All Forum Posts by: David Hite

Quote from @Noah Wright:

David, you've brought up a great point, and it's something many seasoned investors run into when they start screening multifamily and commercial deals. Sellers and agents often inflate prices based on potential income, but like you said, you want to base your investment on what's actually being produced right now. It makes sense to be cautious of paying for projections rather than the current reality, especially when you're the one who'll need to take on the risk and effort to achieve that potential.

When it comes to negotiating, I think it's about finding a balance. The seller will naturally want the highest price possible, and their agent is likely to push that "potential" value hard. Your job is to bring the conversation back to the current, real-world numbers—actual income, actual expenses, and actual cash flow. Sometimes, early due diligence can help set the stage. If you approach it with a mindset of establishing facts upfront, you can sidestep a lot of the fluff. Asking for detailed financials—especially rolling 12 months' data—can really help you determine what’s realistic.

Think like a bank. Bank wants proof and records. We are not investing in tech startups here.

In negotiations, you might not always get down to the exact current income value, but by anchoring your offer on the facts, you can often pull the seller closer to a realistic middle ground. The goal is to make sure you’re not overpaying for "what could be" while staying grounded in "what is."

 Thanks for the reply.  Thats the line of thinking I was going down.

In my number crunching, I plug into my spreadsheet a cost that is mid way between asking and my best estimate on ACTUAL cashflow value.

-I agree, best time to talk about it is after getting 12 months of data, then come back with a step by step approach that shows the actual value of the property.  

-Would you then "offer" or bring up the potential ACTUAL cost as a counter offer? 

-Or would you already split the difference?

I feel like countering with actual value would allow wiggle room to hopefully get at least the mid-point

Thanks

Dave

Good morning!

Wanted to get your input on this.

Been screening multi-family and commercial real estate opportunities.  One thing I have noticed is the asking price with it's cap rate, is almost always priced out by the properties POTENTIAL income!  I.e.  If you increase rents, if you go MUGS and put the utilities, if if if if

Having owned and sold businesses and 1-2 properties, I have learned that I do not want to pay for POTENTIAL, but want to pay for what it ACTUALLY produces.

Of course the seller will want the max, and the real estate agent will also want the max, so will push for the Pro-forma or potential income.....and base asking price off of this.

I find that my numbers to evaluate properties almost never work with the asking price (based off potential), but almost always work with ACTUAL value.

-What are the experiences of the group in negotiating with the seller/agent to bring the price down because of this fact.....Do we hope to get all the way down to ACTUAL cash flow value?  Or should we aim for somewhere in between.

-How do you approach this?  Start by normal DD and circle back eventually?  Or in the early stages ask for more detailed financials for the last rolling 12 months, and come back with that data early in the process to weed out those who won't budge?

(Of course other factors can play into it, location, rates, how long its been listed etc).

I appreciate it!

David Hite

Commerce City, CO 80022

I could HELOC on my personal home or my commercial real estate....

I was hoping that in the same way a rental property can get leveraged funding using the purchased property as collateral would work.....but unfortunately not likely.

Thanks for all the ideas etc! 

Thanks everyone! In speaking with my banker and CPA, it confirms what everyone is saying.....No one will want to use my "stake" in the property as collateral, because of its illiquidity etc.... I know that the CoC returns annually of a syndication deal aren't as good as one COULD get actively trading the markets. But the IRR can be closer to 16-18% when factoring in the refinancing and selling chunks of return. And this being completely PASSIVE really appeals to me. I am working on the markets etc.....my game plan is basically work the markets/crypto world and as I get gains, take 1/3 to pay off my business/building debts, 1/3 to build into these syndication deals, and 1/3 to keep rolling the active investing snowball. Wish there was a way to leverage....so sad. Thanks all!

Good morning everyone!

  So, I am about to break into the world of syndication deals!   (Joinging, not creating!).

I am happy with the passive nature of these syndication deals, and happy with the returns they provide cash on cash.  But it got me thinking about if there is a way to leverage the cash injection.

For a rental property, investors are able to leverage their cash with a bank/lender to then take a loan for the remainder.  I.e 20% down, 30% or what have you.

So, does anyone know of a way (or a lender who does this) to take the money I was going to invest.  Let's say it's $50k, use that as the "down payment" on a loan to use the full amount to invest in the syndication deal.  I.e. My $50k as a 20% down for a loan of $200k, giving us a total investment amount of $250,000 vs $50,000.

I've built a spread sheet and can tweak terms....but most variations I work on come out cash flow positive (more so than pure cash only), and on the refinance and sale proceeds is where the leverage really kicks in.

The loan would have to have collateral......so one could use 1) Their business, 2) Current holdings, 3) Home (hope not), or.......4) Since as a syndicate investor we will be an actual owner of the property (hence the ability to depreciate our share) is it possible to use our future stake in the property as collateral itself?

 Any ideas on interesting/inventive ways to leverage into a syndicate deal?

Thanks everyone!

Dave
   

Interesting...

Thank you Mr. Hinrich!

  I don't have any current properties.....was looking to purchase some properties they were offering already.

Those are great questions, and will definitely ask them those questions!

I appreciate it!

Dave 

Thanks!  

Anyone else to chime in?

Good afternoon all!

  So, I have been hearing radio ads for this company, Hughes Private Capital Group.  They direct you to their website: betterthanaturnkey.com

  They have an interesting structure of investing in real estate, however, the website makes me feel like it's one of those sites that eventually wants to make you buy an ebook or something.

Their idea is this: Most turnkey companies will buy the home, renovate, get renters, then sell to you.  Afterwards you can use them as the manager, or do it yourself, or find your own company.

Their strategy is: they buy the home, renovate, get renters, then sell us the home.....after that is where it differs.  They state that instead of collecting rent, then paying the bills, making repairs etc....that the home is incorporated into their larger portfolio, and you get a more passive monthly income for the property, which they manage, make repairs, find renters etc....

It sounds basically like an UPReit of sorts.  Buy the home, then put it into the larger pool.  You then get your proportionate share of profits every month based off of your rentals values compared to the entire portfolio.

It sounds nice, really passive, and makes sense in the Up-Reit type situation.  You can use your capital, leverage it with loans to purchase more homes etc....

Anyone have any experience with this company or this model?  

Thanks!

Dave

Good afternoon everyone!

So, I know that in most tenant/landlord situations, most of the maintenance of the general premises is the responsibility of the landlord to maintain, since they are usually the ones that own the space and likely paid for most of the improvements for the tenant.

What if a tenant pays for the improvement of the space from "warm dark" shell up to their finish.  They of course own the improvements for depreciation purposes for the duration of their lease.  But if we have issues arise with maintenance, i.e. dropped ceiling issues, I don't even know....normal stuff.  Then would they be responsible for the upkeep of that?

I appreciate it!

Dave