SPC110 – My Story – Evictions, Flip Project, Market Updates

YouTube Link: https://youtu.be/BXbgwbCcTnw

Text “simple” to 314-665-1767 to download the Hui Google Drive files and the 2018 Rental Property Analyzer

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Pardon the grammar – I’m an Engeneer, Enginere, Engenere… I’m good with math!

________Here are the Show Notes________

Dealing with an eviction:

“Hi Lane! I delivered an evection notice to tenants yesterday and had the opportunity to speak with husband at the door. He stated that he and his wife had both started new jobs and would be able to make one full payment in a week (this was the story for seemingly a month or two) and would be able to make a partial payment in 10 days. Before we proceeded forward with an agreement, wanted to see if that works for you. They are currently $3,000 behind before for a total of two months.  

Here is what I did…

I okayed the concession to give more time. I requested some sort of proof of new job status (a hire letter or email). I am more than willing to work with people… These have been long tenants of almost a couple years and B+ /A- home that rents for $1500 a month.

Caveat… I am really near to selling these properties this year and don’t really want to rock the boat in terms of enforcing long-term behavior.

Revamping my turnkey rental content – simplepassivecashflow.com/turnkey

I have currently sold 2 of 10 SFH rentals (P&L offer)

One of them Columbia is had $27K to get back online. Going to pay 37K to sell retail.

Another property Riverwood just went vacant. Going to pay 20-30K to sell retail too.

  • Talked with my team – PM, Contractor, couple other hui members
  • Is it a good area to go retail
  • Will I recoup capital overlay based on comps

Soon I will unrolling my private lending platform. CrowdfundAloha.com! So if you are looking for a 1st lien property with my partners let me know. We are talking about even providing turnkey services.

This is not really a money making things cause the margins are just really tough these days.

After over 1000 strategy calls with investors and coaching clients over the past couple years here is what I tell W2 employees… For those who are able to save more than $30k a year or have substantial liquidity (over 200k), being a landlord and especially flipping is a lot of work. If you like it cool/good for you… but just remember why we got into this… To be free from a JOB. A lot of us (80%) who stumble upon simplepassivecashflow.com and start drinking Kool-Aide will be financially free in 4-7 years pending taking action. So I always urge people to start with the end in mind and take a more passive approach.

Do the math here… you with 300 dollars per property (2 months of work to buy a turnkey rental) you are going to need 20-40 of these to replace your income. I have 10 of these and have systems in place but have 1-2 evictions a year and 3-4 big things that happen. Image if I had 30, just 3 x those numbers.

Directly investing in a turnkey rental or small MFH is a good way to start to learn and build up the war chest to go into my scaleable investments such as private placement syndications. Whatever you do, try to be as close to the investment as possible. This is the fundamental problem I have with Wall Street who takes too much fees off the hard-working efforts of the middle class.

Looking at some deals. So folks in the Hui Deal Pipeline Club (who have reached out to me and built a relationship) will see those really soon. 😛 I hope I have enough liquidity… I might need to borrow some money 😛

Single Family Homes becoming a legitimate asset class – Spring 2018 Conference

The lending requirements and new loan products is slowly changing. I know a lot of you have heard that Short Term Rentals (Air Bnb) income is starting to become part of the loan calculations.

Something I’m following is lending on large portfolios of single-family homes. Some of the highlights:

1) up to 10-year term with 1.25 DSCR

2) portfolios minimum size of 50 properties

3) assumable

Pilot program details download here – https://drive.google.com/open?id=1aTIbru2HEPbw_KLHTvU5-Iyk0aoQB8Gx

Look even a SFH conference – https://drive.google.com/open?id=1cI15DnBUn8LRA54NTCh667exeR3OtlIu

Other Fannie Changes – https://drive.google.com/open?id=1WumUWsduuLnHqDi6IJXNipX7IsT9AUFa

AirBnb lending requirements loosening

I read this following article that described rent concession in a few major cities that I like as apartment markets.

http://www.nreionline.com/multifamily/more-apartment-landlords-offer-free-rent-lure-tenants

Here is another article citing industrial as the sector to be in:

http://www.nreionline.com/industrial-cre-market-study/exclusive-research-clear-sailing-industrial-sector-through-2018

My takeaway is that this is important to monitor especially if you are developing because this is a leading indicator of softness in the market. It might be economic reasons or just because a bunch of new build inventory is coming online in that area. Either way…

Robert Kiyosaki has a saying, “there are three sides to a coin”.

People argue that its a good time to buy or bad time to buy. For example “mfh” is overheated or commercial is getting killed by Amazon and e-commerce. I think these are mental justifications by tire kickers not to do anything.

Sophisticated investors live on the edge of the “coin”. They buy deals out our reach of amateurs due to the lack for network/knowledge. These opportunities are undervalued, with undermarket rents, with value-add opportunity.

They are patient and don’t stray from standards that make them get crushed in a market correction. (Cashflow from other investments make this possible) They invest following the macro and micro trends and don’t gamble on gimmicks such as guessing where Amazon’s next HQ is going or where the hurricanes just crushed a market.

The trouble is as an outsider is figuring out which of these deals transcends the two side of coin and is on the edge. And starting out its going to be slim pickings due to lack of network but you have to push through this rough part.

I am from the camp that you need to become an expert or get beyond the surface level investor stuff in some freebie pdf guide or video. Or just find the right people to work with. To many people get shinny object syndrome and float from sector to sector, from a money-making activity to another, read book after book and never get anywhere. You see these people at a lot of networking events. There is a lot of movement but no tangible results. This is where coaching comes in but for some people not able to get over having another person call them out on their BS you need to get laser focused and take massive action or quit fooling yourself.

I’ll be at the notebuyerbootcamp on the panel for syndication in Chicago next week. Notebuyerbootcamp.com

Turnkey Wisdom (2012-2018)

Dear prospective turnkey investor,

The following is my constantly updated guide to turnkey. (Updated 4-2018) Email me for any additions or feedback. In the spirit of the Hui Deal Pipeline Club where we crowdsource due dilligence together!

Today I buy apartment buildings like this 193 unit in San Antonio but it took me almost ten years to get there.

As much as I poke fun at the asset class and jokingly call it “turkey” instead of turnkey rentals it all started here and is the foundation of my investing portfolio.

 

I bought my first couple rentals back in 2009-2012 in Seattle (Primary market/no cashflow). As the prices started going up I was forced to go out of my comfort zone and purchase out of state rents because I needed cashflow in order to achieve my goal of replacing my W2 income as an engineer. I bought one I Birmingham, without seeing it and set up a professional property management company to manage the day to day. That was proof of concept for me to sell my two Seattle rentals and buy 9 Properties in 5 Months via 1031 Exchange.

I work with a lot of engineers and a lot of them say they get analysis paralysis because they like data. I call them out of it and tell them they are just scared and losing $500 of opportunity costs and time per month! A real engineer would look at the numbers. IF rent minus expenses (with contingency) minus mortgage is greater than THEN fricken do it!

Example of capital expenses that need to account for in your expenses and contingency.

Let me be clear, I don’t flip or wholesale or do any of that. I have a W2 job and not looking for another job or chore. I am all about leveraging my money and more importantly, time. For people like you and me who live in places (Seattle, West Coast, Hawaii, East Coast, to name a few) where the Rent to Value ratio is 0.5% or less we have no other option.

It drives me crazy when the Real Investor Peanut Gallery (internet forums) say we are overpaying… well if I didn’t have a life then licking stamps and swindling distressed buyers I could buy at a good discount too and probably do it better too;)

My full-time professional job that earns more per hour than most folks even in real estate and more than these Turn Key providers do. So I’m like “Sure… I’ll pay retail and rely on their volume and expertise.” Its all about leveraging your highest and best use, which maybe your day job.  Sorry.

The problem is that you have to find the right property and people to work with. And have a mentor so you are not getting screwed. Investing for cashflow is not a get rich quick schedule but a prudent way to build lasting wealth a few hundred dollars at a time.

When I first started buying the rehabs done by the turnkey guys in the blue collar areas, if you posted “hey I’m looking for turnkey” in the forums you get the usual suspects soliciting you for marked up properties. It’s off market because they rehab it for the investor with more durable and less visually appealing materials than your normal retail product. I’m all for the wholesaler to make money because they do spend a lot of time and money on mailers and advertising but the layers of middlemen who add no value is excessive and is almost as bad as Wall Street.

These days’ people in the Hui Private group are not on internet forums. They say its 95% of active people who are not high paid professionals and marketers. Here is some of the chatter:

 

The most important thing to do is to grow your network.

So you can bounce ideas off other investors and not a salesperson. I still do free calls but please review the free content I have put on this website first. No, I do not just give recommendations to good people to buy from because things change and I am not going to throw my brand around like that. And by the way that’s an “ask-hole.” I know your character and the trajectory of your success but how you add value to others first instead of taking first. Some people are unaware of this which is why I’m saying something so I aplogize. This could be the reason why people are not helping you out and you feel like a lone wolf.

Webinar with 2018 trends is sent out to Hui Deal Pipe Line Club members sign up below:

I don’t really see much difference in the secondary markets with robust economies (Memphis, Kansas City, Birmingham, Atlanta, to name a few). I have tried to set things up so my different markets complement each other. For the most part I buy in the 1.1-1.3% RV range. I take home 70% in 2015 but now in 2017, I buy in the 0.9-1.1% RV range and take home 60% of the rents after all expenses (vacancy and Cap ex).

I made this diagram in 2016 and it illustrates some of the popular “secondary markets with robust economies” that a lot of out of state turnkey buyers like to invest in. Things have changed a little but as you can see you can either have appreciation or cashflow. It’s tough to get the best of both worlds.

I stress NOT to spend too much picking a market. If you sign up for the newsletter as a Hui member you will get more than enough data to create analysis paralysis. The biggest thing you can do is vet the people. As you can see the same principal is what I use in my syndication due dilligence: 50% people & 50% the numbers of the deal.

There are three ways to purchase a turnkey rental:

  • Marketer – I would not recommend going through a marketer, they don’t even invest themselves and they did not add any value. The only one I can recommend is Marco but that is because I know like and trust the guy. By the time I bought my 3rd rental I knew way more than those folks did. Unfortunately I probably overpaid by a few grand on each of those first few properties not knowing what I don’t know, Work with me only if you want to compress time and want me to look over your shoulder to get my unbiased opinions and guidance. Plus you will be setup with a plan and not shoot yourself in the foot like I did by buying a dozen non-scalable investments.
  • Direct from Turnkey Provider – You cut out the middle man and go direct to the source, theoretically getting the best price. Just know that you are not represented by a broker who supposedly has fiduciary responsibility to you. (BTW never trust a broker) The transactions are done with their paperwork and their rules. They are the pros and its dangerous for a newbie to go down this route. There are household Turnkey Providers (TKPs) out there but I call them the “Prada of Providers”. You pay for what you get and often times more than what it’s worth – I’ll just say you are paying over 105% of retail.
  • Hybrid method – When I was going through my buying spree in 2015-2016, I was going (off market) via an agent that had fiduciary responsibility to me to check all the BS that the providers give you – this is what I recommend only after going through the process a few times. Usually the agent helping you is not an investor and does not really know what type of amenities/floor plans and locations are best for rentals. You will need to drive the ship.

You seemed bored reading… There is no such thing as turnkey. Check out these disaster photos from an eviction that ended up being a $37K repair bil… https://photos.app.goo.gl/R4PZLuOLGHONO5Rl2

As I was in the middle of my 1031 buying spree (#6 of 11), a lot of TKPs started to come out of the woodwork and offered their properties to me and gave me the royal treatment (discounted prices from what they normally offer). I got to meet a lot of them via meetups and national conferences because I had this podcast and they were interested in getting at the Hui Deal Pipeline Club ecosystem. Since I was pretty experienced and they liked working with me they offered me referral fees to simply send guys like you over to them with a simple “CC’ed” email. Sort of like a referral source where they would give me $1000 per home sold. I thought it made sense for them because it was a lot cheaper than paying $6000+ to a Marketer (#1 above), but as you know when you go with a marketer or this sort of referral program the buyer (you) don’t really get any value add.

Personally, I’m not really into picking up $1000 referral checks and passing you off to the TKP (never to hear from you again) since I’m more looking to give back to other investors and build my network for my larger syndication deals in the Hui Deal Pipeline Club. I think turnkey rentals are ok for people starting.

After over 1000 strategy calls with investors and coaching clients over the past couple years here is what I tell W2 employees… For those who are able to save more than $30k a year or have substantial liquidity (over 200k), being a landlord and especially flipping is a lot of work. If you like it cool/good for you… but just remember why we got into this… To be free from a JOB. A lot of us (80%) who stumble upon simplepassivecashflow.com and start drinking Kool-Aide will be financially free in 4-7 years pending taking action. So I always urge people to start with the end in mind and take a more passive approach.

“I have B- class rentals and high that rent for at least $900 a month and I am still having a hard time selling dang properties to other cheapo investors”

 

Do the math here… you with 300 dollars per property (2 months of work to buy a turnkey rental) you are going to need 20-40 of these to replace your income. I have 10 of these and have systems in place but have 1-2 evictions a year and 3-4 big things that happen. Image if I had 30, just 3 x those numbers.

Directly investing in a turnkey rental or small MFH is a good way to start to learn and build up the war chest to go into my scaleable investments such as private placement syndications. Whatever you do, try to be as close to the investment as possible. This is the fundamental problem I have with Wall Street who takes too much fees off the hard-working efforts of the middle class.

I currently work with one business who I can align with because they offer sort of a hybrid between the marketers (I know you know the reasons why to stay away from them) and going straight to the TKPs since you lose a lot of the protections when you do that and it’s sort like signing agreements in the “wild wild west”. The reason I do it this way is that I get a licensed agent that has a fiduciary responsibility to your best interests and guides you along the transaction as you buy through the TKP. Basically it’s like having MLS agent to cover you for the off market deals. All the properties are aggregated from only the good TKPs and the same price that you will find on the weekly digest that is sent out by the local TKP. This is the way I buy my properties and if nothing else it’s good for browsing what’s out there.

Can you please recommend a good turnkey provider? You said you would help…

Short answer is not really. A provider will try to size you up and try to pull a fast one on you when they get the chance. I will not endorse anyone! The only way to protect yourself is to network with other investors by providing value first – if you are a cheapo. If your net worth is over $300K, have at least $50k liquid, and have a time crunch (kids) I think it’s a no brainer get me on your team and stop screwing around.

There is really no reason why you cannot put in an offer on a property and start collecting $300 a month with a $25K down payment in under 90 days. Someone who is still “reading”, “contacting investors”, or “picking a market” frankly lacks focus (finish one course until success) or scared of making a move. Every day you don’t do anything is $500 a month of opportunity costs!

My rentals in Seattle were cash flowing each with $600-800 a month but it was because I bought at the right time and I did not look at the numbers like a sophisticated investor does. Although my cashflow was good (bad in terms of percentages) I realized that my return on deployable equity was very low, in fact it was under 5%. Now each rental I get typical cash flows by $350 but I think of it like $250 to be conservative and more importantly, my money is not being lazy. I think if you’re making less than 8 percent you’re better off in the stock market despite my aversion toward stocks or mutual funds. A sophisticated investor does not say “well… at least I’m able to cover my mortgage”. They are constantly monitoring their return on equity.

I wasted a lot of time in 2012-2013 looking for rentals in King, Snohomish, and Pierce county (Washington state) and nothing cash flowed. I still have the spreadsheets where I underwrote how crappy the Cashflow was. Now prices are even worse.

I helped dozens of people with this out of state investing game and have pretty much figured it out after making a bunch of mistakes that I didn’t realize till later – this is why it makes me laugh with the “do it yourselfers”.

One mistake I see people making is going after these sucker properties that only can be sold to “Californians,” “Hawaiians,” or any rich person not from the area perceived to have trees that money grows on, from a trust fund, and drink seven Mai Tais on the beach everyday. (Personal Note – I have lived in Hawaii for about six months now and I have only been the beach twice).

These types of people (not follows of SimplePassiveCashflow.com) like to pay a plumber for ten hours to fix a small toilet leak.

Sucker properties are in the wrong area that none of the locals would touch with a ten-foot pole. They are C or D class properties that the Broker calls “B-Class or good area” and usually cost sub $60K for $750 rents a month.

“It may look good on paper but stick to rents that are higher than $900 a month”

The second thing I see newbies doing is buying 2-8 unit properties after hearing all the good things about multi-family and scaling. I think most highly paid professionals will graduate to syndications (which is why I structure business and own investing around them) and therefore will need to sell these SFHs to move up. The exit strategy on selling 2-8+ just is not there. They look good on paper but the exit strategy kills you. If you are thinking you are going to hold on to these properties for cashflow for 7+years think again because that is not what sophisticated investors do because they monitor their ROE and they know the cap-ex tidal wave will hit them in year 5-12 taking back all those profits from the earlier years.

How many turnkey homes are people buying. Here is one data set I found from one popular turnkey provider. Takeaway – most (82%) get a few properties and the rest don’t get it or are too lazy.

The main thing is building the relationships and knowing who has the integrity out there. More importantly, you have to buy a few and go through the process of buying/selling and operating a while to learn how this mouse trap works. Tactically, it’s no different than what I have learned in corporate America (although I’m trying to leave the rat race) by setting expectations and keeping people accountable via email remotely. Trust but verify and financial freedom will be yours.

 

Here are more resources:

  1. *The Analyzer Video Walk Through- https://youtu.be/qr8M6NMBhRw
  2. *Download 2018 Buy & Hold Analyzer Spreadsheet – https://drive.google.com/open?id=1kMAn962d52UN-ObKNWmjT11z6gqATR1I
  3. *SPC005 – So you want to buy a Turnkey Rental – http://simplepassivecashflow.com/podcast-5-so-you…a-turnkey-rental/
  4. SPC014 – 22 questions to ask a turnkey provider – http://simplepassivecashflow.com/podcast-14-22-qu…turnkey-provider/
  5. SPC015 – 9 Turnkey listener questions Part 1 – http://simplepassivecashflow.com/podcast-15-9-turnkey-listener-questions-part-1/
  6. All the SFH related material – http://simplepassivecashflow.com/tag/sfh/

Refer me to a friend via email and I will personally send you both my spreadsheets of usual suspects of turnkey providers plus the questions I used to ask them for due diligence. And let me know if you would like a referral to my exclusive partners.

Real Estate books (more in the products tab):
1) Rich Dad Poor Dad
2) Millionaire Real Estate Investor
3) Cashflow Quadrant
4) Equity Happens
Any more is just overkill.

Business Books:
1) 4 hour workweek
2) E Myth
3) Think And Grow Rich (read this again and again, all the Gurus regurgitate this book)

***Put a red circle on your calendar 60 days from now and see where you get… and how much of your family’s time you waste as you consume websites, books, and podcasts.

You know what I mean ‘Jelly Bean’

https://www.youtube.com/watch?v=BOksW_NabEk

“I started the Hui Deal Pipeline Club because I want to see each of you get to your goals financially so you can focus on what is really important to you. There are other fundraisers out there that will train their investors down to 10-15% IRRs on crappy deals and do “deals to do deals” or to pick up acquisition fees. Between investing alongside you folks and wanted to grow my track record the right way with the best product I know you guys will keep coming back and bring your friends.”

LANE KAWAOKA accepted into Forbes Real Estate Council

Lane Kawaoka, Podcaster & Real Estate Investor, Honolulu, Hawaii has been accepted into the Forbes Agency Council, an invitation-only community for executives in successful public relations, media strategy, creative and advertising agencies.

Lane Kawaoka joins other Forbes Agency Council members, who are hand-selected, to become part of a curated network of successful peers and get access to a variety of exclusive benefits and resources, including the opportunity to submit thought leadership articles and short tips on industry-related topics for publishing on Forbes.com.

Forbes Councils combines an innovative, high-touch approach to community management perfected by the team behind Young Entrepreneur Council (YEC) with the extensive resources and global reach of Forbes. As a result, Forbes Council members get access to the people, benefits and expertise they need to grow their businesses — and a dedicated member concierge who acts as an extension of their own team, providing personalized one-on-one support.

Lane Kawaoka, says “Excited to share my viewpoint of real estate investing to help the hard-working middle-class emulate what the wealthy do and interacting with this exclusive group within the Forbes Real Estate Council Members”

Scott Gerber, founder of Forbes Councils, says, “We are honored to welcome Mr. Kawaoka into the community. Our mission with Forbes Councils is to curate successful professionals from every industry, creating a vetted, social capital-driven network that helps every member make an even greater impact on the business world.”

For more information about Forbes Agency Council, visit https://forbesagencycouncil.com/. To learn more about Forbes Councils, visit forbescouncils.com.

 

Podcast #103 – My Story – Money Savings Ideas Before the Simple Passive Cashflow (Scarcity Mentality)

YouTube Link:https://youtu.be/HOeBP0w00eI

Please help the show by leaving a review: http://getpodcast.reviews/id/1118795347

Download the FREE 2018 Rental Property Analyzer for free: https://simplepassivecashflow.activehosted.com/f/14

Pardon the grammar – I’m an Engeneer, Enginere, Engenere… I’m good with math! Here are the Show Notes:

I started to a hobby to make Mead or fermented honey wine. It’s pretty healthy because of the good bacteria cultures.

I started it because I needed to diversify from my Kombucha hobby because moving to Hawaii I was worried that there was going to be a fruit fly infestation that would wipe me out.

Got to be diversified with multiple streams of income!

Notebuyerbootcamp.com – Coupon Code “simplepassive”

It’s been a busy month after wrapping up the closing on these two latest deals. If you are interested in the deal flow, make sure you are a part of our Hui Deal Pipeline Club.

I recently met George Ross who came to speak to my Syndication Mastermind for a private dinner. If you have need the movie “The Founder” you know the lawyer had a very big impact to Ray Kroch.  George was the legal counsel to Donald Trump during his rise and “retired” once he hard Trump was running for presidency. George He held court to the remaining 15 of us for 3 hours after dinner until midnight telling stories for the past. Very insightful to know that this man shaped the Trumps business sense.

He is known as a master negotiator and he gave us the following relationship advice:

“In marriage, I tell my wife that I make all the Major decisions and she can have the Minor decisions… In all my years of marriage, we have not had one Major decision come up.”

The recently launched YouTube Channel just clocked in at 17,577 minutes or 293 hours or 36 working days. So there much be one person watching my content around the clock which on the clock.

I need a little bit of a break and took the time to reflect back on how far I have come from 2009 and buying that first rental property. By the way remember to incorporate “play” into your day.

The first twenty tips came from myself but after sharing the list and finding the other ex-cheapskates out there we have been slowly syndicating more and more bad ideas. Note: they are not in any particular order.

Our parents will be so proud of us!

If you want to add more, please email me and I will keep growing the list. And if you like I can add you initials at the end to cement your legacy.

If you call me collect, I will not pick up!

Money saving ideas for the shameless…

 

  1. Stack Mr. Rebates shopping portal and Groupon discount codes with gift cards purchased from eBay or Safeway with more gift cards and Mr Rebates shopping portal. To sign up go here: http://www.mrrebates.com?refid=413597
  2. Take a shower at work to save on utilities, water, and electricity – as a side benefit you go to the gym more often (do your 3S’s there, shit, shower, shave)
  3. If you work in a startup company that caters food, it’s a no brainer— eat at work and bring food home. Maybe you can even befriend someone that works there and join them for lunch from time to time. For extra credit consider a life of “intermittent fasting” and totally binge at these free meals.
  4. Wash your car in the rain. No mineral deposits left while it dries. Video of me demonstrating this: https://youtu.be/kZkYnkXOI7Q
  5. Costco leasing to own program
  6. Buy an Anker powerbank and charge it at work.
  7. Always take a pee before leaving for the day.
  8. Try to poop at the same time every day while at work… get paid to poop. Time is money and flushes cost 10 cents.
  9. There are soft drinks available at restaurants?
  10. Why are you eating at a sit down restaurant, you have to pay tip?
  11. If you must, order food to go and eat on the premises. Best of both worlds!
  12. Wear clothes with the tag on it and return it.
  13. Buy a snorkel from Costco to go to Hanama bay while visiting Hawaii to return it. Another Hui member cautions that on many electronics there is a 90-day return policy. Lady who returned a dead Christmas tree on Jan 4th.
  14. Use an app like GasBuddy to find the cheapest gasoline station, better yet, double stack your Costco credit card (4% cash back on gasoline) and buy Costco gas.
  15. Cash flow, cash flow, cash flow. Also, see uncle Kohlers team for tax optimization (easily the single largest expense in your life) http://keystonecpa.com/~keystone/images/5_Cash_Flow_Strategies_for_RE_Investors_eBook.pdf
  16. This one is a bit morbid, but an important one. Set up a revocable living trust with your lawyer to avoid probate expenses following the death of your family members\
  17. Susie Orman’s advice – make coffee at home and save yourself the $5 Starbucks Vente frappucino
  18. FAST (intermittently, not forever)! Skip breakfast daily (work yourself up gradually) and when you’re ready to get to the big leagues, attempt to fast for an entire day (no breakfast, lunch or dinner)
  19. Solar panels (maybe?)
  20. Free (coffee) money, this one’s really easy ($25/quarter or $100/yr) w/ BofA and Amazon http://www.magnifymoney.com/blog/consumer-watchdog/better-balance-rewards-card
  21. Maximize and optimize what you’ve got BankPurely has a 1.30% APY since April (not sure if promo rate?) but most banks have 1.0+% (which is 10x the 0.1% APY rate given by most conventional brick and mortar banks like BofA, Chase, WellsFargo)
  22. https://www.depositaccounts.com/savings/
  23. Become an Uber driver or deliver post maters? (not a big fan)
  24. If you have a spare room not in use, AirBnB it from time to time
  25. Check out EventBrite or other social event platforms for free lunch/dinner/drinks
  26. InvestinAHP.com        or email me for a few Burnzone book with your mailing address
  27. Buy Mod Pizza’s mega salad for $11.27. Dinner for days!
  28. Paid online surveys (not a good use of time)
  29. Coupons (think http://www.freestufffinder.com/)
  30. Use www.bensbargains.com or slickdeals.net before buying anything online
  31. Use Honey or Ebates or other discount portals for Amazon/eBay or other internet purchases to save a few %
  32. Certain credit cards provide 5x bonuses (Chase Freedom has rotating categories) and Chase Business cards are good for auto-pay things like internet with extra bonus categories
  33. Make a Ghetto Latte at Starbucks and other fun

Growing up in Hawaii where a gallon of milk is $8, I was taught to save money in strange ways. (I don’t drink milk)

Some of those were pretty bad which develop into unhealthy money mindsets.

Some downright unethical but hey if you are a cheapskate, own it!

I don’t condone any of these tactics but look, it is no coincidence why you folks continuously have so much money to invest and pay your bills on time unlike 4 out 5 of my Birmingham rentals every month.

Join the Hui Deal Pipeline Club!

Podcast #100 – My Story – The 100th (Drunken) Episode with Abhi Golhar – Who is Lane 2.0

VIDEO VERSION: https://youtu.be/azbjx9fhVbU

 

YouTube Link: https://youtu.be/x1FsDcF0d2E

 

Please help the show by leaving a review: http://getpodcast.reviews/id/1118795347

Pardon the grammar… I’m an Engeneer, Enginere, Engenere… I’m good with math! Here are the Show Notes:

Lane is dringing Maui Brewing Company Makawao beer and POG IPA and homemade mead (honey wine), Abhi – Whiskey

Hi, I’m Abhi!

How old are you? 1985

How much simple passive cash flow do you have coming in and from what investments?

At this point my cashflow is a little lower because some of sfhs are offline because I’m trying to sell them and my syndications are in the ramp up stage but I’m around 3k. more importantly I have very low expenses and essentially financially free. My salary from my paycheck is 4k at the-end if taxes and that’s what I use to put right back into my business. That’s 3k not including my day job.

– What are your healthiest habits? How do these help contribute to being your best, most productive self?
Intermittent fasting.
Used to do paleo but has evolved to keto
I used to do crossfit but the 225 lb deadlifts twenty one times for three rounds really got old. Its for people in their twenties
Got a trainer who won the hawaiian iron classic
Keep changing goals

– What do you attribute your ability to be prolific and productive to?

I don’t have that many distraction
I got lucky with initial positive feedback

I work really hard/consistent
Make tweaks frequently. If you follow me around I do weird things. or going to the restroom put coffee in microwave and then take a call like a machine

– Looking back what do you wish you had done differently along your journey so far?

I wish I would have gotten a personal mentor to call me out on my and minimize the hours of mental planning and scenario

Q1) You mentioned that you have spent close to $60K last year in coaching & mentoring programs/events, can you share some insights on how do you determine which ones worth investing your time & money into, which aren’t, and how to avoid the scammers/pitfalls? Are there ones that you recommend trying out or avoiding?

Get feedback from actual students. Make sure there is no referral fee going on.

Allocate a development allowance. 10 percent of your income.

A mentor taught me never to speak bad of others so I won’t here publicly. But if you guys get to know me I tell you what I think. Another example of going an inch wide mile deep.

Q2) I’ve listened to most of your podcasts (and yes I did leave reviews :-)) but can’t say every single one so apologize if I missed it if you shared already – how do you manage employer/manager after they learnt you were doing this REI “side gig” with the eye of quitting your day-job? I am sure quite a handful of your listens work for companies that have requirement of disclosing outside business activities that require either company/manager approval, or Compliance clearance, varying level of scrutiny , or maybe just a disclosure. What would be your words of advice or caution on how best to navigate this when one cannot fully launch into investing full-time?

I have a humorous article of what to do in a day job.

But honestly people don’t rreally know what I do. I am a government worker who drives a mercedes at work and smiles a lot. It does not make sense. Its good that my parking lot is really big so no one really sees me.

I work in a non profit so I try to respect that they are paying me for my time.

Honestly if they find out I bet the “clock watchers” will become whistle-blowers. my mindset is that it won’t be a bad thing. It will just pressure me to work my ass off and get out of day job and take that leap.

I just like how authentic I can be in the way I work with people… In the I interviews for the this last job they asked why should we hire you?

No one else has a masters degree and real world experience that I do and willing to be paid the salary level and will be happy there.

If people give you a hard time this is all about lifestyle creation. Financial freedom gives you the freedom to do what you want. a recommended real is Mark Madsen “How to not give a fuck”. Its not about living life like a cavalier but opting into a conscious life of people and projects that are aligned with you.

 

Podcast #98 – Fundamentals – How I lost $40,000 as a Passive LP Investor

Youtube: https://youtu.be/D7j79XknQqg

Please help the show by leaving a review: http://getpodcast.reviews/id/1118795347

Pardon the grammar: I’m an Engeneer, Enginere, Engenere… I’m good with math! Here are the Show Notes:

Summary: I brought a house for $43,000 in 2013 and the operator ran the property into the ground and I sold the property for a net of $7,000.

This is the dark side of investing as a passive.

Timeline:

2013 – Had 43,000 in my SDROTH IRA, The deal 9% and 50/50 split on profits. I got the referral from a Self-Directed IRA company. I asked them where should I invest this money because I did not know any better. If you are looking for a good SDIRA custodian let me know.

2014 – Heard this dude was a scam artist from my network but it was too late. Lets just watch this. I started connecting with other clients via the interwebs and learned they had another market that they did this in to which was MS.

2015 – Heard there MS portfolio went underwater, taxes not paid

Mid 2016 – Got the letter saying they were going under and I had several options,
1) Deed in Lieu – had a lease purchase agreement
2) I did not really understand the other options but basically wait in court forever
For about a few months everything was fine. The tenants were paying their 500 dollar rents and I was pretty lucky compared to the other investors who tenants had trashed the homes. This is when the story started coming out on what this shyster did and the poor property manager that took over these problems.

Note that this was in my SDIRA so you can’t bring in outside funds to help the property or that could throw out your tax sheltered status per the IRS.

Early 2017…The property went offline

From the Property Mangement:
“The home is in pretty bad cosmetic shape. Keep in mind it looks worse than it really is. The photos will be shocking but most appears to be cosmetic repairs. The exterior just needs cleaned up (cut grass, trim hedges, clean and small repairs to gutters and down spouts). However, the interior had a bathroom leak on the second floor, there is alot of trash. It will require new flooring throughout, a new vanity in the bathroom as well as new caulking around the tub. It will need some patching and painting of the interior walls, a new drop ceiling tile and about a 30-yard trash out. I could not test the mechanicals but they appear serviceable. No way to really know until you have them up and running though.”

Summer 2017 – The city had a lot of complains about the grass not being kept.

We could not find these lost Western union checks – they were written out to my personal name.

August 2017 – House listed 25,000 with the broker fee 4000. Average days on market 180 days for a retail ready.

Average days-on-market for homes between $10,400 – $15,600 = 138 (in zip code 16101)

Time suck!

A couple offer/counters.

November 2017 – Property sold and I walk away with $7,000 after sales commissions 9

I only had about $12K in my Roth IRA. I could have kept building that amount via a fund or private money lending (although that was a small amount) because my contributions were 20-40K range. In a Roth IRA you can take out contributions any time. I used to do this for an emergency account but because I am pretty good at finding good deals I would rather have the cash and minimize administrative headaches that takes time away from deal finding, networking, and making podcasts. The fees were about 25 a quarter so that would have been 1% a year. Each transaction I would have done would have been an additional $50 dollars to execute along with the time it consumed.

More information on my recent transitions to syndications please check out my previous podcast.

QRPs

Lesson learned: don’t invest with anyone you don’t know, like, trust, or outside 1 degree of separation. There are deals out there being passed around via daisy chain style where no one really knows who each other are.

http://www.selectcranberry.info/remaxpade/modules/internet/search/search2.asp?p=findahome.asp&listing=true&mlsid=2196&mlsnumber=1301374&officeaccountid=182667&rnmid=171559122112164824&rnmsob=true

https://www.biggerpockets.com/forums/517/topics/490254-913-warren-ave-new-castle-4th-pa-16101

See pictures

April 18 & 19, 2018 – See you in Chicago

 

On April 18 & 19, 2018 I will be attending notebuyerbootcamp.com in Chicago-Land!

Why the heck am I going to a note buyer conference? Have I got shiny object syndrome again?

Not to worry I am speaking on a panel about raising private equity 😛

Use $200 off coupon code “SimplePassive”

One takeaway I have gotten from the past couple months of open phone calls with your folks is that after turn-key (SFH) rentals, your natural progression is to forge a path on either syndication as a LP, BRRRRs, or non-performing notes. In that order of popularity from my unscientific study.

If you make it out there… I’ll buy the first drink!

__________Event Information_________

AHP’s CEO Jorge Newbery and 10-years of contacts will gather to share what they have learned about NPL (non-performing loan) investing in order to inspire a new breed of note investors – those who want to achieve superior financial returns and an extraordinary social impact.

Come to learn and connect with some of the leading note investors in our country! It doesn’t matter if you’re new to note buying or a seasoned vet, you will learn step by step how to build & scale a note buying business.

 

The Simple Passive Cashflow Latte

If you are not a turnkey coffee parcel owner… a post just for fun…

When I need that jolt of energy to write an article or do the day job I make a The Simple Passive Cashflow Latte using these ingredients.

Please support the site and buy through this link.

Ingredient Why What Brand
12-16 OZ

Brewed Coffee

Because coffee is the drink of the gods, caffeine Bulletproof (non-moldy beans), Kimera Coffee (Nootropic infused), or Kona Coffee (to support the 808 State)
Butter Fat – because it’s not the 1990s anymore KerryGold because it’s organic. I like the salted version because it’s more widely available but the salt adds depth to the taste
1 Tablespoon to 1 OZ

MCT Oil

MCT are medium chain fats, the key to brain function and good skin. Basically modern day snake oil. Bulletproof Brand has XCT Oil but I use this Mickey T Brand (isolated 8-Carbon Caprylic Acid Molecule) which is the same thing except a lot less marketing costs. You can use Coconut Oil in a pinch but the taste isn’t that great.

 

1 Tablespoon to 1 OZ

Whey Protein Powder

Whey is the cheapest form of protein. This is a way to add a bit of sweetness and blends into a foam. Life is always better with a bit of foam! Optimum Nutrition is the go-to brand for thousands of wannabe bodybuilders so stand on the shoulders of these giants and do the same.
1 Tablespoon to 1 OZ

Collagen Protein

This is the most expensive protein that has benefits for skin, joints, bones, hair, and digestion. Sort of like drinking bone broth without the flavor. I use Natural Whole Nutrition Vital Proteins Collagen Peptides.

I have also used Collagen Hydrolysate under the Great Lakes brand.

Lately, I have been using Collagen Protein – A little more expensive but good for skin, joints, hair. This is lieu of the whey protein.

Other optional pick me ups:

1 Teaspoon (pick only one)

Cocoa Powered for a Mocha

Vanilla for a Vanilla Latte

Turmeric for a yellow mess

 

Cocoa improves blood flow (not saying it’s going to be like Viagra but at least it takes like Chocolate)

Turmeric – Google it

Vanilla – Google it

 

Bulletproof Cocoa

Turmeric powder

Bulletproof Vanilla

 

For those of you who are into the whole autophagy intermittent fasting protocol (12-hour daily fast) this is pretty good for you too because you are basically drinking a MCT oil drink. The only recommendation is to eliminate the whey protein. Also if you really want to geek-out, blend the whey separately because it is the most unstable. By blending separately you allow the butter and oil to cool down the hot coffee and protect the whey from heat.

Blend and serve in a mug that says “What Would You Attempt To Do If You Knew You Could Not Fail” or “Life Begins at the End of Your Comfort Zone”.

Please note that some of the links found on this website are affiliate links. And at no additional cost to you, paid by the seller, I will earn a commission if you decide to purchase which helps pays for the various costs of running this website. Please understand that I have previously used these products. Do not feel the need to purchase these products but if you do please use these links. If you have any additional questions on how I optimize the use of these products please let me know.

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AHP Update & Free Burn Zone Book!

CORRECTION: Hi folks, I checked in with AHP and they told me the “American Homeowner Preservation 2015A+ will continue to pay up to 12% to investors.  We expect to continue accepting investments into 2015A+ through May 24, 2018Currently, we are preparing the SEC filing for our next fund, which will open sometime after 2015A+ closes. For the next fund, we intend to pay up to 10% to investors” 
As you guys know I don’t work with anyone I don’t know, like, or trust. And now add “1 degree of separation” to that list. (I got burned for a $40K loss as a LP on a deal that I started in 2013… More on that story in a future post but if you want to know that referral came from an IRA custodian).
Jorge Newbery is one of those guys that I met on my travels in 2016. He has been sponsoring my podcast from the start and been a mentor helping me along because he used to go after heavy value-add recourse loan apartments back in the day.
He wrote this book “Burn Zones“… Email Lane@SimplePassiveCashflow.com your mailing address if you would like a free hard copy.
And I have some cash in InvestinAHP.com like the deals the Hui Deal Pipeline Club (Sign-up if you have not) I have skin in the game too.
Inline image 1
Wondering what AHP is? Here is a past webinar:

Podcast #94 – Fundamentals – Ask Lane: MFH latest underwriting hacks, GP/LP Splits, reading an executive summary, mobile homes

Stories from my SFH portfolio… Show notes below:

One of my longest tenants went AWOL. 🙁

“They did send in a partial payment of  $965 that we received on Monday..  They now owe for January and $385 past due.  for a total of $1,263  I am not sure why they are being so uncooperative for the inspection”

A couple weeks later…

“She has been in the hospital again.  I gave her our direct number and she said she will call.  She is also supposed to bring the late part and will bringing last months rent in about a week and half.  She apologized for the trouble of getting her, but she was not able to return calls.”

I like to work through and with my property management.

They alerted me of the issue.

“Seems like valid reason for being late. Maybe we can ask for hospital invoice or doctor note just for record keeping. We might submit to the potential seller to explain the gap in the rent rolls. That way we can verify it too. “

Rats!

The dishwasher stopped working in this home.  It looks like it needs a new sprayer arm and wire harness for $285.89.  But the bigger picture is there are rodents in the home that chewed the wires.  See pictures.

We will need the approval to repair the dishwasher but first, we will also need to get a quote for rodent removal.  The quotes for rodent removal are free so I will send someone out to see how extensive the rodent issue is.  I will keep you updated and we will go from there.

Our tech went to this property and reported the following:

dishwasher model# gz8945pg35 wire harness was chewed by rodents also spray arm has burn spots estimate for repair $285.89

Sign up for the Hui Deal Pipeline Club to get access to a Sears pricing list to see how my you are getting screwed for by your property management.

Our tech made a temporary fix to wires so dishwasher is working now.  We also recommend to do something about rodents otherwise they may cause more issue….

But hey just got my AHP and private lending not monthly payment J

Mold in one of my properties

Buying a drone-

For the past few years I have been amazed the amazing drone shots.

J Martin posted some shots in Changmai, Thailand and I started to ask him which one he used. Basically there are two of them that everyone gets one that is mobile and in 1080p (300) the other which is larger and in 4K (1000).

I’ve been adding videos to our YouTube channel and think that the 4K is where the future is. I’m making the leap to get the 1000 dollar version. I also am going to consider it a business purchase so I can get a nice entrepreneur discount too. Sometimes I think in amazement how crazy that would be to buy such a toy for a miser like myself. But then I figure I would take cool shots for our investor club when I do due diligence. How cool would it be to take shot of drilling rigs for exploratory drilling? Yup we are going there.

A couple of years ago when we were working our first project in Iowa which we ultimately dropped we did some video and it really brought the project to life.

As a side note, I had shinny object syndrome kick in and thought I would be able to make videos for other companies. Imagine I could go to a CrossFit and record their outdoor workout or go to a wedding (and get free food).

Then I thought that I could get a dime a dozen (commodity employee) or Millennial good with computers to do the tedious editing for me.

But then I stopped myself. But the whole mental exercise brought insight about what I want to ultimately hit my Simple Passive Cashflow number when you work on things for joy and engagement. What better to help people share awesome visuals and be around people on their special day like a wedding or birthday party.

So I heard Uncle Buck Joffrey started intermittent fasting a few months ago and lost 40 lbs. I started doing IF when I started renting out my first home in 2010. I can remember reading the ebook “eat stop eat”.

Ralph Waldo Emerson
“The first wealth is health.”

I needed to step my game up so I decided to find a personal trainer. So stay tuned for that. After spending 60k in 2016 and 30k in 2017 on training and mentorship I truly see the value of it. Of course, as you know I am someone who takes action. I can also say being on the other end mentoring you guys in my paid coaching program that it’s neat seeing the barriers broken. Honestly, I don’t feel like I do much but the results are amazing. As an ex crossfit coach myself, if you would asked me if paying someone 90 dollars to count my reps and pass me the weights… I would have thought you were crazy. But now I get it!

Wanted to share a trend that I have been seeing in the past 6 months in MFH (idk how it manifests in sfh?)

The class c assets are getting beat down by cap rate compression (delta between cap rate and interest rates) and therefore a lot of the experienced investors are getting into class b because the per cost unit is getting pretty much the same. This is moving away from the normal business plan for turning class c to b. The thought is… heck might as well go for the 1980s build instead of 1960-1970s stuff for the same price. Having a newer asset might also be a little more conservative way to go with this stage in the market cycles because in a correction A will move to B… And B will move to C and the lower class D/C in the tertiary areas will see most of the vacancy or rent concessions.

Hurricanes:

I got to pondering looking back when New Orleans was hit by Hurricane Katrina there were short-term disruptions to gas prices especially since Houston is a major think tank for the metro industry. I expect Federal money which might have been focused on (helicopter money) be spent on infrastructure spending or tax cuts NOW be redirected to damage recovery.. Which will manifest as tax breaks, loan subsidies, or other incentives offered to entice investment capital to flow into affected markets.

Definitely an opportunity in the short term to go in there and develop to take advantage of the fiscally earmarked casually funds.

As a long-term buy hold investor what I am keying in on is what the big institutional players (like insurance companies) will do. I suspect they will actually have to pony up and pay claims in Houston and Florida which will divert funding away from their Plan A: financing new class A multi-family apartments in other markets. This results in less new developments coming online which is great for Class B and C mfh investors who have been struggling with the recent cap rate compression.

Other random thoughts:

  1. Low / no equity homeowners will walk from their properties and focus on rebuilding their lives as renters for the next 2 years. These foreclosures will certainly impact values in numerous communities throughout Houston.2. Many insurance companies will re-think the coastal markets and their policy premiums for same. This, along with the inevitable increase in flood insurance premiums will also impact buying power for future homeowners.3. Landlords will be in demanding higher rents as there will be a shortage of housing for the next year or while properties are rebuilt.

    4. Long-term impact can only be speculated on since this was an epic storm that caused billions in damage to homes, autos and businesses but those purchasing SFR’s better buy very, very low or they could be the next distressed sellers.

Changes in MFH Underwriting and getting deals

I’ve had some hurdles here.  It seems the standards in submitting LOI’s have been changing the past 9 months. What changes have you been seeing from the front line?

1/ Business conditions are dictating POF with the LOI.   Based on the latest sophisticated investors are underwriting deals with 80/20 terms,  1% interest only and 1.25 DSCR.

It’s becoming more common for brokers to review the buyers’ underwriting before accepting an LOI to present to the sellers.  The brokers view these terms as aggressive and are reluctant to submit my LOI.  It matters who your lender because it comes down to team and a portion of it is your lender.  Large deals have been falling out of escrow due to over-aggressive underwriting that cannot find financing.  Las Vegas lenders are underwriting at 65/35 LTV, 1.3 DSCR.  You can change your underwriting to match Las Vegas standards, giving brokers more comfort, and therefore remain on the ‘A’ list or do nothing.

A lot of time you will needs POF with the LOI.  Use an angel… anyone who is an ‘Angel’ on the LOI, will be given the option to KP and co-sponsor ( if qualified ) the deal if the LOI is accepted.  The average $/unit for a C-class, value-add, stabilized asset in a C to B- area is $55-85K.  The POF for a 200 unit property at the top end is $5.95M.

2/  Post close liquidity equal to 10% of the loan.

3/  Proof of net worth equal to the value of the property.

4/  Hard money; the standard is becoming 1% of the purchase price (I haven’t submitted an LOI with hard money yet; .5% hard money and see if that places me in best and final).

Question: I heard you say in the podcast that you have a team in Atlanta. How did you go about building a team there? Is there a podcast episode on that?

I think it’s no secret that as the sellers market matures, turnkey properties not in war-zones are becoming endangered species. When I began picking these things up in 2013 you could get inside the loop highway (under an hour commute to the city center) and get a 1980-1990s product. Now you are looking outside of the loop highway and in 1940-1960 properties. The good turnkey providers are frankly making more money selling to retail buyers than us cheapo investors who has got a million questions. The stuff I see coming out on most lists are properties that you would not want to buy. Unless you have someone boots on the group (who is not trying to sell you) and is agnostic to the transaction, you are going in blind to a loaded minefield.

I am beginning to leverage my contacts and finding investor focused real estate agents who know what to look for in a rental property. This effectively cuts out the middleman in the transaction but it requires you to know what you are doing in the first place (two to four transactions or a mentor) so you can coach your agent and arrange for contractors. You find one person who is good you find the others because good people associate with good people.

I feel like the SimplePassiveCashflow Facebook group has reached a tipping point where everything you need from a peer investor network is here. You just have to go about it the right way. One wrong way I see it done and I see it done in other groups and BiggerPockets is being an “ask-hole”. Asking a one off question and not contributing to the community is a sure way to get crickets and a one off answer. But you miss the point, which is to build a relationship. Put your perspective goggles on and think… how can I add value to someone or others? What do they need?

So my call to action is if you want to team up with me and help me source properties and teams let me know. The rest please stand by for PML deals and others on the Hui Deal Pipeline club.

We need to stick together and work collectively. As a Hui. I know what happens when you read a few websites and podcasts and go it Rambo style because I did it myself when I first got started. You will get eaten by the sharks and you won’t know what got taken from you. You leave so much money on the table that you don’t realize a couple years down the road.

I don’t want to discourage anyone from not buying because at the end of the day even with the prices as they are it’s still better than the equity markets. I currently believe that there is a 50% chance we will see a recession in the next three years so keep investing just as long as the numbers make sense. If you don’t know the numbers or think you know get someone to help.

Where do you think the crossover point is?

I am talked to over a couple hundred people over the past year and for those people SAVING less than 30K per year after their day job should invest in rentals or turnkey rentals in a market like kansas city, memphis, atlanta, birmingham, not seattle, san francisco, california…

The short term goal is to gain landlord/acquisition knowledge and build a cashflow base of a couple thousand every month. But once you achieve that you should step up to larger passive partnerships/syndications because the return to pain in the butt ratio is greater. People who call/email/write on forums fail to see this two phase journey. People hear the benefits of MFH and come up with the ridiculous 1000 unit goal when they have not even see if they are borrowing material on their first buy and hold. Eventually, a lot of people quite a fizzle out while starting out on the MFH road when they should have done sfh and this insight.

As much as I advocate for “simple” I am really an advocate for the minimal effective dose to maximize returns with minimal effort.

So I’m trying to learn how to evaluate syndications as a passive investor. I was looking to a deal that was presented to me near your last one and I ran a quick analysis. What do you think?

CONS:

– 1990s build A class than B/C Class @ 120k per door and value-add reposition is from B/C to A, risky at this market cycle in event of a recession and rent contraction (Usually we are buying at 45-65K a door with a stabilized building that have over 90% occupancy)

– Loan is 80.25% LTV -> too high? – (This is not really a factor – you want to be borrowing as much as you can and this is why you are going with such syndication to buy in bulk with others and get better terms. When looking at the loan you need to look at the term such as loan length, if it is recourse or non-recourse, and pre-payment terms)

– Loan is 36 months -> dangerous in this cycle (5 years and less is dangerous, just closed on a property in OKC for 10 year 4.22% 3 year interest only)

PROS:

– Sponsors experienced – how did you verify this? (Talking to investors who were in past deals. Relying on my network to discuss reputation and character. Note: This is not going to be completed by emails or phone calls.)

– Investor waterfall favourable – (Waterfalls create complexity and typically they mean less returns for the passives. Generally, the best terms for investors is a simple 80/20 or 70/30 split. Waterfalls raise a red flag for me. I have seen people balk from a high sponsor fee but that is just one thing, if it’s a deal then the sponsor should be able to take what they want. A deal is something that is underwritten very conservatively – see below)

Based on my limited and growing knowledge, I wouldn’t invest in this deal if I had the funds. What do you think?

(You are scratching the surface of these: A true analysis of the deal requires you to have income and loss statements and rent rolls going back 12 months and possibly 36 months. This is where analysis totally differs from SFH or units under a dozen. Another part is to analyze the rental comps because 90% of the projections are based on the proforma rents per square footage. A lot of smoke and mirrors can be used by leads and brokers to inflate this number. Comps need to be verified and it is really a touchy feely thing. It cannot be a feeling on hey this 1985 property looks like this 1987 property on the westside of the train tracks looks like I can get $1.12/Rent per SF. Warning…I have see a lot of garbage underwriting play with annual rent increases 2.5%+ a year, expenses increase less than inflation – under 2% annual increases, and total rent increases of over 18% – this is something Patrickherbig.com has really opened my eyes too.  Past performance is not an indicator of success and 2012-2016 anyone could have made money if you were in the right place.)

I saw the last deal you did was at a 70/30 as opposed to 80/20, which is what I understand to be the generally accepted industry standard for syndications.  How do you think about evaluating deals with respect to the profit split, both from the investor and the sponsor perspective?  I’m trying to understand the situations where a “below market” upside would be acceptable and how the sponsors decide what structure to use – is it just based on supply/demand and the reputation of the deal sponsors (ie the sponsors/GPs will make the deal as favorable to them vs the LPs as possible while still being able to attract investors)?

I see a lot of yahoos doing 70/30 splits with silly assumptions like 1% expenses increases and expectations of over 20% bump in rents. I also see a lot of 80/20 and 90/10 deals that are run by folks with long and short track records. Beware of a person with a nice suit. I think I need to personally show up better because of people never the less associate a shinny pdf deck and cool bio page as reliability or perceived value. I would not really look at the GP/LP splits. The way I see it if it’s a great deal then we as LPs should have a large room for error and heck yea the GP should be taking a large cut. But things get muddled by the assumptions the GP is using and quite frankly unless you have analyzed 100-200 large MFH properties and put in a few LOIs I don’t think you will be able to see where the red flags are. There is a YouTube video “Bear and basketball awareness test” https://www.youtube.com/watch?v=Ahg6qcgoay4 where you get fixated on this split stuff and forget the fundamentals of the deal.

Thoughts on mobile home parks/ self-storage?

I recognize as both still being in the real estate category as a good way to diversify away from Real Estate in a heated market. I admit I don’t know much about the two, especially self-storage. From what I have gathered from other investors the Cashflow in Mobile homes is a little higher but there is not as explosive upside as apartments. This upside is really never captured in a conservative proforma anyway. Mobile home parks are a not being made and in times of correction, they are going to be in very high demand.

I have been looking at some mobile home parks and talking to a bunch of you if you are more interested in either a single asset higher risk/reward mobile home park or a more diversified play of multiple parks in one.