All Forum Posts by: Mark Masiel

Originally posted by @Ben Leybovich:

 What do you mean by "how could the required DP be only 30,000", Mark?  This is what it is in this particular deal - what's confusing about that?

Hard to believe that you would still get cash flow with that little down. seems very hard to do. If the margin was that big to start with he probably should have got investors to go into a larger down payment and I would think the numbers would be  much better. But if that's the deal then that's the deal.

OK - so, you mean to tell me that you would trade $30,000 in exchange for $5,000 which may happen (of the roof doesn't leak, units don't get trashed, tenants don't skip in the night, main water line doesn't freeze, bed-bugs aren't brought in, and a million other things..) Do you really mean to tell me that just cause the calculator says `17% CCR you'd do the deal?!?!

 I had assumed the calculator was followed correctly in that the roof leaking, units trashed, tenants skipped, was all calculated into the final amount. This is all plain and clear on the calculator and on any spreadsheet I would create myself. After all of these deductions it then had a cash flow that in my world, would be worse case scenario. You are assuming that none of the above potential were added into the calculations-or perhaps you know they were not. I was not given that information.

Dude - numbers tell a story, and until you learn to read, you don't need the calculator...

I think the story here is the risk/reward of high leverage multi-family investments. It is an education on how 10 percent increase/decrease multiply in a hurry when dealing with several units under one roof.

In this way, CCR is a very bad indicator when taken on its own and out of context... He was misled. You are misled. And lots of newbies are misled, and the calculator does decidedly nothing to expand your perspective so you can visualize the nuances...

I was not misled. I was only given two numbers to look at. If I were to truly analyze this deal I would need more. Perhaps the numbers plugged into the calculator by the investor were super conservative and he took out 10 percent potential for decrease, etc. Perhaps the cash flow was closer to 600 or 700. I have no idea. That's where the calculator comes into play.

Hope this helps

I think the conversation was good, but you cant convince me the calculator is anything but a great tool. I really wonder how much you have looked at it if you are assuming that we are not factoring in losses such as vacancy and roof leaks like you say above. Newbies who do not have a calculator or spreadsheet make those mistakes. The calculator helps avoid them.

@Account Closed 

Thank you. My "arguments" are questions as I am trying to understand this.

So I do thank you, not cynically mind you, on helping me understand this a little more. Basically the red flag here is that the expenses are too high for the return? There are of course other factors, for example where the 10plex is located? I was recently in SOCAL where cash flow is not easily obtained for any amount of DP.

To be honest, I do not think this deal even exists. The numbers just don't make any sense. With only 30K down owner financing 650K building and yet still on paper providing cash flow, there has to be more here.

Also, you are now saying you are in trouble with 10 percent loss in rent or whatever. You are correct. You said 5 percent before, not 10. Do all deals you make cash flow after you knock another 10 percent off of all the other deductions such as vacancy, cap ex, etc?

All of this is good discussion, and I appreciate the comments and figures that experienced real estate investors give to the inexperienced.

However, I do not agree that my questions on a post that I did not understand somehow proves true that I am an example of the dangers of spreadsheets, especially as I have not run the numbers that Ben gave out through any spreadsheet-he did not provide the details.

I just don't follow your argument on the spreadsheet use nor do I agree.

I wonder if everyone on this post has taken a real good look at the spreadsheet. I mean it is brutal and unrelenting in determining cash flow. I think that's a good thing for a newbie. These aren't just acronyms thrown out, it explains what you are taking out and why.

@Account Closed  for supplying these tools and this forum.

And by the way, 400 dollars a month on a 30,000 investment is worth looking at. There are risks in everything. Maybe it doesn't work here (we know nothing except a couple of figures thrown out) but 30,000 can bring in lots less than that in other investment vehicles.

@Neil Schoepp 

Thank You! It does work but it takes so long to load out here that I didn't notice the name on the bottom.

Now if I can only figure out this real estate thing....

Originally posted by @Account Closed:

 I think you make @Ben Leybovich point because the spreadsheet is just a calculation.

Really? My question has nothing to do with using the calculator which is just a tool. I didn't understand his post or wording very well and the numbers did not make sense to me, that's why I asked questions. And if you think about it, the calculator forced the investor to ask questions. Isn't that a good thing? His point is that us newbies should go nowhere near a real estate spreadsheet.

But... if his point is that newbies aren't supposed to ask questions and that we are supposed to know everything already, then yeah, he got me! LOL...

Ok, I get it, the margin is small for a big property. But you are still only in 30K. I would have assumed that one  month vacancy was put into the expenses, as well as other expenses such as cap so that the margin is fairly realistic and a 5 percent hit off rent might not be the end of the world.   Now if you look at this yearly:

expenses are 90, 720

Income is 95,700

Lets say you have the 5 percent hit that you didn't factor in through cap expenses, etc-

income is now 90, 915 

I don't see where the 20 percent loss comes in. It wouldn't be a good year, but you could get a 5 percent increase as well another year plus you are getting equity built. We know the property is a bit overpriced but we don't know how much it is.

I am not arguing here I am trying to learn. What am I doing wrong in this calculation? I did not use a spreadsheet by the way! And again, I am assuming the numbers Ben supplied was income after all the other deductions Bigger Pockerts favors occurred.

Finally, I cannot seem to use the @ feature. I have a Spanish keyboard and this feature does not seem to function.

What point was that Ben? You asked if newbies should have the use of calculators. I simply asked for your help. You have stated that someone can buy a 650K property with only 30K down and still make 5K in cash flow.

I stated that this does not seem to make sense to me and asked for help in understanding this.  If you could actually buy a 650K property with only 30K AND make 5K in cash flow why wouldn't you? This was a question.

Finally, who is giving this guy a 650K place with only 30 down? That does not make sense at all.

My question had Zero to do with the calculator and everything about your post.

There are a few things I don't understand about the initial post. How could the required DP be only 30,000 on a 650K property? And if you could get this deal for 30K DP with 5K a year cash flow why wouldn't you? That's almost 17percent. Since this post was about teaching newbies like myself, I would really appreciate someone pointing out what I obviously seem to be missing here. Thanks!

Anything is possible I suppose, but 4k in year sounds very difficult to me. Are you talking net? If it is possible can anyone give some hypothetical examples? Hey, I want it to be true, I would love to pull in 4K per month net off a 150 investment!

I apologize that my last message posted twice. I am currently located in the mountains of Peru and the net is a bit shaky this morning! That also brings me to another point in that I plan on purchasing turkey this summer from abroad and have no hesitation looking towards areas that I do not live in. I believe California will be difficult for you and that you should not limit yourself to your own backyard. With due diligence you can be successful without borders.