All Forum Posts by: Tyler Weaver

21 irrefutable laws of leadership by John C Maxwell might be a good book for you.  

At the macro level it might not really be about mindset like you are asking.  But it definitely seems more in line with your way of thinking than Napoleon Hill.

You mentioned an accountability partner, do you journal and review it with them?  What you are asking is probably not going to come from a book, but rather introspection. What did you do that day, what did you want to do that day, how well did you accomplish it, how did it make you feel, do you feel like you are getting enough done, falling behind, or crushing through stuff? Then you will have some good reading!

3 family, 110k arv? that is not close to the university of cincinnati by any practical means. what street is it on?

@DL Martin You might be able to weigh in here.

@Chris Washington I have not closed a deal like this before. But from the research I have done, I would say there are commercial banks that would approach such a loan. They are going to want to see substantially more skin in the game than something with a positive NOI, it will most likely be a short term note, they are going to want you as the borrower to be strong, they will want to see that you have been involved in deals like this in the past successfully, or you have done business with them in the past and this is a logical next step.

@Chris Washington Why is it negative? Lets assume its because poor repair.  Did the owner defer all the maintenance, including turning around units?  Or did the owner defer maintenance because his model was broken and he was losing money every time he fixed up a unit to rent out again to have the tenant cost him money and get evicted.. 

I would underwrite a negative NOI property almost the same as a completely vacant property. Basically you take the pro forma, but not theirs. You make one based off of conservative rents, and conservative figures of where the building should be. Figure out a very conservative cap rate for the neighborhood based on sales. Thats the ARV, then work backwards. Subtract out construction and holding costs. I would price it at the rate a company that does a project of that size every month, not once or twice before. For the holding costs I would calculate it based off of the market's highest rates for private lending, even if you are going to qualify for a lower rate commercial loan of some sort. This would be the calculation I use to defend any offer I made.

Then I would do the same calculation for internal use. Rather than looking at all the numbers 100% pessimistically I would look at them realistically. Try to calculate out my construction costs accurately, and cost of capital with my required IRR for funds and my investors/lenders rates/expectations. My IRR would have been based off of a value add on a pre-stabilized property though, so I would also add in an extra margin to account for the risk of this project. I would want to see at least double the returns for taking on this kind of risk.

Hopefully these 2 figures make sense and you end up with a starting point to negotiate from and a ceiling of max to pay. 

I would only use the replacement method in a neighborhood where you could conceivably want to build a new multifamily.  Here is why, if there is a 10 unit building in say Avondale, that would cost 400k to build new, but is currently 100k and has 50k in deferred maintenance and would stabilize at 200k. The spread between the 150/200 and 400k is a risk, not equity.  The capex doesn't care that the building is worth less than it costs to build it, or rebuild parts of it as things break down. 

Welcome to BP.  

Brandon turner's rental book is great, very comprehensive info in there.

https://get.biggerpockets.com/rentalbook/

The public often overlooks the value technology plays in widening the gap of income inequality.  In 1800, how many people did it take to roll out a service a billion people could use?  A million?  Ten Million?  In 2016, how many people does it take to roll out a service for a billion people to use?  Probably somewhere closer to a few thousand. A small company with less than 100 employees can have a service that serves millions of people.  This of course leads to the founders, investors, and key employees to be able to receive a very large portion of the pie.  

Using technology has a similar effect on income inequality in society as leverage does on money in REI. It puts a lot more responsibility in less people's hands. They can then use it to create massive wealth or destroy wealth very quickly.

A lot of wealth is created in this manor.  A look at the Forbes list shows people who have served a lot of people.  What trips people up is the, probably pretty true, narrative of using wealth to influence politics to create an unfair playing field.  Cronyism is not capitalism, and is the biggest danger to capitalism.  If left unchecked, it will be the reason for radical political change.   

Flipping has less exposure to long term market trends than buy and hold.  If you are faced with a 10 year market trend that the graph looks something like this: \ Then buy and hold, especially all levered up can sink you quickly.  Where in flipping you would be in and out of properties quick enough that hopefully it doesn't move against you more than your expected profit anyways. 

It might not be so easy as just waiting with buy and hold.  If you bought wrong, and are in the hole on equity from day 1.  And also are negatively cash flowing because you missed an assumption then the timeline on when this investment is causing pain is dragged out for years and the mistakes can add up in $.  While you are losing money, the rest of your money is tied up in it, and its unlikely people will be rushing to give you more of it with that track record.  If you mess up in flipping at least you get to take it on the chin and move on...

It sounds like you are looking for a line of credit without the underwriting.  I am not sure what the underwriting is for personal credit. It is probably very similar except the rates and the dcr would be way different if compared to salary vs business income. 

On a 7 year amortization line of credit banks will most likely be looking for 1.2 to 1.25 dcr.  For a 100k limit they would be looking for 72k annually of business net income.  

There is wiggle room, and banks will compete against each other on commercial products like this. If you have good credit the interest rates on these lines of credit are usually measured in prime - something.  So the rates are VERY good.  But you would need existing business income to get this type of line at any real amount. The intent of these products is for cashflow, so they will probably not underwrite it for flipping.  Though if your flipping business owns a construction company which has receivables for the work performed, they like extending LoC's for that kind of purpose.  

This might not help you too much right now just getting started but hopefully it helps you understand a bit about what banks are looking for when extending credit.  I also hope it helps you and the other people in this thread think about how they could structure their business to maximize the availability of short term funding if they need it.

America undervalues tech schools by a lot.  While they still value tech trades you can learn at a university such as engineering, business, law, etc.  Currently the onus of finding a degree that will be marketable upon graduation is on the individual.  Usually a kid in high school who has no idea, besides maybe trying to mimic people they think are successful. 

Then there is the student loan program, which gives students access to way too many funds, but also makes colleges charge more with the understanding that students can just get loans for their product.  Driving the cost out of control!  It currently costs 26k a year to go to UC.

I went to UC as well, but I didn't go to the well renowned CCM.  Just the unassuming business school, and got a degree in finance.  While I never used my degree directly in the job market, I believe this degree has impacted my skills in business significantly.  Could I build a successful RE business without it, sure!  

The data on people with college degrees still shows a huge lift between people with degrees and without.  This data is hardly good science though, since the people who completed a degree were probably more likely to earn more money in their life, period. 

I don't know if anyone is collecting data on success rates of guru program students vs people who didn't attend.  

Welcome to bp Dave! If commercial property excites you for those reasons then you might also like the BRRRR strategy coined by Brandon Turner.

The Cincinnati community on BP is really excelent.  

Yea picking a strategy and learning everything you can about it is important.  There is something to be said about focus.   Strategy isn't set in stone either.  The more you learn the more it can evolve. Have you checked out the bp podcasts?  Listening to interviews of people out there doing various strategies can be great to figure out where you want to focus. There are subtile things you can glean from the interviews like what personalities see success in which part of investing.