All Forum Posts by: Jay Khoury

@Steven W.

Steven:

You are definitely on the right path thinking about scaling. With bigger unit numbers, you shorten the time to reach your goals.

The most important step in this whole process is to put a very specific achievable goal: example, “ I want to make $ X a month to replace my income”.

As far as commercial loans: there are two types, recourse and non-recourse.

Recourse loans are generally bank loans, that put you personally on the hook. Generally banks like to minimize their risks, that’s why they want to amortize for 20 years even 25. Bear in mind with higher amortization time your rates will be higher. Also recourse loans rates are way more expensive than non-recourse. Trust me, I know!

Non- recourse are the exact opposite: you are not personally responsible but it requires certain criteria like experience etcetera: These are Fannie Mae and Freddie Mac.

All professional real estate investors go with non- recourse.

Real estate is a numbers game, the bigger the better. It’s also a team sport: you cannot do it on your own. You need to build a team.

I invite you to shift your mind set from recourse loans ( the ones you’re referring to) and start considering non-recourse options, which will take you the syndication route.

When I started thinking about syndication, it took me a while to let go of my preexisting beliefs of having to control every single step of the process, including fully controlling the property. Syndication, and real estate in general is built on the premise that with experience come more units.

I know I digressed a lot. But It is really worth it when thinking about loans to consider your options because the most important element in real estate investing is TIME. You build your net worth with time. And you don’t want higher interest rates eating from your time. You are very limited in your scaling options when you approach it as an individual.

Feel free to reach out if you have any specific question!

@Stephen Scire

I have not attended any meetups in Boston. I have not looked into it because I don’t see myself scaling my business in this market. For me, It’s almost next to impossible. I learned through smaller deals.

Aside from prices being too high, I find the following factors to be inhibitive :

- More restricted capital markets

- Less landlord friendly ( compared to Texas or Florida for example)

As far as Dallas/ Fort Worth, I find Old capital Lending to be super informative. They are a market leader and have an extensive network of brokers, investors etc. They have a podcast that is very informative about Multifamilies in general and Dallas Fort Worth specifically.

@Lucas Miller

- Find a good mentor

- Don’t think that you have to start small and go big. The bigger, the easier.

- Network with like minded individuals and don’t waste your time in wrong circles

- Budget properly for your deals and unexpected events. You don’t want to go back to investors in the middle of a deal to raise more equity.

-know exactly what your target is: 150 units vs 90 units, class B , C or Class A, workforce housing etc...

- surround yourself with top notch experts in their field. You cannot do it in your own. It’s a team sport.

- Keep on learning. Don’t do one deal and think that you know everything.

- You can always invest as a passive investor for a few deals and see how it’s done.

@Stephen Scire

@Stephen Scire

Hey Stephen,

I too am in Boston and have struggled with the same problem.

I have enough equity to take out up to 1.5 mil.

The problem, however, is finding the right property in our local market to justify the use of these funds.

I am currently looking into Dallas / Fort Worth market where you can tap into bigger deals. As an example a 3.5 Million purchase may get you a 25 unit here compared to say 50 units in Fort Worth area.

And with the economy of scale, It becomes a real business versus being a mom and pop smaller operation. I can hire a management company with a 50 unit property. I don’t have the luxury to do so on a 25 unit.

Also, in out of state markets, I found that investor networks are more mature than in Boston with more opportunities to syndicate on deals.

Multifamily investing is about building a great team. I found that there are a lot of great resources to build such teams in Dallas. CBRE reports Fort Worth as the second multifamily market where investors tend to invest, behind Los Angelos.

I

Aside from real estate being very local, some general principles I follow that serve in any economy :

1- Follow proper underwriting principles based on my specific investment style ( value add etc..)

2- Use leverage to my advantage but never over leverage my position.

3- Keep proper cash reserves.

4- Educate oneself in the economy of the market I’m investing in, including jobs, changing demographics, historical cycles etc...

5- Surround myself with the proper team members who will cover the areas I am weak at and are real experts in their niche.

6- Knowing when to cut my losses.

7- I use real estate investing as a way to achieve more important milestones In life including family, health etc... this keeps me focused on the big picture and adds more objectivity to the process.

8- The bigger the portfolio, the more risk one gets exposed to in a turning market and the harder it gets to change direction. A 100 unit operator may have other needs and goals than a 10,000 unit operator. This goes back to #1 about knowing my investment style and Following proper underwriting principles.

These rules have allowed me to not worry much about being bullish or bearish and focus more on what I love doing.

Hey Matthew! Sure looking forward to exchange ideas!

Jay

Hello BP! I am looking for some insights on investing in Leominster, MA. My current portfolio mostly consists of duplexes and triplexes in the Greater Boston area. I am looking to get into 6-12 units and I find Leominster ( or Worcester ) generally financially attractive. I don’t, however, have any experience in that market in terms of rental outlooks, neighborhoods, Vacancies, help, management companies, snow removals etc.. I have looked at many More affordable areas including Lynn, Lowell, City of Worcester - but I find myself somehow pulled towards Leominster. It’s attractive to me because it is big enough but less risky than Worcester- in a big city like Worcester it is essential to know the neighboordhoods- I feel that it’s not as essential to do so in Leominster- Lynn is attractive but it’s getting to be overpriced- the rents do not support the prices- there seems to be a lot of speculators in Lynn- flIppers. I am a buy and hold. In Lowell it is impossible to currently find a good deal on a 6 unit, one that generates a positive cash flow. Any recommendations on management companies, plumbers, builders, specific neighborhoods, past experiences( the good and the bad) or even on proving me wrong in my assessment of the area. Jay

@Benjamin Robertson Northern Bank and Trust is a great bank to work with for portfolio loans. Good luck!

I see more opportunity in using ML tools, as a business model, for the intersection of Appraisal, Lending and Development. Think a startup mentality version of Marcus & Millichap, using the same kind of datasets.