Issue Analysis for asset
managers is probably my favorite

topic of this series of four.
It's the last series, but it's

really the main heart of it
about what we do as asset

managers when we're wearing that
hat in order to make those best

decisions, not only taking in
those different issues that are

come up from the other analysis,
like the analysis that we did,

in part one of the series, the
video on property analysis, or

part two about financial
analysis, or part three, on

market analysis. Now we take all
that data in, and we apply it to

the issues at hand, in order to
prioritize what projects we're

going to do in order to make
sure that our budget is being

allocated properly, again, so
that we can be more successful

as in our syndication in our
investment fund, so that our

investors are happier and better
treated and get better results,

which is at the end of the day,
the benchmark for our success.

So I know you're going to find
this video helpful.

We're talking about operations
and custody. And in this video,

we're going through Issue
Analysis. So the point of Issue

Analysis is, at the end, when
you're doing your property

management plan or your your
custody plan, what we're trying

to do is come up with a list of
all of the issues that are out

there, develop a plan of what
the priorities are, and

determine if there are things we
want to take care of sooner

rather than later. Now, this
obviously is an evolving thing

is well, it's just like the rest
of our plan. And so what we're

trying to do is we're trying to
set down a something in stone

that says this is where we're at
today, this is what we're

seeing. So you can make plans
for the future about what you're

going to tackle next. And then
you also have the ability to

measure how good you were at
estimating the the improvements

that you made. So after you've
gone through your certainly your

Property Assessment and your
financial assessment, that's

probably the right time maybe
the market assessment as well,

that's probably the right time
to start doing the initial issue

analysis, or the for the whole
your whole custody plan. So

basically, what we're doing here
is we're developing an action

plan.

So the best way to do this, I
have found is to again, use a

table, now the table I would
start with is I would basically

start ranking everything in
priority. So you'll probably do

this in Excel or some
spreadsheet, I would talk about

the priority of them, I would
then define what the issue is.

And I would would not include
solutions. In the definition of

that issue, I would just talk
about the issue itself, the air

conditioning system is breaking
every once a month, every 12

months or whatever. So I would
then go through the cost that I

think it would cost in order to
that I'm having as a result of

this problem. So if it's air
conditioner, a track system, it

may be that my cost is I need to
pay a service or service

contract is going up or whatever
is useful. And then I have the

why. Now, it may seem self
evident as why this is an issue.

But it's still useful to put
down on paper why this is an

issue. That way you have a solid
plan and you have something to

really make sure that you're
checking your priorities against

you may find something may seem
like very high priority. But if

when you get to your why you
realize it's not or you may have

something that you thought was a
very low priority, but because

of its impact, it is actually a
very high priority and you want

to make you want to change it.
Then we talk about the as is

versus alternatives.

Here I want to just quickly
define what the Situ ration

would look like now versus what
the different alternatives that

I have are. And we're going to
talk more about like fleshing

out those alternatives in a
minute. But I still wanted to

make some sort of reference to
it here. I want to know what

improvement costs there are
going to be.

Typically, these are these costs
money, if they don't cost money,

then great, then it's, it seems
like it might be something

simple to do with it unless it
takes too much of your time. And

then what is the source of the
funds? Is it your reserves? Is

it the tenants paying, you know,
where what is the source of

that? So what you'll do is
you'll take your spreadsheet

like this, and you'll just go
down the list, you know, one,

whatever those things are, you
could have the each fact we

discussed, maybe there is the
parking lot, we'll need new, new

striping. Up, look what I said,
I just told you don't put

solutions in here I went and put
a solution. Parking Lot,

parking, lines fading. And
there's a good reason why we

also don't put our alternatives
in here, because it may be the

restriping. But maybe you what
you really identify is, you

know, as you're writing or why
it may say something like the

parking lot lines are fading,
making it difficult for people

to know where to park, we've
always had a problem parking

this anyway, G and as you write
this, you're starting to realize

that maybe you need to revisit
your parking plan as well. And

so you may want to change your
mark, your parking plan, etc. So

you put those all down. So now
you've got a list of actions and

you've got them prioritized in
terms of where you want to take

them and what the source is. Now
for the alternatives. Your

alternatives plan.

Here's what I would want to
know. I would want to know what

is your pro forma today, so
before you did this action, what

is your pro forma? I want to
know if there is any. Any change

in your escalations. Percentage
I want to know what effect that

has on noi. And what that dollar
amount is? Because ultimately,

what I'm trying to find out is I
want to know, certainly the

cost, you know, how much is this
going to cost? But I want to

know what the existing unit
let's say it's an H fac unit?

What's the existing value? So
what I'm trying to find is, Am I

really adding value with this
alternative or not? And then I

want to know, do I have any if
there's dead on on that piece of

equipment or whatever? Is? It is
there any equity in it? And then

I want to know, ultimately for
the entire property. I want to

know

what my I want to know what my
estimate is for my going in. So

before I do this cap rate versus
going out. I ultimately want to

know what that change is going
to be am I adding value to the

property above on the NOI line,
which we're talking about here?

Or am I adding value in the in
how its positioned in the market

so that it is is a better
property and it appreciates

more? I want to know that sort
of thing. And if the answer is

zero, it's fine that it's zero.
If it's negative, it's fine that

it's negative. They Orton thing
is that you're documenting what

these things are. So when you
make a decision, you've got a

track record of that you can
point to and say, Okay, those

were the decisions we made, what
was good and what was bad. And

ultimately, for each
alternative, we're going to do,

and I'm assuming that there's
different alternatives. So for

each we calculate the cash on
cash effect. Or you could do the

ROI that you're estimating, I
want to know what the value

enhancement is. If this is
making a change to the cap rate,

down here, if it's making a
change to that cap rate, it's

going to have an effect on your
overall value. And I want to

know what that is. And I want to
know that in dollars, and then I

want to know what the net
present value is. And I want to

know if they're, what the IRR
is. So I want to know the net

present value. So I can
determine whether this is a

change that's going to pause,
really put money in the pockets

of my investors or negatively, I
want to know what that dollar

amount is, because that will set
a budget price for me. And they

will help me determine that
well, I'm been trying to get my

investors a 10% return, I use
that in my net present present

value calculation. And if I'm,
if I'm seeing that I've got a

negative number there that I'm
getting a negative net present,

or a negative net present value,
maybe that's something I want to

take a look at. And then after
we've done that present value,

so certainly it changes dollars
amount, but I want some more of

more a quantitative idea as well
about, you know, just what

percentage wise what effect that
has over the term. So what's the

IRR of it? So I hope that helps.
This is how we make smart

decisions about how we address
each action that we decide to

make when we're doing the
custody portion of our

operations. So that we make good
decisions that are bounded in

rationality and that our are
very logical. And then at the

end of the day, you can walk
your investors through this and

you've got a really solid case
for really everything you've

done. There's no second guessing
there's no questioning. It's

either you're adding value or
you're not. And that's really

what your investors care about.
This is Tilden, Moschetti

altitudes syndication founders
club and we'll see you in the

next video.

This is the last of this four
part series of videos on asset

management. It was put together
a little while ago for some high

top level real estate
professionals, not only the very

best brokers but also people
from investment funds from REITs

who wanted to take off the hat
of working for somebody and

start doing syndications or
putting together an investment

fund for themselves. My name is
Tilden Moschetti. I am a miss I

am a syndication attorney for
the Moschetti syndication Law

Group. Now if we can help you be
successful, give us a call

today. Not only can we help you
with the legal side of things,

the making sure that you're in
compliance with the SEC rules

and with state regulators, but
also applying our business

expertise and having done this
many many times for ourselves as

well as our clients. Again,
please don't hesitate to give us

a call