Ben Kelly on LinkedIn: 90% of millionaires made their money in Real Estate. I became a… | 26 comments (2024)

Easy sharing "Wins," here's a recent "L."The deal started out as a "W."Bought for ~$2mm in 2019, beat budget on renovations, beat timeline, and beat underwritten rents.Appraised for ~$3mm, would have been >30% return on investment in less than a year had we sold.Instead of selling, we decided to refinance.At the time, this looked like a great decision. We locked in a historically low rate, investor's received ~50% of their capital back tax-free, and we owned a great cashflowing property in an improving location. Recall 2019: low inflation, low interest rates, growing population, growing economy. Part of the investment as I pitched it to investors was not just about the value add work, but a thesis I have around the supply and demand inbalance in this pocket of Los Angeles: you have institutional development and renters from around the city wanting this location, yet the zoning restricts new supply. A classic supply and demand imbalance setup for above market rent growth.Then what happened?2020-2023: COVID, riots and crime spike, inflation, population decline, city rent freeze and eviction moratorium, higher interest rates, lower market rents.We're now in 2024 with a property worth ~$2.75mm instead of ~$3mm and a refinancing looming at 7%, up from 3.5%.Instead of doing a capital call, I am stepping in with a loan. Fortunately, the delta between the current loan and new loan is manageable and will be quickly repaid relatively quickly thanks to (i) our loan's been amortizing for 5 years, (ii) expenses kept in check, (iii) stable occupancy with rents steady, actually slightly higher.Lesson for young GPs: consider selling after you've done the incredibly tough work to create value in order to realize your promote. Acquisition and management fees barely cover expenses in this business, so you need to be hitting great returns to survive. If you don't lock in your compensation after you've hit your numbers, you put your business at risk. During the value-add period, you control the increase in property value. After you've completed your business plan, you are taking market risk that is out of your control.(There are ways to structure promote crystalization without selling given many LPs prefer to hold, but that is a post for another time.)

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Heres a great BRRRR exampleThis property is an 85k off market deal, the photos show real light rehab needed, and for a rental property you are not doing anything crazy or expensive when you renovate.So lets say 20k in reno (maybe less)That puts you all in around 105kYou can take out a hard money fix and flip loan with 10-20% downYou can partner with people or use private capital and put 0 downOnce the reno is done, rent it out, then time to refi There are comps pushing to 140k so you can then take out a loan to refinance and payoff the loan, and potentially pull out all the money you put in out of pocketI would personally raise 100% private capital to do this deal, then id do a rate and term refi at 80% of the value after the work is done to payoff 100% of the private money loanThen after PITI, prop management, 15% for repairs, capex, and vacancies, it shows around 50 a month profit… nothing much and too thin for me… I’d want at least 200 a month cash flow but if you can do this and get all your money back, own a property that tenants payoff, and goes up in value over time…. Is it worth it?If not, then look at bigger deals, more units, apartments, just flip the property for profit… And im not even getting into the tax benefits if youre a full time real estate professional with a cost segregation and bonus depretiation 🙂Because this is how you should be buying homes, regardless if its your primary, a rental, or if you want to flip for profits. BRRRRAnd dont let money be the excuse if you find a good deal! There are low down payment options, no down payment options, you can partner with people, partner with me! Click the 🔗 link in bio to:📰 join my free real estate investing community and learn how to do this with none of your own money! 🧐 Check your home buying power/get financing🗣️ Schedule a free consultationFollow 👉 @loansbyjb for daily tips on personal finance, investing, and maximizing wealth through real estate!#propertyflipping #brrrr

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Rent vs. Buy in Biglaw? (The true cost of homeownership)The siren song of homeownership lures in many, but don't feel pressured to buy a house if renting makes more financial sense for you right now.People only look at the monthly mortgage payment, not the "phantom" costs of ownership like:- Property taxes- Insurance- Maintenance and repairs Just like how a $500 car payment can easily turn into $1,000 per month after gas, parking, insurance, etc.Homeownership has benefits, but it's not always the most financially wise option. Run the numbers for your situation before deciding. Renting gives you flexibility and frees up cash that could be better utilized elsewhere like crushing debt or investing.You do you. There's no "one-size-fits-all" path. Renters, don't let society make you feel guilty. Stand firm in your financial plan. Homeowners, don't judge others' choices.Focus on your own financial goals and what sets you up for long-term success. The numbers don't lie. For now, renting may better empower you to build wealth your own way.Learn more about how to convert your Biglaw income into wealth here: https://lnkd.in/gqyjCqJZ

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A MUST READ FOR EVERYONE WHO DESIRES TO INVEST Through out my years of experience I can say that most First-time investors often approach the process of acquiring a property with a mix of excitement, anxiety, and uncertainty. Let me give you breakdown of how they typically think and how they should ideally think:How First-Time Investors Often Think:📌 Emotional Decision-Making: - They may focus on finding their "dream home" without fully considering the practical aspects like budget, location, and future needs. - Emotional attachment to certain features or styles can lead to overspending or compromising on other important factors.📌 Underestimating Costs: - Many first-time investors focus solely on the purchase price, overlooking additional costs like closing fees, maintenance, property taxes, and infrastructure fee - They might not consider long-term costs like potential repairs, renovations, or utility bills.📌 FOMO (Fear of Missing Out) - The fear of missing out on a good deal or a hot market trend can push buyers to rush decisions, sometimes leading to regrets. - They might feel pressured by friends, family, or market conditions to buy quickly.📌 Overextending Financially: - Some buyers aim to buy the biggest or most expensive home they qualify for, which can lead to financial strain. - They might not fully account for how mortgage payments will affect their overall budget and lifestyle.📌 Lack of Research: - They might not fully research neighborhoods, market trends, or future developments in the area. - They might rely too much on online listings without visiting multiple properties or considering long-term resale value. How First-Time Investors Should Think:📌 Practicality Over Emotion: - Investors should focus on what they need rather than what they want, considering factors like space, location, and future family plans. - They should aim for a property that meets their essential needs while leaving room for future growth or changes.📌 Comprehensive Budgeting: - Buyers should factor in all costs associated with homeownership, including initial costs, ongoing expenses, and also plan for unexpected occurrence. - A realistic budget helps ensure that they can comfortably afford their home without sacrificing their quality of life.📌 *Long-Term Perspective*: - Instead of being swayed by current trends or short-term gains, buyers should consider the long-term values . - They should evaluate the potential for property appreciation, neighborhood development, and personal life changes.📌 *Financial Caution*: - Buyers should only purchase what they can comfortably afford, considering their monthly income, expenses, and financial goals. - They should explore different mortgage options, interest rates, and repayment plans to find the best fit for their situation.We continue in the comment 😊#thoughtleader #20daylinkedinchallengewithhaoma #realestate

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Not many know this, but the average homeowner’s net worth is 40 times that of a renter. Owning a home offers numerous advantages over renting, making it a seriously smarter long-term financial decision for many.https://lnkd.in/gmKNzZ8G #thelendingcoach #homeownership #realestate

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We took a BIG risk buying this house 3 years ago😨 When we purchased this house in 2021 for $358k, the max we were approved for was $360k. 😬 We had previously decided that we couldn't go above $320k because finances would be too tight. 😕 The payment was $1980 which was about $700/month above what we would have been paying for a nice updated 2 bed apartment. 🙃 Yet we moved forward because we knew that while the payment was really high, we could make it work. 💪 We knew that over time the equity we would gain (and force) would be well worth the struggle. 🙌 Since purchasing it just 3 years ago, the equity (via a HELOC) has already allowed us to:1. Start a Bounce house rental business that paid itself off and that we'd later sell on payments generating 2 years worth of cashflow averaging $1250/month. 2. Purchase an off market property for $40k under market value that cashflows $150/month. 🤑3. Purchase a third property and add an ADU that has lowered our out of pocket mortgage expense to $800/month despite an interest rate of 7.25%. 🏘 4. Start my real estate sales business that has rapidly allowed me to exit the corporate world and live my life by my own design. 🙏 5. Rehab the property to drive our equity from 3% to 32%. 📈 6. Generate $200/month in cashflow by turning it into a rental. 🏡 7. Give me the liquidity to be able to make offers on potential flip properties. 🛠 All from 1 property that felt like a HUGE risk. This is why I believe everyone who can get into their first house should absolutely do so as soon as they are able to. 🏡 Do you have questions about purchasing a house or accessing the equity in a house you already own? Shoot me a text and let's chat! 📞 📲 (801) 709-1122#equity #realestate #firsttimehomebuyer #HELOC #REinvesting #business #cashflow #firsttothirdproperty

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In the real estate world, everybody talks about ROI. Everybody wants a return on their investment, right? You put some money in, you want to get some money out. That's the fundamentals of investing.The thing that a lot of people don't talk about is ROE, which isreturn on equity. Let's say you have a rental property and you have 10% equity and it's making you $500 a month net. If you take that $500 and you divide it by the $10,000 in equity, that's actually a very good property because you're highly leveraged. You're making a lot of money based off the amount of equity that you have in it.Now, let's say you've had a property for 20, 25 years. You're still making $500 a month net, but you've got $150,000 in equity. The return on your equity is incredibly low.I looked at all the equity that we had in all of our properties and I thought to myself, "We're making decent cash flow, but what could I make as a hard money lender if I were to lend that out?" Of course, everyone says it's just not the same because it's taxed at ordinary income, you don't get the depreciation, etc.Call me crazy, but I kind of think thatdepreciation might be over glamorized.Do I care about depreciation?Honestly no, Ireallydon't.I care more about the here and now and what we're doing to make money now. I think people need to put more emphasis on their ROE instead of ROI, simply because it's another metric to look at and to track your profitability.I would say that people need to analyze the situation and say "Do I want to keep these rentals? Can I make more lending it?" Or maybe you do some sort of a hybrid approach like this:I have a friend that has paid off his rental properties, gone to a credit union and put a line of credit on these properties. Usually if does someone this, they're not going to get80%or90%, but most of the time, I've seen 60% to 65%. He then uses that cash to lend out as a hard money lender. He's still getting rent checksandit's kind of just like an ATM that you can tap into.I see why he would do that, because he gets the best of both worlds. Personally, I don't like the fact that 35% of my equity would be tied up in this asset that I control, but I wouldn't have full access to. Also, in these instances, the credit unions and the banks still dictate the terms. I like to havefullfreedom andfullautonomy for everything that I want to do.Maybe take a closer look at the assets you have. Can you make more money just by lending that out in a more passive way?Even with the lack of depreciation, the ordinary income being taxed at ordinary income, people think they're more profitable than they really are. All that to say, maybe just analyze your portfolio and take a look at the equity that you have and see what you can lend that out at. In turn, you could make more and also have a more stress free life.

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A few things I learned what not to do in real estate!My first commercial real estate investment was in my own office. I spent my first 15 years in the investment/insurance advisory business. In 2014 I bought a brand new 800sqft commercial space and spent almost $70k finishing it out as an office space with really nice finishes. I then had a mortgage and paid myself rent for the next 6 years. I then sold it in 2020 after I had sold my business. Overall it was an ok investment but didn’t make me a millionaire! My biggest return was probably in learning commercial real estate and what not to do! So what would I not do again?1. Buy a condo - condo fees are not determined by what you need but by the whole building. There was an elevator for the residential part of the building that everyone had to pay maintenance on. Expensive! Also harder to sell. 2. When buying a space for myself I had a lot of leftover space that was harder to rent to others. Left me footing the bill for a larger office then I needed. 3. Exit plan - I had none when I bought the unit. Maybe you do plan on staying somewhere “forever” but things change. Overall it was a good learning experience. Learned about commercial mortgages, leasehold improvements, condo association etc. Now my next commercial property was a home run! My next post I will explain how I bought a 9600sqft property with $0 of my own money!

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5 red flags Multifamily investors must consider:---1. Bad DebtThe historical Bad Debt, found on an AR ("Accounts Receivable") report, demonstrates the financial health of the existing tenant base.If the 31+ day bad debt is greater than ~5% of the Net Rental Income, then be very thoughtful about your go-forward business plan(Or better yet, find another property to buy).Bad Debt crushes loan proceeds, reduces cash flow, and increases R&M and Turnover expenses. Avoid this brain damage if you can.---2. ConcessionsGiving up portions of rent in exchange for a signed lease is a slippery slope.Many new properties offer 1-2 months free, but when an older property is offering similar concessions, be aware that there could be a supply/demand imbalance.---3. Vacancy TrendsLow vacancy is not necessarily a deal killer, but if vacancy is trending in the wrong direction then you need to ask why.Many investors overestimate their stabilized vacancy, and fail to combine their physical vacancy with their construction vacancy (if renovations are being done, for example).Also, assess the overall market vacancy to arrive at realistic assumptions.---4. Capital ExpendituresIf you're evaluating an older property, and a lot of work has been done to the units, are they achieving premium rents consistent with the comp set?If so, great - you can continue the value-add business plan to grow NOI.But if not, you need to ask why. Is the property on the wrong side of the street? Is there crime or gang activity? Or are rents softening such that there are little to no renovation premiums available today?---5. Construction as % of StockUnderstanding the supply pipeline is the best way to predict future rent growth in a specific market or sub-market.If construction as a % of the existing stock is >4%, then make sure you know how far that new supply is from the subject property you're considering. Competing with a combination of heavy concessions, lower asking rents, and higher vacancy can quickly become an unwinnable death spiral.---Would you add any other red flags to this list?Curious to hear your thoughts 👇 ---Enjoy this? Follow me Trey Wheeler for more Real Estate content, and join my free weekly newsletter to Crush Your Real Estate Career (link in bio)

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How to invest in real estate in 4 simple steps!Investing in real estate should not be complicated. The hardest part is finding a good deal and having the guts to put time, energy, and money into a project (yes, even a rental turnkey property). 𝗧𝗵𝗲 𝟰 𝘀𝘁𝗲𝗽𝘀: 𝗦𝘁𝗲𝗽 𝟭: 𝗕𝘂𝗶𝗹𝗱 𝘆𝗼𝘂𝗿 𝗰𝗿𝗲𝗱𝗶𝘁.Many people treat their credit as a game, allowing them to overspend or save them in moments of low funds. However, it is the exact opposite with great real estate investors (and anyone who understands the game). Step one requires you to stop spending over 10% of your credit limit. Stop holding credit card balances. Don't miss any payments, ever. Smart money uses their credit as a tool and does not concern themselves with using cards to get cash back, or points. Those are nice, but the focus is the score. 𝗦𝘁𝗲𝗽 𝟮: 𝗦𝗮𝘃𝗲 𝗺𝗼𝗻𝗲𝘆Obviously saving money is smart regardless, but real estate investors have even greater saving habits. Try to aim for 15% of your paycheck. There is no excuse to not save at least 10% of your paycheck. If you make less money and live paycheck to paycheck, you will end up saving less total dollars, but 10% of any paycheck is a good start. Your goal should be a minimum $30,000, but if you have a property value goal you should aim for 25-30% of the property value goal that you have. That will leave enough room for closing costs, down payments, and unexpected purchases. 𝗦𝘁𝗲𝗽 𝟯: 𝗙𝗶𝗻𝗱 𝗮 𝗴𝗼𝗼𝗱 𝗽𝗿𝗼𝗽𝗲𝗿𝘁𝘆.This step is difficult without connections. However, if you stay connected to other real estate investors, realtors, and players of the game, you will have a much easier time. A good realtor is gold. A great realtor is a game-changer. However, make sure you stay informed about what each person is going to charge you. 𝗦𝘁𝗲𝗽 𝟰: 𝗚𝗲𝘁 𝗮 𝗴𝗼𝗼𝗱 𝘁𝗲𝗮𝗺 𝗮𝗿𝗼𝘂𝗻𝗱 𝘆𝗼𝘂.Every single third party that you use can save you money. Title Companies: Can save you from getting messed over on title, and can charge a fair amount for their services. They can also sometimes detect red flags regarding zoning, previous records, and more! Realtors: Can help you find good properties, and off-market deals, and can save you from a bad neighborhood or undetected issues with the house or block. They can also charge 3%, 4%, 5%, 6%, or even higher than 7%!! Each percent is a huge amount, and it is important to not get ripped off for less value. Contractors: Your reputation can be built or destroyed by your contractors. Bad work leads to less rent, less value, and more hassle and cost. Good work raises your value, leads to higher rents, and less cost long term. Possibly the most important part of real estate. So get yourself connections, save money, and get to work! Real estate is profitable for hustlers. Call me if you want a real estate loan: ☎️ 443-393-9555

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