All Forum Posts by: Andrzej Lipski

I respect your opinion and I'm approaching my 50s and I have a growth mindset but I disagree with your statement about cashflow not being king. In residential real estate you are probably right because of the way properties are appraised for value.

But if you are int he commercial space, multifamily 5+ units Cashflow is and will always be king. Without it you can't achieve growth not matter how hot the market is. I'm sure a hot market can drive cap rates down and sitting on a negative cashflow property might appreciate a bit over time but that runs contrary to your goal which is to grow fast. It also take your own decision making out of the equation you are left to the whims of the market.

If I have a $2mil property, 20 units with an NOI of $216k and a cap rate of 10.8% and I replace appliances in all my unit ($2000/unit or $40k of rehab)) and raise rents by $100 dollars I increased the value of the property to $2.1mil. For a $40k investment I made $100k. All by increasing cashflow.

I am the owner and operator as General Partner on over 1100 apartment units worth say $150M so I am well aware of the value of commercial real estate and how to increase value.

I didn’t say cash flow is unimportant. I just say I focus more on equity growth. Yes the value of commercial real estate is based on net operating income not cash flow which is dependent on financing.

Your own post actually highlights the growth in equity from value add. You invest $40K to increase value $100K, you just increased your net worth $60K.

So it’s both cash flow and equity growth.

Well if you wrote a headline to get engagement and then walk it back then mission accomplished.

@Andrzej Lipski

What are you talking about?

Read thru all my comments and I consistently indicate investing for equity growth is primary. Yes cash flow is important. But equity growth is primary.

Do you comment just to be a troll?

Ask a lender which is King. If you are an all cash buyer or buying land then you make your point. Lower your rents on any of your commercial properties and then put it up for sale and tell me how much you are offered on that property. Tell me how much equity growth office properties have right now. Then answer who is king. If an stable healthy market equity growth is beneficial but it comes from improvements in income which is -- cash flow.

1 Vote

Quote from @Arn Cenedella:

Quote from @Andrzej Lipski:

Quote from @Arn Cenedella:

“Cash flow is king” is a mantra to many.

It’s repeated over and over in forums and conferences.

I am not a “cash flow is king” investor

Well if you wrote a headline to get engagement and then walk it back then mission accomplished. Maybe say Cashflow is King and Equity Growth is Queen. Not as catchy and maybe it will be largely ignored. But thanks for making all my points in your reply.

0 Votes

Quote from @Arn Cenedella:

“Cash flow is king” is a mantra to many.

It’s repeated over and over in forums and conferences.

I am not a “cash flow is king” investor

2 Votes

Quote from @Joe Villeneuve:

None of the above. The biggest challenge is to not fudge the numbers trying to make a bad deal into a good one. The second biggest is to keep your emotions out of it.

That could be also mean all of the above. I've felt compelled to fudge the numbers on each of those poll options.

I decided on ARV since the market as a whole has low inventory and turn over in my area. I'll be lucky to find 1 comp withing 6 months and a mile of the area.

2 Votes

Quote from @John Mocker:

Andrzej,

I checked with a few local markets and the answers came out the same as what Jason Bott mentioned. The "Real Estate Professional Liability" Markets that I contacted wanted to know if you were licensed. If not, it did not qualify for their program. I you are licensed, but the current Professional does not cover the Wholesaling situation, they may look at it.

Thanks John,

I checked with a few people and we discussed contract law. We found the same results regarding E&O as a licensed realtor. It only protects when acting as a real estate agent. So if the agent was wholesaling and did not disclose they were a realtor then that is what it would protect against. But it wouldn't protect the act of wholesaling.

What it sounded like to me are that the purchase and sales agreements are similar to options contracts. What may be traded is the right to buy. There isn't any insurance for an options contract. Unlike what has been stated here there are no services being provided when contracting the right to buy a house whether the person is licensed or not.

0 Votes

Quote from @Jose Petitfrere:

When rates go up, asset prices must come down. The problem in some markets is that the rates have gone up, but sellers and agents are reluctant to bring the price down because comps are looking at the past and not the future. Eventually, they'll get the idea when their property sits on the market longer than average. It doesn't mean stop buying real Estate because the deals are out there; you have to find if the deal makes since for you.

That just means that there will be more and better deals in the future. Especially when the regional banks start to buckle later in the year. 80% of all CRE loans are held in banks with under $250b in assets and 60% of all residential mortgages are.

0 Votes

Quote from @Jason Bott:

@Andrzej Lipski When you say,

"Error and Omission is if we are sued for missing something that the original seller disclosed to us and we didn't not communicate to our buyer."

Insurance carriers will not provide coverage for this type of exposure unless you have a professional designation or license.

The same issue carries over into any field. If you were going to file taxes for someone and wanted E&O to protect yourself, you would need to be a CPA for the insurance carriers to provide coverage to you.

Hi Jason I will take this under advisement and speak with a local broker.

1 Vote

Quote from @John Mocker:

Andrzej,

The issue you are having is that wholesaling does not fit neatly in the existing Real Estate Professional Liability (aka E&O) niches. If you do any other real estate functions (sales, rental, managment, etc..) you may want to include that info. It may be that you will need a Real Estate Professional Policy that will allow/include wholesaling. The other option, if you are not doing other real estate functions is a "Miscellaneous Professional Liability policy.

Yeah, it seems that I will have to work with a local RE insurance agent that is more familiar with the activities. We are strictly creating purchase agreements and assigning contracts. Any property that would be purchased by me or another member of the company would through a separate llc which we would assign the contract to for the purchase. And that llc would have the necessary insurance for owning property.

0 Votes

Quote from @Jason Bott:

@Andrzej Lipski you would need to become a relator to be insured for real estate transactions. I have never seen any products available specifically for Wholesaling.

We are not trying to be insured for real estate transactions. These are wholesale transactions. We are both the buyer and the seller. The GL is just for all around liability and Error and Omission is if we are sued for missing something that the original seller disclosed to us and we didn't not communicate to our buyer.

0 Votes

I'm having a hard time finding an insurance company that provides GL and Error and Omission insurance for wholesaling. Does anyone recommend a provider?

0 Votes

All Forum Posts by: Andrzej Lipski

Andrzej Lipski has started 3 posts and replied 50 times.

Post: Cash flow is NOT king!

Post: Cash flow is NOT king!

Post: Cash flow is NOT king!

Post: What is the Biggest Challenge When Analyzing a Deal?

Post: General Liability for Wholesaling

Post: How is everyone feeling about rates?

Post: General Liability for Wholesaling

Post: General Liability for Wholesaling

Post: General Liability for Wholesaling

Post: General Liability for Wholesaling