All Forum Posts by: David C.

@Account Closed  I was waiting to see how long it was going to take for that comment to show up.  I get it all the time.  And no, I don't have his cars....I prefer real estate instead. :)

@Spencer Gray  Exactly right about cap rates.  There is so much misconception as to what a Cap Rate is.  I have seen 6% cap rates that have negative cash flow all dependent upon financing.  Additionally, I have seen people brag about their property having a 10% cap rate, which is in shambles in the middle of a crime ridden demilitarized zone.  Cap rate means very little to me.  In fact, I mostly ignore it and just look at cash flow.

@Robert ONeill  Precisely!  I had omitted that part of my post at the risk of sounding like "captain obvious", but my thought is that unless there is something that I am missing, when the market cools/corrects from this frenzy, and/or vacancy rates increase, people who overbought will be hemorrhaging cash, with such little (or no) cashflow to begin with.  It's just crazy stupid.

To the group:  As more and more "deals" cross my desk and I perform underwriting, I find that the vast majority of these deals are simply overpriced offerings - even in lousy locations, Cap Rates are around 3-4%.  Most offerings have minimal meat on any of the bones, and by the time financing is factored in, it cripples the cash flow, sometimes into the negative.  It's amazing to see what are being called "deals" these days.

Fellow BP-ers,

I was interested in hearing from those who have used Small Business Loans (unsecured loans from Fannie Mae/Freddie Mac) to purchase their multiunit deals.  I would be most interested to hear about:

- How rigorous of a task the document submission process/review was to secure your loan and your experience with the process.

- The turnaround time for your loan.

- Best practices that you found enabled your loan process to run smoother and efficiently.

I would also invite those to comment who had applied for the loan, and perhaps used a commercial loan in the end to close the deal.

Thanks!

@Gino Barbaro  That's awesome!  I have reached out to several of my favorite authors, and they are often very generous with their time.  It has really made an impression on me.  They practice what they preach about wanting to help others.  I find that as I expand my network, it is a much smaller world than one might think.  That's one reason why I liked Beau's book so much.

@Gino Barbaro

Gino - I love traction.  It is such a great book.

One suggestion that I would humbly make to those who purchase Traction.  Don't become intimidated when some of the examples in the book refer to larger business models or reference companies that make $2MM to $50MM in revenue.  The core concepts still apply to a good business, regardless of the size.  Try to see the forest from the trees, and I think you will like it.

I purchased two books recommended by @Brent Kawakami

Multifamily Investors Who Dominate by Beau Beery (Finding Deals/Broker Relationships) - A fast read, but a great read!

Best in Class by Kyle Mitchell and Gary Lipsky (Asset Management) - About half way through, and really like it.  Thanks for the recommendation Brent!

Keep the book recommendations coming!  Maybe we should have an ongoing thread post for a "Book of the week" recommendation ?

@Alan Ouellette @Justin Goodin

So many good points from everyone.  By taking a look at the responses, the terminology, "I own X doors" can confuse folks(especially newbies) and has in some cases.  

I know that when I first heard that someone making a statement that "I started 5 years ago, and now I own 1000 doors/units", I had thought that this person actually owned 100% of those 1000 units.  I thought how in the world can that be?? - that person would have had made $100MM+ in 5 years!  This may have been unintentionally stated, however, it can skew the thought process into trying to figure out how someone could possibly replicate this, or even discourage someone.

But hey, I guess it could happen ($100MM+ in 5 years) ...... and kudos for someone who does that!

@Brian Sigrest  I was curious as to what your thoughts were regarding this:

I had run into a real estate attorney who had mentioned that in his mind a $1MM policy for an SFH property(regardless of size) was the bare minimum, and then had commented about having an umbrella policy of $10-20MM, which I thought was crazy high!

I invite anyone to join in and see what they thought particularly @Jeff Henderson, @Mike McCarthy, @Rod Hanks, @Cameron Moore ?

To the group,

I am curious as to what the concensus is regarding the amount of liability insurance one should carry on a rental property?  I happened to speak with a real estate attorney recently who had mentioned that the bare minimum they would recommend for each property is $1MM per occurrence and have at least a $5MM umbrella policy.  However, another attorney had mentioned having $10-$20MM dollars worth of coverage per property, which I thought was astronomical.

I would appreciate any seasoned real estate owners or RE professionals to chime in. What is a good rule of thumb for recommended coverage regarding liability insurance for both SFH rentals as well as Multi unit properties.

Thanks!