All Forum Posts by: Justin Goodin

👉 Why do most real estate syndicators aim to sell their properties?

Why not just hold the property forever?

Most each real estate syndications (group investments) go through a progression of stages.

All should have a clear beginning, middle, and end.

Here are the 4 phases for a typical syndication deal:

Phase 1 - Acquire
Phase 2 - Add Value
Phase 3 - Hold
Phase 4 - Sell 💰

The sale is arguably one of the most important phases!

At this point, the property exhibits completed updates, increased revenues, and appreciation.

So, the best use of investor capital is to sell the property so that they can seek their next investment project.

Once the sale is complete, investors get your original capital back, plus a percentage of the profits.

While slow & steady cash flow can be nice, selling the property allows investors to multiply their equity faster over time. 📈

Quote from @Greg Kasmer:

Justin - What was your approach to the content of your letter? Did you ask to "connect and have a conversation" or get right to asking about "Are you willing to sell your property?" Wondering what type of language you use in your campaigns. 

There is no magic message. I think a lot of people get way too concerned about sending the perfect message. It just takes consistency. But yes I’m happy to share the message I sent. 

Quote from @George Voutsinos:

Quote from @Justin Goodin:

Quote from @George Voutsinos:

I'm sure you sent out thousands of mailers and spent a lot of money but this one deal makes it all worth it.  Nice job!  You're right, consistency is key.  So you only sent this particular owner one letter?

 Nope. I sent letters to all property owners that fit the criteria I was looking for. 

 Awesome!  On the $500K you raised from private investors, will you cash-out REFI to pay them back?  Would you mind sharing your letter?

A refinance was never part of our business plan for this one. We plan to sell by year 5. 

1987: "Interest rates are too high."
2008: "The market will never come back."
2015: "No good deals are out there."
2020: "The market is too hot."
2021: "The market is going to crash."
2023: "The market is definitely going to crash this time."

It will never be the perfect time to invest.

Instead of trying to perfectly time the market (impossible), stick to these simple fundamentals:

1. Only buy in high growth markets.
2. Underwrite with realistic projections.
3. Only buy stable, cash flowing deals.
4. Choose smart debt terms.

This is how you can buy real estate in ANY market cycle.

Do you think 2024 will be a great year to invest in real estate?

Quote from @George Voutsinos:

I'm sure you sent out thousands of mailers and spent a lot of money but this one deal makes it all worth it.  Nice job!  You're right, consistency is key.  So you only sent this particular owner one letter?

 Nope. I sent letters to all property owners that fit the criteria I was looking for. 

Quote from @Jonathan Bock:

Duration of campaigns, list building, investment $, follow up strategies ....

aka all your secret sauce ha 

I would recommend sending a campaign out once per month. 
You can get a list from Costar, Reonomy, etc. 
You can find sites that charge $.60 - $1.25/card. 

There is no secret sauce 😅 Just takes consistency and a little luck. 

Quote from @Jonathan Bock:

@Justin Goodin

Amazing!  Can you tell us more about your direct mail campaign I have heard so many conflicting opinions on direct response marketing?   

What would you like to know?

📈 XIRR vs IRR: What's the difference?

XIRR and IRR are used to find the IRR of a project.

But what is the difference between them?

The XIRR and IRR functions in Excel are nearly identical besides one critical difference:

✔️ Timing Assumptions

- -

The IRR formula assumes there are equal time periods of a year between the cash flows of a project.

The XIRR formula is much more flexible and is based on the dates of the cash flows for the project.

Bottom Line: We recommend using XIRR.

 16 terms you need to know in commercial real estate:

1. Internal Rate of Return (IRR): A metric used to estimate the annualized return on an investment based on the timing and magnitude of cash flows.

2. Cash-on-Cash Return: The annual income generated by a property expressed as a percentage of the initial cash investment.

3. Discount Rate: The rate used to discount future cash flows to their present value in financial models; often represents the required rate of return.

4. Capital Expenditures (CapEx): The funds set aside for property improvements, renovations, or major repairs.

5. Gross Operating Income (GOI): The total income generated by a property before subtracting operating expenses.

6. Operating Expenses: The costs associated with managing and maintaining a property, including utilities, taxes, insurance, and maintenance.

7. Debt Service Coverage Ratio (DSCR): A measure of a property's ability to cover its debt payments, typically calculated as NOI divided by debt service.

8. Loan-to-Value (LTV) Ratio: The ratio of the loan amount to the property's appraised value, used to assess risk in financing.

9. Equity Multiple: A measure of the total return on an investment, calculated as the ratio of total cash flows to initial equity investment.

10. Residual Land Value: The estimated value of land after deducting development costs and desired profit margins.

11. Sensitivity Analysis: A technique used to assess how changes in key variables (e.g., rent, expenses, interest rates) affect financial model outcomes.

12. Operating Pro Forma: A projection of a property’s income and expenses over a specified period, typically used for budgeting and financial analysis.

13. Cash Flow Waterfall: A structured distribution of cash flows to different stakeholders in a real estate project, often involving equity investors, lenders, and developers.

14. Leverage: The use of borrowed funds (e.g., a mortgage) to finance a real estate investment, potentially amplifying returns but also increasing risk.

15. Equity Investment: The amount of money invested by equity partners or investors in a real estate project.

16. Yield-on-Cost: The return on an investment based on the original development or acquisition cost.

Quote from @Melanie P.:

That's very interesting, Justin. Care to explain why your company, Next Level Equity, has a deal listed on it's portfolio page that you're unable to provide any information about? It just so happens to be the largest project you list a 236 unit apartment in Jacksonville. Is this a project of Next Level Equity? if not, why does it appear on your portfolio page?

If you're thinking of sending money to Next Level Equity use EXTREME CAUTION. If you have sent this company money or been "pitched" on one of their investments in the past, please send me a DM.

Totally agree. Always use extreme caution when picking the right sponsor to work with. Do the same when taking advice from random people hiding behind their keyboard on the internet.