Ground Up Grind
@groundupgrind
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Real life: real estate principal, family capital, mostly ground-up development. Twitter life: trolling people for investing in garbage in the sunbelt.
Joined January 2021
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A warehouse in Newark sold last week for $820 PSF. Meanwhile, all glass towers on Madison and Fifth and Broadway going for under $700 PSF. This is now a single-issue twitter account. Make it make sense.
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A thing about working in RE: I regularly meet people with no special vision but who have easily accumulated high 8- or low 9-figure wealth. And also people who are clearly brilliant and have accumulated much less. Difference seems to be bravery. Not sure how I feel about that.
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I really hope that guy from the plane the other day with $300M in his checking didn't have it at Silicon Valley Bank.
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I am very suspicious of the people who think the sunbelt is the future and that SF, NYC and LA are dead.
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A random prediction I’m not qualified to make: “homeownership is the path to wealth in America” will be for this generation what “every student should get a college degree” was for the previous one. Terribly destructive messaging—and I say this as a homebuilder.
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Choosing violence with this one, but: if you're a real estate investor and you're good at what you do...
If your net worth is between $100k and $50MM, you should be GPing and playing with OPM. If your net worth >$50MM, you should be only using your own capital.
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Funny thing: when you build nice, new product, property values of everything around you go up. Buying some cheap parcels around your planned development to land bank before this bump is essentially legal insider trading.
Did this once by accident; now I do it every time.
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Had a meeting today with a very rich developer in which he asked his associate whether 1031s even existed under $50M.
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Choosing violence with this one but: if your deal doesn’t make sense all cash, without leverage, the cheap debt doesn’t make sense of it. The leverage is to juice an already great deal. This is a thing that old school investors knew instinctively, and that Excel made us forget.
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Weird coincidence: every broker I know just wants to catch up this week. Super-odd. Anyone know what’s up?
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The
#1
risk I am underwriting in blue state MF is political. We can talk about supply constraints all we want, but resentment is building and I fear laws will become even more landlord-bashing. This is a real thing we should be talking about far more.
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There should be a really good "Architecture for Developers" class (and also "Engineering for Developers") on the internet.
It's insane how much of this stuff I have ended up learning ad hoc over the years when it could have been way more efficient.
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Ground up is famously the riskiest form of real estate investing. This rep is well-earned.
But if you know what you're doing (or can hire experience) and are well-capitalized with reserves, I'd argue it's actually a safer model, because at least you're building low basis assets.
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Lately I've seen some "if you're going to hold the deal for 30 years, it doesn't really matter what price you buy for" talk on here, and as someone who mostly does large-scale deals with very long horizon, I'd just like to say: yes, it fucking matters what price you buy for.
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Retwit 6 months ago: ALWAYS BE GRINDING 🚀🚀🚀
Retwit today: really, earnestly evaluate how much money is enough for you.
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A weird fluke: every RE developer I know who thinks of himself as a “numbers guy” is bad at RE.
A related problem: I think of myself as a numbers guy.
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@PinkPoloShorts
I know weirdly too much about this and am happy to have a longer convo lol, but: really depends what kind of lifestyle you want there. It can be done without feeling truly destitute for under $5M, but if you want to keep your pink polo shorts life you’ll want at least $25M.
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A 1031 is the right move if and only if the asset you’re buying is within 25% of the highest and best use for your capital. This is an amazingly low bar and yet I’m often stunned by the dumb stuff people 1031 into.
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There are accounts that manage 9 and 10 figures of real estate. I understand how they do it, it’s impressive AF. And there are people managing 7 units that they reno’d by hand in spare time and now manage. These people blow my mind, and I genuinely have no clue how they did it.
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Lots of talk here about the need to get bids in case there's a cheaper option than your subs. Maybe controversial but fwiw I feel having a relationship with the same subs has real value. Sure, I shop it if a bid seems crazy, but I'll also slightly overpay for that relationship.
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Individual RE investors have a gigantic advantage over people who take OPM that most don't even recognize: we control horizon.
I cannot tell you how much better I sleep at night, knowing that my downside risk is just having to stretch to a later exit.
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As always, I am amazed by how much money there is to be made in real estate by people who understand basic math.
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@CXCarroll
They're doing a full reno, which is why it's got such high vacancy. Putting $150M into it... they will have no problem leasing this up. They also may be doing it for like a 3% IRR when all is said and done, if they can't drive rents into the high 90s at least, but...
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My core retwit belief is that every anon account is either a complete charlatan or managing $1B+.
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“Never show an idiot a work in progress.” —Russian Saying
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@Raleigh_will
Nobody understands people’s need to escape better than a first year biglaw associate.
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Bought a rate cap about 6 months ago for a big transaction. Price: $70k, which had roughly doubled in the prior 3 months as we negotiated. Swallowed the high price, and moved past it. Mark-to-market on the cap I bought is now $430k.
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People say homeownership is a great mechanism of wealth creation but actually cheap debt is a mechanism of wealth creation and it sometimes comes through homeownership.
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@CaseyMericle
I'm solidly mediocre at GPing, but LPing is great. As a GP, I generally know quickly when the GP can execute, but I don't have to do any of the work. I give up a promote over a negotiated hurdle, which is something I'm thrilled to give up to a smart person who deserves it.
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A hilarious thing is that most real estate developers would make less money if all NIMBYs would just stop, and yet we all just want them to stop on principle.
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FO principal here, somewhere in a (not that long) line of trust fund kids. I think people mistake some of the challenges here. Can't believe I'm doing this thread but:
1/6
Controversial take:
Everyone wants generational wealth
But not sure you want a long line of trust fund kids
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Overheard on a conference call:
"It's available way below replacement cost."
"Why would anyone replace that with itself?"
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@onlyoakland
Fwiw, as an LP when I see this from GPs, I can't wait to invest in their next deal. Ability to walk away is by far the most underrated GP skill.
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@moseskagan
Real talk, I think this is the wrong approach.
Raising your kids to prepare them for a life they won’t have is not actually doing them a favor.
You’re great at talking about the leg(s) up you got from your parents. Teach them that they can do even more because they have more.
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@jayvasdigital
@PinkPoloShorts
Have lived in both Nice and Monaco and can confirm that Nice is nicer, that many people think so, but also that it doesn’t come with tax benefits so it’s a totally different experience. In fact, I know some people with a villa outside Nice but a Monaco studio for tax purposes.
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If your executive summary for a MF purchase opens with job growth numbers for the MSA, I WILL ask you with a straight face why you’re not just buying the office down the street at 50% of 2019 value.
Sorry, I don’t make the rules.
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Nobody asked but: if someone could offer a course that taught people to be good at real estate, and charged $10k, that would still be worth it. The problem with the courses isn’t the fee, it’s that you can’t learn to do this in a course.
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A reminder to all the "buy great buildings in great locations and hold them forever" people: owning a great building is a constant battle with entropy, and generally the greatest building also requires the most capex.
Location is the only thing that doesn't depreciate.
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My favorite people are the brokers who send me OMs of a NNN Applebee's in Nashville that they describe as a "Trophy Asset." Is this a participation trophy?
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Imagine living through one of the hottest markets in American real estate history, a time when trillions of dollars of stimulus had been handed out and the cost of money was a spread over 0%, and coming out of that owning a bunch of crap in the Sunbelt. Couldn’t be me.
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@WeddingVenueGuy
The obvious thing to do here is to have the couple bid against one another for the right to host an awesome non-wedding party. 50% chance it brings them back together, and either way one of them recoups some portion of the expense.
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Look, I love you all, but some of you build the worst product ever and decide to post pictures of it on here.
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@TripleNetInvest
Yeah but if you threw it in the market at 7% since 1803 you’d have like $4.3T, right? Napoleon made a great deal! 🚀🚀🚀
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@realEstateTrent
My lawyer (jokingly) told me the other day he was going to quit his job if I’d let him LP on the deal we were working on, and I think it was the single best compliment I’ve ever gotten.
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Crazy fact: the Dow was at 29,398 on February 14, 2020 (the pre-covid peak). Closed today at 29,590. Basically a round-trip.
I say this noting that RE values have not come close to round-tripping in private markets yet.
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@PrivatEquityGuy
Counterpoint: this just encourages being unhappy with your lifestyle, no? Isn't it much better, if you want to teach yourself this lesson, to take a look at any publication and see the people doing regular multi-billion-dollar transactions, since that's focused on work?
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The longer you spend doing RE the more insane public market volatility becomes. I’ve experienced some swings, but never has a property I owned lost 20% of its value in a day just because we all felt kind of down that day.
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Lots of dunking on people who bought stuff in 2021/2022 and lost money. I’ve dunked on some of these (Tides), myself.
But a lot of this is misplaced.
Short 🧵
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It’s basic math, but worth repeating: when your cap rate moves from 3 to 6, that is not just the same 300bps as 6 to 9. A move from 3 to 6 literally halves the value of your property. Those kind of moves are genuinely enormous even on a historical basis.
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Ok I’ll bite. I think Mark Cuban should have found a way not to pay $288M in taxes. Personally, I think that would have been a better move for him.
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On here and in life, I keep hearing people say stuff like “rates are actually quite low on a historical basis,” which is totally true and also not the point. Most people don’t get nosebleeds from simply existing at high altitude, they get them from ascending too quickly.
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I am Spartacus.
@moizali
is the sole equity in all of my deals.
"ReTwit is full of complete sh*^ and frauds. I read their tweets on deals I am in and wondering, how is nobody calling you out on this, im an LP in this deal, I know the numbers."
"I am in dozens of Retwit deals as an LP"
" I unfollowed you because you were a fraud and…
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Every so often I read people on here talking about LPing in order to learn a particular market. Forgive me, but this is not a thing. LPing gets you access to financials and allows you a piece of allocation. But this is not a way to learn to do anything yourself.
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Autocorrect on my phone just changed “owner” to “lender,” and it has never been more accurate.
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Friend of mine is American but was buying a project in the UK, using USD. Closes next week. When DD started, less than two months ago, his USD were worth 15% less than today. So his buy got 15% cheaper without a retrade, just on the currency move. Unreal.
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“Anyone here at the offices today? ‘Cause we sure are! Remember to tip your landlords!” —Marc Holliday, basically
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This moment is fun because every single person I know with cash is freaking out that their cash is getting inflated away without earning, and every single person without cash is freaking out about how to pull together the capital stack.
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Yeah no on this thread. Don’t buy land with hard money. I don’t care how rich you are. Actually I do: better if you’re broke because your PG will be dischargeable when this strategy bankrupts you.
Your bottom line will thank me.
Here's a free guide to hard money lending in the land space. Below, I'll go over the basics of hard money lending and reveal where we've found lenders in the past.
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@SultanofStorage
These stories blow my mind for lots of reasons, but chief among them is: why would you give seller financing to someone AND provide a fraudulent rent roll? Seller was taking a HUGE risk with the seller financing there...
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Retwit is hilarious because the person I am absolutely most convinced is making the world a better place is acting as a lightning rod for negative attention.
Someone called me the "ambulance chaser of real estate," and I would like to clarify.
I don't just chase the ambulance, I cause the accident first. I have diverse skills.
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@shawngorham
With stuff like this, I think of the end of Schindler's List, when Oskar realizes he could have saved 2 people by selling the gold pin on his chest. I've flown pvt and might for a special occasion. But humans are starving in the world, and this feels broadly indefensible to me.
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@moseskagan
I’ve done this a bunch, and honestly I think mom and pop retail is a value creator in a way very little else is. The challenge is that people are unwilling to meaningfully subsidize, but it can drive MF rents 20% if the retail is tastefully selected, fwiw.
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This is the kind of tweet this account lives for.
A multi-family deal in Scottsdale just sold for a $49 million loss. The seller had only owned it for 2 years. Crazy.
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Real talk: I think coworking clearly has a future, WeWork is the best brand in that space, and it makes sense for Adam Neumann to buy it back.
I also think he’s a grifter, and his ability to be a lightning rod for flows is everything that’s wrong with the biz, but…
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If you're a perma-holder, you shouldn't care about cap rates at all, just rent growth.
If you're just in for your value add, crystalizing promote, and exiting, rent growth won't be the major driver, cap rates will be.
It's those of us in the middle who are confused right now.
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Current market assumes humans are entering a period of greater isolation than ever. Less travel, lower hotel occupancy, less office, less retail, less entertainment. I get this in a pandemic, but forward-looking I’m confused—is your thesis that people won’t want to interact?
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Weird thing about doing lots of ground up: at this point, I probably overvalue unique sites and great locations. I periodically find myself dismissing really nice buildings on generic sites, like "yeah, it's great, but you could have built that anywhere."
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POV: you own an all-retail building on one of the highest-traffic blocks in world history. A broker brings you a tenant who wants this TI.
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@MRossG199
@evanmr
I know exactly who needs to hear this (3/4 of retwit) but if you get “only” a 12-15% IRR over 40 years, you will be rich AF.
#justiceforlongtermcompoundingat12percent
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The number of people in my orbit who don't want to take "waste of time" meetings with other principals is really stunning to me. I've never wasted my time in a waste of time meeting. Worst case, I always learn a ton, and best case we make a deal.
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Thinking about this again today for some reason.
Retwit 6 months ago: ALWAYS BE GRINDING 🚀🚀🚀
Retwit today: really, earnestly evaluate how much money is enough for you.
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Before he was in the NBA, LeBron James was a young man looking for a job.
He was a legendary interviewee and, after a pre-draft interview, he was selected
#1
overall in the NBA draft.
Here are 8 tips on how he crushed that interview:
1. Eye contact.
Before Blackstone, Stephen Schwarzman was a young man looking for a job, and before that a kid looking to get into college.
He was a legendary interviewee. Yale and Harvard accepted him. So did Lehman Brothers & Morgan Stanley.
Here are his 8 tips on how to crush an interview:
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@fortworthchris
Unironically my favorite part of the development process.
Don’t get me wrong, it’s awful, but it’s also a way of printing money and a new and fascinating creative challenge each time.
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Deal's a 10 but the sponsor penciled in a 3.5 exit cap so now you can't trust him.
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@innoc_bystander
To everyone saying Vail and Aspen, please reevaluate your life choices.
NYC/Vienna/Miami.
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@abakermont
Earnest answer is that there are a lot of ways of being fucked. Some people are fine for now, but if the balloon payment comes due in a rate environment like this or worse, they're fucked. Other people are not able to pencil deals, so they can't charge fees, so they're fucked.
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Real question: has anyone EVER closed a deal on a Monday?
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This doesn’t apply to everyone; some people are just smarter than I am. But it’s amazing to me how many people right now are allocating because when you’re a hammer, everything looks like a nail.
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I know there are a lot of fans here, but wow does this guy seem like an ass.
Elon Musk's alleged brief affair with the wife of Google co-founder Sergey Brin led to the couple's divorce filing
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I’ll be asking for an 11.25% pref with a piece of the ups on all future deals. This is now market.
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(Small) FO-ish investor here.
The way to close deals with FOs is to be able to express why your deal is good. No joke, I’d say 95% of deals I’ve had pitched to me fail this test. It is insane how often I have wanted to give someone money and they have made that impossible.
How to close more deals with:
- family offices
- PE
- VC
Implement a proactive due diligence strategy
The steps you should take: ⏬
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I have never bought an asset because I was excited about the cap rate. I have, however, sold an asset I’d intended to hold because I was excited about the cap rate. Fwiw.
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(I've been lucky and I haven't ever lost money on a deal but just want to say again that) the absolute worst deal of my career so far has been a deal that everyone I know was begging me to get in on.
And the absolute best deal so far was a deal nobody wanted to buy off me.
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I know I’m preaching to the choir on this one, but eviction moratoriums are insane and have been for roughly 1 year and 11 months.
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Fwiw, I really wish more on here were willing to talk counter to their books.
I build suburban ground up, often master planned. This is a hard thing to learn to do and I’m barely good at it. I’m not going to learn to do something else just because I see a hot cycle coming.
@jasoncoxnc
San Francisco, NYC, LA, SD, Philadelphia, (maybe) Chicago. This isn’t my book and it isn’t going to become my book in the next two years, but it’s definitely the set of submarkets I believe are most overlooked.
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@bobbyfijan
The longer I do this, the more I think the windowless bedroom should be the future, especially in our most expensive cities. It’s wild that there isn’t more of this product being built.
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Dying to discuss the Fortress/Capital One deal. Let’s hear it, friends.
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I underwrite deals for fun a lot, and my IRL friends make fun of me. Jokes on them. Now we’re all just underwriting deals for fun!
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