All Forum Posts by: Ronan Donnelly

@Russell Buxton, I'd recommend talking to lenders to understand how they qualify your suitability for the loan. If it's based off leases then you may be good, it it's based of T-12 NOI then you'll need to wait.

@Jason Dobbins, if you buy for cashflow, create equity by improving the asset and wait for time to do it's thing then there is really no other asset class that comes close to real estate. Good luck!

@Mitchell Chingay, it's impossible to predict when markets will have a crash like event and @Erik W. is an example of how expensive it would have been for him to sit on the sidelines waiting for a crash to happen. That said, it is helpful to consider market cycles and at present we are a long way into a growth cycle.

From an investment success perspective here's what you can do to protect yourself in the event there is a downturn

1. Focus on the right asset – we like the multifamily asset class because multifamily real estate is popular during times of uncertainty because during these times, people prefer renting and because it is valued intrinsically it is less prone to large swings in sentiment which can impact the value of single-family homes.
2. Diversify your Portfolio – real estate has low correlation to stocks and bonds and this makes it a hedge against the stock market. Acquiring below market and implementing a value-add improvement plan will result in a portfolio of properties that appreciate over time and that also offer significant tax advantages
3. Pick the right market – not all housing markets were impacted in the same way during the last recession. If you select a market with population growth, jobs and wage growth, a balance between supply and demand and a diverse range of employers you will do just fine. If you invest in a stagnant market with just one big employer then you will be exposed
4. Buy for cashflow, not appreciation – this is a cardinal rule of real estate investing. If you have a cash flowing asset you can hold onto it indefinitely, if you have negative cashflow and are hoping for appreciation you will end up being a forced seller in a down market. We can create equity in multifamily real estate by investing in our assets to grow rent, improve vacancies and by cutting expenses
5. Avoid high end real estate – high end real estate always gets hit first in any downturn as people migrate from more expensive to less expensive homes. By focusing on class B/C properties we expect to see an increase in demand and in rental rates during any downturn
6. Lock in long term financing – lack of available credit was the downfall of many homeowners and investors during the last recession. By locking in our funding, we can eliminate one source of potential distress and we can also 'fix' one of our major expenses by locking in the financing rate
7. Increase your cash position – there will be opportunities to buy distressed assets from people who were not prepared, but you will need cash
8. Reduce Leverage – leverage can be used to provide higher cash on cash returns however along with leverage comes greater sensitivity to any loss of income. If we reduce leverage we may get lower cash returns however we do increase our ability to 'stay in the game' and not be forced sellers should rental rates decrease or vacancies rise. Being a distressed seller during a downturn is not where you want to be
9. Be more conservative underwriting – multifamily properties are priced based off their current financial performance only. When we are underwriting deals we can plan for a downturn in our assumptions e.g. increase expected vacancy and decrease rents to avoid overpaying
10. Dispose of weakest assets – this is simple portfolio management, it's key to let go of underperforming assets to free up cash and credit required to buy better performing assets. Don't wait until the recession arrives to sell underperforming assets
11. Increase cash reserves – whilst this can decrease returns it is all about being able to weather the storm, cash is king!
12. Have a range of exit strategies – If it isn't a good time to sell then you do have other options with multifamily real estate, provided that it is cash flowing. You could, for example refinance to get your cash out.

Good luck!

I agree with @Joseph Firmin, work through your goals and objectives and then work backwards to see which approaches are the best fit for your skills, personality, time, experience and money. Good luck!

@Spencer Glaser, I believe that Hunter has a book out. That might be a low cost way to get insight into what you might learn on his mentor ship program.

Hi @Brian Dudash, there is a great rental return analyzer within the BP tools section. The more deals you analyze, the better plugged into the market you will be. Starting off it isn't a terrible idea to buy places that don't need much work, at the expense of some cashflow.

As for utilities, speak with brokers and property managers in your market to find out what is common and depending on the answer either include it or don't in your calculations, and ultimately the rent that you charge. Good luck!

Hi @Emmanuel Cedeno, it might be helpful to take a step back to look at why you need the partnership in the first place. I would suggest writing down your constraints e.g. time, experience, skillset, money, access to deals, etc.). Once you have that list write down several ideas on how you can best remove that constraint e.g. for money you could save up, wholesale, use hard money etc.

What you will see is that partnerships work best when there is a clear need and until you have established that clear need you are potentially just making your life more complicated. It's fund to do things with friends but it isn't always the best approach from a business perspective. If you do decide to go ahead make sure that you have got formal legal docs that define the partnership. Good luck!

Originally posted by @Remington Lyman:

A contractor put in barn doors in my out-of-state client’s duplex that I am managing in Columbus, Ohio near The Ohio State University.I guess they left the back doors opened because when I went to do a tour today they were unlocked and 1 fridge and 2 stoves were missing.

I replaced the deadbolts in case they somehow got keys. I ordered replacement appliances from Lowes and they are coming in tomorrow. I am out $2,200.

What would you have done to prevent this?

Bonus pictures of the sweet doors 

 Some credit cards offer purchase protection so if you used a credit card you can check to see if the items were covered. After that you can do what has already been suggested and ask the responsible party to take responsibility. Going forward you could try something like simplisafe 

Worst case, you eat the loss and learn a lesson which you can use to modify your approach, communication and expectations going forward. Good luck!

Hi @Matthew Doos, in order to be successful in anything we must be willing to put in the work and to stay engaged through tough times. The only way we will do that if what we are doing is very aligned to our own goals and objectives. I’d recommend taking the time to map out what your goals and dreams are and out of that exercise you can reverse engineer the best strategy. Once you pick a strategy that works for you, let the numbers drive your decisions. Good luck!

Hi Isaac, in order to find the ‘best’ sponsor it can be a good approach to try to define a few filters in order to narrow down the field. Some parameters that come to mind are:

1) Risk Tolerance

2) Direct investing versus investing in a fund

3) Strategy e.g. value-add, ground up development, etc

4) Asset Class e.g. multifamily, self-storage, mobile homes, student housing, senior living etc

5) Geographical Area

6) Hold Period

If you can apply these filters in advance it will leave you with a much more focused pool of sponsors that you can then due-diligence in detail, including asking the BP community for specific feedback. Good luck!