Calvera Insights

Why do so many real estate sponsors use bridge debt?

By Brian D. Milovich / November 29, 2023

Why are people still extolling the virtues of bridge debt today? You won’t hear it from me, but here’s their argument: 1) the Fed is going to stop raising rates and you don’t want to be locked into fixed rate debt; 2) you can buy an “in-the-money” cap to bring the interest rate down from 9% to 7% or lower; and 3) a value-add business plan is going to raise net operating income, therefore allowing an investor the option of refinancing or selling during their three-ish year business plan. Never once do I hear any of these groups discuss that they’re taking on more leverage than the property can adequately sustain today.

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Why Interest Rates Matter

By Brian D. Milovich / November 22, 2023

At no point in the past 20 years can I recall spending so much time wondering about where this interest rate will go. Interest rates matter because they impact property values. Rates also impact capitalization (i.e., debt vs. equity amounts) and cash flow. Real estate is frequently a leveraged investment, meaning debt is used to finance the purchase. When debt is used, it can make a good investment great, and it can also turn a good investment bad.

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Tax Considerations in Real Estate Investing

By Brian D. Milovich / November 17, 2023

Taxation is one of the hottest topics for our investors. Not only are they concerned about how much they might have to pay, but they’re also concerned with the potential hassle that tax reporting can create. When making an investment in real estate, it’s important to have a tax plan in mind and a full understanding of your filing requirements and the potential cost.

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FAQs

Answers to three questions investors are currently asking us:

By Brian D. Milovich / November 16, 2023

1) What are the advantages of your “evergreen” structure?

The biggest benefit is that your money keeps working for you. We will work to defer any capital gains taxes indefinitely. This allows you to fully maximize your investment with us. Also, with a focus on cash flow, regular and growing quarterly distributions are another benefit. Click here to see the rest

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FAQs

Answers to three questions investors are currently asking us:

By Brian D. Milovich / November 8, 2023

1) Why invest now versus putting available funds in a money market fund?

You can do both! We do not call your commitment unless we’re acquiring a property. In the meantime, you can keep your dry powder in a US Treasury or money market fund earning 5%. Once we call your investment, you start earning a preferred return and will be investing in a property with a return target in excess of 10%. Being an investor now puts you in the best position to reap the rewards of Calvera’s distressed investing. Click here to see the rest

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Calvera Shifts Focus to the Long-Term

By Brian D. Milovich / November 8, 2023

Back in 2010, we launched Calvera out of the Great Financial Crisis without capital, a deal, or long-term vision. All we had was a belief that there was going to be a major opportunity in the apartment market. Today, I’m getting similar vibes to when we started Calvera. Our enthusiasm is high. There are opportunities starting to trickle out with more on the horizon. The market fundamentals are very different than in 2010, but the opportunity is the same.

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FAQs

Answers to three questions investors are currently asking us:

By Brian D. Milovich / November 3, 2023

1) Have we reached bottom in the distressed commercial real estate market?

Not in multifamily. Distress isn’t even fully here yet. We have only seen the initial cracks of expiring interest rate caps and loan maturities. The bid/ask spread remains wide enough to stymie transactions. Keep an eye on 2024. Click here to see the rest

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Did Long-Term Investors Get Lucky?

By Brian D. Milovich / October 31, 2023

The people who I look up to in real estate are those who have been invested for the long-term. They largely invest their own money, self-manage their properties, rarely sell assets, use modest-to-no leverage, and continue to accumulate properties. This investor doesn’t buy when prices are high and is a favored buyer when the market is in distress. The Calvera Income and Growth Fund is specifically modeled after this successful investor profile.

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Sourcing and Underwriting the Calvera Way

By Brian D. Milovich / October 24, 2023

We uncover new investment opportunities many different ways -off-market, on-market, and limited market. Sourcing properties off-market gets all the attention. It’s what everybody wants, but it’s not always the best deal.

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Is There Enough Fear to Start Buying?

By Brian D. Milovich / October 16, 2023

Warren Buffett famously said in his 1986 letter to shareholders, “to be fearful when others are greedy and to be greedy only when others are fearful.” This is great advice, and an admirable goal to have, but it can be incredibly difficult to execute. Now, however, there’s plenty of fear in the real estate market, and unlike past times of distress, there are attractive risk-free options for those who are fearful.

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