All Forum Posts by: Roger Doe

These guys were on a show called Flip This House and frankly, the renovation work that they did was terrible. The quality of the work was terrible, the design was horrendous, and they seemed to have no clue on how to manage a project. Just look at the colors that they ended up picking...ugly.

I can't believe people give money to these guys to teach them. Flipping houses isn't rocket science. It just takes time and hard work. You buy a house, hire contractors to fix it up, and then sell it.

Hello. I am new to the forum but noticed your explanation on valuation and I'm interested in your discussion. I am an experienced real estate investor.

Do you guys have a systematic method for calculating cap rates because I can't seem to find anything. For example, with stocks, analysts have used CAPM (although it's popularity is dwindling) which uses volatility to be a proxy for risk. Although I have a problem using daily stock price as a true measure of volatility, at least daily price fluctuations is something resembling volatility. We don't seem to have anything similar for real estate.

I have friend at Blackstone that does 100+ MM development deals. And, I've asked him what they do. They use hurdle rates that they simply arbitrarily assign to specific types of developments. If a development exceeds it, they do it. Seems pretty lacking.

Can you share exactly how you come up with your cap rates? Do you have a data-based process in which a cap rates is derived?

If you have time, you can approach the banks directly. Each state has a list of all banks and credit unions. Call each of them directly and ask to speak to the commercial mortgage department. Just to warn you, some of them don't like to deal with inexperienced investors because it takes so much longer to complete a loan. Also, you might get paired with a loan officer that is clueless who might screw up your application.

On the other hand, you can work with mortgage brokers who are very expensive but will do all the work for you. Also, they are more likely to get the loan for you since the banks trust them because the bank trust that the mortgage broker did the screening for them.

If you have time, I would approach the bank directly. It'll be a long stressful process but it's a great learning experience. But, if it's a deal that you need to get completed right away, use a broker.