All Forum Posts by: Paul NA

@Paul NA

If you are saying meticulous analysis of future economics and projections of cash flow is the Midas touch, ok... I can accept that!

My background is starting from a REALLY poor immigrant coming to NYC in the late 60s. The 70s was the absolute worst. It's really a rags to riches story that I basically tell from these postings. Really, anyone can do it if you apply more than some adherent cash flow now calculations.

I even think that there are some guru classes that seem to even ask their students to look for City Planning Developments, etc. so that they can buy ahead of it.

When House #2 is only analyzed on a Cash Flow basis and you ignore all other aspects of what makes a property valuable in the future, it's more like judging a book by it's cover. There is a lot more to  an Investment than meets the eye.

I know that many of the folks here don't seem to care about things like 10 year pro-forma projections and Internal Rates of Return (IRR). However, it's industry standards for sophisticated investors, especially on the Commercial Side.

I'm hoping that some readers will say... wait... it's not about dumb luck (the midas touch).... it's about MATH and Economics! Maybe that's the real secret to becoming a Millionaire Real Estate Investor!

The problem is that the best Books about Real Estate Math is virtually unknown and certainly not a best seller. Books like What Every Real Estate Investor Needs to Know About Cash Flow

will just not sell and the readers, who are aspiring millionaire investors won't bother to try to understand the Math. Yet this is EXACTLY what they need.

@Christian Hutchinson

@Stuart M.

I know it's difficult to believe but a lot of companies are actually Real Estate companies rather than retail or selling a particular product. McDonalds come to mind. Their Real Estate Holdings is amazing! The burgers pay for the upkeep of the Property they bought and bingo, their market returns are great!

Here is just one of many articles about McDonalds: MCDONALD’S REAL ESTATE: HOW THEY REALLY MAKE THEIR MONEY

I also trade and invest in the Stock Market. But I do MUCH better with the leverage from Investing in Appreciating Real Estate in Brooklyn. Much better than the indexes.

Also, one way Fund Managers choose to add particular stocks into their portfolio is by analyzing their future cash flows and projecting their Enterprise Value to their free cash flow.

When I worked for the large financial institutions, while I wasn't a Fund Manager, I created the software that they used to analyze the individual stocks. I use the same techniques to analyze Real Estate.

I basically project the Total Value (FMV minus Debts) divided by the Cash Flow over a 10 year basis. The calculations are all done the same way.

It's amazing what you can do with spreadsheets and some economics.

Stuart: I am in contract to purchase a $2 Million 3 Family house. Climate Change will affect NYC, true. But, before it gets worse, it will get better. I am projecting that in the next 5 to 10 years, NYC winters will become warmer. As the weather warms up, there are risk for more hurricanes, which is why I don't buy near the waterfront or in areas that will become a flood zone.

I am also projecting that as the hurricanes get worse for the Caribbean and the Southern States, more people will migrate to NYC, Philly and possible Boston 

When I feel that it's a turning point and it's time to sell, I will, which is why I just became a Broker in anticipation that in about 10 years I'm going to prepare to sell. OR, maybe NYC will spend a lot of money to mitigate the effects of climate change which could help for another 10 years.

I'm also going to start buying in other States after I get reciprocity for my Broker's License, concentrating on Cities that can be least affected by climate change.

The point is that I'm prepared to do what's necessary but have an eye on the future.

So far, I have been right for the last 2 decades while I kept on hearing "What are you crazy? Buying at that price?!"

I know it's difficult for people to think that the property that i'm buying for $2 Million will be $4 Million easily in 10 years. But it was the same expression I heard when the property I bought for in the year 2000 at $140k is now worth $1 million in 17 years.

 Neither is risk free.  There is an awful lot of risk buying these 100k houses in war zones that I see going on.

I assumed 2% appreciation to track expected inflation because that's what houses have averaged forever here.  Of course there are many variables - everyone leaves for example.  This also harms rents though.  I'm not trying to make this about speculating on above average appreciation, about picking the next NYC, I have no special insight there.

I looked at rent declines during the last housing bust, which had larger declines than we could possibly see now, and I didn't see that large of declines in most metro areas - and many just had stagnant rents for a while. I understand that risk.