All Forum Posts by: Jason Baik

#2
Back-of-the-napkin math is great for investors who already know what they’re doing, but newer investors really need to master the numbers behind real estate. There’s a ton of levers that impact returns - you should either know how to overcome these obstacles through experience or learn how to plan for them.

If you’re starting in multifamily, accept that underwriting requires some work and dive head first into spreadsheets. Udemy classes, digital events, and masterminds are a great place to start.

You want to learn how to swim? You start wading in pools… you don’t take a bath at home and expect to learn the backstroke.

You want to learn to underwrite? Dive into the spreadsheet. Don’t use oversimplified rules as a crutch. I know it’s easier to just divide a few numbers but I promise you it’s not doing you any favors.

#3
Anyway, here’s a list of free (or very low-cost) resources that will teach you how to underwrite:

Justin Kivel on Udemy
➕ good logical flow⠀
➕ Udemy course that walks you through⠀
➕ can buy it on sale for ~$15⠀
➖ a bit overwhelming with the details⠀
⠀
Michael Blank course
➕ in-depth⠀
➕ has a video tutorial + examples ⠀
➖ ~$130⠀

Symon He ⠀
➕ video course explaining the spreadsheets⠀
➕ includes all the core needs of MF⠀
➖ choppy flow. ordering of course sometimes confusing⠀

One-off Youtube videos:
https://www.youtube.com/watch?v=zQeLumLMlAE

https://www.youtube.com/watch?v=61dfn1RuJdg

https://www.youtube.com/watch?v=MoDMfwP5AVk

https://www.youtube.com/watch?v=Y0n8qJyBgyk

Why do I share this?

Because these are the same exact resources that I spent the last half year improving upon.

My last post about my start in real estate got a decent amount of traction and I'm looking to continue providing some value to those starting out.

I'm a former data scientist and my superpower on teams is underwriting so I'm sharing tips / advice / perspectives on this niche skillset.

Underwriting isn't the most glamorous or lucrative skillset but if you're just starting out, it's (in my opinion) the BEST way to build your knowledge and confidence. You can find deals or raise capital by reiterating some key points but being an underwriter means you're the one responsible for most of the numbers-related questions. You're forced to learn about debt, market rents, investor returns, macro trends, sensitivity analyses etc. in order to underwrite effectively and help your team navigate getting that deal closed.

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Tip #1/ Underwriting neither begins nor ends with a spreadsheet. If you’re defaulting straight to an Excel when you’re looking at a deal, your process can become more efficient. My personal tip? Drive around on Google Maps first. Does this look like a place that you’d want to invest?

I'm guilty of spending 5 hours filling out a spreadsheet before realizing the property was in a class D area (which isn’t my strategy).

+++

I'll continue to update this thread every single day (workdays and non-holidays) for the next 30 days.

Jason

It seems like a lot of investors have given great specific advice but I'd like to comment on some of your mindset + beliefs. I see a lot of language from you that seems defeatist and I believe it's feeding back negatively into your journey.

In April, a medical collection popped up that I truly had no knowledge of and another item from years ago
I can't seem to figure out how to make it work.
I can't seem to find them. They seem to be like unicorns.
I don't seem to find anything tangible to grab hold of or follow to actually get the ball rolling
Both my wife and I are going at this entirely alone
we just need a little wind on our backs

Be proud of the progress you've made, know that you're taking the right baby steps by posting on BP, but tweak some of that language that you use for yourself. You're not alone if you meet some people at local meetups. Everyone else can find these lenders through Google so you can too.

If it gives you any comfort there is no magic solution here. I'm a bit confused on the tactical side of your problems because I can literally Google right now and find dozens of "hard money lenders" and "private lenders" - my guess is that you have a bit too much of that self-deprecation that's clouding your thoughts. Best of luck.

 Same as above! You can go to our website via my bio and sign up for updates. BP doesn't let me include links in forum responses.

 Our website's in my bio. We're in the process of revamping but you can at least get on our list.

@Carlos Ptriawan There's a lot that goes into being a full-time multifamily investor / syndicator and property management is a very small fraction of it. I still love analyzing data but the higher I went up the corporate ladder, the less data I actually analyzed. I actually get to create processes and grow a business in real estate - something I enjoy much more than dealing with executives, managing teams, and fighting internal political battles.

@Jake Handler I'm in Middlesex and most of the portfolio is spread out across Ohio: Cincinnati, nicer areas of Dayton, and towns in-between. Most people follow the same rules for picking a location: look for great HHI growth, job growth, etc. Unfortunately, everyone ends up in the same locations: Florida, North Carolina, Phoenix, Texas. We stay in Cincinnati because of our competitive advantage. My partner is local to the area and we've developed a long list of GCs, lenders, brokers, and partners. Cincinnati is a perfectly average market on paper if you compare it to Dallas but we're able to make it work and get some great returns.

Nothing special in terms of the process: Met up with brokers in my area, underwrote hundreds of deals over 6 months, submitted dozens of LOIs and eventually found an offer that worked.

It was marginally less competitive when I bought my SFHs - I could offer at asking and have a good chance of getting my offer accepted. There was an investor looking to sell 20 of his SFHs as a package on the MLS and it crossed my desk during my daily search. I didn't have enough capital to buy 20 and a majority of the houses were overpriced so I wrote a cover letter and made an offer on just 2 I wanted. I had seen the listing within a few hours of it being posted and submitted an offer that afternoon.

Turns out that another investor (we'll call them Sam) was interested in about 10 of them. The seller countered us both - if Sam was willing to up their offer to take 14 of the 20 and I could take 6, we'd both have a deal. I never had any communication with Sam but it worked out.

Mind you I thought buying 2 at once was a stretch but I had to somehow get into the right mindset to buy 6. The numbers worked and after a lot of internal debate, I had to logic myself into a decision: If I bought these 2, I was going to eventually refi and use that money to buy more SFHs anyway BUT the price on these 6 as a package was way better than I'd get in another year on an individual SFH.

I was getting a Costco-sized discount for buying in bulk and instead of shying away from the chance, I pooled together the money from friends, family, a HELOC, etc. and went for it. Again, not an easy decision - I spent almost 10 hours checking every number to gather the confidence but eventually pulled the trigger. I added another SFH to my portfolio a few months later but that one was pretty standard.

As much as I love to share numbers, it's an unnecessary risk to share exact percentages on such a public forum. Most attorneys and CPAs would advise against it.

I can, however, provide general commentary: I don't like to use unit counts as a metric. People can say they have 1000 units and own 1% of the deals, 15% or 99%. Co-sponsor deals are usually very small percentages and in my experience, it's mainly marketing for investors (or capital raisers) so they can put it on their website and make posts like this. :)

As a lead sponsor, I take a much bigger chunk. It's a smaller unit count but I play a larger role in finding the deal, putting together the team, asset management etc. and on top of that with a more favorable GP split, more GP equity, and a better hurdle, I stand to make hundreds of times more from a lead sponsor deal (but obviously have a ton more work).

In terms of yearly income, my goal has been to re-invest every dollar I make - I've been rolling my fees back into my own deals to 1) show my partners I'm committed and 2) because I didn't want cash lying around. My single family homes cover my baseline expenses and I've committed to living a minimalist life for a few years (I'm naturally a frugal person so it's not that bad for me personally). My cash flow today is probably a 1/4 of my corporate annual income but I'm hoping to explode my net worth in a few years. 2nd half of 2022 and 2023, I'll focus a bit more on cash flow - maybe try to create an online community / UWing course or stop rolling in all of my fees into the deal.

@Lee Whitford

My evolution went something like this:

Once I had a decent rhythm for stabilizing my single families, I decided to pivot and figured an online event was a good first step. I looked up "multifamily event" and picked the first one that popped up on Google. I paid $100, attended a two-day Zoom session, and took a lot of notes. The event offered a $25k mastermind to get taught multifamily but... I had a bit of a chip on my shoulder so I made the decision to go about it my own way.

I reached out to a few of the attendees afterwards, finding more people on Facebook + Linkedin and asked for intro calls. I offered to underwrite for free on every Zoom call and discovered that most people would gladly promise a small portion of equity for it. In hindsight there was no way I was going to close a deal with randoms who also had little experience but it was a start.

I wasn't satisfied with Zoom calls so I decided to attend an in-person event. Again, I looked around and just picked an event. I paid $1,000 for the event ticket despite knowing absolutely no one but I knew it had to be done; I printed some business cards and committed to meeting new people. The event had a Shark Tank portion that allowed participants to present in front of well-known investors and I volunteered. As an aside - this wasn't a walk in the park for me. I'm a hard introvert so I hate attending events and abhor presenting but... again, I knew I had to get noticed. I spent a week practicing my pitch, prepared a one-sheeter, and presented. The deal itself was mediocre and I was the only presenter who was a complete newbie but... I made an impression. I tried to be relaxed and mildly funny, my one-sheeter looked fantastic in comparison to the rest, and afterwards a lot of people wanted to chat.

That first event was the spark I needed. I found a group at the event that needed an underwriter. They were hesitant at first but they were mildly impressed by my boldness to present so they gave me a shot. I spent another X hundred hours underwriting for free but this group had access to another experienced underwriter through their mastermind who would check my work (I am not in this mastermind). I hopped on dozens of calls with him through which I refined my UWing process. Access to someone with genuine experience allowed me to download a ton of real-world knowledge in a short amount of time. It's not what I was expecting but I ended up getting 1-on-1 underwriting coaching for free.

I didn't want to be a mere "employee" so I kept looking for others to potentially partner with. I eventually met Jay over a Zoom call based on a recommendation from another investor (I had never stopped doing this). We got along, met in-person at MM4, and I decided to take a risk by flying to Cincinnati on my own dime and spent a week hanging out with Jay - looking at deals, meeting other investors, bonding while we drove around. Jay and I got along incredibly well and I also provided value for his gaps - I could underwrite (confidently given my 1-on-1 coaching now) and create processes while he loved being on-site and meeting brokers.

We've been partners for almost a year now and after many hours of chatting through business priorities, spending a ton of money on education + outsourcing, and many flights attending events together and on our own to grow our network, we've had a good year.

I didn't think there was a common theme here but after writing all of it out, there is indeed a similar thread. I followed a very generic scientific process: make an educated guess > take a risk in testing it out > refine the approach > try again. I read random books, attended random events, briefly partnered with random people and over time, I've been able to optimize.

I want to emphasize that despite the process being pretty simple, each decision was incredibly hard. Spending thousands of $ to fly to an in-person event and then to Cincinnati with no promise of any return, spending hundreds of hours and pulling 90 hour weeks to underwrite for free, getting in front of sophisticated investors and pitching them a deal as a complete newbie... I've had my fair share of restless nights and candid chats with my wife throughout these past few years but ultimately I always chose to take a risk so I could make some sort of progress.