All Forum Posts by: Jared Prevost

• Could long-term still generate positive cash flow? If so, how much per door?
• This really depends on how you buy. If you're looking for a turn-key place on market, it would be tough to find without a short-term or medium-term strategy. However, as with all things real estate, it will get better over time with rent appreciation/inflation. If you're willing to do a reno, find a discounted property, can do sub-to or seller finance, you're much more likely to cash flow.
• Single family or 2-4 units?
• Personally, I like multifamily better because it tends to be valued more closely on a cash flow basis as opposed to being a consumer good which is often the case for single-family. However, the inventory of multifamily is much lower and the price point is often higher. However, if you've got a good mortgage broker, they'll know some tricks for using rent income to help support a larger multifamily loan.
• For a duplex, what is a reasonable purchase price for two units (2B1B each)? Would around $200k still achievable or mostly around $300k?
• Which area to buy to get cash flow?
• For this question, I think you'd be better off doing some of your own research rather than asking. Find some neighborhoods you'd be interested in investing in and draw a border on Zillow. You can then look for recently sold and see what prices things have gone for (I'd only look at the most recent 6 months). This will give you some really good insight into the market. Also an important thing to know here is that block homes go for more than wood-frame homes due to termites

Hi @Austin Drew, I'm glad you asked!

We recently closed on our first syndication deal which we are converting in part to short-term rentals. I think the obstacles for STR are practically the same whether you raise money through a syndication or by another means. Here are the considerations in my opinion:

• Political risk - what do your neighborhood, city, and state think about short-term rentals, especially at the commercial residential level. It's important to know whether short-term rentals are considered commercial or residential in your area as you could run into zoning issues. Do you have a plan if you can't rent the units short-term?
• Nosy neighbors - Ideally any short-term rentals are situated in any area that is naturally private (big yard, fences, discrete entryway for guest,etc). Not bothering the neighbors will save you a lot of face and headache!
• Operating expenses and capex - You really need to consider the systems you will need to maintain a successful short-term rental - from bookings to cleanings. Also, you need to think about furnishing the units, the aesthetic you are trying to create, and the fact that the units may get extra wear, especially your washers and dryers.

As far as structuring the deal for the LPs, you don't need to do anything different. You can set up the same waterfall and management fees as a long-term commercial residential deal. The only thing I might consider changing is increasing the asset management fee because short-term rentals are much more intensive for property management in general.

I hope that answers your questions, please let me know if there's something else I can help with!

@Saravanan Saravanan Thank you, I appreciate the support!

@Shyd Coloma You can access the projections from the same link, I just checked :) - You can use this link as well if that's easier.

@David M. I think it's very important to keep your audience in mind on a pitch. For me personally, I want my family to understand the basics of real estate before considering private lending. In the context of page 6, that covers the 4 wealth generators of real estate, one of which is tax advantages. There are, of course, a number of ways to minimize tax exposure through real estate, especially in contrast to other asset classes. Slides 9-15 explain private lending - this is mostly an educational pitch, because, once again, this is for family that doesn't know very much about real estate. I'm a bit confused why you're responding to this post, not sure what the value add is here?

Hi @Shyd Coloma, happy to hear you've found that useful!

I don't have any time of '1-pager', but fortunately, I may have something better if you're pitching to people that just want to see the numbers work out.

If you click on that same link there are two projections that I built, one for detailed and one for a quick underwriting of SF and small multi properties. The last tab is the 'sum' page, which provides the high-level numbers and returns on a deal along with two graphs. If you printed these out or put this on a PPT for private investors, this would probably do the trick! Let me know what you think.

Also, where are you investing?

Hi Lydia,

I think it depends on what you're looking for. As I understand it, here are some things to think about for turn-key vs. syndication

Turn-key

• Limited upside as 'turn-key' means you are not buying any deal and forcing appreciation
• Potential for cash flow, especially in the midwest and moderate asset appreciation over time
• Still requires property management, which can be a headache if out of state (especially when it comes to local knowledge issues such as inspections, pricing rentals, what's going on in the neighborhood, etc)
• More simple tax strategy (depreciation and loan interest)

Syndication

• Potential to achieve both cash flow and long-term equity
• Upside in that a good deal means you will get more than a preferred return, but the upside is better for the general partner due to the waterfall structure
• 100% truly passive income
• If the syndication you are investing in has a lot of experience and local knowledge, it's probably less risky
• I'm unsure of how you would get taxed, but I do know it is possible to invest using types of IRA accounts to avoid capital gains

Being from Michigan, I don't know a whole lot about what's going on in Columbus and Cleveland, but I know a few folks from those areas. Everything I've heard suggests that Columbus is really booming with logistics and Cleveland is turning it around (probably similar to Detroit).

Here's my overall thoughts:

If you want to learn the ins and outs of the real estate process from acquisition through disposition, go turn-key or even non turn-key. However, if you want to reap the benefits of real estate from afar and not deal with the potential headaches and be truly passive, go with the syndication.

Hope that helps!

Hi Zack,

Looks like you've got some good advice above. No doubt, having confidence in running the numbers is very important. Reaching out to locals and finding a way to provide value (it could be as simple as offering to take out the trash or answer tenant phone calls) in exchange for some of this intel could be a good way to go.x

Also, I personally created a few deal analysis spreadsheets that you can find here that will give you a highly accurate and adjustable deal analysis. You'll notice that property taxes are automatically calculated based on millage rates for owner occupied vs. non-owner occupied rentals.

Hope this helps!

Hi Antonio,

Here's my advice as someone who just graduated and felt similar:

See if you can't have your cake and eat it too. Just because you're in college doesn't mean there's no way to invest in real estate (many of the guests on BP started investing in college). Now of course it won't be straightforward, but here are some things you could try.

• Network with real estate investors in your area - see if you can help on any flips or find deals (be a bird dog)
• Rent a house for yourself and then turn around and rent by the bedroom - just make sure to be transparent with the landlord about what you're intending on doing
• If your parents are able to pay for your education, perhaps they would also be willing to lend to you on a house?

In general, I think it's worth sticking it out mostly for this reason. Banks are risk-averse (especially in housing since 2008), so they really want to see a W-2 income and stable job to want to lend to you. While your degree may not teach you about real estate, it could help you get a good job that would make banks happy to give you money.

Hope this advice helps!

Hi Jonathan,

I recently started managing a syndication with a friend (and now partner) of mine.

Here's my advice:

1. Show you can close a deal. In other words, don't be the guy talking up the brokers all the time and not closing on any deals. Even if the first deal isn't a home run, it will prove that you're worth the brokers' time.
2. Know your stuff - the brokers who have been around will be able to tell right away if you know what you're talking about or not. So, make sure you allocate time to education and connect with other syndicators who are willing to teach you what they know (of course you want to offer to help them in any way you can)
3. Have your financing in place. If you're deal shopping, but don't have any money raised there's very little chance you'll be able to close on anything with the break-neck pace of the market right now, especially in multi-family
4. Hope that helps!

Hi Scott, I'm glad to hear that PowerPoint is useful for you!

Likewise, I've been looking at a few myself. I appreciate you offering to send some my way - I'm looking for either a duplex or single-family home I can house hack in the $180g - $240g range. Something that's near downtown in a neighborhood that's turning around (I don't want to buy in any of the suburb cities).

Thanks!

Sharing some resources for private lending!

I'm looking to get my first deal and raise some private money from my family that doesn't have a deep understanding of REI. So, I spent some time researching private lending and put together a presentation that walks a beginner through how you make money in real estate and how private lending works.

I thought this might be a useful resource for others, so I'm sharing the link to access the PowerPoint here.

If anyone has experience with private lending in West Michigan or Grand Rapids and wants to connect, let me know!