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I specifically mention this at the end. Complicated subject. Can't really look at short term moves though

Rents are very specific to location. In areas with a lot of supply coming in, rents will go down. In areas with steady supply, they won't move much. Yes the point is to time right after that - if you look at how valuations have moved the last few years, values have very likely bottomed. There's always guesswork and other factors involved with all of this though, as I state at the end.

They exist but they're not really relevant to this video. It's also not really a thing that makes sense to cover because everyone's tax situation is different dependent on tax bracket, depreciation, other businesses, etc. It's not one-size-fits-all.

@@therealestategod that's true, you're right. Idk if it's free money though valuations go up and go down but I understand the point. keep making more videos huge fan !

@@timothybracken1728 They only tax your earnings - the more taxes you're paying the more money you made! Trying to avoid taxes has a really detrimental effect on proper mindset.

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Thanks! Personally I wouldn't hire 3rd party management for a deal as small as 5-units - I would use a live-in-super model. But the reason you want to include the management fee is because the next buyer will at sale.

Partner up with someone who has an adequate balance sheet

Just to confirm I'm no longer 22, that was just when I started buying real estate. Your entire life is your resume. At 22 you have people who've known you for 5+ years. College friends, friends from home, acquaintances, family, etc. If you've always been competent, smart and driven, you should be able to find people who trust you willing to kick in a few bucks. Then it snowballs from there.

How I sell the deal to them?

Just the waterfall structure/promote?

Congrats! You've been chosen for the free university membership. We'll make a video on your topic in the coming weeks. Can you DM me the best email to reach you at?

Yup, will probably do this

Yup that's a good one

Few.

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Asset management fees are fees you (as the private equity firm) charge for managing the investment for your investors. You get you initial investment back because the deals were sold for more than breakeven

Once you get your stabilized yield above the market cap rate, you've effectively "monetized" the deal. That spread is your profit and you can choose how to monetize it. You can monetize through cashflow, you can monetize through refinancing or you can monetize through a sale. Doesn't really matter at that point as it's really more of a personal choice than anything else.

1. Establish market rents 2. Get previous expense numbers from the property as well as comparable properties to underwrite expenses

Thanks! You don't really. You find good deals and underwrite conservatively. Sometimes the market ends up going with you, sometimes it ends up going against you. But if you underwrite well, you'll still make money in both scenarios.

There's the same incentive for a $1MM building that there is for a $10MM building: the return on the deal, which (if the GP is decent, especially in that smaller size range) outperform what they can achieve by themselves. Also tax benefits, etc. Regarding the uncertain return, every investment has an uncertain return aside from treasuries.

No. The cap rate of 7% is the individual cap rate you're buying the deal for (the "entry cap rate"). The market cap rate is the average cap rate deals sell for in the market.

I think it's generally the best asset class to start in for beginners

Great content! What are your thoughts on mixed use buildings (retail with apartments)

@@aliu1189 Slightly harder to start out in given the advanced complexity of retail

I'm assuming you meant #3? Because #2 is pretty easy to accomplish. #3 is definitely rarer to accomplish (it's the hardest of all three criteria) but that's why the video stresses it's for homerun deals, not normal deals. I'd still say you see 1-3 homerun deals a year though.

@@therealestategod Sorry i Meant #3, yes.

and yeah that's plausible 1-3.. so you're betting on smaller markets and mispricings ?

@@timothybracken1728 It's easiest to do in smaller market but you can do it in larger markets too. I have a deal under contract in a major sunbelt growth market right now that fits these criteria

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You can 1031 if you want and pay no taxes. Or can choose to refinance instead of sell and pay no taxes. Also if you have real estate professional tax status, you can use depreciation to offset your income. Last option would be to pay taxes which is long term capital gains so it's the lowest tax rate possible of all tax brackets. So a large portion of your sale proceeds should never really go towards tax - real estate is incredibly tax efficient.

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8 week 1-on-1 program. $7,500 dollars. Can find more information here: therealestategod.com

Yes I have. It's a fine strategy, just doesn't work well with my current model.

They're generally funded up front by the GP but then are split pro-rata. So take a deal with a $1MM purchase price and closing costs of $25k. Loan is $750k. So there needs to be $275k of equity since the loan only covers $750k and the entire basis is $1.25MM. Whatever percent of the equity you put into the deal, you own, so the closing costs are effectively funded pro-rata since they're pooled together with the rest of the equity. Typically, however, LPs aren't involved yet early on in DD so GPs end up funding the costs early on by themselves then it ends up being pro-rata once the deal is finally funded. Acquisition fee generally makes up for all the dead deals you spent money on. AM fee funds the ongoing costs of asset managing the deal once bought.

Makes sense, appreciate the help. Interested in the structuring of SPEs and the best strategies/industry standards for individuals/funds on the organizational level to protect individual assets. Love the content here and on Twitter!

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Hahaha yeah I'm not a fan of the gray interiors either but it unfortunately works with the tenant base.

@@therealestategod gotta do what makes $

If I had a big firm, yes. But my overhead is essentially zero. Have one fulltime employee who gets paid out of Water Street property management fee (which I specifically didn't include as it isn't profit). Agree on pursuit costs but those were zero some years and amounted to less than $20k/year for all 3 years - wouldn't be a big factor anyway. If you want to be really technical I guess you could include those but all other fees are pure profit.

Glad you like it!