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The Real Estate God Profile picture
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20 Sep, 9 tweets, 7 min read
Rarely promote my course but it's been a while since I posted any new reviews

Some new reviews are below and course is linked at the bottom of the thread

If you have any questions, feel free to send a DM
Link is below. As a reminder, students and veterans get 75% off (DM for discount code)

therealestategod.gumroad.com/l/trdbw

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More from @TheRealEstateG6

The Real Estate God Profile picture
19 Sep
Quick thread on underwriting in the current environment and why it makes sense to slightly de-emphasize exit basis for value-add deals in markets in which assets are trading significantly (~25%+) below replacement cost:
Typically, two of the most important aspects of underwriting are comparing entry cap rate to stabilized yield to market cap rate and comparing purchase price basis to stabilized basis to exit basis to market basis
But the recent increase in construction costs (and by proxy, replacement cost) changes things a bit
Read 9 tweets
The Real Estate God Profile picture
18 Sep
This is a common issue. When your DSCR doesn't hit the banks threshold (usually a ~1.25x DSCR), most people think banks don't give you any option but to lower the LTV. But in reality, if you negotiate, you have 3 options

Thread:
Option 1: Lower LTV
Option 2: Schedule an earnout once 1.25x DSCR is hit at implied ~75% LTV
Option 3: Fund reserves up front to artificially hit the 1.25x DSCR

Almost everyone goes with option 1, but it's actually the worst option by far. let's go through them one by one
For this entire thread, let's assume you want 75% leverage, but the bank is pushing you towards 60% leverage because that's the leverage that supports a 1.25x DSCR at the projected Yr 1 NOI
Read 9 tweets
The Real Estate God Profile picture
16 Sep
Should always read a document from the perspective of who wrote it

Reading a loan doc? Pretend you're the lender

Halfway into the doc (from the context of the writer, tonality and language) you should be able to tell the intention of the document and almost predict the clauses
Actually makes a huge difference when you're reading more complex docs

Ex: a condo doc made by a developer who sold out of the project yrs ago. The intent of that doc was most likely to protect the developer in the short term - lot of the "teeth" of the doc evaporates long term
So really helpful to get into the mind of the writer

Why did he include this clause? What is that protecting him from? Is there anything he might have missed thinking with a shorter term perspective? If you were him would you have added in any other clauses? etc
Read 4 tweets
The Real Estate God Profile picture
15 Sep
Think people go about choosing a market all wrong. RE investors make money on mispricings

Smaller mkt=less competition=less price discovery=more mispricings=easier to generate outsized returns

So your main criteria for a mkt should be "place with the least competition"

THREAD:
Most people will tell you to look for population growth, etc

But that just means more competition

If 15 firms are bidding on a deal (like in bigger/higher growth markets) there's no mispricing and only way you get outsized returns is if you're lucky or have a unique biz plan
So (as long as you're searching for short term flips) I would ignore all of those "population growth"-type stats entirely

The only stat that matters is finding a market that has the most mispricings. Everything else is essentially useless noise
Read 25 tweets
The Real Estate God Profile picture
2 Sep
Since I've been getting a ton of DMs about the RE career path,

// DECODING REAL ESTATE CAREERS //: An in-depth overview of the career paths in the real estate sector, which ones you want to target and which ones you want to avoid
Read 6 tweets
The Real Estate God Profile picture
20 Aug
Got some questions regarding the flow of funds in an RE deal

The flow of funds is actually determined by the lender, which is provided in loan docs. Then, the operating agreement will have a separate FOF afterward for "excess" funds

Lender FOF on the left, LLC FOF on the right
Cash Management typically occurs when a debt covenant has been breached (usually the DSCR or Debt Yield dipping below a required threshold)

Once this occurs, all cash is swept into a "lockbox" controlled by the lender and follows the "lockbox" FOF (rather than the normal FOF)
The Cash Management Period can typically be resolved by 2 consecutive calendar quarters above a specific DSCR or Debt Yield threshold, after which time revenue is no longer swept into a lockbox and the normal flow of funds resumes
Read 8 tweets

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