All Forum Posts by: Justin Goodin

 16 terms you need to know in commercial real estate:

1. Internal Rate of Return (IRR): A metric used to estimate the annualized return on an investment based on the timing and magnitude of cash flows.

2. Cash-on-Cash Return: The annual income generated by a property expressed as a percentage of the initial cash investment.

3. Discount Rate: The rate used to discount future cash flows to their present value in financial models; often represents the required rate of return.

4. Capital Expenditures (CapEx): The funds set aside for property improvements, renovations, or major repairs.

5. Gross Operating Income (GOI): The total income generated by a property before subtracting operating expenses.

6. Operating Expenses: The costs associated with managing and maintaining a property, including utilities, taxes, insurance, and maintenance.

7. Debt Service Coverage Ratio (DSCR): A measure of a property's ability to cover its debt payments, typically calculated as NOI divided by debt service.

8. Loan-to-Value (LTV) Ratio: The ratio of the loan amount to the property's appraised value, used to assess risk in financing.

9. Equity Multiple: A measure of the total return on an investment, calculated as the ratio of total cash flows to initial equity investment.

10. Residual Land Value: The estimated value of land after deducting development costs and desired profit margins.

11. Sensitivity Analysis: A technique used to assess how changes in key variables (e.g., rent, expenses, interest rates) affect financial model outcomes.

12. Operating Pro Forma: A projection of a property’s income and expenses over a specified period, typically used for budgeting and financial analysis.

13. Cash Flow Waterfall: A structured distribution of cash flows to different stakeholders in a real estate project, often involving equity investors, lenders, and developers.

14. Leverage: The use of borrowed funds (e.g., a mortgage) to finance a real estate investment, potentially amplifying returns but also increasing risk.

15. Equity Investment: The amount of money invested by equity partners or investors in a real estate project.

16. Yield-on-Cost: The return on an investment based on the original development or acquisition cost.

Totally agree. Always use extreme caution when picking the right sponsor to work with. Do the same when taking advice from random people hiding behind their keyboard on the internet. 

I sent a letter to find this apartment complex.

The owner called me a few days after receiving.

We closed 3 months later.

Here’s an overview of the deal 👇

// 16 year owner

// 100% classic units

// 33 units in Indianapolis

// Avg rent was $400 below market

The letter cost $1.

Purchased the complex for $1.36M.

Raised $500k from passive investors.

Spent $550k in improvements.

Now it's worth over $2.5M.

I think that letter was worth sending 💪

Have you ever thought about using direct mail marketing?

Quote from @Scott Trench:

@Justin Goodin - I'd be interested to learn more about this. 

I want to call out some incongruities here, given that you just DM'd me asking to delete @Melanie P.'s direct challenge to you. 

1) Your post is literally titled "You Don't have to buy a 400-unit for your first deal". 

2) Melanie is calling you out on this one because the deal at the bottom of your "portfolio" page on your website (a reasonable person can infer that it is the earliest acquisition for Next Level Equity) is literally a 236 unit apartment building, which is a little incongruous with the title of your this forum thread you started. 

3) Melanie is directly challenging you, stating that she doesn't believe you were involved in the deal. And, alleging your response deflecting her challenge. 

4) You DM'd me asking to delete Melanie's posts. 

5) You are the most prolific contributor in this multifamily forum. 

You can see why this set of facts is setting off a number of alarm bells for me. My job is to preserve the integrity of this brand, and that starts with an open and honest forum, and the ability to be frank. 

Good operators deal with challenges all the time - that's how they raise capital from skeptical LPs, like me. 

You can put them all to rest by directly answering Melanie's question. I'd like to know now too.

 Thanks Scott! 
I don’t owe any troll an explanation or proof about anything on my website. It’s a pretty small world, so you both can ask around and I’m confident you will hear great things about us.  
I’m also challenging Melanie to prove her identity 😅 This is a random person with no info or profile pic, hiding behind their keyboard. 
This is a little surprising that such trolls are allowed here on the forums. And they are allowed to spread misinformation. That’s why I asked for it to be deleted. It really hurts the quality and conversation of the group. 

Thanks for checking out my website!

 Totally agree! Don't focus on unit count when you're getting started. Focus on buying great deals. 

 EXACTLY! You said it yourself 😅

What does it matter what you think about it? I’m glad you finally understand!!

 What do you think it means? 

📈 Preferred equity (PE) is the layer of a capital stack that sits in between common equity and the senior debt (or sometimes Mezz).

Since we always read the capital stack from the bottom up, we can see that senior debt is always paid first, then preferred equity, and then finally common equity.

Often PE investors are providing a large chunk of equity, and therefore, want to get paid first (preferred position) before the common equity.

By getting paid first, the PE provider is in a less risky position compared to the common equity investors.

✔️ Important: PE is interesting because it has characteristics of both debt and equity. Meaning, preferred equity often gets paid a fixed rate of return (like debt) but can also still earn tax and depreciation benefits (like equity).

👉You don't have to buy a 400-unit for your first deal

But I would recommend this:

Just get started.

Figure out how much time you have to devote to real estate investing and determine your goals.

You can get started in 3 ways:
1. Buy a 6-unit on your own
2. Acquire a 40-unit with a few local partners
3. Invest passively with an experienced real estate investor

Stop procrastinating
Stop having analysis paralysis

Taking no action is the riskiest thing you can do.

// Let me know if you plan on investing in real estate this year 👇