All Forum Posts by: Omar Khan

@Tony F. Looking at cap rates for value-add deals is completely asinine (within the bounds of reason). The whole reason why one is acquiring under-performing assets is because they are UNDERPERFORMING. 

It might comes as a shock to most people but most assets are not valued solely off financials (i.e. income based approach). The seller/listing broker picks the highest of comps or income-based approach which means that in this market the valuation based off comps is picked. 

While it is prudent to wait and sounds like good advice, I don't think the OP is running an opportunity cost analysis on his funds (i.e. should I wait now or buy later) and neither is he looking to get another headache by buying a high cap rate asset in a war zone which looks good on paper but sucks in reality. 

@Gulliver R. I would echo the comments made by @Ronald Rohde. Plus, you don't need a boot camp / mentor to do basic cash flow analysis as you can get all that info for free on YouTube/Google. 

Honestly, if you can get land in the path of progress, at favorable rates, and have a long time horizon (5+ years), just close your eyes and go for it.

@Cody Godfrey Your chances of getting a solid list on this forum would be next to zero. In other words, why would investors provide you a list - to increase competition? 

@Jonathan Dempsey Best of luck finding a 10 cap in an area where the chances of getting stabbed are less than 100%. 

You live in a very hot market and it's hot for a reason - high growth prospects, diversified economy and a great weather (might not feel like it at this time of the year). 

You could find this mythical 10 cap creature by going to a war zone or buying a piece of absolute crap but then the 10 cap returns would only be on paper i.e. you will have little to no chance of collecting most of the rental income due to you.

This article might help you: 

https://www.biggerpockets.com/member-blogs/10776/77428-the-cap-rate-is-dead-long-live-the-cap-rate

@TJ Simon Literally, ask any of the folks investing in your niche and you will find a plethora of contractor names. The only issue is going to be that nobody has a good contractor story i.e. it's a thankless job and the customers are never satisfied. Some of the contractor hate is deserved and some not. 

I wouldn't pay contractors to partner up unless I was doing smaller deals, doing deals for the first time or highly distressed deals where I need a specialty contractor. After all, why pay to partner when you can pay for a similar service in the open market at competitive rates?

@Vincenz DeCastro I'd be very happy to find bonds (or a bond ETF) yielding 6%-8% CoC all day every day. The only problem is that they don't exist.

You are correct that margins are becoming slimmer. But you are also happening to look at a city - Austin - which is one of the highest growth, most attractive places to live in the country. Money is pouring in for a reason and that's because relative to other areas Austin is offering better prospects. 

You could buy a cheaper place in the middle of nowhere and get nowhere. You will always pay a dear price investing in high growth markets but more often than not you will come out on the other side very happy (in a few years).

@Tyler Kastelberg

I am all for developing a team especially when you don’t have the luxury of time or money. Reason: Most things in life are momentum-based. Humans tend to do more of those actions that provide pleasure. Hence, starting out (and later on) learning how to develop a team and delegate (even with limited resources) allows one to develop momentum quicker than otherwise.

The trick is finding the right people. There is no magic cure and most people learn the hard way (at least, I did). So it pays to be somewhat wary. I also had the advantage of coming from a capital markets background so in that sense I was used to (A) working with high achievers, (B) delegating and (C) understanding that talented people need to be paid exorbitantly (the pain of paying doesn’t diminish especially when money is tight).

I understand it might not be feasible for everyone but it has worked out for me. Even today, as we speak, I am bringing on a new BD guy and cursing myself on why I didn’t do this earlier. It’s going to cost me money in the short-term but I am already seeing the benefits.

This was / is a learning process and I am slowly getting better. But I also have the luxury of being young and knowing that there is a long road ahead of me. If not now, eventually I will have to create a team. So why wait?

Plus as @Frank Wong said, time is the most important commodity. I am learning that especially now that I have an infant who's growing up very quickly.

P.S. I think you’re on the right track by building out your team.

Not promoting GC here but what's wrong with opening up a legitimate investing vehicle for non-accredited investors. I'm assuming you haven't raised sizable pools of capital before but even accredited investors don't fall from the sky wanting to throw their money at each and every "good" deal. Sizable sponsors with decades long track record still have to slog it out to raise money (albeit with less pain than others). 

Do agree on the red flags part. If it walks like a duck and quacks like a duck.... 

@Caleb Heimsoth Thanks for the shout out. 

@Abe Homulo There is a big disparity between the US and Canadian markets. But that would happen anytime there is one market with a deeper buyer/seller pool than another. @Roy N. mentioned a good point about Canada being a huge place, but net-net you will find a deeper asset pool in the US. But remember that deeper is not always equal to better. 

@Chad U. 30%-40% unleveraged cash-on-cash returns sounds nice but can you operate on scale (say $10M-$20M)? If so, sign me up.

Hope is a powerful drug. So is overnight riches and "power of positive thinking" only type mentality people.