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Levi

3 Oct, 11 tweets, 2 min read

I often think about how to structure our real estate buys so that we can own them for the proverbial forever. 👇

When we sit down to set goals for the future none of them include rolling around in a bunch of cash on a mattress, but they all include owning billions worth of great cash flow generating real estate. 👇

I’ve been contemplating the best debt structures to use in order to achieve that goal. 👇

I know for certain that the more cash flow a deal throws off the more a) Happy our investors will be b) Capital we will have available to do more deals and grow our portfolio. 👇

For years I’ve been a Low LTV / low rate guy. I felt proud when I saw our deals paying off debt. 👇

However, some of my new friends on Twitter are starting to change my mind. In our latest deals we’ve begun using I/O periods, slightly higher LTVs and fixed rate debt. 👇

I have come to believe the best ways to ensure that you will always be able to continue to own a deal are. a) Buy only great assets that are the most likely to see rent growth. B) Create a super sized reserve fund. (Low LTV is not high on that list) 👇

The amount of debt that you carry relative to the current value (which will always fluctuate) is not important. 👇

Honestly, I’ve thought long and hard about what it would be like to own a great asset that cash flowed well but was underwater on its mortgage for a few years and I have come to the conclusion it should not bother me. 🎢👇

So if today’s value is irrelevant, than so too should LTV. The right answer is to buy right, lever up at great rates and hold. 👇

Said differently; I’m becoming less and less interested in paying off debt and instead interested in structures that ensure long hold and generous LP returns. Would love to hear your thoughts. 👂👂

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More from @Levijameshere

Levi

@Levijameshere

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Posted a while back about our hiring funnel. -> Website says we aren’t hiring but for the right person we might consider it. 500 word essay to explain why we should talk to you.

Over 100 essays so far, most are trashed immediately as they just aren’t interesting. 3 have been very good and got to round two.

Round two is a model with one question. “What’s wrong with this model”. Most don’t respond.

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Levi

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Thinking about investing in real estate and don’t know what kind of property to buy? Take a look at industrial assets in growing cities. Here is a 🧵about one deal I own that is like an ATM machine. 👇

Many industrial properties are trading for far below replacement cost and yet offer functionally the same value to tenants as a new building would which means you can earn great returns if you buy smart.

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Serious question here for real estate GPs and LPs: Should long term hold GPs stop modeling out 10+ years and just focus instead on the quality of the asset and the Un-levered yield on cost?

@moseskagan

I had a conversation with @moseskagan several months back in Austin and he told me that they model the first year only and it’s stuck with me. Honestly I thought he was crazy at first, but I think he might be on to something.

We all know that the likelihood that your model is correct is near zero. And the further out it goes the less accurate it gets.

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In 2001 I decided it was time to go big and try and raise $600k for my first raw-land development deal.

I was 20 and knew literally nothing.

I wrote a 🧵 about how that circus went down. 👇

The deal was a 7.2-acre farmland tract that I had in contract for $530,000. My plan was to subdivide the land into 33 single family residential lots and to sell it to one of the big builders in the area.

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It’s crazy that you could be about to make the worst choice of your life and nothing would stop you. Not even a little popup to ask “are you sure you want to do that?”

I love this little corner of Twitter we call RETwit. My hope for this community is that we can all be a resource for each other. A safe place to bounce ideas and make each other better for it.

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At our best we could be Clippy the paper clip for other investors. “It looks like you are trying to design a six unit apartment, have you met @bobbyfijan?”

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@Levijameshere

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👍If it is not a Hell Yes, then Walk Away👎

(10 simple rules that will make you successful at anything)

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Here are 10 things that I wish I learned to years ago.

Never leap from little information to big conclusions. If you don’t know enough, keep searching.

Doubt is not a pleasant condition, but certainty is absurd. No one knows everything about anything. There are always variables that you cannot predict. Learn to be less certain about the things that you think you know, and you will become better about planning for the unlikely.

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