All Forum Posts by: Russell Gronsky

When the forbearance announcement came from the Federal Government, I was curious about the details of how it worked. So I called several banks that hold mortgages for my residential rentals and asked how their programs worked.

To be clear, I didn’t ask for forbearance, I just asked about the details of how it works.

Earlier this week, I looked in my credit report and found that 2 of the banks I spoke with reported a note to the credit bureaus that my loans with them were in forbearance!

When I called the banks, customer service from both banks told me they automatically enroll people into forbearance right now, even if you just call to ask questions about the program.

Please look at your credit reports and make sure there aren’t notes on your loans from forbearance that you didn’t ask for.

@Roni Elias absolutely! Looking at exit CAP rates is key!

@Paul Ko if you are drawing a blank on questions, google the question you just asked and many pages of good questions will come out in the search. As you read through them, they will help spark your memory and critical thinking, and the questions that come to mind in those moments are the ones you should write down so you don't forget to ask!

Also, for partners and lenders, don't be shy to ask specific questions. Try to dig 2-3 layers deep on 1 or 2 topics that someone who has been in a partnership should be able to rattle off the top of their head and be very specific about them. 

Some examples are how they set up voting if it was an even number of partners, how to settle voting ties, how company property was handled when the partnership dissolved, what was their process for amending the operating agreement, etc. Basically, ask them specific questions about the partnership process itself as they are likely to not know those details unless they've been in a partnership before.

Lenders will depend on if they are commercial or residential lenders.

@Colin Stuart I really hope that doesn't happen. But if investors fall for it or let it happen, then we will absolutely see more of it happening in CRE deals.

I've also heard some negative emotions tied to capital calls. I'm sure there is a way to use them strategically and probably not all capital calls are created equally but it is interesting how they can be used to manipulate IRR.

@J Scott That makes sense. Sounds like assumptions for these things are unavoidable. I'll definitely try to keep mine conservative.

@Evan Polaski I agree all these formulas rely on your assumptions so keeping those realistic is key.

To be honest, I’ve always struggled with projections further than 1-2 years out since so many things can change. But I just have to make those projections with conservative estimates, based on the info I have at the moment and taking into account the historic averages for the area and asset class.

Definitely a topic that can take up hours of time playing with different scenarios.

@Fran Arti

What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures by Frank Gallinelli is the best $20 I’ve ever invested into my RE education. It will take you through some analysis and introduce you to the various calculations that will help you determine your exit strategy.

Then the next thing to do is connect with a commercial loan broker, preferably one that lends in your target market and can talk to you about loan options to purchase and exit options.

Finally, I recommend getting into an RE training program which will give you an understanding of the overall process and details of what needs to be done and how, in order to close a deal. These can get pretty expensive (thousands of dollars, some more than that) but usually worth it.

@Connor Mullen, the filling in of expenses and income is the same in many ways. All have electric, tax and insurance bills. The calculations you are looking for differ.

Check out Michael Blanks SDA spreadsheet for doing the analysis and be sure to pick up What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures by Frank Gallinelli. That book is probably the best $20 I’ve ever invested into my RE education.

@Thomas Greer that makes sense. Each metric is communicating something different.

My initial confusion was that IRR looks for what year(s) your returns peak and what the return will be in those year(s) so that's when you should exit. While I thought the PV would tell you how much you should offer on an asset if you already know you want to hit, for example, an 18% return and stay in the deal for 5 years before exit.

Looks like I still have more homework to do.

@Bill F. I think you've cleared up a little theory here for me that I didn't quite understand before with the relationship of IRR and PV (and NPV).

I understand what you are saying about IRR being a single, easy number to show LPs and KPs. Although, since IRR fluctuates year to year, you'd have to make every effort to sell in the year(s) where the IRR is at or above your target. But I'm starting to dive deep here so I'll stop before I put everyone to sleep.

Thank you for clarifying the relationship for me of IRR and PV. What you said makes total sense. I appreciate it.