Hi all,
I listened to the podcast with Mr. Leybovitch a couple of days ago and found it to be a very insightful introduction into some real estate fundamentals. As I've stated before, I am very interested in the industry but also completely new, so I have a few questions from my notes on the broadcast that I'd like some clarification on! I'll list five primary questions for now, feel free to answer any individual ones as you see fit.
1. REOs Ben said he tries to stay away from where most other people are going so that he can be more selective with his real estate acquisitions. He phrased it particularly as other people being out there chasing REOs. I see it stands for Real Estate Owned, but can someone help me understand why he prefers to stay away from REOs and deal with the sellers themselves?
2. Ten-Cap, or Cap Rates I hadn't heard this term before. Ben mentioned that after gaining 25% of his tenplex from private lenders, 70% from a commercial note, and putting 5% down himself, that he was able to get a capitalization rate of 10% which would drive up the value of the property by another $100K in two to three years when he planned to resell it. I may be botching up the terminology and structure of the facts already so any help on this concept is greatly appreciated!
3. Private and Commercial Lender Funding Ben brings up that his 20% private note (and in the same respect, his 70% commercial note from his bank) is the result of years of rapport and good business. His reputation helped him in getting such a deal. When it comes to the bank, what other factors besides excellent credit would need to be established? I'm 22 and have close to four years of great credit history, but it's hardly enough to justify such a loan, especially in the California real estate market. Assuming I could get the proposed 25% (and I am working just with Ben's real life example), what other factors would the bank need to see?
4. Market Analysis I am in the Los Angeles area. What are some excellent sources of updated market analyses that I can start utilizing and practicing on my own time? Since I am not financially ready to make my first acquisition, I can start familiarizing myself with some of the basics. Anyone in the LA area with an excellent source regarding this would be greatly appreciated!
5. First Venture Finally, my last question rests on what your opinions would be as to the best way for me to get started. Coincidentally, I have been interested in Ben's sort of work for years before listening to the podcast - that is to say, buying, holding, fixing up, and reselling at a profit. And I am interested in starting primarily with apartment buildings in the LA area. What are my best options to start? What sort of minimum down payment should I be expecting?
