All Forum Posts by: Matthew G.

@Gregory Washington It completely depends on which market you are investing in. You won't see 10% cap rate in most areas of CA, but you should get appreciation. With appreciation your IRR might be significantly greater than if you invested in a 10% cap rate property that has no appreciation. If you get a lot of appreciation you can pull out the equity and purchase more properties and would do better than going on cap rate alone.

@Hector W. Zamora Cordova I have a Model X and don't charge at home because there is a supercharger (I received the promotion with free supercharging) nearby where we usually walk around at anyways. I also have multiple investments that pay for the car and all my other living expenses.

Another option is to buy the condo you are living in and spend the money you would have on the down payment of your car for a rental property out of state. If you have a perfectly running car and you aren't satisfied where you are financially yet, don't buy the car.

I haven't used the app, but I would disagree with @Ben Leybovich. Your competitive advantage comes from experience, knowing your market, and seeing greater potential in a property than what others may see. If investors see a property and from comps believe the property is only $100k, but you know the area and market and think you can get $120k, then that allows your max offer to be different than other investors. If you are an experienced flipper and have a team of contractors that can get work done cheaply and quickly, that also becomes your competitive advantage. Even if you all used the same app, your insight and experience allows you to make a better offer.

Personally I would probably still use a spreadsheet just because you can customize it easily and it can do more if you need it. Since the DealCheck app makes nice reports, I would probably use it after the fact to check my numbers and print out reports if needed.

@Ryan Enk I started a software business and used the money I made in the business to invest in real estate. My real estate investments make more than all my expenses, so I could technically retire but I'm still in my 30s so I don't like saying I'm retired. I mostly invest in more passive real estate investments (i.e. private lending, equity partnerships, real estate notes).

@Braden Downs It largely depends on your market. If you have a $100k property, spending $40k on rehab may be a lot, but if you had a $1M property spending $40k may not be enough. The best option is to look at properties around your area that have sold above market and quickly. You could see what materials they used and try to match them. If you try to save money and the property sells below market or takes longer to sell, you will just be spending that savings on holding costs.

Whether or not you have full authority based on your operating agreement you still have a conflict of interest.

Let’s look at the extreme case and say you actually were trying to deceive them and your construction company made all the profit and your investors broke even or lost money after the deal. Do you think that your operating agreement would protect you when you have interest in that construction? Probably not. 

If you can’t prove with some documentation that your construction company was the best choice for the job then they may have a case against you. 

@Kevin Christensen I have my own business as well that is in software development. The business has provided mostly passive income for me and so I also had a lot of time and capital to get into real estate. After going to a couple meetups, I realized active real estate investors are just like business owners. It can easily be a full-time job. It made more sense for me to invest passively and focus on what I enjoyed doing more.

Being on BP tempts me to become more of an active investor , but then I hear some horror stories from friends or other investors and realize that I'm fine investing passively. Now I'm just trying to merge my two passions of real estate investing and software development. Maybe it will work out, maybe it won't, but I get to learn a lot more about real estate investing in the process.

I'd recommend you go out and meet other local investors. Talk to them and really get a grasp of what it is like. Podcasts and YouTube videos can be very one-sided. They try to inspire people and not scare them out of doing something. When you can talk candidly to someone in person, you can really ask questions and figure out if it really is for you.

@Kevin Christensen You should look at real estate investing like owning a business. Did you decide to just build out 5 retail stores at once, or did you build out one, see how it did then expand? You may not want to just jump into as many units as you can buy without first testing the waters. What if you buy a 50 unit rehab that ends up taking away time from your successful business. If you start smaller, it's easier to get out of it if you decide it's not for you.

I do consider where the market is and other opportunities. If I were to invest in a project, I would weigh out whether the opportunity cost of having the cash locked up in a project for X years is worth it vs having it available to invest in something else like the stock market. The past couple years, I felt the stock market was overvalued so I didn't really consider it when I was investing in real estate. Now that the stock market is correcting, I'd rather have more cash to divert funds into the stock market rather than using it for real estate.

As far as alternative markets, it wouldn't really matter to me. As long as the numbers makes sense and the project isn't any riskier than a similar project in a "better" market, I would invest in it. They key is to be truthful about the type of risks and benefits there are in this market. It all comes back to the deal though. If you could get a property for $10,000 that is worth $100,00 and it will sell/rent easily, I don't care what market it is in.

I don't think building relationships with investors is completely necessary unless they have millions of dollars to invest in multiple projects. I've invested with people I've only met once. What you have to do is manufacture trust. You can do that by being an authority on a subject (i.e. hosting or speaking at a meetup), showing people who have invested with you (startups do this all the time by stating which big name VCs have backed them, you can do it by pointing out job titles or something: professor from USC or CEO of X company), showing your past projects (all of them, not just the ones that did good), or just offering your help (i.e. help someone analyze other projects they are considering, but if the other projects are better than yours you should say so).

Building trust isn't really part of your REI pitch though. Building trust is part of your marketing and branding, so that when you do pitch someone a project, they will be more receptive to hearing it. If the numbers don't entice them though, it doesn't really matter how much trust you've built.

If you really want to nail down how to pitch someone, don't think of it as a pitch, but think of it as a dialogue. Start off by asking them questions of what they currently get in returns, what their risk appetite is, etc. They should be doing most of the talking. Once you know more about the investor you can point out how your project may fit with their current investment strategy.

@Mary Paras There are hard money lenders that will loan to an individual, but there are also hard money lenders that only lend to a business entity. You would be better off having an LLC, so that you can talk to more hard money lenders rather than narrowing your options down before you even start looking.