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why i don’t love real estate—but just acquired $20mm of property in 6 months

by:QiMeng     2019-10-02
This is the story of how and why I got a $20 million property in half a year.
This is not the whole truth.
My partner and I spent 20mm.
The stable valuation of the repositioning ended up at $30 millionplus.
I\'m like many of you.
Diagnosed with multiple hardening
No, I hope it\'s not you.
Most people look at real estate because they don\'t want to work for \"men.
My good friend Brandon Turner
You know, the guy on the podcast and the Webinarof-
Control beard in plaid shirt)
It tells the story of how he went from a bank teller, a hacker, a landlord to a tycoon.
Why did he do this because he didn\'t want to work for \"that person.
\"My partner Sam Grooms went from a CPA to a hacker to a flipper to a passive investor to a syndicate.
Brandon and Sam did not work for the same \"man.
\"Sam\'s salary is much more than Brandon\'s, but it\'s not enough in the end.
Neither of them likes to be paid (read: owned)
So both of them want to find a way out through real estate.
However, in my case, the doctor told me that whether I like it or not, I will not be able to work for a period of time due to my diagnosis.
So, for me, it\'s not that you don\'t want to work for a \"man\", it\'s not that you can\'t work.
This need, more than any desire to push me to the real estate field.
Fortunately, I am good at real estate.
Today, you will think I like it very much.
But, dear friends, I have only one positive thing to say about real estate: it works! That’s it. I’m hard-
Forced to think about other positive things.
This is a very stressful business.
This is sometimes a bad business.
Many situations and people you encounter in real estate are not what you will choose.
When I first started, an experienced landlord told me, \"If you stay long enough in the game, you will lose all hope for humanity.
\"You know, he\'s right!
But while I don\'t like it, I sincerely respect the power of real estate.
It is impossible to ignore how effective it can solve some problems in life (
As long as you know what you\'re doing). So, here I am.
For six months of real estate value of $ monthly mm, this number is likely to be at least doubled next month.
There are many reasons why I chose union apartment.
In addition to the fact that this is the best use of my professional skills, I find that single families are much more troublesome than it is worth.
In most cases, the numbers are not worth it for me.
Then I moved to a small, multi-family.
I find that, in most cases, while these properties are a little better than individual families, the figures suggest that they are still unable to absorb professional managers.
My conclusion is that I am basically looking for a job.
So, as you expected, I started to learn.
Assets of scale, think these numbers will be better. I studied up.
This is the case. Twenty-
4 to 60 units, which is a bit defined mid-
Size is probably the worst space in my opinion.
In order to work in the way it should, this scale requires more or less professionals
I would even say the system.
Methods related to management, maintenance and financing.
Although that\'s what it needs, you can\'t usually absorb any of these into operating expenses because the scale is not enough to generate enough revenue.
As a result, these \"assets\" tend to end up being a job that takes over your life.
In the end, there are a lot of structural parts that force me into greater performance.
But one important, though, may be a little free-
The difference in art is the quality of the people around you at the institutional level.
I work very hard to get an ability to live in my own way, not doing what I don\'t want to do, not sharing space with people I don\'t like, never go anywhere I don\'t want and appreciate.
Well, in the real estate industry, attracting high
Good people, you have to play a role at the institutional level.
It may sound a bit sublime, but I don\'t live for real estate.
I live for something better than this.
I live for the people inside.
I live my life to make a difference.
Real estate is a multi-faceted tool where you can choose how to use it.
Use it in the wrong way and your life becomes rubbish.
In the right way, your heart is singing. You pick!
The people I interact with on an institutional level make my life better
It\'s fun and easy.
That\'s what I want, and that\'s why I\'m United.
In this case, $20 million in two condo communities in Phoenix looks like 215 units.
My partner Sam and I closed the first complex in August 2018. It’s a 98-unit value-
We paid $8.
15 million, the renovation budget is $1. 4 million.
We raised about $3.
5mm of that deal.
We closed for the second time recently.
This is 117-unit value-add. We paid $10.
75 million, the renovation budget is approximately $1. 5 million. We raised $4. 5MM this time.
Acquisitions are very similar in many ways. Both are mid-
After 80 construction.
Both are based on what we call \"the road to progress \".
\"Both companies represent very important opportunities for repositioning, in which we grow our revenue by $300 per door, of which about $175 is to recover the lease losses, the rest is renovation work.
In both cases, we are able to underwrite almost twice the net operating income (NOI)in three years.
Let me say it again: there are a lot of voices outside shouting that the market is too hot and you should wait until another recession happens to take action.
I disagree on many levels.
First of all, if any of you think the next recession will be similar to 2008 in any way, then you can stop this nonsense.
What we saw in the Great Recession was once. in-a-
Generate events;
We will never see such a thing again in our lifetime.
The next recession will essentially be more cyclical and constitute a flat process rather than a depression as we saw during the Great Depression.
This means that if you can\'t find any deals right now, you may and may not find them in the next correction.
Secondly, you need to understand that \"trading\" is defined by the increment of the market.
In other words, no matter what the market is, the transaction is: because of this, what the market is doing is not important.
The agreement is the same as a needle in a haystack.
Although it is difficult to find, it does not depend on the market, but exists in each market.
Phoenix is different from other places.
In most cities you will find a poorly managed apartment building with a rent of about $50 too low but a pile of vacant apartments.
In these cases, most of the value
Add is to simply manage the building to a stable physical vacancy and then apply some lipstick on it for a rent of $50.
Unlike Phoenix, there are no physical vacancies in most cases.
Population growth is so strong that even the worst-managed buildings are running at full capacity.
Well, I can\'t reasonably charter a full room, so I have to assume that I will manage the assets, which is why the only way to add value to Phoenix is to increase the rent by about $300.
First of all, I need to offset those higher economic losses that I have in underwriting relative to the current market.
And then, I really need this value.
Create returns for me and my investors.
Please trust me when I tell you that finding an asset that allows this to happen is really challenging.
Plus the other obstacles listed below, you start to understand why Sam and I only want to make a few deals each year.
Here is a list of obstacles we have identified: each item in the list above needs its own post.
Now, I want to leave you the following ideas.
Not sexy real estate.
Real estate requires extremely high fluency.
But real estate will make you rich!
There are deals in any market.
Money in the Delta.
All you need to do is know how to recognize it.
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