All Forum Posts by: Ben Leybovich

Joe, are you stalking me? Everyone, watch out for Joe - he's probably stalking you too LOL

Joe, the answer to your question is - yes. There needs to be additional infrastructure to accommodate furnished rentals. We chose to bring it in-house. @Patrisha Leybovich and I with the help from @Sam Grooms  are handling the buildout, but when we reach critical mass we will pass this off to an employee. Soon enough there will be 30 such units across the portfolio, and the income more than facilitates a partial salary of the office staff.

Now, to the question of whether it's worth it. You are making a classic (short-sided) mistake of just seeing the income, while not seeing the value. 5% vacancy on the revenue of $100,000 per month adds up to $60,000 - this is what I am creating/saving. This is nice, but more than nice is the reality that capitalized at 5 cap this $60,000 represents a value of $1.2M

So, the question is less about whether or not $60,000 of annualized revenue is worth the headaches and more whether $1.2M of valuation is worth the trouble...

Finally, there is actually more to this in two ways. One - 5% physical vacancy is accompanied by bad debt, turn costs, marketing costs, etc. So, in reality, 5% physical vacancy really costs 7% - 9% economic vacancy. And, two, - with these vacation rentals I am thinking I can do better than double the income, thus cut into some of this economic loss at the property.

When looking at real estate it's important to see past real estate :)

Originally posted by @Greg Dickerson:

Originally posted by @Ben Leybovich:

Think of it this way:

If stabilized operations presume 5% physical vacancy, then if you could squeeze 2x the income from 5% of the units in the community, you could effectively "erase" the entire 5% vacancy.

This is the second unit we furnished at Canyon 35. This is a studio that typically rents for $750. As a furnished unit we just took a 45-day booking with a payout of almost $2,900. Thus, on a monthly basis, this is about $1,900 of revenue out of a $750 rental.

The other unit we have is clearing about the same.

We will have about $300 in costs associated with each of these units, thus the Net is about $1,500 - $1,600. Basically double, which was the goal.

5% of the units will get this treatment.

Ben - this is a great strategy in my region as well. In addition to one of the top wedding destinations and huge wine country we have a major university, major military bases, state capital and DC in my region. They are marketing units as executive rentals in the apartment complexes and some houses as well as vacation/visitor rentals. They all have printer/copier/scanner/fax for business travelers.

Thanks, Greg! We agree :)

Think of it this way:

If stabilized operations presume 5% physical vacancy, then if you could squeeze 2x the income from 5% of the units in the community, you could effectively "erase" the entire 5% vacancy.

This is the second unit we furnished at Canyon 35. This is a studio that typically rents for $750. As a furnished unit we just took a 45-day booking with a payout of almost $2,900. Thus, on a monthly basis, this is about $1,900 of revenue out of a $750 rental.

The other unit we have is clearing about the same.

We will have about $300 in costs associated with each of these units, thus the Net is about $1,500 - $1,600. Basically double, which was the goal.

5% of the units will get this treatment.

Janet is a well-known operator in Phoenix and parts of TX. As @Sam Grooms mentioned, we've competed (unsuccessfully) against them in the highest and best.

Everyone has their "tricks of the trade". WWC likes to create several levels of value add in a community, with various levels of interior improvements. Perhaps one level is just to clean up the unit and install new appliances. The next level up might be to reface the cabinets. Another level might be to add tile backsplash and stainless. They also like W/D install.

In general, I am not aware of anything bad. They seem disciplined, and like Sam said good underwriters. I don't particularly love the methodology for this cycle, which is reflected in Sam and I are doing things very differently, but this is a matter of opinion. There's enough for everyone.

As to the fees, we can argue either way. However, these fees tell me that Janet wants to get paid, and while some of the fees may be on the high side I see nothing wrong with it in general. What we do is hard work and a lot of responsibility. And, ultimately, she is raising the money, which means that enough people trust the prospects of her performance.

You simply have to decide where you stand and play or pass.

Should I get a girlfriend or get married? And if I get married, should it be a girl or a guy? And if it's a girl, should she have blond hair or red? And should she be 23 or 42? Or, should I just go get a convertible instead and call it a day?

Hahah Hope this helps :)

Dude, Yonah, just got another Tesla. These things are getting more and more ridiculous every year...

Question - how many people do you know on BP or anywhere who have the chutzpah to write an article called: Grant Cardone is fabulous but he is wrong...hahah? 

Did you know that once upon a time I sent in my resume for a position in GC's shop? He, in so many ways, told me I'd be better on my own. Well, what is there to do when both @Grant Cardone and @Brian Burke tell you that you'll be better off on your own...?

Go syndicate a bunch of apartment complexes in Phoenix, of course, lol

IN 2020 Sam and I will do some more stuff!

You have to take all of these reports with a grain of salt. While Columbus, Austin, Raley, Phoenix, and New York are all grouped together in this graph, they are very different dynamically from one another. You are comparing 1M MSA in Columbus to 5M MSA in Phoenix to NY...

Milken is good, bit hyper-focused on technology, which may not provide enough flavor about the other sectors.

Ultimately, here we are. Today. Is the population story likely to continue in the MSA? Is the job growth story going to continue in the MSA? Is there an intrinsic barrier to entry relative to new development in the MSA, whatever it may be?

Maybe we are at 11 on the graph. Or, maybe we are at 9,25 on the same graph. Or, maybe we are at 11, but the green is going to stretch past 13...

This has never happened, but I agree with @Brian Burke - it seems to me that the forward-looking picture is what's really important. And, let's face it, all of us are making a guess at it; an educated guess, but a guess nonetheless. 

SO, now that you've done this one, what's next?

 I would add that the asset management fee should not be thought of as cash flow either. As you scale your business you will have to keep the lights on, hire personnel, etc. This asset management fee allows you the latitude to hire the help you need to do a good job overseeing your investor's investments. 

This is not a cash flow business.

@Yonah Weiss and I both would like your father to adopt us...LOL