While my dad was dying as he fought a losing battle against cancer, he asked me to take care of Momma and everyone. With tears running down my face, I made him a promise. No. It was more than a promise. It was an oath - and I would never stop until I fulfill it. Fast forward a few years, I surprised my mom on her birthday by paying off the mortgage on her house. I captured it in video. Watch this (but you need some Kleenex): https://youtu.be/BNkyk0reoJ4?si=-Sl-Zh3U5eUo_mqn As my mom cried tears of joy…I looked up and silently said… “Pops, I fulfilled my promise.” I am grateful for BIG real estate deals. The massive income and generational wealth BIG deals give me…allowed me to pay off my mom’s mortgage, gave me time freedom to spend with my family and helped me to give SIX FIGURES to charity every year. Hope this inspires you. P.S. If you want the BIG money and the BIG impact you can make through BIG real estate deals, REPLY to this post, and let’s talk.

One of the things we do for our Mastermind members is analyze their apartment or hotel deal WITH them. Last night, Wen (one of the coaches in my Mastermind) analyzed this deal from one of our Mastermind members: 168 units; Currently rented for $1,020/month on average It's in an area of the country where the cap rate is around 7%. The rents are under-market by $145/mo on average. We estimate the apartments need $10,000/unit in updates to command a higher rent. They're asking $15.5M and they have an assumable mortgage of $12M with a 4.38% interest-only payment. This is what made the deal interesting. It's a "C" property right now in a "B" area. Is this a DEAL or NO DEAL? Step 1: Calculate the proforma value of the property . We use a simple formula for our initial "back of the envelope" calculation. {Proforma rent x 12 x 168 units x (1- expense ratio)}/ cap rate {$1165 x 12 x 168 x (1- 50%)/7% = $16,776,000 Step 2: Calculate the over-all profit The mortgage payment is $12M x 4.38% interest only or $525,600/yr The proforma NOI is $1165 x 12 x 168 x (1- 50%) = $1,174,320/yr This gives us a cashflow of $648,720/yr To be conservative, we factor 4 years' worth of cashflow or $2,594,880 cashflow profit. The assumption here is we get minimal cashflow year 1 as we renovate the units and get them stabilized. The profit from the re-sale is $16,776,000 less $15,500,000 (purchase) less $1,680,000 (rehab) or - $404,000. So the profit will come only from the cashflow, for an overall profit of $2,190,880. Step 3: Calculate the Returns The investment needed is $3,500,000 ($15.5M less the $12M assumable mortgage) plus the $1,680,000 in renovation cost for a total of $5,180,000. Our favorite metric is Equity Multiple which is calculated as: (Profit + Investment)/ Investment = ($2,190,880 + $5,180,000)/$5,180,000 = 1.42x The goal in every deal is at least a 2.5x equity multiple so this is a NO DEAL at the current asking price. But what do you guys think? Is this a deal for you?

Before residential real estate investors crucify me, know that I own 40 houses (in addition to 1500 apartment units and 4 hotels). So I know the difference among 3 asset classes and the TL/DR is you should not buy houses to rent right now (the "median-kind" that is). Here's the MATH: 1. The median home price in the US right now (2024) is $395,000 2. The median home rent however is $1,981 per month 3. The median home property tax is around $300/month 4. The median home property insurance is around $200/month 5. Assuming you put 20% down ($79,000) and at today's interest rate of 7.5%, your monthly mortgage payment on $316,000 mortgage is $2,208 6. By the time you add the taxes & insurance to that amount, your total house payment is $2,708/month 7. You are already negative $727 a month on a median house with a median rent! 8. By the time you factor in property management, maintenance and repairs, and having a budget for replacement reserves, you're looking at possibly a negative $1,227 a month or negative $14,724 a year cashflow. That's a NEGATIVE 18.6% cash-on-cash return. I don't know why you would like to LOSE over 14 grand per year and you have to deal with tenants, toilets, and trash..So how do real estate investors like me make money with houses? First, I invest in areas where the rents are higher vs the price (not median rent on median house price). Second, I don't buy houses at market value. I buy them at 30-50% discount. How do I find those houses? They're not in the MLS most of the time. And they need substantial renovation (mold issues, structural problems, gut rehab) so the sellers are desperate to sell them. If you're a high earner like doctors & business owners, you don't have the time to do 1 & 2. But there's a better way. I will reveal that in my next post. Write "MEDIAN" or comment below and I will tag you when that post comes out. #realestateinvesting

Back in 2001, due to a combination of buying properties at market value and having no cash reserves, I started losing my properties to foreclosure. Ultimately things became so bad that by 2002, I lost my own home to foreclosure so I became homeless. In the process, however, a real estate agent taught me about shortsales. It was a way to CREATE equity out of foreclosures. A property worth $300K with a $400K loan is upside down and normally won't be profitable. However with shortsales, sometimes banks will agree to a $200K pay-off. Why will the bank agree to this? It depends but usually banks are not in the business of owning real estate. Per every $1 of bad mortgage on their books, they can't lend $8 so they'd rather get some money from non performing notes. Also, banks are scared of liabilities that come with property ownership. I've seen banks agree to shortsales when they realize they have a properties with mold issues, properties with structural issues like foundation problems, etc. When I realized the power of shortsales, it became one of the tools in my acquisition toolkit. Once I was back on my feet and buying properties again, and especially when 2008 happened, shortsales helped me to buy MILLIONS of foreclosure! Shortsales is just one of the 5 strategies to make money with foreclosures. Shortsales has a "twin" strategy and I will share that in my post tomorrow. P.S. Good thing my mom and dad agreed to let me stay in their home when I lost everything. So I didn't have to be the guy with a cardboard sign begging people for money.

Here's the DEAL Number of units: 368 units Class B property in solid B area Built in 2000-01 Purchase price: $39,475,000 Capex + other costs: $10,800,000 "All in Costs": $50,275,000 Why It's a Great Deal? Rents are under market (we're converting it from LIHTC to market rates). Current rents are between $700-$1,000/month. Market rents are $1,400-$1,600/month. Moreover, we're getting this using a combination of owner financing and an assumable loan: - Owner financing: $15,775,000 at 5% interest only for 42 months, 7 yr term, 35 year-amortization - Assumable loan: $6,200,000 at 3.6% interest "Downside" of this Deal The only "downside" or difficulty of this deal is the fact the significant amount of capital needed to do the deal. I prefer to do deals with 25% equity or less (meaning, 25% or less downpayment). For this deal, the amount of capital needed is $28,300,000 - which is 53.6% equity. We did the deal anyway because the interest rates on the financing are quite low and this resulted in great cashflow which, when stabilized, deliver a 7% cash on cash return for our investors. Over-all, we project this is a 1.72x equity multiple (for our investors) over a 3 to 5 year hold despite the higher than normal % equity. How Did We Get This Deal? Answer: relationships. We're buying this directly from the original builder and found him through our broker relationships. #AISChallenge