All Forum Posts by: Carlos Silva

Is there any benefit of trying to purchase a QSR franchise territory to enter the commercial real estate space? Is it common to buy the territory, buy the dirt and build the store? Create a LLC to buy the dirt and building and lease this to your operating company? Does this sound like a good strategy for entering into the commercial real estate space?

Which is the better investment currently, 5 years, 10 years down the road? Which will give more bang for the buck? I’m guessing single family rentals are less risky and more passive income?

Which is the better investment currently, 5 years, 10 years down the road?  Which will give more bang for the buck?  I’m guessing single family rentals are less risky and more passive income?

Are there any concrete calculations that can help determine when is the right time to cash out of a low interest rate loan to utilize equity?

Quote from @Lauren DeFreitas:

Thanks for sharing, I will have to research and learn how to use these.  I’m 45  ke and would love to be able to quit my job and live off of real estate sooner than later.

Cap Rate: NOI divided by sales price

GRM (Gross Rent Multiplier): sales price divided by SGI

NOI (Net Operating Income): SGI minus vacancy & expenses

DCR (Debt Coverage Ratio): NOI divided by debt service

Depreciation: sales price x 85%, divided by 27.5

REO (Return On Equity): Cash Flow divided by equity

ROI (Return On Investment): Cash Flow divided by down payment

SGI (Schedule Gross Income): income before vacancy & expenses

Vacancy (depends on market): 5% of SGI

Cash Flow: NOI divided by Cap Rate

GOI (Gross Operating Income): SGI minus vacancy

Value: NOI divided by Cap Rate

Value: SGI x GRM

Expenses: 35% of GOI

Max Debt: NOI divided by Debt Coverage Ratio

Quote from @Chris Seveney:

Quote from @Carlos Silva:

Do rental rates usually fall when interest rates increase and home values decrease?

Great comments here. One thing I want to add to this is most are predicting rental rates to remain flat or decrease over the next few years. If they remain stable, people will think "its ok as long as they do not go down". That is really not the case, as everything else will be getting more expensive - maintenance, capex, property management fees, utilities. If your costs are growing at 3-4% per year and rents are not, that can have a significant impact on your portfolio. This is one of my concerns with a lot of these DSCR loans.

What's a DSCR Loan?

I stand corrected.  SRS National lease group is selling the property on one acre that I am looking at.  $3,930,000.00 with a 5.75% cap rate.  the store isn’t even open.  It’s a triple Net lease.  They have a 20 yr lease with the QSR. It’s a 2000 sq/ft class C building $1,965 sq/ft.  I’m surprised they building is being sold before the store even opens

Quote from @Ronald Rohde:

Quote from @Carlos Silva:

I’ve noticed four fast food franchises that bought the land and building to open the store and immediately put the land and building for sale.  one is a frozen custard store that hasn’t officially opened yet.  Why would a fast food chain or any other business go through the trouble of opening a store and immediately put the real estate for sale?

 what makes you think the QSR bought it and developed it? Its a lot more common for a 3rd party to develop and sign a lease, once the tenant takes occupancy, the developer sells it. QSR never owned the dirt...

I’ve noticed four fast food franchises that bought the land and building to open the store and immediately put the land and building for sale.  one is a frozen custard store that hasn’t officially opened yet.  Why would a fast food chain or any other business go through the trouble of opening a store and immediately put the real estate for sale?

Quote from @Randy Bloch:

Can you elaborate on the comment 401k money is stagnant?  Do you mean for the year 2022?  The past ten years S&P (including dividend reinvestment) returned 232% and 12.7% annually so far from stagnant and it is 100% passive and offers some diversification with you real estate portfolio.  If you are worried about fees have you considered rolling it to IRA so invest in low cost ETF?

My understanding of fast food franchise is the operating margins are quite thin and you need multiple locations to be able to afford a FT restaurant manager.  In many cases you are buying second job.

   



Quote from @Carlos Silva:

I thoughts are the 401k money is stagnant and not appreciating much.  We will be losing money due to fees over the long run.  I figure we will lose 45k in penalty.  However if the 2million dollar appreciates at .03 it will be 60k in appreciation. would offset the penalty over the long run.

I’m just saying in my situation it has taken me 17 years to build 500k in 401kretirement.  In that same time i’ve bought 2.7 million in real estate, cash flow 30k a year and have net value of 1.5 million plus in real estate alone.