All Forum Posts by: Ryan Daigle

Hey @David White,

Few things to point out in this approach. First, the incentives seem misaligned. Why would somebody sign on the loan, but not have any sort of ownership in the business (which is what happens if they're not a part of the LLC)? I suspect that wouldn't even be allowed by the bank.

Second, if your high net worth individual doesn't have time on their hands, then they probably don't want to deal with a loan application. There can be a lot of back and forth, which is understandable given the bank is about to give you 75% of the cost of the property. So the bank is going to want to vet the financial details of all loan guarantors. Sounds like that's not what your money person wants to be involved in.

Hope that helps!

Hey @Ryan Crowley - PMs should be creating a monthly property statement for you, but that's distinct from, and is only one input to, bookkeeping for your LLC. If you're still in DIY mode you should probably learn quickbooks and keep your financials there instead of Excel. If you feel like you're past DIY mode then you should probably find a part time bookkeeper who will take the raw records, receipts, etc... and input them into QB for you. Then at the end of the year your financials will be in good order for your CPA.

@Sharon Ho I don't do any of your top 4 listed there! :) That's a very Dave Ramsey approach to personal finance which is fine and good for many, just not my approach.

Regarding maxing out retirement plans - retirements plans limit my flexibility with their limitations. I don't want to have to ask permission to use my own money in the way I want. IRAs limit what I can do with my money. Since I know real estate, and its tax advantages, I know I can keep 100% control over my money and still get similar tax benefits by investing my way in real estate. So no retirements plans for me.

Regarding debt, I definitely avoid high interest personal debt, but will always be open leveraging financing if it makes sense. It's really hard to have a hard and fast rule around no debt without knowing other details.

Hey @Danh N.,

Sounds like your first CRE investment experience was a poor one, and only partially due to COVID. Sorry to hear that. You definitely shouldn't have been thrown in the deep end with no support (unless you knew that going in).

Your primary questions seem to be around financing. It is going to be difficult to quality for a loan because it doesn't sound like you're listed on any other CRE loans. Lenders want to see that you've done it before and this isn't your first rodeo. So that's one hurdle. Most people get around this by partnering on their first deal so both partners sign on the loan with one bringing their past experience/qualifications. Your hotel deal may help here even if you're not a guarantor on the loan, but quite likely it may not. Be sure to ask.

The other thing about qualifying for a commercial loan is that you will often need to have a net worth equal to the loan amount and have personal liquidity of 6-12 months of debt service (varies by lender). So, yes, the lender will underwrite your property and base their decision on how they think the property will cover your debt service, but they also want to know you have the ability to step in if stuff goes sideways. So they're also looking at your personal qualifications.

Hope that helped? Happy to answer any other questions as well.

Hey @Tyler Kastelberg - I'm not in the Bay Area but do have a tech background and underwrite a ton of multifamily. Happy to chat over Zoom if you want - just DM me if so?

@Ryan Taylor depends on your definition of "good"!

Is it a hot market with growing population and, thus, high appreciation and growing rent? Yes. Is it an easy market to get into? No.

If you're having trouble in Atlanta I'd suggest surveying some of the other strong growth markets to see what their point of entry looks like for your preferred property class. I maintain a list of metros and their growth trajectories in this public spreadsheet if you want to explore other areas:

https://docs.google.com/spread...

Hi @Carley C.. I don't believe this would be an option for commercial multifamily (5+ units), but most 4 units and under are treated the same as SFH so you might be in luck there.

@Paolo Sciarra I'll echo @Todd Dexheimer and add Wilmington and Asheville (smaller markets, obviously).

Additionally Greenville, Spartanburg, Columbia, and Charleston in SC are growing as well.

I track population growth trends in this publicly available spreadsheet as I believe it's a very good indicator of the positive long term trends that support the MFH asset class (not the only one, but a great one).

https://docs.google.com/spread...

It's all based on government data and identifies both perennially high growth metros, as well as recent accelerators (Flint, Michigan - really!)

Hope that helps.

@Raj Parwani for the cap rate the primary factors are:

• The market/city
• The sub-market/neighborhood
• What class property it is (A, B, C...)
• What the business model is (stabilized, value-add...)
• How big is it, number of units

For each combination of the above factors there will be a prevailing cap rate determined from previous sales. To get an accurate reflection of what these are you will likely need to speak with a commercial broker in your area.

@Ki Lee if I were the buyer, I would expect a $500 credit for Unit B since that is rent paid for the first month of my ownership of it. And I would not expect to be docked $500 for Unit A since that was unpaid rent for the last month of your ownership. That will be marked down in your books as "bad debt". So a net of $500 coming to me, the buyer.