All Forum Posts by: David Diner

At the risk of sounding glike a complete newbie (which I am)... How are you planning on growing your real estate business? What does the extra time buy you?

I think most of the bases have been vovered, but I want to throw something else into the mix. I read this in a BP article... I wish I could remember the one but it's a quote from Lewis Carroll's Alice's Adventures in Wonderland. Alice asks that cat "Would you tell me, please, which way I ought to go from here?" To which the cat replies "That depends a good deal on where you want to get to."

So where do you want to get to in real estate? What are your long term goals? Put the answers to paper and commit 100% and you'll find it hard to not have some success. Also ask yourself why real estate (as opposed to another business venture. If you're in it for just the money... you're going to have a hard road ahead).

Good luck!

~Diner

oh how I wish I was young again. In addition to the wonderful advice and resources given, I'd like to add that one of the first things you can do (with little to no experience) are answer the following questions (actually put the pen to paper though or else the exercise is moot).

1. Why are you serious about real estate? (Dig deeper than money, if it was all about wealth, their are other vehicles for that).

2. What are your goals (10x and long term) start from there and work your way backward.

Also, if you are going to study at university... look into buying a house nearby. As long as it is in livable condition you have a place to live and can charge other students dis count rent to pay down the mortgage (it's obviously more complicated than that but it's a solid starting point).

Good luck and congratulations for starting so young...!!!

I'm hoping for some insight on an idea for getting started in NYC. I'm largely basing this off of what a friend of mine did while at University (bought a run-down, but livable house with a group of friends for $75,000, fixed it up over four years)

For example, (I just picked a random house on Realtor.com in Bay Ridge, Brooklyn with 5+ bedrooms for less than $1,000,000). Now I happen to work in a lab with about seven people on average. Asking a couple of them to share a room (although weird) wouldn't be out of the question. Let's also assume that a couple of professors are interested in doing a real estate deal (but they say they don't have the time / no where to start). Some back of the envelope calculations. 25% down payment ==> $200,000. (I don't know how to determine closing costs... I've been meaning to look that up, but I'll just use 10% for now, please correct me if this is low or high) so add another $80,000. That's $280,000 we need to bring to the table. So now the problem becomes how do seven grad students and a professor come up with $280,000. Split evenly... this doesn't seem doable. but... if seven grad students contribute $140,000 and the professor contributes $140,000 all of a sudden, you're looking at something possible (The students that were in industry before going back to school definitely clear this, Otherwise, it just takes a year or so of saving your stipend to be able to contribute the necessary amount). The monthly payments work out to about $5,500 (back of the envelope calculations). Split seven ways, this yields $800 per month (plus utilities). Now most students I know are paying ~$1500 on rent (based on word of mouth). If the lab members agreed to pay $1250 a month (put another way, that's $3000 a month to help offset the professor initially). So here's where things get interesting. What happens when the initial batch of grad students graduate? There's still $3000 a month coming in from students. Let's say half goes to the professor and half goes to the rest of us. That's an extra $200 per month for a bunch of people fresh out of grad school. Well... that's not much. So let's fast-forward a bit and assume we've put in some sweat equity so the house is the nicest on the block. Other homes in that area are selling for about $1,000,000 So I'm going to assume that we can get at least that much. Let's also assume that we only get to keep $900,000 (after fees and such). Well, this let's us get started in NYC. 

I know this was long winded (and it is very long term oriented), but let me know (if at a high level) it seems viable. If it does, I might start drilling down into the details and I would love to connect with other students who have done house hacking (or are thinking about doing house hacking)...!!!

~Diner

@Aaron Manji

Congratulations...!!! What prompted you to work for New Western Acquisitions instead of starting your own company...??? Are their hidden advantages...??? I ask because most of what I've seen on the forums seem to advocate starting your own investment company.

~Diner

@Jim Hartmann

I also think some more natural questions that arise from your initial question are "Why am I involved in Real Estate?" and "What are my career goals?" The answer to these questions may help paint a better picture of your perspective on real estate.

Good luck!

~Diner

@George Hermann

I find it's less of analysis paralysis and more of being a grad student in New York City. There are for too many variables to try to account for, that is most definitely true, but that doesn't excuse an entrepreneur from having a rock solid business plan, (identifying a gap in the marketplace, providing a solution to bridge that gap, and identifying a market willing to buy that solution). Being able to adapt to an ever changing market is one of the greatest strengths any business can hope to have. Unlike most goals, to own x number of units, or financial freedom, my goal (which I apologize for not including in the original post, I blame the late hour on its omission), is to start the next Blackstone (though that's probably a 10x goal... maybe even a 100x goal, but it gets the point across).

I noticed most of the business plans investors seem to follow are the more traditional avenues (buy and hold, fix and flip, wholesaling, commercial, BRRRR). I am trying to find out how others scale up their business(es) to create generational wealth (especially if locked in a difficult market like the New York City metropolitan area).

That's why I'm asking for people's perspectives on their (big picture) strategies and how people who scaled their businesses from less than $25,000 thousand in annual revenue to $100,000 in annual revenue, to $1,000,000 (or more) in annual revenue actually managed to accomplish this. (I am an engineer, and I have a difficult time understanding business logic).

Diving in isn't the frightening part (find deal, take deal). It takes time and work, but anyone (with perseverance, a little bit of cash, sweat equity, and a calculator) can do it. The frightening part is structuring a profitable business with plenty of room to grow around those deals. (A small team can only handle so many deals).

Thanks for taking the time to engage with me!

~Diner

I'm hoping someone can shed some light on whether or not income from renting out other units in a multiplex is a factor when trying to get a conventional mortgage.

Also... yes definitely read Brandon's book (UBG). An invaluable resource for getting g started (and to pump you up!) I read it in Brandon's voice... it made the experience even better.

Io,

I've been doing some serious reading, webinar watching, podcast listening, and forum lurking. This has helped me identify a couple of solid business strategies.

First, let me explain why I want to get into real estate (as opposed to just starting my own technology business). Even though my own technology company would likely be more profitable, it would not build wealth. Taking care of my parents, siblings, kids, and grandchildren would not be an issue while I am at the company, but afterwards, it would be difficult to ensure that the wealth flows to the next generation(s). Based on what I have learned, real estate seems to be the most stable vehicle for preserving wealth. So, even if my business is not in real estate, eventually, I need to get into the real estate business (and there is no time like the present).

A solid business plan needs to identify a gap in the current marketplace and explain how the business fills the gap. This requires identifying a target market and how much of that market the business can capture. Personally, I am in the camp that it is better to have a large chunk of a small pie than a small chunk of a large pie (for scalability and less competition reasons). The bad news is that this will vary from location to location, so I feel that it is imperative to begin in a real estate market that you are intimately familiar with, where you can easily take a pulse of how the market is doing. The good news is that this familiarity will give you a competitive edge and theoretically should enable a higher rate of growth. A few examples I have been theory-crafting are affordable student housing, foreclosure relief programs, and new graduate housing (these are mostly from personal experience, I am sure there are plenty of other markets out there and I'm sure that there are many markets that are yet to be created). Of course, there are established markets, typical families looking to buy a single family home or rent a unit that aren't changing any time soon (until someone comes along and completely disrupts the industry, but that is a story for another day) that offer traditional avenues (buy and hold, fix and flip, commercial real estate). If I knew more about wholesaling... I'd make a comment about it here (read: if you can explain the wholesaling business model, please elaborate in a response to this post). 

My main concern with traditional approaches is scalability. (My point of view comes from these two articles and various podcasts and webinars, I apologize that I did not record where I got specific references from). 

http://www.biggerpockets.com/renewsblog/2015/04/20...

http://www.biggerpockets.com/renewsblog/2012/12/12...

The major flaw with the first article (which it points out towards the end) is that in order to build substantial wealth using the method described, you eventually need to expand and control more units. The amount of passive income mentioned in that article is significantly less than what you can expect from starting your own business. The major flaw with the second article (aside from assuming appreciation, which the author addresses in the comments and being region locked) is how to grow investment operations when these deals are virtually non-existent in the investor's home town (again, the author addresses this in the comments).  If you happen to live in an area (or are comfortable travelling to an area) where it is efficient (I'm arbitrarily saying efficient is that for every 100 properties you view, you make 10 offers, of which, 1 is accepted), the the rest of this point is moot since that is fairly easy to scale up (as in a small team can probably view 1000 properties annually while the wealth is compounding). This scaling issue is partially addressed here

http://www.biggerpockets.com/renewsblog/2012/09/23...

What I took away from the article is that in an expensive region (like the one I live in) requires a creative individual to tap into a new market. This is most easily achieved through a business and it offers plenty of room to grow an expand.

I want to briefly touch on flipping. It suffers from scalability issues in the sense that in order to be profitable, you need to constantly have houses in the pipeline. Although this is definitely a great area to expand into (since there are plenty of societal benefits) it seems to me (especially after listening to podcast 3) that there is virtually no room to grow initially. However, once you have the experience and capital to do multiple flips in parallel, this becomes a profitable business that can restore neighborhoods and make the community a better place to live.

I (regrettably) do not know enough about commercial real estate to speak on the matter at length. It seems to me that the problem is the high cost to enter the market. This would then make sense as a great area to expand into, but I am not sure how one would get started with a commercial real estate business... if someone can fill in the gaps, please let me know.

With that out of the way (hopefully I explained why I am not in favor of traditional routes for my area, the opportunities are there, but there is not enough room to grow the business). I want to explain a creative solution I have and hopefully get some feedback from the community.

My first problem after moving to MA for my first job was finding my first apartment. I did not know the area, did not know what a good price was, and did not know how to find a roommate. My business would be to pair home-owners with a spare room with new grad students starting a new job who need a place to stay for a month or so. What (if anything) does this have to do with real estate? Mostly, the idea is to make money on the side while networking with potential clients. Since this can easily be scaled up to just about any town that hires a lot of new grads, it seems like a solid way to enter the real estate market.

There are plenty of deficiencies in just about any given market. A good thing to remember, if the numbers for a certain investment strategy are not giving you the answer that you want, it's time to ask a different question.

Thanks for reading...!!! I hope this gets at least one person thinking about creative real estate business opportunities...!!!

~Diner

I think the analogy is great in terms of describing the mindset necessary to succeed in this industry. I also like the analogy since once you start working out it makes it easier to keep working out. That being said... I thinK the analogy falls short on the time scale involved. Real Estate takes a long... long time to get results. Working out... you feel different and can see results in as little as a month. So... I'd argue that yea, you need the same mindset, but even more discipline for real estate investing (just like any other full time job).