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Real Estate Modeling Course

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Comments (61)

Sep 24, 2020 - 7:56pm

What is it, like a 4 unit or a bigger building? Also, you may have trouble raising money while you're in still school, unless you got some family members/friends with money. If you don't mind me asking, how much do you have to play with? If it's a decent amount, you should perhaps put it away for now and wait till you have a job, that way you take little risk, learn a lot and may have co invest or something similar. After which you can raise money for smaller deals and people will be more inclined to invest with you. Just my 2 cents. 

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Sep 24, 2020 - 8:25pm

This is exciting, but I would caution you to really think about this - again you could let that money sit a little 150-200 at 22 is pretty good. Once you get more experience and even more savings it'll give you more leverage. Like you, I'm in college and haven't bought a building, so can't help with that aspect. However, I can recommend you to 'Real Estate Asset Protection' a great YouTube channel that discus legal/partnership structure and tax strategies. The guy who runs is it a successful investor and attorney. Still, hire your own attorney to discuss this stuff with.

Don't be offended but if you come to WSO to ask how the do's and don't of buying an investment property, perhaps more experience is what you need. Which goes back to my original point about putting the money away and learning the ins and outs of RE on someone else's dime/reputation while they pay you a nice salary.

Sep 27, 2020 - 4:10pm

My only thoughts are start small. You will make mistakes, it's inevitable, and it's a lot cheaper to make a mistake on a duplex than an 8-plex. Whether it's overpaying, missing something during inspection, getting some GC work done, whatever, there will be mistakes. 

Nothing sucks worse than having to go back to your partners for a capital call because you fucked up on your first deal.

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Oct 22, 2020 - 5:04am

I also agree with you, If you start with small there are less chances to loss. because you are investing less in that.  

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Sep 24, 2020 - 9:37pm

I am buying for the experience. I don't want to wait. A common theme among investors which I have heard is I wish I had had bought earlier. My goal is to put together a deal a year and learn as much as I can while doing.

Sep 24, 2020 - 9:54pm

If you're willing to invest the time, there's good info on Bigger Pockets, but you'll have to take a good amount of time to find it.

Quant (ˈkwänt) n: An expert, someone who knows more and more about less and less until they know everything about nothing.

Sep 24, 2020 - 9:59pm

The podcasts are better then forum, in my experience. The forum is just so underwhelming with some of the posts the deals they talk about on there aren't very good either, a lot of stuff is sub par. The podcasts are cool but everything else is kinda meh... 

Sep 25, 2020 - 5:22pm

I work for a family office PERE firm in the southeast USA. One of the best suggestions that I can give is to start smaller than a 6-unit building... With your inexperience, you will likely run into issues with tenants and end up putting out more capital than planned. 

That being said, if you would still like to continue with your plan- I would make sure that the first investment you make is a home run. You don't want to be caught swinging at a pitch outside the plate when your reputation, money, and dignity are on the line. 

Sep 24, 2020 - 9:47pm

How did you get that kind of money?

Also renting out can be a swing or a miss especially now with COVID. Think long and hard about this. 

Greed is Good!
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Sep 25, 2020 - 3:18pm

u laughing at college students with that fat check u make from re dev ;) 

What concert costs 45 cents? 50 Cent feat. Nickelback.

Sep 24, 2020 - 10:13pm

@MaxEpic" Thanks for the shoutout... didn't even look at this thread.

To the OP... What are your long-term career goals? I mean do you want to be small scale landlord? If you want to do residential, small-scale apartment deals is that part of a broader career plan, like becoming a lawyer or doctor? Buying a deal to learn how to become a successful principal is one way to do it I guess. Overall, if you want to figure this out, I'd look at Bigger Pockets or a local "REIA" (stands for Real Estate Investor Association, basically a club of "I buy houses" types and landlords), they train for this. 

If you are looking to go into institutional real estate and ultimately get a shot at being a partner or investing in the GP of a fund/development/etc., I would keep the powder dry and liquid. If you are a senior in UG, you are at least 5 and more like 10-15 years before actually getting the realistic shot at making the right move. Again, if that is not what you are interested in doing, don't listen. This board tends to filled with people looking at institutional real estate careers that may lead to starting or partnering in a fund or development of their own (if so desired), so that is where the feedback from here will come from.

You should look up a post about someone wanting to start an "International Family Office" awhile back in this RE forum. The majority of the comments were making fun of the poor guy as he said he was inheriting $2 million and wanted to start an FO. But, I left a comment on how I would play it if I were him. The jist was to keep it liquid, safe, and dry to wait for a real opportunity later in his career. That thread may have some value (just know your idea is not crazy, just really an "investment" question). 

Sep 24, 2020 - 10:37pm

Thanks for responding and giving me your thoughts!

I am not exactly sure what my specific route is. After spending three years in the military I have discovered that I do like working on a smaller team (just personal preference). I am extremely entrepreneurial and don't have a desire to work at a large corporate role. I don't personally seeing myself taking that route.

Currently I am doing acquisitions right now as an internship. If am am lucky enough to land a full time multi family acquisitions role after school I would take it. I would do it for as long as I feel necessary and than try to do it myself.

At the same time, I am also interested in real estate capital markets (debt/equity placement). I feel like this would be a great route and also allow me to meet and connect with debt /equity players which would be beneficial for trying to go on my own. I like the idea that capital markets brokerage can be very lucrative early on, allowing me to invest in real estate quicker.

Still have just over a year left of school and trying to learn as much as I can. The money I have has came from saving and putting it into the market. I don't personally have 200k. That money would come from a mix of different limited partners and I.

Sep 25, 2020 - 8:13am

You will like real estate, and ex-military people tend to do well. I would try to find some local, on the ground mentor/friends who are doing deals. In reality, you are probably better not rushing anything. Honestly, if you are syndicating the equity (i'm assuming you have friends/relatives/etc. to go to) on a small deal, you should consider how much you can actually make vs. time/risk. Personally, I'm not a fan of small real estate deals, but that is stylistic to me. I've owned SFH rentals in the past, but have sold all in last several years. Some people love that world, I sorta thought I wanted to do something like you are talking about when I came out of UG. I got bored with it and wanted to go institutional. 

Sep 25, 2020 - 9:37pm

Hey in the same boat as you, as being in my last year of UG, entrepreneurial/ not too inclined for the institutional role of RE. Getting my salesperson license at the moment to focus on doing deals for other people to really understand CRE. Plan is the money I make from brokerage goes directly into MF investments. To understand real estate investing more/ hearing other people's stories listening to the podcasts: Millennial Millionaires Through Real Estate with Jonathan Farber, Apartment Building Investing with Michael Blank, The Real Estate Investing Experience with Chris Grenzig, BiggerPockets, Own Your Time Podcast with Kyle Marcotte (he's only 22!). A lot of these people have facebook groups and are big on LinkedIn so they're easy to reach and start rubbing elbows with other successful investors. The amount of people I've networked with by being "I have some money, I'm young and ready to learn" brought so many opportunities. Feel free to PM me, happy to connect you with a few investors

  • NA in RE - Other
Sep 25, 2020 - 8:04am

I could be wrong, but I think to buy as a partnership you'll need a commercial loan, and the only smaller commercial loans with attractive terms are Fannie which have a minimum requirement of $750k loan size around 60% LTV and must be 5+ units, so keep that in mind.  I also think one of the partners will need to have net worth in excess of some multiple of the loan amount.  I've looked into using other commercial loans from banks/credit unions for a 4-unit which didn't qualify for fannie and the terms kind of sucked (like 150 bps higher rate than fannie and 20-25 year amortization instead of 30).

  • NA in RE - Other
Sep 25, 2020 - 11:33am

you can also easily get good terms on an traditional FHA loan if you buy 2-4 units as an individual, but then you'll have a harder time setting up a partnership and have more liability issues if you amass a portfolio all under your own name.

Sep 25, 2020 - 1:45pm

I just got a community bank to lend 3.3% fixed for 10, 20 year term, 30 year am, 75% LTV up to 85% LTC. 

Array
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  • Associate 2 in RE - Comm
Sep 25, 2020 - 11:13am

Since it's your first deal, start slow. Make sure you have plenty of reserves. And as other's have mentioned, go into it with a partner or a team. You'll want to get to know some people with experience in your area and learn from them. I would start building out your team and talking with owners/brokers/property managers now, it usually takes some time to get things rolling. Be patient, especially with everything going on in the world now. It can take some time to find that first deal

Sep 25, 2020 - 4:38pm

Definitely market dependent - doing it now myself on a smaller scale, but in a lower COL city, (Phoenix, Denver, SLC). I just have a 2/2 condo that I bought a little over a year ago and rent out the spare bed/bath. The rent pays the majority of my mortgage, but with the appreciation I'll capture in a year or two when I sell I'll easily be able to use the proceeds to put down 10-20% on a quadplex and do what I advised OP to do.

Sep 25, 2020 - 4:17pm

I would suggest waiting for the right opportunity (not saying this isn't but I don't know). You tapping into your family/friends network at such a young age could result in struggles for syndicating a deal later in life when you find a better investment and have more experience. The first one is always the hardest to do and most scrutinized by others. 

Sep 25, 2020 - 4:45pm

I personally wouldn't buy a deal like this right now with the eviction moratoriums. Don't have the risk tolerance or disposable income to be comfortable with the mortgage on a 3-4 plex. With that said, you may be able to get a really good deal right now. I'm sure there's some mom/pop landlords that have taken a beating with rent collection and need to liquidate, but to my first point eviction moratoriums would still be a hurdle I'd imagine. 

Sep 27, 2020 - 1:41am

I'm a few years out of undergrad and I'm buying small apartment buildings. Have a 6 unit for 220k under contract and an 8 unit for 200k under contract. 

Financing isn't impossible, but you might get some pushback from banks. I'd recommend going through a local community bank and explaining why you want the property, some of the renovations you will do. Right now, I'm able to get 70% LTV at 4-4.25% for a commercial loan. The reason why they're okay with lending to me is because I've got more money behind me and want to create a relationship. 

Make sure you underwrite with the increased property taxes and insurance at the newly assessed value. 

Sep 27, 2020 - 9:14am

Good luck.

And do it - but why do 4/6 units all at once?

Just pick up one flat - do it up - rent it - manage it. That's a 6 to 12 month project and you can put the mortgage under your own name residential with high LTV

Do this again if you liked it and you managed not to blow all your money - this time do it as a project and get lending for it not under your name but as investment finance.

For the third project if 1 and 2 did well in the first one to two year you managed to do it you will have credibility and will know a lot more yourself. You will also have a better feel for your market and will be able to spot a deal more easily.

Sep 28, 2020 - 3:05am

To play devil's advocate - 

Getting a loan on a 6 unit property is a lot easier because it's based on the property's P&L and banks sometimes don't check your personal income statement. If you are signing on the loan as a personal guarantee, you need to have the balance sheet that's greater than the loan amount. A good way around this is to find someone who's got higher net worth than you and pay them a loan-guarantee fee

Sep 29, 2020 - 2:41pm

REmonkey2

To play devil's advocate - 

Getting a loan on a 6 unit property is a lot easier because it's based on the property's P&L and banks sometimes don't check your personal income statement. If you are signing on the loan as a personal guarantee, you need to have the balance sheet that's greater than the loan amount. A good way around this is to find someone who's got higher net worth than you and pay them a loan-guarantee fee

But getting a loan isn't the name of the game.  Managing the property is.  The focus on achieving the most favorable possible debt terms is misplaced, in my opinion.  The first question that should be asked is "am I capable of managing this building at a profit at [60%] leverage?"  Make up your own number.  If the answer is no, then more debt is only going to get you into trouble that much faster.

Both yourself and OP are in situations where you don't seem to have experience actively managing a small apartment complex.  That's dangerous, to say the least!  Something always goes wrong, and at this scale, if you don't have the ability to achieve (a) an economy of scale, or (b) self perform some of the needed work, it'll be extremely difficult to make a property cash flow.

Sep 28, 2020 - 8:59am

Throw it into EV SPAC warrants and double your money in 3 months (or less)!

--$$--
Oct 18, 2020 - 9:22pm

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