All Forum Posts by: Account Closed

@Omar Khan Unfortunately I did not find anything out there yet.  If you have any deals, let me know.

Thanks,

Luke

The best way to get these costs is just ask your mortgage broker what they expect these costs to be for your market.  They usually have a pre-filled sheet with all those numbers.  I would take those numbers and add a little bit more just in case.  FYI - I bought a 54 unit but my costs were a little skewed since I did owner financing.

@Roopali Bahal

Wow, if we all knew the answer to that then we wouldn't have anything to do.  Big question.  Definitely much harder to answer that question.  Markets are always changing.  I would just recommend that you set your criteria and be flexible on the markets.  That way you can shift as markets change away from your criteria.  When you are starting, I definitely recommend staying close to home.

@Ryan Davidson  I agree with all the other posters here.  Cap rate is junk.  Also don't be concerned about the 2% rule or the 1% rule or any other rules.  Those rules are meant to be there for people who are learning their ABC's.  Value is based on the cash flows a project will be able to generate.  Period.  How is the 2% rule going to tell you that?  At the end of the day, how much money are you going to make with your $500k investment and are you going to be happy with it and do you have enough cushion if something doesn't go out the way you plan it to go.  Because all investors answer that question differently, the value is in the eye of the beholder.  Focus on analyzing the deal and see if it makes sense for you.

My opinion on this is that you want to be maximum leverage based on the worst case scenario.  What I mean by that is if you have cash reserves sitting on the sidelines, maybe 100% leverage is not a bad idea.  If you don't have any cash reserves to support a downturn, maybe it is a terrible idea.  You need to figure out how much liquidity you have to support you in downturns or when things don't go the way you planned.  That is how all large corporations manage their cash for maximum equity.

Practically, I would start with the DCSR ratio (mortgage/noi).  I personally wouldn't want to do anything less than 1.2 or that would be too risky for me.  Then I would stress test it with what-if scenarios.  If I have cash or lines of credit that can support through any downside scenarios, I am good.  Otherwise, I reduce the leverage.

Hope that helps.

@Joshua Ryan Meador

Before you make some drastic moves, I would try to figure out why there are so many good deals coming out on the market like that.  Is there something happening to the neighborhood?  In terms of jumping in too fast...I always say go big if you feel confident in your abilities.  Figure out what the worst case scenario is.  If you feel the worst case is that you could lose all the money and you are not ok with that, maybe you scale back.  However, if this is money that you can easily replace after a while, then what's the risk.  Always balance your risk and reward.

@Paul LaSpina

Thanks for the clarification.  In that case, I would say it is not a tall mountain.  You can get all of that with some work.  If you don't have experience, as long as someone on your team, has experience you should be good.  You probably have more real estate experience than I had when I started, yet I was able to acquire a 54 unit.  Your mortgage broker can find a product that fits your experience but it will be difficult to do it without having team members.

Wow.  This is a fun topic compared to a lot of other posts here on BP.  I have to jump in.

My advice to you is to stop focusing what others are selling or not selling.  Once you accept the fact that everyone is trying to sell to you, you can just take the best parts of what people are giving you for free and decide if you want to invest more.  I go into every real estate meeting expecting to get pitched with something.  It makes it a lot easier to keep your expectations like that so you can really get the most out of it.  Emotional decision making can make you broke real quick.

FYI - I never took a course, maybe bought 1 book.  I bought a 54 unit in 11 months with no experience.  All the information that I acquired was online.  However, I am not saying courses are bad.  Every person has a different life experiences, desired time frame of learning, needing hold handing, etc. so a course might work for them.  Others have tremendous business experience that can easily translate into the real estate industry quickly.  Getting to the finish line is the most important thing.  Does the vehicle really matter?  Some people need to go to college to get a job, others don't.  Same concept.

Side point:  It doesn't even matter at the end of the day if you are getting free advice or spending thousands on the course.  The people who are going to be successful are going to be successful.  I am sure if there were statistics of people who became successful after reading that book or that course is probably low.  It's more about the person consuming that information than the medium itself in my humble opinion.

I don't want to be the negative one on this thread but my suggestion would be to just wait.  There is no rush to get into something.  There will always be deals tomorrow.  I rushed into one thinking I couldn't wait and then I ultimately bailed on it and lost some deal cost.  A couple of months later a GREAT deal popped up.  Don't rush into something thinking if I don't take advantage of this opportunity, it will be gone tomorrow.  If deals were only open for a limited time all the investors on this site would not have anything to do.

If you don't have cash, nothing wrong with saving up.  Save up so that you can at least partner with someone.  You should be focused more on how to generate your income or reduce your expenses so you can save cash.  If you can't manage your own house, how are you going to manage someone else's.  I don't say this to discourage you but to give you a different perspective.  What investor or owner is really going to trust someone who can't take care of their own personal situation.

While you are saving up, keep educating yourself and grow your network.  Once you saved up enough to do your own deal or with partners, you will also have the network and knowledge to be a huge success.  Don't give up.  Just be patient and enjoy the process.

I don't think that is correct.  My personal banker is encouraging me to take one out to use for my real estate strategy.