All Forum Posts by: Daniel Frye

Hey everyone,

I started my business about 3 months ago and have been fortunate enough to hit the ground running. Recently closed on a lot in Coronado Island, which is in San Diego. The lot has two 70+ year old cottages on it, and our plan is to demo and build up to 5 condos or 4 single family homes for sale. Our pro forma is pretty tight after having spoken with multiple architects, general contractors, and agents on the island. It would take about 18 months from now to get the product to market, with about a 25% IRR. Today we just got an unsolicited offer from another development group that would give us an 11% cash return on our investment.

It makes me wonder whether an 11% return days after closing makes more sense than holding onto this for 18 months.  The risk involved in trying to unload multiple $1MM plus properties in a business cycle that seems to be coming to an end does make me think twice now that we have this offer. 

I would appreciate any thoughts or advice on this!

I've never used a company that specializes in bird dogging necessarily but I did connect with a good wholesaler in SD via BiggerPockets.  Not sure what the rules are regarding mentioning specific companies here so feel free to message me if you'd like to talk more.  I haven't purchased anything from them yet, but I have looked at quite a few properties that they have sent me and they are quite professional.

@Brent Coombs, thanks for the response. I should provide some more background to our strategy I suppose. We are buying a moderate sized multifamily building in a high priced area. Commercial loans are rarely going above 70% LTC on these buildings. In fact, to get the best interest rate, we will be putting a loan on the property at 60% LTC. The remaining cash will be provided by a loan from this credit line which costs 1.5%. The refi won't be paying back any loan, but to simply extract all the cash we are providing. The refi loan costs along with the 1.5% credit line are still providing a CoC of 13%.

Additionally, our exit strategy is defined as an exit in year 5.  While we reserve the right to change that strategy as market conditions change, our desire to build capital for other ventures requires us to cash out at that time.

I understand my tax considerations, I was just wondering how the figure "Profit if Sold" number in the BRRRR worksheet was calculated.

@Jacob Rogers thanks for the explanation!  Makes sense.

Hey guys,

Forgive me if I am overlooking something simple here, but my question is about the profit calculation that is a part of the BRRRR calculator. I understand the Property Value, Equity, and Loan Balance figures and how they are arrived at. I am having trouble figuring out how the total profit is calculated.

Would someone be so kind as to explain this to me?

Cheers!

P.S. The reason I am wondering this is because I am trying to figure out how to account for my profit after a second loan is paid back.  I am using a part of a credit line in order to make up the difference between my cash outlay and my refinance loan.  I will be paying 1.5% for that money.  That second loan will be interest only for the duration of my holding period, to be paid back in full upon disposition.

Hey Nabil, this sounds very interesting.  I'd like to talk a bit more with you about this.  Please email me at [email protected].

Greg, please send me an email at [email protected].  I am interested in speaking with you about this.

Would definitely be interested in helping to build a community of young professionals focused in this area.

It is difficult to find 10 caps because the price growth of buildings has generally outpaced rental price growth. That being said, cap rate does not give you the full picture of your return based on different financing situations. It is simply a snapshot of return at the current point in time based on a cash purchase. Overall returns higher than the cap rate are more than possible.

Like a lot of you, I've read the Four Hour Workweek and was fascinated by Tim's use of VA's to help keep his day to day live as efficient as possible. I'm wondering what value you all see in the real estate context? I'm not a wholesaler so I'm not dealing with a high volume of leads or contacts that need to be tracked. Aside from that, what value do you all see VA's adding to your business? Thanks!

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