All Forum Posts by: Chris Levarek

@Jeffrey Myers It depends on the person. However, if said person were looking for the best "cash on cash return" or best "return on equity", debt is typically better. The less cash invested, the higher return.

This simple formula should help : Annual CASHFLOW / EQUITY = ROE (RETURN ON EQUITY) or COCROI. (Equity can be Cash or simple Property Equity)

Less on bottom equals more ROI.

$10,000 / $50,000 = 20% return

$10,000 / $100,000 = 10% return

$10,000 / $250,000 = 4% return

etc. etc.

Find a way to lower your equity/cash invested, while maintaining your cashflow, increases your returns.

@Jeff Joachim This all comes down to the person's lifestyle goals. Being a private lender or passive investor is far less time and responsibility. There is the argument as well, would you rather be hunting gold in the gold rush or sell the shovels?

At this point in the market, I'd say it makes a lot more sense for many investors to examine private lending or passive investing. There is much more risk at this point in the markets, especially for newer investors.

Yet, when I first started, I partnered with a private lender for 70% of the purchase price on two duplexes in North Carolina. This helped launch my real estate ventures in 2018. I can 100% say however, I did not make any money on that first deal while the private lender made out very well. 

As it was a Class C property, I also had some sleepless nights, as well as many calls with property managers, contractors and utility companies over the life of the deal.  I learned, so it was a good experience but the private lender slept soundly whilst making cashflow. :)

Depends on the person's goals.

Btw, Have you checked out the new Biggerpockets book https://store.biggerpockets.co... on private lending? Just release coincidently.

@Michael Key Raising capital requires a brand with credibility. It takes time because when you start, you don't have a brand. If you have a brand that checks the boxes, people invest or buy. 

OPM is 90% marketing(brand/image), 10% product(real estate) and this typically applies to many other services/products. 

Think Apple versus Windows. Same product. Exact same product, a computer. Yet, People pay 3x as much for an Apple. Why? Brand.

If you work on the brand and credibility, OPM falls into place. But you have to spend the time to build the brand, this takes 2-3 years in most cases. 

People simply won't resonate with something or someone they don't know or understand or can't find.

Now will people invest with brands that have more experience? 100%. But if they never know about them, find them or resonate with them; no they won't. 

Case in point for many experienced investors on this platform seeking OPM, they have no brand/profile/image yet expect to find OPM. 

@Bryan Metz Don't forget to use the free tools at hand. There are alot of free reports given on "best markets" or "top cities for investing". These are great to get a headstart versus collect all the data yourself. I mention some of them here https://www.biggerpockets.com/... from a post at start of year. AIRDNA is also a great resource for STR and even grades markets.

I invest from Phoenix, AZ in NC, Texas, Ohio and Florida. That book helped get me started with my first purchase in NC and has alot of value. 

My advice is make your job easy, find the tools or team to simplify every aspect of real estate you aren't looking to do. This includes gathering data. Oh and don't forget to invest at some point ;)

@Joseph Clark Well typically you start talking on a forum like this about what you do and why you are good at and what deals you have. Then lenders find you. Private lenders are different then private investors though. A lender for example might lend based on interest rate while an investor might want a piece of the equity.

So depends which you are looking for. As mentioned, most will want to see experience, passion, or credibility as to why you are a good investment.

Hard money lenders are easy money right now, so perhaps start there to see what they require from you as a learning to what private lenders would ask for. They are practically the same form of capital.

Or perhaps give this a read, https://store.biggerpockets.co..., new book on private lending!

@Robin Carriger And who do you think invests into said hedge funds? It will continue as long as it makes sense to do so to curb inflation, make a profit, satisfy investor demand, etc. When 30% rental growth numbers are being flashed in Florida, Texas and Arizona, can you blame them?

It is a funny argument to me when I hear the public criticizing businesses acting like businesses when inevitably they are doing so because of customer demand. Funny because the customer is often the public through investments, 401ks, etc! Not saying that is what the post is about, just adding to the discussion.

Interesting times!

@Seth Baumgartner Florida is one of the top markets for real estate investors due to pop growth, rental growth and overall landlord friendly policy. It is also a top choice for vacation, so vacation rentals thrive. This being said, we are at the top of the market and many prices in Florida reflect as much. If you can find the right property, there is still opportunity for LTR and STR.

I wrote this post earlier in the year, but see how many times Florida pops up. https://www.biggerpockets.com/...

@Michael K Gallagher June 2022 had a 23% drop in occupancy for vacation rentals in Ft. Lauderdale. :( We shall see what July brings but oversupply is the issue.

@Nathan Leland Owch. Are you saying the property didn't have insurance? Red flag #1 for a STR in my opinion. I wouldn't buy in the area if that box isn't checked. Always need STR insurance not only for property value but also for liability issues. Hindsight of course is 20/20 but the silver lining is you learn.

As an investor, it's best to buy with the utmost control to limit your risk. Assuming or handing off control to unknown parties (government) tends to lead to unknown risks.

Wish you the best. 

P.S. In one of our first ventures, we bought a 5 unit apartment and lost 3 full A/C units to theft the day after close. Weird right. Welcome to real estate. Insurance was the savor but it was a lesson!

@Ryan Cushman Way to go! I hear it's getting a bit crowded on supply around there. Not as much as some of the others, but oversupply is causing a drop in occupancy at least for June numbers. About 5% for Pigeon Forge. Of course, Ft. Lauderdale, FL was the winner with 23% drop in occupancy. Much of this is related to supply and not demand however.

If you do differentiate yourself from the pack, not to worry.

@Graham Storey typically anything under a jumbo loan you can get the 10% down if it’s your 1st vacation home loan. Many lenders offer this option but it depends on your income and credit, as well as the purchase price as mentioned.

Check out Parker Borofsky with Movement. Str saavy.