All Forum Posts by: Mike Dymski

@Account Closed

NOI = $100

Purchase price = $1,000

Cap rate = $10%

If market value rises to = $1,300 and NOI remains the same (for conversation sake), you have 7.7% cap rate on current market value and the ROE declines. I understand that NOI drives the market value in commercial and that rents often increase in both SFR and commercial with increasing property values but they don't always move in lock step and many investors find that their post-acquisition ROEs and cap rates are lower than their purchase metrics (especially in today's market).

I imagine some investors, me included, calculate their purchase cap rates, ROIs, CCR or whatever their metric of choice but then fall victim to parking that property in the portfolio, enjoying the cash flow, moving on to new acquisition and not revisiting those same metrics. Equity builds up through mortgage payments, value-add and/or appreciation and next thing you know, your 25% ROE becomes 18% and your 12% cap becomes 9%, using market value rather than purchase price. You may end up holding properties that do not meet your same thresholds for new acquisition....said another way, you could redeploy that capital elsewhere and get larger returns. It's easy to use purchase metrics rather than current metrics and it's comfortable to have equity, low leverage, to be nimble for when opportunity arises, to think about retirement with low/no debt and just general ease with not having to churn properties to get the best ROE. Just want to throw this out there, see who does and does not look at post-acquisition ROE and generate dialogue (excluding due to mortgage payments...that's been vetted elsewhere).

@Dustin Kircher I'm adding mortgage broker to your list.  Aside from family and friends, agents and mortgage brokers can be the most important people in investors lives. 

1) be an investor yourself - that's how I sought out agents

2) be fast - first to get your clients in the property

Congratulations on the huge appreciation and nice work on finding and following that opportunity. IMO, appreciation plays need an exit strategy just like any REI and even more so.

If you don't have another property available, maybe you can search for developers and syndicators that have investments that are attractive to you and you can invest with them.  There is less geographic restriction with this strategy and you can find some with long track records of success.  There are some here on BP and many around the country.  I have a colleague of mine who has rentals but is putting future funds in private placements rather than direct investment.  I'm doing both but my future funds are going into direct investment in my own properties.  Only time will tell which path is better...his is certainly a lot less work.  Good luck.

My most important criteria for investing in private placements is the developer's/syndicator's track record....show what you have done in REI. Absent experience for something as large as an apartment complex, you are looking at angel investors...friends and family.

Congrats and welcome. Your first house can be a perfect opportunity to jump start your REI career whether you purchase a multifamily and live in one unit and rent the others or buy a house that you can renovate (sweat equity), refi and use the equity to continue investing. There are also very favorable loan terms for first time home buyers that are owner occupants. Good luck!

I paid $3000 for a 25 unit appraisal in SC.

If an investor performs proper due diligence and buys right, the investor knows the total return though exit of the property at the time of acquisition.  If you buy wrong, pay too much or are uncertain of your exit, it's an uphill battle.

Fix and flip is a good example. If you have modeled your rehab, ARV and other costs properly, you know with a fair amount of certainty what you will make on that flip as you leave the closing table.

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