Saving Development Deals with Pref Equity with Darin Davis

How can preferred equity deals help developers navigate the current real estate market challenges while offering attractive returns to investors?

 

In episode 711, host Taylor Loht welcomes Darin Davis, a real estate investor who has successfully executed transactions approaching $1 billion through his investment firms. Darin shares his perspective on the current real estate market and how preferred equity deals can benefit both developers and investors. He talks about the challenges developers face in the current market, including rising interest rates, falling valuations, and reduced loan proceeds. Darin explains how preferred equity can help developers bridge the gap and complete their projects while offering investors attractive returns with a defined timeframe and a safer position in the capital stack. Darin emphasizes the importance of underwriting, and being focused on class A assets in prime locations. He also shares his perspective on the current market compared to previous recessions and offers advice for young people looking to build a strong financial foundation.

 

[00:00 - 05:40] Challenges Facing Developers in the Current Market

Rising interest rates, falling valuations, and reduced loan proceeds.
How preferred equity can help developers bridge the gap and complete their projects?
Preferred equity offers investors attractive returns with a defined timeframe and a safer position in the capital stack.

 

[05:41 - 13:03] Navigating Preferred Equity Deals

Due diligence and underwriting are crucial when evaluating preferred equity deals.
Advice for Investors: look for deals with a significant amount of common equity behind their capital to provide a safety net.
Preferred equity investors should have the ability to cure and take control of the asset if necessary.

 

[13:04 - 20:50] Focusing on Class A Assets in Prime Locations

Why Darin's company focuses on class A assets.
Targeting development projects near the end of construction or lease-up.
Why preferred equity deals are easier to underwrite. 
Reputation is key in the real estate industry.

 

[20:51 - 24:09] Comparing the Current Market to Previous Recessions

Darin’s perspective on the current market. 
Discounted assets VS Distressed assets in the current market.
Opportunities for the next few years. 

 

[24:10 - 32:41] Question Round

Book recommendation: The One Thing by Gary Keller. 
Storytime: saving and preparing for life's unexpected turns. 
Advice for young people starting their financial journey. 

 

Quotes:

 

"I would encourage young people to really focus on who and what you want to be early in your life because what happens in those first 10 years of your life for most everybody will determine what happens the rest of your life." - Darin Davis

 

“Find the one thing that you're good at and just go." - Darin Davis

 

Connect with Darin Davis: 

Website: https://clubcapital.co/

 

Apply to Invest with Taylor at www.investwithtaylor.com

Track your wealth for free with Personal Capital, go to www.escapingwallstreet.com

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