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Shannon Robnett Industries’ Blog About Business
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This is why SRI takes the time to maintain a blog about business. Our entries discuss some strategies we and our clients can employ to keep Boise’s economy--and our businesses--as strong as possible.
MoneyShow Virtual Expo: The Boise Growth Fund
Did you miss Shannon's MoneyShow Presentation? Don't worry, we've got you covered!
In case you were not able to make it, below is the recorded version.Shannon shared insider tools and tactics that have proven themselves to be an effective and profitable year in and year out. He also shares about the solution he is creating to allow investors the opportunity to quickly create passive income regularly without the headache or stress.
Equity Multiple VS Internal Rate of Return
In syndication deals, sponsors have metrics. This confuses the potential investors as it is hard to comprehend what every one of the numbers means and how it identifies with their investment strategy.
Two often used metrics to measure potential returns are equity multiple (EM) and internal rate of return (IRR). Investors use IRR to compare several deals and would pick the one with higher IRR. However, this is not always true.
Equity Multiple
Equity multiple estimates the total returns from an investment. including cash flows from distributions, the initial investment (principle) and also any gains from appreciation of the property. It is the ratio of this total over the original investment. However, notice that there is no consideration for the element of time. So a deal with an equity multiple of two only tells the investor that the sponsors have projected a “doubling” of the investor’s money. However, over what period of time?
Here’s the formula for calculating an equity multiple:
Equity Multiple = Total Distributions / Total Equity Invested (principle)
Example 1:
An investor invested $1,000,000 in a deal. The sponsor has distributed annual returns of $200,000 to the investor over a 5 year period.
$200,000 x 5 years + $1 million investment / $1 million total equity invested = 2.0x
In this example, an investor receives an equity multiple of 2.0. In other words, for every $1 invested in the property the investor gets back $2. (An equity multiple greater than 1.0 means you receive more cash back than invested, while an equity multiple below 1.0 means less money is returned than what was originally invested.)
Example 2:
An investor invested $1,000,000 in a deal. The sponsor has distributed annual returns of $100,000 to the investor over a 10 year period.
$100,000 x 10 years + $1 million investment / $1 million total equity invested = 2.0x
The equity multiple for both of the above examples is 2x, however as you can clearly see the hold period for example 2 is twice that of example one. So an investor should not compare two different deals just based on equity multiples as two deals with the same equity multiple can have very different hold periods. This is where the use of IRR becomes important.
Internal Rate of Return
The IRR calculation considers the time value of money (TVM) while the equity multiple calculation doesn’t. However, equity multiple reports the total cash return of an investment while the internal rate of return measures average cash return over a hold period, taking into consideration that the value of money depreciates over time.
A property with a high IRR may return more money to investors faster, but not necessarily more money overall. Here is an example:
In the above example the initial investment by the investor was $200,000. The total returns are $300,000 (including the initial investment of $200,000). The IRR for this deal is 18% and the equity multiple is 1.5x
Notice that the sponsor returned $100,000 back as distributions in year one which makes the IRR inflated.
In this second example we use the same initial investment of $200,000. However the distribution improves over time. Notice that because in the IRR calculations the money earned today is weighted more than money earned tomorrow or the day after tomorrow the IRR for this particular deal is 11%. However, the equity multiple for this deal still remains at 1.5x because the total returns haven’t changed between the two deals. So, IRR can be manipulated by timing the cash flows
Based on the examples given, investment decisions should be based not only on one metric but all.
Real Estate Development | Multifamily Construction and Syndication
In this video, Shannon Robnett talks about his 40 years of experience as a builder, developer, realtor, and multifamily syndicator.
Aaron is a private money lender and real estate agent in Austin, Texas who helps real estate investors, builders, and developers leverage their money to get higher returns on their deals.
He also help buyers buy homes in the Austin area. He post videos relating to the following topics:
• Real estate investment
• New construction • Spec homes
• Fix/flips
• Finance
Connect with Aaron Trevino:
Boise Ground Up Construction Multifamily Investor Returns with Shannon Robnett
You Tube: https://youtu.be/E5zXjkept10
Website & Transcript: http://
APT Capital Group - Ground Up Development with Shannon Robnett
Key Points From This Episode:
5 Talents Podcast - $200M in Construction Projects; How to Get Started with Real Estate Syndication
- Let’s get to know Shannon Robnett
- 5 generations in the real estate
- College is an option, not a be-all, and end-all
- We talk about the “ultimate value-add” in real estate
- What you should do if you want to bring a value-add
- Shannon wants you to remember this real estate advice
- Shannon talks about his approach in real estate
- He gives interesting insights about real estate partnerships
- Don’t focus on everything
- Shannon’s tips to start investing in real estate
- The belief that you can succeed in real estate
- Connect with Shannon! Links below
- Shannon shares 2 books you should read!
- Final words from Shanon and me
Our Expanded Social Media Presence
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In addition to our blog, Shannon Robnett Industries is active on:
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In addition to our blog, Shannon Robnett Industries is active on:

