All Forum Posts by: Adrian Mahdian

Want cashflow, low prices and appreciation?

Starting local is usually your best bet, and then drawing 20mi circles and adding 20mi again around you until you find an attractive market.

But I am not in the US....

... so I developed My market analysis algorythm for out of state (or country) people like me

This made it easier for me to find a market with landlord friendly laws, population growth, cashflow potential and low entry prices (I have a limited budget of around $200k).
So this ranks the cities (the pink numbers) from best potential to lowest potential. this is a REALLY huge rule of thumb guys... it's just MORE LIKELY to find cashflow in these areas and ALSO these areas are more likely to appreciate (population growth baby ;)). 

So I am optimizing for some cashflow and some appreciation. And this list is the fruit of that. Then I went furthur and added landlord friendliness, property taxes and other info such as likelihood for natural disasters etc etc... honestly this can get as detailed as you want it to be but I think I will share it now so you can just choose a market that is good enough and START.

I love data and boring numbers.

I decided to share this to help all other investors who are in on their journey where I was in my research phase about 1 month ago, I hope this makes it less painfull.

I have already done due dilligence on a few of these markets so feel free to reach out and I will connect you to the best people that I know in that area currently. 

Good luck! // AdrianBeFree

@John McKee 

Great advice! Junior partner with an active roll, I like that! I will start connecting with lawyers then right after we have some investors lined up! 

The insurance needs to be buttoned up too, made a note of that. Should it cover some specific cases? We will have a liability insurance which will cover lost income and we have fire insurance (happens alot in CA). 

And yes, we will be owning 40% of the WHOLE deal, real estate and business both!

To all: If you guys know any other investors who might be interested to look at this, please do share!

@Bjorn Ahlblad 

Thank you but I am unexperienced in this and want to do more due dilligence, and of course even if everything is good to go, I still will need 1-2 more people to come up with around 550 000USD!

And I am more scared on the legal side, how to set up the partnership, how to make sure we are secured. We talked with the operator and he said that his liability insurance will cover everything in case of another extreme event, but since I don't know what I don't know... I will need someone with more experience to chip in. 

So I am a new to commercial investor. I appreciate every and each one of your inputs guys!

I was looking for operators, small home operators so I could help them to rent another home and earn more money. 

I came across an experienced operator but what he talked about was waay larger than what I imagined... So I am trying to put myself in this situation even though it's 20x larger than what I was originally aiming for...

The operator had a family friend who was going to invest, but the friend fell through because of family issues and he has 35 days to close,

We would of course need to verify everything possible to see if it's the real deal! 

and here are the current numbers I have on hand approximates:

10m$ purchase price

62 beds

800 000$ down payment (on our side as investors)

Revenue: 40 beds occupied currently, bringing in $3 000 000 a year

After the debt service and all costs 800 000$ would be the profit. The CAP RATE in the area for other commercial properties is around 4-6%. Cap rate on this would be around 8% but of course it's not the best way to evaluate this, since it's together with the business... a bit complicated for my brain...

We will own 40% of the deal in total. 40% X 800k = 320k$ profit per year for our syndication which is 40% Cash on cash per year!


Operator will put some money down also. He already has 3 ALF homes in CA and is profitable. This facility is already operating with a good reputation, the operators wife is also a nurse for many years.

I don't have the full downpayment myself so I am now talking to my friends and industry experts to take a look at this. I can put down 1/4 of the money around 180k basically.

I now have prepared my own Proforma, I have checked the neighborhood and it's high income, median income is 98 000$. I can share the proforma with those who are interested.

There are only a handful licenced facilities in the area, and 4-5 million Californians will be in the 65+ age range in the next 7 years.

Yes young people are leaving California, but most old people are staying put. And long term I still think CA will be having the appreciation factor! And this is cashflowing today already!

RISKS:
1) If another corona happens it could be bad for the facility as vacancies go up, but it will still service the debt. 
2) Staffing is problematic since there is a shortage but Most staff have been there 7-10 years

PROS:
1) With new solars installed the utilties will come down quite a bit!
2) The roofing, plumbing is in good shape! 
3) Appreciation over the next 10 years
4) More elderly people that will need help
5) Great cash on cash and equity buildup

I asked him about the eventual exit and operator said "I could buy out the equity partner if they want an exit!"

We will be the LPs in this partnership operator GP. The real estate and the business will be in separate entities. There will probably be quite a bit of bonus depreciation as the cost seg will allow the syndication to do that. 

We will of course look at operators existing businesses, balance sheet, last 2 years personal tax returns, experience and etc...

Any ideas on how to do better due dilligence?

I want to detect the RED lights for this deal and move on!

Here are the current numbers I have on hand:

10m$ purchase price
62 beds
800 000$ down payment (on our side as investors)
Revenue: 40 beds occupied currently, bringing in $3 000 000 a year
After the debt service and all costs 900 000$ would be the profit

The operator had a family friend who was going to invest, but the friend fell through because of family issues and he has 35 days to close,

I asked him about the eventual exit and he said "I could buy out the equity partner if they want an exit!"

We would of course need to verify everything possible to see if it's the real deal!

The operator will put some money down also. He already has 3 ALF homes in california and is profitable.
This facility is already operating with a good reputation, the operators wife is also a nurse! Don't get me wrong, MORE DUE DILLIGENCE IS NEEDED!

We (the cash investors) will own 40% of the equity in total.

40% X 800k = 360k$ profit per year for our syndication which is 360/800 = 45% Cash on cash per year!

I can put down 1/4 of the DP around 180k basically. I don't have the full downpayment myself so I am now talking with RAL savvy investors to consider this.

1- How do I structure this? The operator wants to deal with 1 person, even if I bring on more partners to reach the 800 000$ downpayment. 

2- The cost seg analysis has not been done yet, I am guessing since the downpayment will be around 1m$, the 1st year bonus depreciation will be around 1m$ for the LP partners! 

// Adrian

Hey @J.R. Arebalo I am also looking to do the same thing, did you find any agents or property managers that you think are great?


I am looking to do a BRRRR but not expecting to take all cash out, and I need to do it with a DSCR which will eat some of my profits sadly...

// Adrian

Investment Info:

Condo buy & hold investment.

Purchase price: $110,000
Cash invested: $33,000

Appraised at 120 000$ and with a price at 110 000$ (10 000$ below appraised value) I paid around 13 000$ to acquire the property.

Spent around 2 months for renovation around $12 000 and $4000 holding costs and lost revenue.

In total around 33 000$ invested and with a mortgage payment of 850$ a month on a 15 year loan, I am going to cashflow anywhere from 100-300$ a month.

That's around 15% CoC ROI if it was a 30 year loan.

Pictures of before and after below!

What made you interested in investing in this type of deal?

The AMAZING location and the building is quite new in a great location! This is in TBILISI Georgia and not in the STATE of Georgia!

How did you find this deal and how did you negotiate it?

On the Georgian MLS basically, not even OFF market.

How did you finance this deal?

15 year ARM loan at 7% 1 year fixed. 20% downpayment but because appraisal was higher than purchase, I actually paid around 12% downpayment.

How did you add value to the deal?

Renovated the apartment

What was the outcome?

Even if I have to sell this, I would be profiting a bit more because the prices are now 20% higher even when NOT counting the renovation work that I put in.

Lessons learned? Challenges?

Renovations took much longer than expected and made the property ready 1 month too late... and coincidentally it was ready in the worst month of the year to find new tenants... even more holding costs...

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, worked with a professional real estate investor specialized in Tbilisi who has his team of agents and contractors.

Shoot me a message and I will connect you to him!

@Joshua M. smith did you attend the seminar? I am looking into this and I like what I see so far... 

@Marc B. So I like the business model but I would like to do it in the leasing way. Buy and lease to existing operators. Which resources would you recommend for me to read up on to get fully up to speed? You mentioned that you also teached (this post is from over a year ago ofc) are you still teaching this business? // Adrian

@Sendhil Krishnan
This is a great post! 

The time and energy to get something like this up and running seems to be very high... I love your advice about the manager and also the location!

How often did you fly in to do something in person yourself? Or could you do it all remotely?

I know this is an old post but still it's amazing and I just found this area of real estate! RAL!

@Scott Hamilton
How far have you come with your RAL journey? Would love to know how it went for you and if you plan to open new ones. 

@Alan Norton
Are you operating any RALs now? I was thinking to buy the right place and lease it out instead. Not sure which route might be best! 

Hello and great day to you fellow Texans,

I think Rio Grande has some great potential! 📈

1))) I have around 200k in cash and want to scale up rather quickly, so I am thinking to BRRRR it!

BUY - in a C-B neighborhood.

Single story 2-4 units. (or more maybe...)

$170 000 ALL CASH buy!

REHAB - up to 30k rehab.

RENT- My main goal is to cashflow minimum $150 per door so a 4plex would give 600$ PURE cashflow in total.

9-15% Cash on Cash return.

REFINANCE- And of course refinance it to pull most if not all of my money out

Repeat...

2))) Could you share any multifamily BRRRR deals you have done lately? Any area in Rio Grande or even around to San Antonio, Austin is highly appreciated! 

3))) Any recommendations for GREAT people in the industry like PM,Agent, Lender, Investor would also be HIGHLY appreciated 

// Adrian