All Forum Posts by: Dan Hennessy

Thanks for starting this post @Todd Powell as it on my mind 24/7.

I’m 45 years old and have 3 children ages 7-13. Achieving financial freedom and ‘independence’ from the “rat race” are on my mind as it’s appealing to consider the possibilities of engineering my work to fit my life; work on my time, have the freedom and flexibility of spending more time with family, traveling, or more leisure. I live outside of Boston with a high cost of living and with college education is right around the corner, I feel the strong gravitational "pull" of the corporate world that has been so generous to me and my family. I’m employed in the biomedical field and am passionate about bringing new medicine to patients, and I wouldn’t trade the experience I’ve had for anything. I love what I do and see securing financial freedom as an evolution to more entrepreneurship and autonomy that requires strict management of career capital (which I’ll delve into) as well as financial capital. I'm convinced that there is no better vehicle to attaining that freedom than through real estate and its therefore a matter of patience, intentionality, financial IQ, grit, discipline and action.

Financial IQ: you need to understand the laws of money as much as your chosen area of real estate investing. You need to understand the time value of money, the risks and benefits of leverage, and , ultimately how the magic of compounding can secure the passive income that you seek, particularly if you seek to escape the “gravitational pull” of the W2 career path.

Discipline: Benjamin Franklin spoke about the virtues of industriousness and frugality. Taking his colonial homespun ideals, you need to be willing to work hard, and disciplined enough to set and follow a budget. Read David Ramsey’s Total Money Makeover for more.

Intentionality: you need a mission, and a plan to obtain the knowledge, skills, and network to execute your plan. In his 90-day intention journal, Brandon Turner defines Intention as Goals+ Commitment + Action.

Action: the best strategy and tactical plan is useless without execution. You must take action today to execute your plan. If you listen to Brandon and David’s podcast with successful real estate investors across the board, they always ask the question, “what separates the successful real estate investor versus those who do not succeed” 9 times out of ten it is lack of action, self-doubt, and analysis paralysis that holds people back.

Patience: back to understanding the power of compounding, you need to understand your personal financials (income, balance sheet, cash flow) and have the patience to let compounding work for you.

Grit: you will face obstacles and bumps in the road. The ability to learn from mistake and embrace obstacles that only make you stronger.

On to career capital and securing autonomy while in your W2. Cal Newport wrote about this in a book that I highly recommend, So Good They Can’t Ignore You. The premise is contrarian in that it refutes the “passion hypothesis”…. don’t do what you love. Learn to love what you do – by acquiring mastery, autonomy and relatedness. Acquire career capital to maintain control and autonomy in your work. You will need this autonomy to balance your work and life so as to give you the ‘room to operate’ required to establish your financial freedom roadmap and take purposeful action to set it in motion. Using the ‘craftsman mind-set’ to find a motivating mission that's a unifying goal for your work life. I've read so many inspirational stories on this forum and hear about them on various podcasts that I'm absolutely convinced of and committed to the path forward.

In my case, real estate is part of the transition. Identifying and investing in medical office building real estate unifies my expertise, mission to help patients, and contributes to a passive income stream based on high quality properties with long leases and creditworthy tenants. Right now I’m doing that while maintaining a very demanding job with 65+ employees reporting into my line of management and have a very busy family life with tons of activities for the kids.

My "drop-dead" rat race number is 15k/month, with 20k/month of passive income being my true target.

Thanks for all of the advice on spreadsheets. I use spreadsheets for my 2 multi-families as well as Quicken Rental Property Manager.Quicken has its flaws so I rely more heavily on the spreadsheets. My biggest frustration is that Quicken does not directly link to my bank account for its "one step back-up" feature, which adds another step. I also have not placed all of my real estate transactions in their own bank account, which would make tracking and accounting more efficient.

In the meantime, the spreadsheet allows me to track vacancies, cash flow, and other metrics going back to 2008.

Hi Tyler,

As I've been exploring medical office properties I've created a spreadsheet that includes a pro-forma, valuation analysis, loan details, as well as general assumptions and rent rolls. I've been pulling 1-2 properties/ week to analyze with the tool and help me think through the key issues, assumptions, challenges for for a multitude property. It then allows me to determine a "grey sky", base case, and blue sky assumption for IRR. This is ultimately my underwriting model that helps me seperate the wheat from the chaff.

I have not found it economical to purchase the data from Co-Star for rental comps so I use Loopnet and Crexi to build a comp analysis from what I can find w free registration. For the deal that I have under contract, I was also able to leverage my broker to provide details on comps.I'd be happy to share my spreadsheet just IM.

Hello, I agree to be more conservative with repairs and Capex, and would also caution you on the 5% vacancy, that seems quite aggressive. I suggest that you do more market research and get a sens of the rental market for single family rentals. Lets say worst case scenario that you go through 2-3 tenants in the first year, perhaps a temporary home for family waiting to buy, or a divorcee. You could easily be at a 70-80% vacancy rate and should therefore model your returns with more conservative assumptions so as to determine not only your base case, but also a "grey sky" and "blue sky" scenario. Could you survive if this were unrented for 5 months and and you have to replace the roof in year 5. Also, did you model brokerage fees at sale when you exit? That will be ~18-20k.

This is great that you've gotten started and have used the calculator to analyze this deal. I suggest that you analyze 10 more, inclusive of multi-families, and then 10 more... you'll start to recognize patterns and the work will pay off!

Great question Nicole as you've stimulates so many great and varied responses which are tough to add to.

I'll focus on the "WWYD" component of your question and the general principles I would follow versus giving you any more advice on what you should do.

Rule #1: Don't lose the money. I'd place the money in an interest bearing savings account as I mapped out an investment plan

Rule #2: Invest within my circle of competence with people I trust: I would map out 500k across investments that are within my area of knowledge or expertise. If I sought to gain more expertise within a given asset category, I would consider networking to identify the top 2-3 syndicators in that space to invest (and learn alongside) an a limited partner.

Rule #3: Take a long-term view that is consistent with my financial goals. Invest in assets that are cashflowing at least 6% unlevered cash-on-cash returns. I invest with a long-term time horizon and a 5-10 year time horizon with 13-16% IRR target would need to be achieved for each investment.

Rule #4: Diversification to spread risk. Consider focused diversification across several assets so as to achieve scale with previous knowledge or investments. For example, I'd consider the addition to my multi-family holdings in a given market that could be managed by existing property managers. Otherwise, consideration of acquiring over the course of 12 months several multi-families or a larger multi-families (6-20 units) that were well researched would serve the purpose of achieving scale. 

Outside of these general rules and specific considerations, given that I have been focusing my attention on the Commercial space (Medical Office Buildings) and add to my holdings in this specialized area. I would work with a broker to identify single to 3-tenant office properties with a strong anchor tenants with at least 5-years remaining on the lease that fit within cash-flow and total return goals that I have set.

Good luck and happy investing!

@Greg Dickerson

I look fwd to checking out your YouTube channel .....can you share link?

Blake,

In my opinion, the best way to start analyzing deals, is to START analyzing deals! I’m not being facetious, as the first step is to take action.

A couple of suggestions

I suggest that you start to work on your underwriting skills by analyzing 5-10 deals per week. Sign up to Crexi or Loopnet and do a wide search for your preferred asset class. Review the Offering Memo’s, construct your financial models (I’d be happy to share mine), and start analyzing. Once you’ve analyzed 50 or so, you will start to recognize patterns, and then you’ll be in a position to narrow down your investment criteria (asset class, asset quality, demographics, geographic, sub market). Then I suggest you start talking to the listing brokers on the properties you find most compelling, come armed with key questions.

Another learning opportunity is to sign up to Crowdstreet, listen to investor presentations for an asset class that you are considering. Learn the lingo from the pros. Analyze these deals and perhaps invest first as a limited partner. ‘Putting skin in the game’ not only gives you credibility in the future, it forces you to think as an owner.

You need to educate yourself, take short term action aligned with mid and long term goals.

Best wishes

I just ordered and look forward to tracking against short-term goals/objectives in addition to the Mastermind feature!

Hi Austin,  It is located at the corner of San Jose, Bowden, and Lakewood

Hi Patrick. A lesson learned me as I interviewed multiple GPs, is that integrity, operator experience, the sub-market and investment thesis trump the projected returns any day.

With that said, 138 units and 16.9% targeted IRR. The "cherry on top" that was not underwritten into the projections was the possibility for a 32-unit expansion.