How I'd Invest in Real Estate From Scratch
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- Опубликовано: 14 окт 2024
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In this video, I'll be revealing how much money you can make on a smaller real estate deal. I see opportunities like this in the market all the time, you just need to know how to analyze them right.
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Great video! I noticed you take into account management expenses. Just curious, on a 5-unit deal, do you typically hire a management company? I assumed at a minimum management would be hired on projects with 10+ units or so.
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.
This channel is gold, please keep posting to RUclips!
Appreciate it! Any specific videos you'd like to see?
@jakewom8007 no lie
Wouldn't it be better to just hold if it's cash flowing like this?
1) How are you renovating the units while tenants are living in there?
2) How are you raising the rents as soon as you rehab? Don't they have 12 month leases?
"Wouldn't it be better to just hold if it's cash flowing like this?"
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) How are you renovating the units while tenants are living in there?"
Typically you're not. Some tenants are typically month to month, in which case you can kick them out immediately and start renovating. Some tenants will have leases expiring within a few months in which case you can kick them out when the lease expires. You can also pay a tenant to leave if you want. Or you can even relocate a tenant to another unit in the building and renovate theirs.
"2) How are you raising the rents as soon as you rehab? Don't they have 12 month leases?"
Refer to above answer, the lease is typically expiring one way or another before the rehab occurs so there is no lease on the unit when you raise the rents post rehab.
Why sell the property and not refinance it as your exit?
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.
This is a great video. But it is missing the price of the transaction I think when you're selling and the taxes. Still profitable and great but those numbers are significant.
Appreciate it! The 5% transaction costs at sale are actually baked into the sale price in the model, I just didn't call that out specifically.
If there are in place leases upon acquisition, are those leases technically terminated once ownership changes to you?
With only 4 units to renovate I’m guessing you kick everyone out and work on all the units at once.
No, you have to honor those leases as they're legally binding. But you can pay them to leave early if you want.
GOLD
Appreciate it!