All Forum Posts by: Paul Shannon

Very risky to waive, as specially on a supposed "rehabbed" property.  You don't know where the seller may have cut corners or put lipstick on a pig.  When you buy a rehabbed property, you expect turnkey.  If you waive the inspection, you forgo that expectation.  Your agent should know better. 

Now, if you buy a property and know ahead of time its going to be gut job, I think waiving an inspection makes sense.  You already know everything is wrong with the property, so why pay someone to tell you that.  As long as there aren't termite problems, excessive mold, or foundation issues (all fixable, but will blow your budget if you don't see prior to purchase), which the trained eye can spot, I'd assume the worst and budget for it, while waiving inspection. 

Location, location, location, so they say. You said you could buy/rehab it at 70% ARV. What comps did you pull to get that number?

It doesn't seem to have any comps.  I bet you would be able to rent it, but some renters may have an issue with the location and move on.  I'd be most concerned on the exit when you go to sell.    

Hard to say what a discount should be.  How long will it take to cash flow enough to pay you back for your investment?  If its more than a few years, I'd consider passing.  

Yes, it would be considered commercial if a multifamily has 5 or more units.  Residential loans for 1-4 units.  Commercial you pay a higher rate, shorter-term loan, amortized over 20-25 years, with a balloon payment due at 5,7,or 10 years likely.  I'd look for community banks or credit unions locally for that type of property.  

Enjoy this thread.  

I’m considering an investment in a value-add syndication and actually spoke with Ivan/BAM last week.  I’m really in the exploratory phase right now with the mindset of being ready in 6-12 months for an investment after finding the right sponsor.  

I’m impressed with BAM and putting money to work sooner would be preferred.  However, I’m having a hard time with the uncertainty in the market right now.  

A value-add deal relies on raising rents to achieve a higher NOI and exit price. We have downward pressure on rents right now. If jobs don't come back when stimulus ends, NOI will suffer and defaults will increase. There seems to be a lot of jobs that won't come back. Inflation will come in time with the money printing, but that could be years. If that happens, cap rates go up with interest rates.

Ultimately I feel as though pre-Covid deals face a lot of headwinds. If they are financed with low LTVs, they'll be fine, but I anticipate longer hold periods. I value liquidity and if returns are going to be closer to 10% IRR than 18%+ potentially, Im not willing to lock up money for maybe 10 years. A post Covid deal would have the ability to underwrite these factors in to a purchase.

Am I missing something hear?  Value opinions. 

It depends on your risk tolerance, if you have dependents to care for, what market your in, etc.  Its a very personal decision. 

I would recommend buying a few houses and going through the process of what ever strategy you want to employ (BRRRR, flipping, etc). Know that you can do it and are confident.

Then track your spending and how much you need to live.  Once you’ve got a proven concept and the amount you need to make, you know how to work backwards from there.  Example - need to flip X amount of houses to gross X dollars to net X dollars.

Then you just have to build up the courage to jump.    

Midwest is where its at.  Low cost of living, good jobs, friendly people and most states in the region are landlord friendly.  No mountains or ocean, but a good place to get ahead, build wealth, and raise a family.  

Earned income goes on the other side of the balance sheet.  assets = liability + equity.  Your principal pay down is debt you are paying back, ie a liability.  

However, NOI doesn't take into account debt service.

There are economic indicators that could support both a major storm is coming or that we are poised for a boom.  Its fine to be informed and adjust your risk tolerance accordingly.  But to try and pick a specific strategy to go all-in on based on what the outcome of this mess is would be foolish.  My sentiment is more bearish today.  

It could make sense to have both risk-on and risk-off pots of money.  One to take advantage of opportunities or roll the dice, and another to shield yourself from downside risk and have reserves.  

If I were in my early twenties, I'd be investing heavily in all assets that do well in inflationary environments, ie real estate, stocks, gold, commodities.  If we crash, so what....there's plenty of time to recover and you didn't have that much to begin with.  If I were 65, I'd hide my money in my mattress.  

Adding to what others have said about Zillow.....Its a bit of manual searching, but if you pull up the neighborhood you're trying to lease in, start clicking on every house.  If the house has pictures, its likely been sold or rented recently.  Go down to the "price/tax history" tab.  You'll see rent prices (listing price) and when the property was put on and taken off the market.  You can compare the pictures to your property to know if the finishes are similar and whether your place should rent for more or less.  If there is a history, you can get a good sense of how much your property will rent for and how much turnover you may expect.