2020 has been a tough year for finding deals—even for us. In fact, the Nighthawk Equity team is currently in the process of closing on our first and only deal of the year (so far). But that’s not for lack of trying! So, what are we looking for in a deal right now? How have we changed our underwriting criteria in the age of COVID? And how do we recover from the disappointment of losing a deal?

Garrett Lynch is the Director of Acquisitions at Nighthawk Equity, the investing arm of the Michael Blank organization. Garrett has been in the multifamily space since 2011, cofounding a firm that grew from zero to 3,400 units before successfully exiting that venture. Since taking on his role with us at Nighthawk in 2018, Garrett has built a portfolio that includes at 218-unit property in Little Rock, Arkansas a 276-unit in Huntsville, Alabama, and a 130-unit deal in Atlanta, Georgia.

On this episode of Apartment Building Investing, Garrett joins me to explain how his strategy for finding multifamily deals has evolved over the years and what we look for in a deal at Nighthawk Equity. He describes what he does to build rapport with brokers and stay in touch, sharing how strong broker relationships helped us land our current deal in Atlanta. Listen in for Garrett’s insight on recovering from the disappointment of losing a deal and learn how to adjust your underwriting to find good multifamily deals in the COVID era.

Key Takeaways

How Garrett’s strategy for finding deals has evolved over the years

  • Look for best price per door in D class neighborhoods early on
  • More granular on underwriting today, focus on B and C class

How we dialed in our criteria for deals at Nighthawk Equity

  • Look at capacity on equity raise and debt structure
  • Gradual progression on size of deals
  • Choose value-add properties in certain markets

The benefits of collocating deals in just a few markets

  • Share resources (e.g.: staff)
  • Hit several properties in one trip

How we select markets at Nighthawk Equity

  • Resources available to operate and steady dealflow
  • Population, job and overall economic growth

How Garrett builds rapport with brokers

  • Stand out by responding whether like deal or not
  • Meet in person and check in regularly, share successes

How Garrett recovers from the disappointment of losing a deal

  • Channel hurt into next quest
  • Commit to process

How we landed our current deal in Atlanta

  • Follow up with broker re: deal another investor won
  • Unobstructed shot when that deal fell apart

Garrett’s system for staying in touch with brokers

  • Put regular check-ins on calendar (target markets of interest)
  • Come with thoughtful questions re: specific deals
  • Reach out when land deal in their market to build demand

How we have adjusted our underwriting at Nighthawk in the COVID era

  • Tailor underwriting around few available debt products
  • Set natural market appreciation at ZERO for Year 1
  • Create cushion of 0.5% on reversionary cap rate
  • Cash reserves minimum of 10% of total spent on deal
  • Research tenant demographic to ensure cashflow from Day 1

Connect with Garrett Lynch

Garrett at Nighthawk Equity

Resources

Learn More About Michael’s Mentoring Program

Submit a Deal to the Michael Blank Deal Desk

Access Michael’s Syndicated Deal Analyzer

Join the Nighthawk Equity Investor Club

LoopNet

CREXi

National Multi Housing Council

The Miracle Equation: The Two Decisions That Move Your Biggest Goals from Possible, to Probable, to Inevitable by Hal Elrod

Podcast Show Notes

Michael’s Website

Michael on Facebook

Michael on Instagram

Michael on YouTube

Apartment Investor Network Facebook Group

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