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DealTeamSix

New Contributor
Jan 21, 2018
6
14
15
25
New York City
Hello All,

Wanted to give a quick introduction. I am new to the forum and am building an online business as a side hustle. My current day job is in Real Estate Private Equity where I focus on evaluating investment opportunities within the multifamily (apartments) and industrial asset classes. If you ever need help analyzing a potential apartment complex purchase, are buying a single family home for cash flow and want advice on purchase assumptions, or just want to talk about real estate in general feel free to reach out. I am looking forward to learning from everyone and getting to know everyone.

-Deal Team Six
 

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DealTeamSix

New Contributor
Jan 21, 2018
6
14
15
25
New York City
Great question. Quite frankly atm I would rather be invested in a multifamily property (equity side) with a high cash on cash than the stock market.

I would say that the rising rate environment itself is not going to play a meaningful impact on your investment as long as you factor it into your model assumptions. The main area which the rising rates will impact is on "cap rates" which have a meaningful impact on property value. Assuming I am holding a property for five years, I would typically take my entry cap rate and add around 0.75% - 1.0% to the assumed exit cap rate to compensate for the rising rate environment.

Also you have to think that if you buy now, you are locking in a lower interest rate and therefore a higher cashflow. It may not be a great time to be lending on a real estate deal, but from an equity side as long as you are baking in the bump in cap rates to your purchase price / model you should be fine.
 

WJK

Platinum Contributor
Speedway Pass
Oct 9, 2017
1,192
2,774
657
Nikiski, Alaska
Hello All,
If you ever need help analyzing a potential apartment complex purchase, are buying a single family home for cash flow and want advice on purchase assumptions, or just want to talk about real estate in general feel free to reach out. I am looking forward to learning from everyone and getting to know everyone.-Deal Team Six
I'm not quite comfortable with your post. Are you using this forum to troll for clients? Does your day job make you an expert in real estate matters?
 

WJK

Platinum Contributor
Speedway Pass
Oct 9, 2017
1,192
2,774
657
Nikiski, Alaska
Great question. Quite frankly atm I would rather be invested in a multifamily property (equity side) with a high cash on cash than the stock market.

I would say that the rising rate environment itself is not going to play a meaningful impact on your investment as long as you factor it into your model assumptions. The main area which the rising rates will impact is on "cap rates" which have a meaningful impact on property value. Assuming I am holding a property for five years, I would typically take my entry cap rate and add around 0.75% - 1.0% to the assumed exit cap rate to compensate for the rising rate environment.

Also you have to think that if you buy now, you are locking in a lower interest rate and therefore a higher cashflow. It may not be a great time to be lending on a real estate deal, but from an equity side as long as you are baking in the bump in cap rates to your purchase price / model you should be fine.
I don't understand your reply. Capitalization (Cap) Rates are not calculated on after-debt-service net income -- they are based on N.O.I. (net operating income) which is calculated on before debt service income. "Baking in" any future interest rate "bumps" is usually done through a discounted cash flow study using N.O.I. (net operating income) addressing anticipated future market influences. You sound more like a real estate agent who is trying to make a sale. These are appraisal issues that have well established calculations. You are mixing up oranges with apples.
 
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DealTeamSix

New Contributor
Jan 21, 2018
6
14
15
25
New York City
I'm not quite comfortable with your post. Are you using this forum to troll for clients? Does your day job make you an expert in real estate matters?

Sorry if it came across that way.. I don't have any interest in doing real estate consulting, it's a pretty terrible business and I am already doing real estate 60 hours per week. I am just starting my online business so I essentially no nothing about online marketing, importing/exporting, etc. which means that I can essentially add no knowledge value to people in this domain but am a big believer in win win relationships, and if someone ever is doing a real estate deal and wants advice or has any questions about real estate I'd be happy to answer them considering I am sure I will be asking online business related questions. I don't want to just take take take.
 
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meridian_blue

Eternal Student
I've Read UNSCRIPTED
Jun 11, 2017
24
80
34
Texas, United States
Hey Deal Team Six, thanks for your post.

I'm also relatively new to the forum, and I found where you're coming from experience-wise not to different from my own, albeit a few years ahead of me. In my situation, I'm currently looking at getting a masters and getting involved in the financial side of real estate (development or Private Equity) and eventually transitioning into a more entrepreneurial/fastlane situation. Anyway, here are some of my questions.

- Having read TMF, would you go down your career path again? Would you consider your line of work in private equity fastlane or transferable towards a fastlane business?

- What advice would you give to someone trying to pursue Real Estate as a fastlane track?

- What's your opinion on taking a FHA loan as a low cost-of-entry way into investing in multifamily real estate?

- What are some of the key factors (other than cap rate) that your firms look at when making real estate investment decisions?
 

WJK

Platinum Contributor
Speedway Pass
Oct 9, 2017
1,192
2,774
657
Nikiski, Alaska
Sorry if it came across that way.. I don't have any interest in doing real estate consulting, it's a pretty terrible business and I am already doing real estate 60 hours per week. I am just starting my online business so I essentially no nothing about online marketing, importing/exporting, etc. which means that I can essentially add no knowledge value to people in this domain but am a big believer in win win relationships, and if someone ever is doing a real estate deal and wants advice or has any questions about real estate I'd be happy to answer them considering I am sure I will be asking online business related questions. I don't want to just take take take.

To answer your "does your day job make you an expert in real estate matters?" question, the answer is no I still have a lot to learn.. but when last year alone you were part of a team that bought $180mn worth of real estate you learn a thing or two.
You worry me. You gave advise to a member a few minutes ago -- so I replied to question you. What gives me the right to question you? I have 42 years of experience in the real estate business -- broker, investor, commercial RE appraiser, expert witness in State and Federal court. I don't know everything, but I know a lot. Scary uh?
 

WJK

Platinum Contributor
Speedway Pass
Oct 9, 2017
1,192
2,774
657
Nikiski, Alaska
Sorry if it came across that way.. I don't have any interest in doing real estate consulting, it's a pretty terrible business and I am already doing real estate 60 hours per week. I am just starting my online business so I essentially no nothing about online marketing, importing/exporting, etc. which means that I can essentially add no knowledge value to people in this domain but am a big believer in win win relationships, and if someone ever is doing a real estate deal and wants advice or has any questions about real estate I'd be happy to answer them considering I am sure I will be asking online business related questions. I don't want to just take take take.
Sorry, I didn't mean to insult you. Real Estate can be very complex. It's a NOT liquid asset, so mistakes can take years to correct -- IF you ever can. I've seen a lot of friends go down in flames over the years. We talk in a lot of industry lingo, but the basics are the basics.
 

justonemore

Contributor
Speedway Pass
Dec 19, 2017
63
85
122
NewYork
My current day job is in Real Estate Private Equity where I focus on evaluating investment opportunities within the multifamily (apartments) and industrial asset classes.

Welcome to the forum(I'm new too).
Question for you if you don't mind...
What's your thoughts on investors putting their real estate into LLCs vs just owning them in their own name with insurance?
 

The EL Maven

No longer life's passenger
Read Millionaire Fastlane
I've Read UNSCRIPTED
Speedway Pass
Dec 3, 2015
83
258
170
I recall back over 10 years ago, myself and others wondered how the market would behave in a rising interest rate environment, which would be drastically different from the previous two decades of never ending interest lowering. I foresaw the residential bubble, as the percentage of arm loans, low doc, etc were very high. I didn't see it affecting cre, which it did (and didn't, depending on your asset class).

At the time, the argument was that rent inflation would outpace cap rate expansion. This pretty much happened, and cap rates continued to compress especially as the broader investment markets collapsed (funding was nearly impossible there for a few months). People wanted safe tangible assets with secure returns, that plus ZIRP kept cap rates compressed. All the inflation also hit the rents massively. Owners have had a very nice run over the last ten years.

After pondering all these variables for several years, my gut instinct is that the government will continue to do what they do. The commercial real estate market will therefore be mostly shielded. If the US government were to do what it's supposed to do (ie, get out of the interest rate business, cease money printing, keep monetary inflation at a real zero or below, balance its budget, enforce immigration laws to the letter), rents would collapse, cap rates would explode, and values would plummet. But I wouldn't bet on the US government doing its job.
*this is all one person's opinion and should not be construed as investment advice.
 

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DealTeamSix

New Contributor
Jan 21, 2018
6
14
15
25
New York City
@meridian_blue

- Having read TMF, would you go down your career path again? Would you consider your line of work in private equity fastlane or transferable towards a fastlane business? - I would consider my line of work relatively fastlane. However, there is a bit of a hockey stick curve in terms of income. You start out making somewhat average pay for a lot of hours (think 60 hours/week with some weeks hitting 80-100), and get around 10%-20% pay bumps per year. But after 7-10 years it isn't unheard of to be making $500K-$1M per year. There is a guy on my team who is in his mid thirties and will be easily clearing $2M this year.


- What advice would you give to someone trying to pursue Real Estate as a fastlane track? - I would say start small, and get deal experience as soon as possible. 1) Join the local real estate networking groups (ULI is a good one, and they have some great resources for small scale developers and investors) 2) Get a really good mentor (probably through ULI or another group). When someone has already climbed the mountain, they can guide you on how to climb the mountain a lot quicker. 3) When you are talking to brokers, tax lawyers, due diligence consultants, etc., pick their brain on why they priced it where they did, what was their thought process on certain items, and really try to understand and learn from their reasoning behind things.


- What's your opinion on taking a FHA loan as a low cost-of-entry way into investing in multifamily real estate? - I have no experience doing FHA loans so I would not be the best person to ask for advice. I have done Fannie/Freddie loans, but that is the extent of my governmental loan experience. I primarily work with banks for financing.


- What are some of the key factors (other than cap rate) that your firms look at when making real estate investment decisions? - Market Rent Growth, Vacancy Rate, IRR, Cash on Cash, Debt Service Coverage Ratio, Expense Ratio
 

WJK

Platinum Contributor
Speedway Pass
Oct 9, 2017
1,192
2,774
657
Nikiski, Alaska
- What's your opinion on taking a FHA loan as a low cost-of-entry way into investing in multifamily real estate?
FHA only finances 2-4 units under this program and it can really work for a small investor who is using his own money. YOU MUST live in one of the units in order to qualify. And I've seen them check up to see if it is really your residence... and to verify that it's not a case of fraud.
I mentored a young man in a investment program where he bought a set of units and moved to the next set of units that he bought every couple of years. Every night, after work, & on the weekends, he worked on his properties. And he was also on a payment plan where he was quickly paying down the loan principals on his properties. He's done very well for himself. I'm NOT sure I would call it a "fast lane" program, but it has worked for him.
 

HotRocket

New Contributor
Read Millionaire Fastlane
Jun 14, 2016
23
13
19
Great question. Quite frankly atm I would rather be invested in a multifamily property (equity side) with a high cash on cash than the stock market.

I would say that the rising rate environment itself is not going to play a meaningful impact on your investment as long as you factor it into your model assumptions. The main area which the rising rates will impact is on "cap rates" which have a meaningful impact on property value. Assuming I am holding a property for five years, I would typically take my entry cap rate and add around 0.75% - 1.0% to the assumed exit cap rate to compensate for the rising rate environment.

Also you have to think that if you buy now, you are locking in a lower interest rate and therefore a higher cashflow. It may not be a great time to be lending on a real estate deal, but from an equity side as long as you are baking in the bump in cap rates to your purchase price / model you should be fine.

Any books you would suggest on Multi Family real estate building or investing?
 

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