BP Podcast: Partnerships & Growing to 900 Units with Jake & Gino

[Mindy Jensen]

We’re not going to lie: It was hard to come up with a title for this episode because we covered SO much—productivity strategies, morning routines, growing from zero to 900 units, partnerships, 1031 exchanges. Whether you are a top performing real estate expert or still looking for your first, you’ll leave this interview challenged, encouraged, and fired up to make some big changes in your life! Jake and Gino are full of energy and even more full of knowledge, so get ready for one awesome show.

Listen here or on your favorite podcast player.

[Mike Dymski]

Originally posted by @Anthony Silver:

Very entertaining....But I must be the only investor that cringed at some of the things being said...The idea of justifying bad loan terms because they can refinance 12 months from now sounds dangerously like 2008...What happens if there is a downward turn in the market and the equity dries up?   What if you can't sell because the buyers pool shrinks because lending practices change? What happens when that balloon payment becomes due and you have to exhaust all of your financial reserves?  That puts you in a very dangerous place...I guess these guys don't realize the risk because they've only been in the game for 5 years...I love the guys and their personality...900 hundred units is freaking phenomenal...I have seven...so I'm a minnow in a ocean full sharks...But with the loom of a market correction, I want 50 percent of my units free and clear, so when all he'll breaks loose, I can thrive and not hope to survive...

What "bad" terms are you referring to that are risky? 75-80% LTV at origination...3 year balloon...20 year amortization...low interest rate...gross rents $8,000/mth below market? Their terms improved with their track record but the terms in the early years were not bad in the risky sense. Even if their balloon hit during an economic downturn, they have both a healthy LTV at origination and an even healthier LTV after raising the NOI by almost $100,000 per year. That's the key...they are buying under-performing properties and adding value.

2008 was NINJA (no income, no job) and LIAR loans (no doc or low doc) and LTVs in excess of 100%. Buying at 75-80% LTV and then adding additional property value in the 1st year of operation is the opposite of 2008.

I feel their biggest risk is a general economic downturn and it's impact on blue collar jobs but that is a separate issue from modest LTVs.  Apartments have been the darling investment for a while now and they might not be given a life preserver like they were in 2008 by the housing crisis.  Who knows though...I can't predict that stuff and all cycles are different.  Modest LTVs, positive cash flow, and high vacancy break even points are a good hedge.