All Forum Posts by: Account Closed

Hey Seth, appreciate your reply. Cap rate means rental revenue/ purchase price if i am not mistaken. So I am going to do some math based on 5% cap rate (between 4% and 6% in Boston). If purchase price is 10M, 5% cap rate means I would collect $500,000 a year, roughly $41,666 a month in rent.

Now lets assume a 20% down payment of $2M, that mean I would need to get an $8M mortgage on the property. At 4.5% interest rate over 25 years, my monthly payment on my mortgage would be $44,467 a month. I dont need to incorporate the rest of the expenses since the mortgage is already higher than collected rent. And i am spending $2M as down payment....

Is my math correct? Or am I doing something wrong here?

The bank refused to issue a loan on a $3M 12 unit in Mansfield simply because the rent collected would barely cover the mortgage and we would end with a $2,500 a month income on a $750,000 down payment which is around 5% CoC return which is absurd. Might as well buy some government bonds at that rate.

For a property to generate income, i usually look fro 12% to 16% Cap rate. Meanwhile, for example, if you go down south to Fall River, although not a prime area, however we own a 15 unit complex that we collect $15,000 a month, we purchased it for $800,000, so down payment was around $150k, fixed it up, now ARV is around $1.6M as appraised by the bank based on rental cash flow. Regardless of ARV, collecting 15k a month = $180,000 a year . So Cap rate at purchase was 180k/800k = 22.5%. After paying the mortgage and expenses we net $8-$9K a month off that complex which is $8,000*12= $96,000 a year. So cash on cash return is $96k/$150k = %64.

Just to give you perspective thats the type of real estate we usually buy, excellent heavy cash generating properties. I know I wouldn't find such gems in Boston, but i was expecting at least to make %15 to 25% cash on cash return on my down payment since its leveraged by a mortgage, anything less would be unacceptable by my standards.

Feel free to double check my math if i am wrong. Just trying to make sense of Boston real estate.

Hi, I have been browsing some properties, and the more I drift towards downtown big cities like Boston or Manhattan, I see these 8 to 16 unit complexes priced at ridiculous prices (understandable because of location) but it seems extremely high compared to the rent you can collect off of it. And what is more funny is how brokers advertise it as an "investment property" when the total rent clearly doesn't even cover the mortgage itself, let alone taxes and other expenses. Like a child can see that it doesn't make sense. Whats the point of putting down $1M to $2M as a down payment on a $5M-$10M property and lose money every month or at best break even? Like who buys these properties usually? Like these complexes are clearly meant for investors, so how come sellers price the property at an extremely high price that the rent wouldn't cover the mortgage and expect to find people buying them? That's like every investment property in downtown Boston or Manhattan..... Just want to understand the logic or market behind such properties? Or is it meant for cash buyers only? 

How can I as an owner of a consumer private lending company issuing line of credits raise funds or capital to lend people under my business. Is it possible to issue corporate bonds to the public if it was a corporation? Since its an LLC, I know I cant go that route yet. So what are my options to raise capital to lend to people, get my returns, pay back the investors on the agreed interest rate and then pay myself the rest? Thanks in advance!

@Account Closed Hi Dino, thanks for taking your time to explain a lot of details, i really appreciate it. I didn't know JV was a separate thing in real estate, always thought it was the same as syndication. Yeah the tricky part is that on paper I look like I have zero skin in the game, but in reality i have read a lot of books, listened to podcasts and my father is a real estate investor and was a real estate developer overseas, and i have learnt a lot from him, all the tips and trick for over 4 years now.

A little back drop of where my drive comes from:

My father came from nothing as a refugee and has no college degree at 18 yeas old. He started in the real estate investing business when he bought his first property at 23 years old. Fast forward to the 2008 crash, it hit him hard and he left his properties to the banks. He left the US at that time, and then returned back in 2015 the same time i came to the US for the first time. Starting all over again in 2015 with 80k only, he house-hacked and started flipping houses. I once witnessed him buy a building on credit cards as a cash offer! He made 200k after fixing and selling that property! Fast forward to 2019, he now owns dozens of rental properties in form of complexes and multifamily buildings worth millions of dollars collectively. His past real estate mistakes has made him stand back on his feet and become stronger than ever. He is the true definition of never giving up that i witnessed in my life, can you imagine losing most of your money at the age of 55? That never fazed him, he started from scratch, and i have never once heard him complain about his financial situation or feel bad even though he had 4 children to feed. Seeing him turn 80k to millions in 4 years through real estate investing and flipping blew my mind. I watch people work for decades and never see a 100k in their bank, let alone a million. And never have passive income and financial freedom. Real Estate is one of the best ways to achieve that for the average person!

Long story short, i had first hand experience in a lot of his deals, I would always, and still to this day help him analyze real estate deals, search for properties with him and also i manage a 15 unit complex for him, i handle tenants, draft leases, collect rent and all that to gain experience. So i do have skin in the game from the knowledge perspective, and i have him on my side for assistance and advice. I just never had deals under my name since i am too young with little money. So i do understand that a lot of people would see me as a rookie, but under this skin is a lot of first hand witnessing to deals, analysis and management. But banks and investors can't see that since i never had a piece of real estate under my name.

I am house-hacking my first 3 or 4 unit in 2020 after i file my taxes, and taking off from there.Im gonna start saving money from my job and extract equity through HELOC or a credit line for future properties' down payments. I am always open to new ventures in real estate and try to learn as much as i can to hopefully maximize my future potential! I just want to take off and do it on my own!

Thanks for the information again Dino! Much Appreciated!

I am sorry if "i" offended your OCD, but i am too busy running and starting multiple businesses in different industries plus being a full time Engineer and options trader to focus on petty details. All that after coming to the US 3 years ago, english isn't my first language home boy. No need to project your insecurities and short coming in life on others by being petty, i thought this was more of an adults forum not Reddit. Big picture thinkers and leaders don't waste time on unnecessary details, they hire people like you to do that for them. I am happy to pay you a couple of hundred bucks to proof read my social media texts big shot. The fact that you focused on picking on punctuation and not content says a lot about you psychologically, life is too short to be miserable big boy, cheer up a little XOXO. You need some Gary Vee in your life lmao.

I was wondering if anyone actually already closed a syndication deal to share their experience, and expectations vs reality. I am looking at a 400k 6 unit building that is positive cash flow. I am 21 years old with excellent credit score with diversified credit types except real estate. I understand i need to get at least 100k for down payment. I dont have that much money. i would like to syndicate and raise that 100k from various investors. And analyzing the cashflow i can certainly give them a 10% annual return on their cash invested. How should i start doing this and do i need to be incorporated to do it? I do have a family real estate LLC business going on if being incorporated is a must, but i want to do this on my own. Can i syndicate this deal with no money down, maybe something as little as 5k? Am i being reasonable? Will investors freak out knowing i am barely putting money down? I want to be the main syndicator meaning i handle all decisions and they only get their return. thanks!

Thanks for the reply, i am new to this and yes i think using bill pay through a business checking is the most hassle free way. Do you know if there would be a transaction fee for bill pay from my end if i use a regular business checking? As far as i know, BOA uses Zelle which doesnt charge transaction fees. Thanks!

I should be fine if borrowers send a wire transfer or ACH bank transfer directly to my business checking too correct? Thanks!

Bank of America says using its merchant services for lending money is prohibited. I then asked the representative, can i open a regular business account for my private consumer lending business where customers pay me directly through my checking and routing number with no integration to any special merchant services and she said that isnt allowed too?????

Which banks do private lenders use for their business?

I am sure this is ridiculous and that representative doesnt understand what i am tryna do?

Do private lenders use banks? If so which ones are the best? Do i have to partner with a bank to become a private money lender? Can't i just open a business account under my LLC and operate by myself?

Any input would be appreciated. Im in Massachusetts and California.

Thanks everyone for the quick reply and feedback, i am in Massachusetts but most probably relocating to Palm Springs California next year. So do i need a lender license for tiny consumer line of credit in these states? What if i lend to someone in florida? does that mean i have to get licensed in each state that a customer might exist?

Now Tamara Deering, thanks for the input, really opened my eyes to an easier approach, but one question, when you say you dont accept online payment, are customers still able to login and see their current balance and due date of next payment? And when customers pay directly through a checking number that means they just go to their bank account and wire a payment to the company's business checking account? And is their wiring fees associated with each transaction? Sorry if i am asking too many elementary questions, i am new to this! Thanks!