All Forum Posts by: John Wijtenburg

@Cameron O'Connor Awesome work. Thank you for sharing.

Looks like you learned a lot from this deal. What are your plans for new deals going forward?

Any lessons on deal sourcing?

@Joseph B. Sounds great. Please feel free to get in touch with any questions related to sourcing, underwriting, and managing your deals. Good luck!

Thanks for sharing and congratulations, @Dennis Juanir!

Looks like a nice deal. I have a few more questions, if you wouldn't mind...

1. What is the living and rental arrangement? Airbnb? Students?

2. What was the biggest challenge you had getting to this point?

3. What is the biggest challenge you face now?

4. How did you finance the deal?

Welcome @Joseph B.

You're definitely in the right place if you want to build a real estate investing business that offers financial freedom.

What are the things that you need the most help with right now?

The most seductive thing to do first is get the LLC, branding, URL, bank account, and other infrastructure. It's only natural to think that a business must be officially a company before you can start doing business. Over the years, I realized that this comes after much more ground work.

Great businesses are built on remarkable relationships.

First, get to know people in the industry. Build relationships that will deliver mutual value.

Next, learn about problems that you can solve.

Then, build products that solve that problem.

In real estate investing, your deal making expertise is the product. You serve investors, lenders, tenants, and the community by creating real estate that provides financial return, safety, comfort, and connection. 

This may seem a little "woo-woo," but your mission and vision will drive all the other technical aspects of your business. The infrastructure will come together (and be paid for) by connecting with people and filling an unmet or underserved demand.

Find the mission-driven team by connecting with brokers, owners, and influential third-parties.

If you have that piece covered, and you're only interested in the technical side... get a good attorney and accountant. They will guide you through the technical pieces.

All fees in a deal should allow the developer to keep the lights on. Your profit is most likely coming in the promote.

For a project of that size, I think 3-4% of hard costs would be fair - approx. $90k-120k paid monthly.

You should also consider taking an acquisition fee at closing and an asset management fee upon opening the strip center. This is your business, and you're providing value for these services. I point this out because too many developers are overly generous at discounting the value they add.

Even if it means the distribution waterfall is less favorable, these fees allow you to hire people to help scale your real estate investment business.

You can do this in a few ways, but I would take an approach that separates the interests.

Think about your property as an equity contribution in the joint venture. You're contributing land, which has a value, and your partner is contributing cash. After that, distribute the returns at a market rate based on who's doing the work.

For example, assume the following.

• Land Contribution: $10,000
• Cash Equity: $30,000
• Total Equity: $40,000
• Project Loan: $160,000
• Total Sources of Funds: $200,000

• Land: $10,000
• Hard Costs: $145,000
• Soft Costs: $30,000
• FF&E: $15,000
• Total Uses of Funds: $200,000

The joint venture can then be structured as pro rata split to an 8% preferred return and 50/50 split on everything thereafter if you are doing the work. Otherwise, you may go with a 90/10 split on everything above 8% preferred return.

Another way to do this is to give 100% of profits above the preferred return to your partner until s/he gets all the cash back an then split everything pro rata.

Everyone that provides value should get a fair return on their contribution. You are providing land and an opportunity to build an ADU. That is valuable and deserves a fair market return (+/-8%), and you should be compensated accordingly for building the thing if you run the project.

Hope this helps. Please feel free to connect and DM me with questions or to run through some alternate scenarios.

@Andenet Berta you came to the right place. Poke around this site and pick up a few books. The free course is a good place to start.

I'm happy to be a resource if you have any specific questions as you go along.

Also, check out my member blog for tips to enhance your business.

The Zestimate is an output from their automated valuation model (AVM).

AVMs are great benchmarking tools and they are helpful in analyzing massive amounts of data, but an on-the-ground valuation is usually closer to reality.

For some color, at Fannie Mae, we built a discount into the HAMP NPV tool for AVM because it usually overshoots value for a distressed asset. 

Easy (IMHO):

1. Get a partner that builds multifamily

2. Contribute your land at a market basis

3. Learn as much as you can from your partner

DM me for advice on any of these steps.