All Forum Posts by: Joel Florek

@Peter Tverdov It is definitely a risk to personally guarantee a loan. A few points to note. 

When early in your investing career banks are very hesitant to work with you. That being said they want to see skin in the game. Since I am highly leveraged, young, and dont have many personal assets this makes it very difficult to get loans. Every bank I have spoken with has said they would require a personal guarantee from me. Negotiations are all a give and take. The banks did want a personal guarantee from my parents as well and I said "not a chance." They relented on that one since this is my business and my parents are not involved at all. 

The other point is understanding the risks. Investing in single family rentals can be devastating if the market tanks and you bought very expensive homes. Flipping can get very risky and so can real estate development. But as you get into larger multi family properties the risks start to diminish. Vacancy would have to reach 20% for over a year before I would struggle. Since I have some of the best amenities in my market all I need to do is lower rents to fill those vacancies in a tough time. I run at 2% vacancy right now and could do better if I really pushed myself to work a bit harder but Ive put other systems in place to raise my "other income" category. 

Do people lose their shirts... yes it does happen but thats business. But understand your breaking points and figure out how to mitigate those risks. I don't amortize loans past 20 years so I can be sure to build enough equity to have room to lower my payments in the future. My loans are at 20 and 10 years only. 

Its all a matter of personal preference and I respect people who wish to not personally guarantee their loans. But this does make it harder to creatively structure deals and build an investors confidence in you. After all a bank is not just a lender, but an investor in your business. They invest in the person just as much as they invest in the property. 

@Matt Brechting Thanks for posting and I miss tech but am happy to be out of college in the real world making things happen! Have a daughter on the way due in April! But life is fantastic and I am excited for the adventures to come. Have some potentially very interesting deals I am going to see on Monday or Tuesday next week of which would become extremely post worthy! 

@William Huston How are you doing your calculation to get a 6% cap rate? The property fluctuates between a 9% and 10% cap rate based on performance. $65k(conservative) NOI with a $685k purchase is a 9.4% cap rate.

You need to think a little deeper on the cashflow piece. Given we don't move the purchase price cashflow changes depending on how you finance a property. Since I am highly leveraged I want to pay down my principle payment faster. To do that I have amortization periods of 10 and 20 years for my two bigger loans. This means I cashflow less today but each month pay down lots of principle(roughly $2k for my portfolio). If cashflow is all I cared about I would want interest only loans but then I wouldn't be building wealth.

Another point on cashflow is to think of your risks on the property. With commercial loans you have a balloon payment at some point which will require you to refinance. When you do this you expose yourself to interest rate risk. To mitigate this risk the best solution is pay down your property faster so you dont have to take out as big of a loan and can afford to still cashflow with a rate hike of 1% to 3%. 

Reach out if you want to chat further on anything. 

You can always go to rentometer.com to check market rents. Also look at Trulia to review a crime map to get some additional info about the specific neighborhood.

What are the terms if you don't mind me asking?

@Paul D. Appreciate the kind words and best of luck. Let me know if you ever have any questions. 

@Molly MacGregor A few questions, hope you dont mind. 

What are the properties doing for security? 

How do people sign up for new units and does someone physically meet them to show them to their unit? 

Automated billing with credit cards and what software is being used? 

What is involved with turning a unit? 

How do you handle when someone stops paying or is late?

What is the biggest frustration with these units?

@Mitchlyn D. There were no rules for how long I had to live in it. The bank just understood I was living there when I bought it. Just be sure to watch your insurance policy. I had to switch policies when I decided to move out of the building. Found a competitive price after shopping but its a liability you need to be conscious of. 

Would love to get a chance to network and learn from investors who are currently doing self storage units. Trying to understand the dos, donts, and common trends with software management, security, and remote management. Please reply back if your open to me asking some questions and ideally getting on the phone. 

As a note, I currently invest in Multi family real estate and have 20 apartments but looking for other opportunities to invest as I search markets. 

Don't wait. He uses real estate as a way to preserve wealth and provide consistent returns from his other businesses. He is in the large multi family game which is easier and less risky when you have lots of cash to invest. Take everyone's investing advice with a grain of salt and make your own decisions. I was able to get to 20 units in 10 months with only $5k of my own money and cash flow $2.5k a month right now. Even if I never cash flowed well with my strategy I will have paid down $250k in principle by the time I could have saved $100k from my day job. I would say don't wait! Every day you wait is another day you are putting off getting your hands on real estate education that will teach you so, so, so much!