All Forum Posts by: Chris Grenzig

@Michael Wang I believe if you have a W-2 in a non real estate company or not at least a 5% owner (like @Basit Siddiqi mentioned) than you need to be able to show a certain amount of hours to be denoted as a real estate professional in which case your passive losses would offset...I believe...maybe

@Natasha Verela you shouldn't be buying properties anywhere for the sake of cost of entry and cash flow. There are dozens of reasons on what market to choose and price point and returns are only part of that. 

Population, population growth, ease of access, resources available, population growth, unemployment, unemployment trend, job growth, job diversity, supply vs demand, median income, education level, local economic development, landlord/tenant laws, etc.

And then a lot of that should not only be applied to the whole market but also the submarket/neighborhood you're looking at too.

Investing anywhere is a risk vs reward, so is the return worth the risk it provides. Thats why NYC and LA are 3-4% cap rates because the risk is much lower than places like Lexington, KY for example. The return SHOULD be higher there, but the likelihood of losing money there is greater so they have to balance out. 

Understand what your investment goals are, then back into what metrics you want to see from a market, then find the markets that fit or are closest.

@Shafi Noss tax advantages from syndication aren't usually quoted because it depends a lot on the person investing in the deal on what benefits they received.

Look at it on a cash flow every year, an annualized return, an IRR and an equitymultiple basis. Some place more empahsis on some of those metrics more than others.

Cash flow is how much are you receiving in dividends every year.

Annualized return takes all cash flow and sale proceeds, totals it up, and divides it by the number of years for a return per year basis

IRR is annualized return but accounts for the time value of money ( a dollar today is worth more than a dollar tomorrow, you would rather a 20% IRR in 3 years vs 4 because you could hypothetically reinvest that money after sale in year 3 and your 20% reinvested would be higher)

Equity multiple is the same as total gain ((Principal + total income gained)/principal = equity multiple, ($100k invested + $100k gain)/$100k principal = 2.0 equity multiple) 

@Jordan Archer I'm somewhat happy you asked this question because I think it helps illustrate how subjective cap rates are. 

We frequently buy properties that are 8% cap rates on "financials" but 5% cap rates on our year 1 expenses. Thats because the taxes go up, or needs better landscaping, or needs more payroll, better insurance, etc.

Conversely, we'll buy 5 caps on in place and they'll be 5.75% cap on year 1 proforma, same reasons but the opposite (minus taxes).

Also, you'll see deals being sold as a 6 cap tax adjusted, but they took all the T-12 expenses and adjusted them to "market".

I've also seen deals that run their R&M at like $80 a door when market is like $400-500, but their below the line Capex is $1000 a unit. So whats the cap rate for that deal?

@Charlotte Dunford if the capex was funded into a separate account to be used for those items, than it would not take away from cash flow. If this is a newer acquisition, we'll almost always distribute slightly less than we are able to, until we're 100% certain we're not forgetting something and don't overstep what we can actually do (insurance escrow, tax escrow, reserves, etc.)

@JC Espinoza hey man house hacking is a great way to get started and also get your hands dirty. I'm like you, living in an expensive area (NYC/Long Island) and unfortunately cash flowing house hacks aren't practical. So the way I look at it is, if you are paying $1500-3000 for housing or whatever it is, and by doing a house hack and being conservative, you can reduce that cost and build up equity in the home, it could make sense. 

I think too many people get hung up on house hacking and needing cash flow when its just probably not gonna happen in these areas, but if you reduce a major expense in rent/housing, then thats a net positive to your personal bottom line, and you still get a property under your belt, build up credit by paying loan on time, start your track record, and build up equity through amortization overtime.

It all depends what is right for you, but if you DO care about your properties having positive cash flow as well, then this is not a strategy for you and I would look out of state.

@Andrew Caldieraro just backing up @Bruce Petersen post, we'll frequently look at this. Part of it is also your business plan. If you're going to sell in 2 years and you care more about sale, an extra $25*12=$300/.06 cap = $5,000 per door in additional value (assuming 6 cap). So we'll look at a slightly lower ROI on cash flow if we can get a bit more value on the back end and it boosts our returns in a short time frame. ROI is great, but also look at overall returns too.

Hey Guys we are happy to announce our next meetup on Sept 25th with Long Island agent and investor John McSherry. He's going to talk investing in the local markets, being a real estate agent, and how to incorporate social media into your business. Be sure to RSVP if you're coming, bring a notebook and pen, and get ready to learn. Check out his bio below and follow him on instagram @john.mcsherry!

John McSherry; Licensed Associate Real Estate Broker with Douglas Elliman has 10+ years experience an agent, Investor and social media influencer. He lives and breathes all elements of real estate, which he documents daily through his social media platforms.

John’s success was created through consistent hard work and building relationships. 3 years ago he hired a real estate coach to help him scale his business and implement new marketing techniques. Since then, the whole trajectory of his business and life has been transformed. 90% of his business now comes from social media and word of mouth.

John is consistently a top agent in his office and was recently named a LIBOR Young Professional Network Top 20 Under 40. He currently serves on the Young Professional Network Board of Directors and was also awarded as a Rising Star at Douglas Elliman.
He will be featured on many upcoming projects including the upcoming TV show The American Dream, premiering this Fall!

@Obinna Emukah both

alternatively ask lenders, property managers, insurance guys, other professional relationships to put you in touch with their clients to see if they have anything you can buy direct from them...pay the person that introduced you on closing

@Simon C. make sure you talk with an accountant about UBIT tax if you haven't already. It has the potential to significantly reduce future gains in many equity real estate investments.