and property asset management company focused on a value-added approach to real estate investment.  The company was initially focused on multifamily investments, but is now expanding to other areas of real estate, including multifamily development, resort condo development, and preferred equity investments.  Learn more about us at www.nspireassets.com.

2009-2016 NSpire Returns (IRR=33%)

Written January 26th, 2017 by


This is a recurring post that we like to calculate, so we see how our multifamily portfolio is performing.
What return are you getting from your investments?  Though not simple to answer, it is important to understand, and may surprise you. Your "returns" may be a combination of items such as dividends/interest, distributions, refinance proceeds, principal paydown, tax advantages, and built in gains on the value of the underlying investment.  These are not simple to calculate, nor easy to work down to a single number.  But, once you know what your various investments are returning, it can help you determine whether your investments are meeting your needs and where you may want to shift your investments in the future!

33% NSpire Portfolio Return

NSpire investors have achieved a 33% average annual return since our inception in 2009, across the entire portfolio of properties.  We'll show you how we calculated this for our portfolio below, as an example of the calculations you may want to make for your portfolio.

It is important to point out that the capital gain returns are not realized until either a partial cash-out refinance, or until the property is sold.

Calculate Return for your Investments

The easiest way to calculate your average annual return is by using IRR (Internal Rate of Return) on the annual cash flows for the investment.  We did a past blog on IRR, but basically here is how it works:

  1. Calculate annual cash flows:
    • The investment you make is a negative number in the year you invest it
    • Each dollar that you get out in future years is a positive number
    • The total returned when you sell is a positive number.
    • If you still own the investment, estimate the value of the investment if sold today, and plug that in this year (the final year).
  2. Plug the annual cash flows into Excel or a financial calculator
    • Use the "IRR" formula in Excel
    • Or use the "IRR" formula in a financial calculator (a bit more complicated)

The resulting "IRR" is the average annual compounded return on  your investment.  It is effectively your average annual return.  The spreadsheet we used below is available here, if you would like to try this with your own portfolio.

NSpire Calculation

We calculated our annual return using the method above:

  1. We input the "Equity Investment" for each property raised from investors (negative number)
  2. We input the "Annual Cash Flow (Operations and Refinance)" each year of ownership (positive number)
  3. We estimated the value of the property if sold today, along with the investor returns
    • Be realistic in your assumptions on market value
    • For our properties, we use conservative cap-rates, put cap-ex reserves above NOI (to be conservative) and include 5% sales costs.

This resulted in the following table:

 

Update our Excel for your Portfolio

You can update the above Excel to calculate the returns for your portfolio:

  1. For each property line, replace it with your investment
  2. Under "Equity Investment", put your purchase price for the investment (negative number)
  3. Under "Annual Cash Flow", put any dividend, interest, or any other money received each year
  4. Under "Estimated Returns if Sold", put your estimated return if you sold the investment today.

The "IRR" number at the bottom is calculated for the entire portfolio.  You can only input a single investment to see the IRR for it, or enter your entire portfolio to see the IRR for everything.  Make sure you go back far enough in years to get your initial investment (negative number) for any investment income you include.

Summary

Performing an IRR analysis on the cash flows from your investment portfolio is a very powerful method to understand the returns you are receiving.  Though it can be a bit tedious to do for every investment you own (e.g. stocks, bonds), it is manageable for bigger investments (such as multifamily properties or other very large investments.)  This can be a powerful tool to measure the relative performance of your investments and to make decisions about where to invest in the future.

NSpire sells Woods of Ridgmar: 25.9% IRR, 105% return

Written December 30th, 2016 by

NSpire Assets is pleased to announce that it recently sold Woods of Ridgmar, a 235-unit complex it acquired February of 2014 in Fort Worth, TX.

Investors achieved a total 105% return on their capital, more than doubling their money in less than three years.  This resulted in a 25.9% annual IRR, when calculated using the schedule of distributed cash.  

NSpire Assets substantially upgraded the property through over $14,000/unit in exterior and interior upgrades, including all new roofs, a new chiller, a new dog park, renovated pools with new decks, new stainless steel grills, new pergolas and pool furniture, interior unit upgrades include faux wood flooring, ceramic tile tub surrounds, new counters/vanities, kitchen backsplash, and new cabinet faces, as well as a full office rehab, property wide WiFi, and new property entrance sign and exterior signage. Pictures are available here.

Through improved property operations and upgrades, NSpire Assets was able to increase NOI by nearly 2X, enabling a property sales value of 2X the purchase price.

Special thanks to our broker, Taylor Snoddy of Transwestern, who helped make this sale happen.

NSpire Assets, LLC is an experienced real estate investment organization and property asset management company focused on a value-added approach to real estate investment.  The company was initially focused on multifamily investments, but is now expanding to other areas of real estate, including multifamily development, resort condo development, and preferred equity investments.  Learn more about us at www.nspireassets.com.

2009-2015 NSpire Returns (IRR=33%)

Written February 3rd, 2016 by


This is a recurring post that we like to calculate, so we see how our multifamily portfolio is performing.
What return are you getting from your investments?  Though not simple to answer, it is important to understand, and may surprise you. Your "returns" may be a combination of items such as dividends/interest, distributions, refinance proceeds, principal paydown, tax advantages, and built in gains on the value of the underlying investment.  These are not simple to calculate, nor easy to work down to a single number.  But, once you know what your various investments are returning, it can help you determine whether your investments are meeting your needs and where you may want to shift your investments in the future!

33% NSpire Portfolio Return

NSpire investors have achieved a 34% average annual return since our inception in 2009, across the entire portfolio of properties.  We'll show you how we calculated this for our portfolio below, as an example of the calculations you may want to make for your portfolio.

It is important to point out that the capital gain returns are not realized until either a partial cash-out refinance, or until the property is sold.

Calculate Return for your Investments

The easiest way to calculate your average annual return is by using IRR (Internal Rate of Return) on the annual cash flows for the investment.  We recently did a blog on IRR, but basically here is how it works:

  1. Calculate annual cash flows:
    • The investment you make is a negative number in the year you invest it
    • Each dollar that you get out in future years is a positive number
    • The total returned when you sell is a positive number.
    • If you still own the investment, estimate the value of the investment if sold today, and plug that in this year (the final year).
  2. Plug the annual cash flows into Excel or a financial calculator
    • Use the "IRR" formula in Excel
    • Or use the "IRR" formula in a financial calculator (a bit more complicated)

The resulting "IRR" is the average annual compounded return on  your investment.  It is effectively your average annual return.  The spreadsheet we used below is available here, if you would like to try this with your own portfolio.

NSpire Calculation

We calculated our annual return using the method above:

  1. We input the "Equity Investment" for each property raised from investors (negative number)
  2. We input the "Annual Cash Flow (Operations and Refinance)" each year of ownership (positive number)
  3. We estimated the value of the property if sold today, along with the investor returns
    • Be realistic in your assumptions on market value
    • For our properties, we use conservative cap-rates, put cap-ex reserves above NOI (to be conservative) and include 5% sales costs.

This resulted in the following table:

4Q15 IRR

 

Update our Excel for your Portfolio

You can update the above Excel to calculate the returns for your portfolio:

  1. For each property line, replace it with your investment
  2. Under "Equity Investment", put your purchase price for the investment (negative number)
  3. Under "Annual Cash Flow", put any dividend, interest, or any other money received each year
  4. Under "Estimated Returns if Sold", put your estimated return if you sold the investment today.

The "IRR" number at the bottom is calculated for the entire portfolio.  You can only input a single investment to see the IRR for it, or enter your entire portfolio to see the IRR for everything.  Make sure you go back far enough in years to get your initial investment (negative number) for any investment income you include.

Summary

Performing an IRR analysis on the cash flows from your investment portfolio is a very powerful method to understand the returns you are receiving.  Though it can be a bit tedious to do for every investment you own (e.g. stocks, bonds), it is manageable for bigger investments (such as multifamily properties or other very large investments.)  This can be a powerful tool to measure the relative performance of your investments and to make decisions about where to invest in the future.

NSpire Sells Monterrey, 58% investor return in 17 months

Written October 16th, 2014 by

NSpire Assets is pleased to announce that it recently sold Monterrey Apartments, a 105-unit complex it acquired May of 2013 in Fort Worth, TX.

NSpire Assets substantially upgraded the property through over $7,000/unit in exterior and interior upgrades, including a new playground, new pergolas, new on-site laundry, new roofs, faux wood flooring, ceramic tile tub surrounds, new granite bathroom vanities, property wide WiFi access, and a full exterior shutter/wood repair and paint.

Through improved property operations and upgrades, NSpire Assets was able to increase NOI by >2X, enabling a property sales value of >2X versus the purchase price just 17 months before.

As a result, investors achieved a 58% profit on their capital invested just 17 months before.  This resulted in a >33% annual IRR, when calculated on a quarterly basis vs. cash flow.  Despite only holding for 17 months, NSpire Assets was able to distribute more cash to investors than projected over the original 5 year hold projection.

Special thanks to our broker, Taylor Snoddy of Transwestern, who helped make this happen.

NSpire Assets, LLC is an experienced real estate investment organization and property asset management company focused on a value-added approach to real estate investment.  The company was initially focused on multifamily investments, but is now expanding to other areas of real estate, including multifamily development, resort condo development, and preferred equity investments.  Learn more about us at www.nspireassets.com.

Fort Worth Top-18 Rent Growth

Written October 14th, 2014 by

Fort Worth made it into the top-18 metros nationwide with 3rd quarter rent growth of 4%, according to MPF Research.

This places Fort Worth ahead of Dallas, which did not make the top-20.  This is not surprising, given Fort Worth has seen a delay in rent growth versus Dallas during the recovery.  This has also made Fort Worth a more affordable place to live.

We believe this makes Fort Worth a more attractive place to invest right now, which is why we are looking to Fort Worth for our upcoming construction project.

 

 

DFW supply vs. demand

Written September 24th, 2014 by

How does DFW supply compare with demand (absorption)?  Are we overbuilding?

Here is an interesting set of articles from MPF Research:

DFW Summary

    • 4.9% of current supply is under construction
    • 2.1% three-year average absorption rate (i.e. rate of additional units being occupied)
    • I.e. would take 2.3 years to absorb new supply that is coming on-line, if absorption stays constant

But, Dallas job growth is anticipated to be ~2.5-3% this year.  Thus, the supply doesn't seem to be very worrisome yet.  However, it depends on how much supply continues to come online.  Population and job growth in Dallas is starting to slow down, so if construction continues to ramp up over the next few years, oversupply could become a concern.

Encouraging apartment demand trends

Written August 11th, 2014 by

MMMarcus & Millichap released their mid-year analysis on apartments:

Job growth is accelerating, with DFW ranking 3rd nationwide in absolute growth.  Millennial demand is projected to further increase apartment demand, as employment improves and more young adults move out from their parents.  However, if lenders begin loosening lending standards, first time home buyers may offset this increase (dampened by mortgage payments rising faster than rent, which will only accelerate when interest rates start to rise.)  Slight vacancy decrease in DFW versus 2Q13 (40bp) despite increased supply.  Cap-rates are starting to increase in preferred/primary markets, though secondary/tertiary markets continue to improve (decrease).

  • 9.1 million jobs created, fully recovering 8.1 million lost during recession
  • DFW is ranked 3rd metro in nation in absolute growth (208,300 jobs, +7%)
  • Encouraging apartment demand trends among young adults
    • 20-34yr old employment is tightening
      • Unemployment = 6.1% (nation) vs. 7.8% (Millennials)
      • Spread is decreasing = 255bps (2011) -> 170bps (now)
      • Long-term spread is 130bps
    • Young adults living at home is 3.3M above long-term average
    • Millennial population is projected to grow 1.6M by 2020
      •  Millenials have a 67% propensity to rent
    • DFW Millennial demand projected to increase 89k in next 5 years (#2 nationwide)
  • Gap widens between median mortgage payments ($1279) and rents ($1150)
  • Supply: ~240k completions expected in 2014 with 19k in DFW (#1 nationwide)
  • DFW vacancy at 5.5% (40bp decline from 2Q13)
  • Cap-rates continue to trend downward
    • Driven down by secondary and tertiary markets
    • Preferred and Primary markets are starting to trend upward

Commercial Real Estate 10% higher than pre-recession peak

Written July 9th, 2014 by

The commercial real estate price index from Green Street Advisors is showing commercial real estate prices 10% higher than the pre-recession peak.  This is no surprise - all of the ingredients that drive property values are historically strong -- cap-rates are at historic lows (driven by low interest rates and demand), occupancy/rents at historic highs, inventory is very low, and appetite from buyers is very high.   This will also come as little surprise to those of us who have been acquiring property recently, as we have seen pricing dramatically higher than just one year ago.  As we continue to re-iterate in our blogs and investor meetings, now is a great time to own and sell properties, but buying continues to be a challenge.

Quarterly Rent Growth Hits 14-Year High

Written July 2nd, 2014 by

Great article from GlobeEst.com: According to RealPage MPF Research Division, effective rents increased 1.9% in 2Q14 - reaching a 14-year high!   Rents are being aided by tight occupancy (nationwide rise from 95%/1Q14 to 95.6%/2Q14.)  "Units at brand new properties are being leased about as quickly as they can be delivered in most cases." - MPF Research VP Greg Willett.  Though new supply is coming on-line (estimates of 200-250k units this year), the additional supply does not seem to be out of line with demand.

Our take: continued rent growth and occupancy growth are very strong positive drivers of property values and income.    This is a great time to own/sell, though purchasing continues to be challenge.

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