The Entrepreneur Forum | Financial Freedom | Starting a Business | Motivation | Money | Success

Welcome to the only entrepreneur forum dedicated to building life-changing wealth.

Build a Fastlane business. Earn real financial freedom. Join free.

Join over 80,000 entrepreneurs who have rejected the paradigm of mediocrity and said "NO!" to underpaid jobs, ascetic frugality, and suffocating savings rituals— learn how to build a Fastlane business that pays both freedom and lifestyle affluence.

Free registration at the forum removes this block.

Folks, it's 2000 (or 2008) all over again.

Anything related to investing, including crypto

obrian

Bronze Contributor
Speedway Pass
User Power
Value/Post Ratio
96%
Apr 16, 2015
305
292
26
On October 7 Go Pro hit 98.00. Today its 9.98.

A business built on "one-and-done" is hard to sustain, especially when you now need to appease shareholders over customers.

In other words, if someone buys a GoPro they might be indeed be a customer but they aren't ordering every month.
the global economy is ripping apart tech stocks since the start of the year.
 

MyronGainz

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
91%
Dec 26, 2013
410
374
33
Toronto
On October 7 Go Pro hit 98.00. Today its 9.98.

A business built on "one-and-done" is hard to sustain, especially when you now need to appease shareholders over customers.

In other words, if someone buys a GoPro they might be indeed be a customer but they aren't ordering every month.

I do understand that GoPro was insanely overvalued.. but it's just like any other business with 1 prominent product.

What do you think about Beats Headphones? It's more or less the same type of business, "one-and-done", people don't order a Beats Headphone set every month. Yet Apple still acquired the company for over a billion.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

NuclearPuma

Bronze Contributor
Speedway Pass
User Power
Value/Post Ratio
222%
May 3, 2015
192
426
Fire sale today. Consumer spending stocks sold off quite a bit along with the big tech giants.



Sent from my SAMSUNG-SM-G900A using Tapatalk
 

obrian

Bronze Contributor
Speedway Pass
User Power
Value/Post Ratio
96%
Apr 16, 2015
305
292
26
I do understand that GoPro was insanely overvalued.. but it's just like any other business with 1 prominent product.

What do you think about Beats Headphones? It's more or less the same type of business, "one-and-done", people don't order a Beats Headphone set every month. Yet Apple still acquired the company for over a billion.
evernote is also a perfect example they failed to diversify.
 

Ubermensch

Platinum Contributor
Speedway Pass
Jul 7, 2008
1,034
3,920
Chicago
Ubes, you're pretty close.

Here are the real numbers to your grand plan.

You will notice that without having to should the carry costs and the acq. and disposition costs the NPV of completing these these improvements
is significant.

Therefore, it would be better approached as a performance contract, vs. an asset play. Unless you have a revolver from Wells or B of A you would be better off playing sponsor with a institutional JV partner on a contingency basis.

MK

You're right.

Appreciate the call earlier.

I'll copy you on the e-mail I send to @SteveO.

In my experience, nothing beats a real life case study when it comes to selling anything.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

MJ DeMarco

I followed the science; all I found was money.
Staff member
FASTLANE INSIDER
EPIC CONTRIBUTOR
Read Rat-Race Escape!
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
445%
Jul 23, 2007
38,079
169,497
Utah
I do understand that GoPro was insanely overvalued.. but it's just like any other business with 1 prominent product.

What do you think about Beats Headphones? It's more or less the same type of business, "one-and-done", people don't order a Beats Headphone set every month. Yet Apple still acquired the company for over a billion.

There's a difference between a private company whose objective is not to appease shareholders and Wall Street analysts. There's nothing wrong with "one and done" business operations but as a standalone public company I think they are the worst possible investments because of the law of diminishing returns. A new customer may not repeat in years. Throw in that the company is perceived as a TECH company where investors expect FANG like growth. Once they become public, their primary stakeholder shifted to shareholders and suddenly there's intense pressure to keep the growth rates high. It simple isn't possible.

Of course for the owners/executives of GoPro, it works out very richly...

http://www.cnbc.com/2015/12/22/gopro-ceos-new-toy-a-180-foot-yacht.html

For the investors, not so much.

Hence why we here at Fastlane understand the dichotomy where it's the entrepreneur laughing to the bank, not the poor sap who bought GPRO at 90 bucks and now lost 95% of investment.
 
Last edited:

MKHB

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
151%
Jun 26, 2015
291
438
You're in Ohio?

Why not put PACE projects to work.

Poof.

Side-lined investor money flies into projects that result in 10% - 35% IRR's.

PACE is the best thing in real estate right now since land.

PACE - stands for Property Assess Clean Energy
First, I appreciate the recommendation, and not saying it's not a good one. But, I can't figure out this math (and I'm familiar with PACE)....

You purchase a property for $20M. You spend some amount (let's say $500K financed with PACE) to make the property more energy efficient. Then you sell the property for $23.5M (the $23M sale price and the $500K financed upgrades paid through the tax bill).

I'm very familiar with adding value to properties (I've written books on the topic), and for a $500K investment in energy upgrades to generate $3.5M in additional equity (i.e., 7:1 value to cost) isn't realistic in my experience.


PACE - is growing throughout the nation.

PACE - is often the topic of conversation at the White House.

PACE - allows both commercial and residential property owners to upgrade their homes with energy efficiency type upgrades. Dozens of initiatives - from LED lighting to HVAC to solar and renewable technology, controls, window film, roofing upgrades... - apply.

PACE - stands for Property Assess Clean Energy. The amortization lengths are 15 - 30 years, depending on the region (32 states are currently PACE eligible, with more on the way).

PACE - is structured as a tax assessment on the property.

Therefore, it is not like traditional debt financing.


The financing, in essence, stays with the property after the sale.

So, you take a $20,000,000 office building.



Increase its value to $23,000,000.

15% increase.

Take 3 - 9 months to do with, with a PACE project.

Depending on your lease structure with the tenants, you can pass back the costs to them.

Sell the property for $23,000,000.


















That's for both residential and commercial.
First, I appreciate the recommendation, and not saying it's not a good one. But, I can't figure out this math (and I'm familiar with PACE)....

You purchase a property for $20M. You spend some amount (let's say $500K financed with PACE) to make the property more energy efficient. Then you sell the property for $23.5M (the $23M sale price and the $500K financed upgrades paid through the tax bill).

I'm very familiar with adding value to properties (I've written books on the topic), and for a $500K investment in energy upgrades to generate $3.5M in additional equity (i.e., 7:1 value to cost) isn't
realistic in my experience.


@JScott @SteveO @JustAskBenWhy @G_Alexander @Chitown @biophase (all you real estate geniuses) help me work thru this, it seems interesting and Uber as always has something here, (He's a smart dude, just ignore all the Harry Potter/Robert Green/Matrix take over the world kick a$$ stuff).

Has anyone put on one of these deals or been involved, what is your experience, and if you have any spreadsheets on the pro-formas would love to see. I may have a couple of potential deals similar to this in the drawing board buy I am still kind of "spitballing' my way, so any input would be appreciated.

It's seems doable but only if: asset is in a PACE district, potential for deep savings as a result of an energy retrofits, full service gross leases with liberal pass thru language must be in place and ... the big one? Why would a first lien holder (Wells/Bof A/Met Lifeor a CMBS conduit) allow subordination and if they did I would think you would need to have either a pretty significant equity (low LTV) or a great track record or be willing to accept an added recourse carveout to the first trust deed???


The part about needing 500K is not applicable, from my understanding, this is a zero down, no fee program. The ROI is imediate it starts day one or when the retrofit is complete, maybe day 120??

The weighted cost capital today is somewhere between 7-8% (@Ubermensch help me out here you probably have a recent term sheet) and it amortizes to match the useful life of the improvements. e.g., 5 years for low level LED replacement or 20 year amort for full MEP/envelope upgrades.

So in essence this strategy insulates you somewhat from any cap expansion, if you bought at a 6 CAP but sold at a 8 CAP years after 5 years you would still benefit from TMV standpoint in that even though the reversion CAP is lower that the entry cap, with the NPV of increased cashflow on day 1 and the tax and utility benefits, along with standard depreciation benefits there would still be a positive delta and a decent IRR.

You can see in my spreadsheet attached that it could work as an asset play (buy the asset and put the strategy in play) but it works better as a third party contractor by proposing this concept to a CRE owner. Because even though the PACE programs has no initial outlay, the money needed to secure the asset (as owner) 30% of purchase price and he broker fees on both sides of the deal buy/sell hurt the IRR.

Any thoughts? Sorry for any typos, I can't find my god dam glasses.
 

Attachments

  • Office Building Value Add Pace Project.xlsx
    21.6 KB · Views: 5
Last edited:

MKHB

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
151%
Jun 26, 2015
291
438
I don't think that housing is in a bubble. It has taken a medium drive along the path of recovery. It may falter a bit but the big run-up has not occurred. Apartments seem to be in a bubble though.

I think you hit the nail on the nail on the head professor.

Non-Gateway market residential has not had a big run up. And in the area I am in, outside of DC/MD there seems to be opportunity in short term real estate plays. The millenials are creating a surge in the urban areas and the echo and young baby boomers are upgrading to newer product in the established areas that are adjacent to urban explosion, while rates are low.
 

MKHB

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
151%
Jun 26, 2015
291
438
You think this will affect the real estate market as well?

If all goes poorly it will create opportunities. Up markets are for the highly capitalized and connected players, the transitional periods
(hopefully one is on the way) are for the rest of us.

If you are not exposed to a lot of start up tech (unicorns: the 126 VC funded companies with 0 profits) on your rent roll you should be fine.

According to ULI, tech hub area CRE rents are up an ave of over 40% since the crash, all other areas barely broke 10%.

NYC/SF/Silicon Valley/SD/Boston/LA/DC account for 45% of all VC outlays, might be a problem if your overextended in these markets.

a5bd8684e.png
 

SteveO

Legendary Contributor
FASTLANE INSIDER
EPIC CONTRIBUTOR
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
456%
Jul 24, 2007
4,228
19,294
@JScott @SteveO @JustAskBenWhy @G_Alexander @Chitown @biophase (all you real estate geniuses) help me work thru this, it seems interesting and Uber as always has something here, (He's a smart dude, just ignore all the Harry Potter/Robert Green/Matrix take over the world kick a$$ stuff).

Has anyone put on one of these deals or been involved, what is your experience, and if you have any spreadsheets on the pro-formas would love to see. I may have a couple of potential deals similar to this in the drawing board buy I am still kind of "spitballing' my way, so any input would be appreciated.

It's seems doable but only if: asset is in a PACE district, potential for deep savings as a result of an energy retrofits, full service gross leases with liberal pass thru language must be in place and ... the big one? Why would a first lien holder (Wells/Bof A/Met Lifeor a CMBS conduit) allow subordination and if they did I would think you would need to have either a pretty significant equity (low LTV) or a great track record or be willing to accept an added recourse carveout to the first trust deed???


The part about needing 500K is not applicable, from my understanding, this is a zero down, no fee program. The ROI is imediate it starts day one or when the retrofit is complete, maybe day 120??

The weighted cost capital today is somewhere between 7-8% (@Ubermensch help me out here you probably have a recent term sheet) and it amortizes to match the useful life of the improvements. e.g., 5 years for low level LED replacement or 20 year amort for full MEP/envelope upgrades.

So in essence this strategy insulates you somewhat from any cap expansion, if you bought at a 6 CAP but sold at a 8 CAP years after 5 years you would still benefit from TMV standpoint in that even though the reversion CAP is lower that the entry cap, with the NPV of increased cashflow on day 1 and the tax and utility benefits, along with standard depreciation benefits there would still be a positive delta and a decent IRR.

You can see in my spreadsheet attached that it could work as an asset play (buy the asset and put the strategy in play) but it works better as a third party contractor by proposing this concept to a CRE owner. Because even though the PACE programs has no initial outlay, the money needed to secure the asset (as owner) 30% of purchase price and he broker fees on both sides of the deal buy/sell hurt the IRR.

Any thoughts? Sorry for any typos, I can't find my god dam glasses.
I have expressed my concerns. I like "value add" deals. My comfort level allows me to leverage and double my money in 3 years or less. This includes all costs associated with the project including cost of sale.

The caution should be around current valuations, time for project completion, and time to get rents where you want them.

It is very difficult to negotiate a deal when real estate is so desirable. Most people are trying to sell at future values based on YOU raising rents. This does not happen so much when commercial real estate is in less demand.

Also, values are hot right now so I would want to be able to turn quickly. The faster, the better. Don't get caught in the "musical chairs" situation of holding the property during a slowdown.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

MattCour

Silver Contributor
Speedway Pass
User Power
Value/Post Ratio
128%
Aug 17, 2012
454
579
NY
I have expressed my concerns. I like "value add" deals. My comfort level allows me to leverage and double my money in 3 years or less. This includes all costs associated with the project including cost of sale.

The caution should be around current valuations, time for project completion, and time to get rents where you want them.

It is very difficult to negotiate a deal when real estate is so desirable. Most people are trying to sell at future values based on YOU raising rents. This does not happen so much when commercial real estate is in less demand.

Also, values are hot right now so I would want to be able to turn quickly. The faster, the better. Don't get caught in the "musical chairs" situation of holding the property during a slowdown.

I'm sure there will be a few people left twisting in the wind buying 3 Caps with barely any down payment. Those are the deals I want to be buying in a few years time.
 
Last edited:

obrian

Bronze Contributor
Speedway Pass
User Power
Value/Post Ratio
96%
Apr 16, 2015
305
292
26
the tech market is in a correction mode right now even amazon stock is going crazy,most of these stocks are so overvalued it's ridiculous look at even linkedin, gopro etc. the tech private valuations this year will be slaughtered horribly especially when some of them take the plunge at going for an ipo, the market is going to slash most of those private 10billlion+ valuations in half this year. i don't think it will be a tech bubble like the 2000 but it sure damn is going to be devastating.
 

MKHB

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
151%
Jun 26, 2015
291
438
I have expressed my concerns. I like "value add" deals. My comfort level allows me to leverage and double my money in 3 years or less. This includes all costs associated with the project including cost of sale.

The caution should be around current valuations, time for project completion, and time to get rents where you want them.

It is very difficult to negotiate a deal when real estate is so desirable. Most people are trying to sell at future values based on YOU raising rents. This does not happen so much when commercial real estate is in less demand.

Also, values are hot right now so I would want to be able to turn quickly. The faster, the better. Don't get caught in the "musical chairs" situation of holding the property during a slowdown.
Well said, thanks for the feedback.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

obrian

Bronze Contributor
Speedway Pass
User Power
Value/Post Ratio
96%
Apr 16, 2015
305
292
26
i think the movie the big short sums up the collapse of 2008 nicely.
 

MKHB

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
151%
Jun 26, 2015
291
438
I'd be wary of using the DC/MD market as a case study (not saying you are, but just in case)...

I live in this area now (Howard County, MD), and in terms of real estate, MD/DC/NoVA is a different beast than what I've seen in other parts of the country. DC appears to be very insulated -- not surprising, given that very powerful and influencial people come and go every 4 years -- and prices here generally don't reflect what's going on elsewhere in the country.

During the 2008-2012 housing downturn, MD/DC didn't see a tremendous drop in values, and in the ensuing few years since 2012, it hasn't seen the crazy run-up that much of the country has seen -- though it's certainly seen a run-up. I think it's true that there is some short-term opportunity in MD/DC real estate, but I wouldn't generalize that to places outside of here (necessarily).

Basically, all I'm saying is that MD/DC appears to me to be a different beast than most other major real estate markets around the country. What happens here can be very different than what happens elsewhere...

Yeah, that seems to be the case. There are pockets of Northern VA that I am looking at to do some spec building. And as you state, the values are not out of this world but the pool of potential buyers are the upper level GSA/Fed that have built up a bit of equity and with rates so low are trading up into new homes.

I did really well doing this when I was in So Cal as part of a group, (my role was minimal investor/GC) that did specs in the South Bay MB/HB/Redondo Beach until the buildable lots went out of reach and the financial crisis hit.

PM me sometime on what your up to, let's meet and talk a little shop. I know some people that are doing stuff in MD/Balt/Bethesda mostly adaptive use converting old class c commercial to condo.

MK
 

Ezio

Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
160%
Aug 6, 2014
55
88
31
Gdansk, Poland
Almost everything indicates that it is happening.
Also seems that Deutsche Bank and other big european bank have problems.
http://www.zerohedge.com/news/2016-02-11/deutsche-bank-back-5-year-cds-soar-record-high
4n31IhX.png
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

Lanefaster

New Contributor
Read Fastlane!
User Power
Value/Post Ratio
157%
Jun 23, 2016
7
11
Estonia
Bringing this thread a little up.

How will Brexit affect economy?

I mean other currencies, stock values, even the time of collapse etc?
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

aespinosa

New Contributor
User Power
Value/Post Ratio
110%
Jun 23, 2016
10
11
32
Bringing this thread a little up.

How will Brexit affect economy?

I mean other currencies, stock values, even the time of collapse etc?

I'm not quite sure, most say that it will speed up a global crisis. "It's due time". 2000, 2008, 2016. Eight year cycle.

Right now, pound is devaluating and yen gaining power as a "safe haven". USD is gaining power too.

Stocks in europe are sinking, banks are at ~-20%.

S&P500 technically is screaming to do a big fall. So this will probably make stocks fall too.
My portfolio is down compared to last month for example, still not in the red, but surely will.

If you want to buy stocks, a crisis is the best time. Recessions are not that bad if you are empowered and know what to do. Money isn't "wiped out" from the market like news say, it is just transferred to other hands.
 

king156

Contributor
Read Fastlane!
Feb 26, 2016
79
30
26
I tend to agree... and the leading indicators in 2000 were subtle job layoffs in the tech sector, which we are just starting to see now.

So for those who operate on Slowlane principles and hold big stock positions, you can prepare and be wrong, hence losing out on a 3-6% gain.

Or not prepare and be wrong and lose 50%.

The choice is yours.
DJAI heading down to 15k level been riding this mofo since 18,100.....same with oil pending shorts all back down $28 a bareel much mich later on but DJ is going to be a killer
 

Growth & Learn

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
88%
Jan 1, 2015
282
249
Southern California
Where do you think the money is transferred when public stocks go up or down?

For example, a public company with 10M shares outstanding goes down $1 in price (e. g., one person paid $1 less than the previous person for a single share of stock). A few bucks changed hands for that share of stock, but the market cap of the stock just went down $10M...

Who made $10M if that $10M wasn't wiped out?

You have a good point but it's only money on paper. Unless you sell the asset at that exact moment then the current value of the stock is just on paper. So, to say it's wiped out isn't 100% accurate. It's just not currently selling for what it was valued in a prior period.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

Growth & Learn

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
88%
Jan 1, 2015
282
249
Southern California
You have a good point but it's only money on paper. Unless you sell the asset at that exact moment then the current value of the stock is just on paper. So, to say it's wiped out isn't 100% accurate. It's just not currently selling for what it was valued in a prior period.

On a related but separate note... for those of you who read this thread back in February and got scared and started making decisions based off fear i.e. selling a bunch of assets because you're afraid the market was going down. Let that be a lesson learned. Trying to time the market all while having your emotions involved is a tough way to go.

And if you think the economy is going to shit now because of Brexit and your'e also operating off fear again...stop right now.
 

GIlman

Still Gilman
FASTLANE INSIDER
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
604%
Oct 16, 2014
801
4,842
This is why I don't buy or sell paper value. I insist on some time compensation, if I'm buying stocks this is in the form of dividends. Otherwise when you buy its cross your fingers, hold on to your shorts, and pray the market goes up.

I buy simply based on the fundamentals of the company. Earning, Profits, P/E ratios, Dividend Yield, and Dividend Payout Ratio primarily. Buy when the stock is a good value based on these factors. I don't get antsy. If I have to wait years in cash to buy I do.

If the market crashes, solid companies tend to continue to pay out their dividends, many even raise them even when their stock price is low. Stock price is very loosely correlated with company profitability at the moment.

When these companies boom again, no matter how long it takes, cash in and take your paper profits on top of the years of dividends you've collected in the mean time.

If a company crashes and burns, I've at least had some compensation on the way down. It's rare to buy a solid company, have them cut or eliminate their dividends right away, then crash to zero.

But after reading the awesome options thread by MJ, I'm now dabbling with this too. kinda the same principal, you get paid for the time your in the market by theta decay.
 

aespinosa

New Contributor
User Power
Value/Post Ratio
110%
Jun 23, 2016
10
11
32
Where do you think the money is transferred when public stocks go up or down?

For example, a public company with 10M shares outstanding goes down $1 in price (e. g., one person paid $1 less than the previous person for a single share of stock). A few bucks changed hands for that share of stock, but the market cap of the stock just went down $10M...

Who made $10M if that $10M wasn't wiped out?


The money goes to other traders. You can make money when the market goes up or down.

If you open a sell order at for example $40, and goes down to $38 and close the order, you've made a profit from that fall of a certain stock. I'm not saying that a person makes $10M out of one operation, but among lots of people.

Remember the Swiss crash of January 15th 2015? Their stock index crashed, I had a sell order from a couple of days earlier and I made a profit out of that situation.

Hope this is clear! Don't hesitate to ask more if you have doubts.

Regards!
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

aespinosa

New Contributor
User Power
Value/Post Ratio
110%
Jun 23, 2016
10
11
32
Yes, that is true. Your statement above that I replied to earlier was not true.

Why is not true? It changes hands. Big investors watch their returns go a little bit down while traders watch their accounts go a little bit up. Zero sum. Some people lose, some people win.

It's not wiped.
 

aespinosa

New Contributor
User Power
Value/Post Ratio
110%
Jun 23, 2016
10
11
32
Then I'll ask the question again that you didn't answer above...

Let's assume a stock that has 10M outstanding shares goes down $1 because one person purchased one share at a dollar less than than the previous market price. By definition, the market cap (i.e., value) of that company has just fallen by $10M.

According to you, that $10M wasn't "wiped out" -- it has been transferred somewhere else. Who *specifically* saw a $10M increase in their net-worth based on the $10M drop in market cap?


It would have been transferred probably not to one person, because that would mean he traded a really big order size. It would have been transferred to several other traders who were short. Could be 100 or 1000.

Again, it's a zero sum game.
 

Post New Topic

Please SEARCH before posting.
Please select the BEST category.

Post new topic

Guest post submissions offered HERE.

Latest Posts

New Topics

Fastlane Insiders

View the forum AD FREE.
Private, unindexed content
Detailed process/execution threads
Ideas needing execution, more!

Join Fastlane Insiders.

Top