All Forum Posts by: Kris Bano

Kris, I have a seven-figure directly-owned real estate portfolio and another one for passive real estate investments (crowdfunding/old-school syndications). In my opinion, both types of investments have their pros and cons and neither one is 100% superior to the other. And I prefer the diversification of having both.

One of the cons of directly-owned real estate is that it takes time, work and effort to do well. And sweat equity is what allows the investor the potential to get a higher return than a passive one.

But you're saying you have no time (with a full-time job and on top of that was starting a business). Under those circumstances, I would not even attempt to try to create a direct investment portfolio.

Plus it sounds like you may be in a position where every hour you put into your full-time job and starting your business potentially makes you a lot more money than every hour put into directly owned real estate. If were in that situation, I wouldn't bother until the dynamic changed (i.e. the new business has stabilized in a couple of years where it doesn't require my effort and time anymore).

On the other hand it does sound like you have enough time to analyze investments (which is all that passive investing requires). The cons are no additional return for sweat equity (but for you that's not an option). And the plus is that once you choose a manager, your job is done and it's truly passive. Also, if you choose well, you can find a manager who has years more experience than you can ever achieve on your own (and avoid newbie mistakes that would be easy for you to make with directly owned). And there are hundreds of these deals that come out every month (to look at).

Good luck.

Hey Kris,

What are your goals for investing in real estate now?

It sounds like you're going to have your hands full with your practice. Are you wanting to build cash flow or are you aiming for just having some RE exposure and appreciation without concern for cash flow?

That's important.

But beyond that it sounds like you'd best be served aligning with a team that can take a lot of the lead on the real estate stuff. That way you can move forward with it but continue to focus on your practice.

I would use the "Buy Off Market", using "Subject To" selling on "Lease Option" (BOMSTLO) format. The cash flow is great and you get the "down payment" up front. And it doesn't take up a lot of your time. No property manager needed and you can offset your income with tax deductions. I'm not sure where you are, but AZ, GA, FL, OH and IN are great for this. Socal, not so good. L.A.

and San Diego

markets are expensive enough that the numbers aren't great. I'd stick to where it works.

Very cute property. 

Only thing I would say is, what is the expected rent without the new bathroom, what is the expected rent with the new bathroom, and are there other properties in the area doing this to base your predictions off? 

Don't really have advice, but hopefully me commenting on this will help it get to the "Newest" section of the forum and another more qualified individual may be able to provide insight!

Sure! 

I spent a bit working as an analyst in commercial real estate, so I have been familiar with deal underwriting for some time, however, STR is a bit different.

For projected income, I used AirDNA's rentalizer to get a general idea and then leaned heavily on comparable STR properties. I found a manager who I am using that managed one of the comps as well and did a back-of-the-napkin analysis with them as well which confirmed my projections. It is an out-of-state rental and my first one so I decided to use a well-established manager to help ensure success.

In the offer period, I had the cap that I did not want to go above and when we were faced with a bidding war, I was given the option to come above my cap by about 35K to win the property. I asked the sellers to include the living/dining and basement furniture to come up with the price. With financing the difference, I just had to cover around 7K of down payment costs. The furniture left was more around 12K worth, so I made out well there.

In all, the increase in purchase price only moved the needle for my cash-on-cash ever so slightly, and I could have easily lost the house if I had analysis paralysis and asked for time to think about it. I knew that this was going to be a long-term play and I wasn't looking to squeeze out as much profit as possible as I would in a flip as there will be opportunities to improve on it in the future.

There are some great STR underwriting spreadsheets you can use to analyze the deal from a quick google search. I found one that I liked and made some tweaks myself such as removing appreciation from the annualized return as that is not tangible until a cash-out refinace or liquidation event.

It was definitely daunting but you can't learn to swim unless you get in the water. This is my first one and I certainly have a lot to learn, but I am excited to do so!

Chris