All Forum Posts by: Jason Powell

Congrats Steve. Those are some big results. I did a fitness/health goal this year too, but I didnt find much motivation in a weight target. Instead, I signed up for a bunch of Spartan races and Tough Mudders that were WAY out of my fitness league, and that has pressed me to hit the gym more. I have a 14 miler with 35 obstacles in Aspen in 2 weeks. The elevation will kill me. Especially since I had a kid 2 months ago and I've been slacking off big time. 

For RE, my goal was to get more passive. I've sold 9 units this year and am reinvesting some proceeds in Syndications, some opportunity zones and some not. Already starting to get paychecks and life is good :) I don't know why I didnt do syndications sooner. 

If you had a pot of money you have to invest that you needed to live off of for decades, how would you invest it? "Conventional wisdom", modern portfolio theory, and the typical asset allocation of high net worth individuals shows a balance between real estate, publicly traded stocks, private equity, and cash/fixed income.

How risky would it be to invest 100% in real estate? Could a prudent investor go all in on this asset class, assuming the investments were blended across the risk/return spectrum (i.e. some low LTV or debt free, some 1st lien loans, some higher LTV, etc)

I'm asking purely regarding a passive investing style, assuming no directly held real estate but rather only a syndication model as a LP. I'm also assuming one would still keep adequate cash on hand to cover emergencies and recessions where income may go down. 

Angel Investors are not looking to make loans on real estate at 100% LTV, even at sky high rates. They are looking to make investments into start up businesses that are highly scalable and offer the opportunity to 10x, 30x, or 100x their investment, knowing that any particular investment they make has low odds of doing that (and will likely fail completely)

Angel Investors normally have lots of money, and perhaps for a different piece of their investment strategy would make higher risk loans. But most prudent investors would never take a second position at 100% LTV on a newer investor with no skin in the game with whom they have no pre-existing long term relationship. If you find them, congrats, you are a master salesman and could go earn big bucks in a sales gig.

Go cadets. If you are getting at home depot, you can do bid room and get a discount on them too. Total cost should be roughly $100/unit and $100/unit labor tops if you're using an expensive electrical company. $400 seems way high. My electrician does a baseboard to cadet swap in 30 minutes per unit. You can also have a lower cost person pull the baseboards out as part of demo to save a couple bucks. 

Mini splits are good but only adequate for the kitchen/living area of a 3 bedroom. Still need cadets in the bedrooms anyway so it's a lot costlier option. Plus you're right, only about 10% of your tenants will actually clean the filters.

@Eamonn McElroy Thanks. I am aware cash flow is vastly different from the taxable portion of that cash flow. In fact, I wouldn't anticipate any taxable income coming off the investments for at least a few years. What I'm most concerned with is say, selling a property that I own a piece of in California 5 years from  now. I don't want to pay BOTH California state cap gains tax and depreciation recapture AND Oregon (my home state) tax. That would really obliterate my return potential.

If a person who lives in a state with state income tax invests in property, either directly or via passive syndication, in another state that also has state income tax, must that person pay BOTH state income taxes on:

1) Taxable cash flow 

2) Capital Gains upon sale

3) Depreciation recapture

@Ian Ippolito Wow, fantastic response on how to perform due diligence as a passive syndication investor. I feel like BP should make that into an info-graphic or something. I share just about all of the core beliefs and opinions that you outlined. The toughest part for me would be the legal doc analysis. It's nice to have controlled my own deals up unto this point so I have at least some basis for much of the other due diligence and underwriting.

Right now, due to shared late market cycle concern, I'm gravitating towards all new investment dollars split equally between 1) Cash/MM  2) Safer Senior loans (although I hate the taxes on this one) and 3) MHP and SS syndications

@Ian Ippolito Thanks for the super thorough response! Lots of wisdom in what you're saying. 

@Don Konipol  Wow, fantastic and humbling perspective on risk over a long period of history. At this point in the market, I'm very focused on risk management first, as opposed to potential return. From where we are today, how do you think a passive investor should perform due diligence on deals/syndicators if protection against loss of capital were a #1 priority? I can stomach being stuck in a deal for many years with no cash flow and pathetic returns, but I can't stomach losing all my money due to optimistic underwriting.

My current thought is to only enter deals that have longer term loans in place and would be able to hold for a long time if necessary without bank calls, do business with syndicators that rode out 2008 with stellar track records, only do deals that have some sort of value add component, and that have a "story" of how/why the deal is notably better than what an average market deal would be.

@Account Closed  You need to give more to investors than those with better track records. That might mean the first few deals are an unfair split between you (and your efforts) and the investor, however I view that as the cost of getting a reputation built. Investors are always analyzing risk vs reward. In their minds, you will be a higher risk, therefore you need to tip the scale for them.

My two cents.