"The Bid Decisions and Considerations of Real Estate Career Planning" presentation to @Columbia University.

by Jared Brenner-Goldstein @TheNotoriousJBG

thefamilyofficegroup.com Anyone ever deal with these guys? A guy named "Frank White" reached out and wanted $100k up front fee for the pleasure of introducing us to you his network of family offices. I told him his pitch sounds like a scam, initial reach out was by "David Smith".… twitter.com/i/web/status/1… No phone number on the website, no staff, just a Class C office builidng in fancy "Greenwhich CT" listed.

We toured an interesting building today, developed by "Housing Diversity"/Brad Padden.

$6/sq ft rents, no parking
Average unit size: approximately 361 sq ft
Rents in the $2,000-$2,500 range
Address: 6762 Hawthorne Ave, Hollywood CA
41,489 sq ft (gross)
360 sq ft retail
7,437 sq… twitter.com/i/web/status/1… housingdiversity.com/project/1621-n…

Chat GPT to Estimate Construction Costs:

Input: James Hardie Artisan V Groove Siding - the Coverage area of each piece of siding is = 8.25 inches x 144 inches, costing $45.70 per piece. How much does it cost per ft, assuming 9.5% CA tax rate on materials and.... the sub-subcontractor charges $5 per ft for install? Assume 10% waste.

Output: To calculate the cost per square foot for James Hardie Artisan V Groove Siding, including 9.5% CA tax, 10% waste, and $5/ft for installation:

PSA: Males over 40, check your testosterone levels, 300 might be in the "normal" range but it's far from optimal, optimal is the upper 1/3rd of the normal range. I've been on TRT for years and it's one of the best decisions I've ever made. I keep my testosterone in the 900-1100 range and estrogen in the 25-30 range. Find a doctor that understands this subject.

Case Study: "Creating the Downpayment"

The following is a 13-unit, 1-bedroom townhome project.

We "created the downpayment" by generating enough equity to withdraw 100% of our original investment upon stabilization. We completed the project without any general contractor (GC) or developer fees. 50/50 split over zero preferred return.

With all the cash-out, it's an infinite Cash on Cash return.

We continue to own the property with our partners and plan to do so indefinitely.

"Create the Downpayment" - Most people investing in real estate rely on external income, pay taxes, and then use those after-tax dollars as a downpayment to purchase the property. That's not very efficient. 👇 While flipping homes, I discovered we could "force appreciation" and "create the downpayment" through construction. This means generating value by buying right and improving the property.

$17,500 savings ordering living room furniture direct from China.

Living room set for my personal house from Restoration Hardware for 5 pieces, would have been $21k+ with tax

Cost from China = $3500 including tariffs and shipping for custom made exact replica. 👇 See my Substack (in my bio) for supplier contact info.

I get zero credit for this, my fiance Carla Jones sourced the supplier, got samples and chose the furniture.

When I was choosing the furniture, I had black leather couches.

"Covered Land Play" is a term used by real estate developers to describe a strategy of purchasing real estate, and collecting income from another use while entitling the property for a new development project.👇 For instance, a shopping center may be re-entitled for a multi-family project while collecting rent.

For novice developers, a covered land play may involve purchasing a single-family home, renting it out, and building additional unit(s) in the back.

I can't tell if the inspector on my ADU is completely angling for a bribe, flexing his ego, or is incompetent. He's insisting on asking for a detail for double rafters for a ceiling on my ADU that no one will be walking on, and the details don't call for it. The engineer who designed the building told him on the phone that it was not needed, the engineer gave his structural observations and said framing was good to go, and as I mentioned, the plans don't call for it.

Don't delay payments to your suppliers/subs - they are not in the lending biz.

Pay your daily labor at the end of the day and your weekly labor at the end of the week.

Borrow from banks or prvt lenders who are in the business of lending money, not your employees/subs/suppliers Leviticus 19:13 which states: "You shall not defraud your neighbor, nor rob him; the wages of a hired man shall not remain with you all night until morning."

Question: How do you find good General Contractors or Sub Contractors?

Answer: When we were flipping homes, we would know who our competitors were, and we would stop by their sites after they've just bought a property (you can search properties by searching for the LLC), and we… twitter.com/i/web/status/1… One can use a similar method to find architects and engineers. By visiting the building department and pulling plans for any project, you can see the design team on the Title page of the blueprints, which are all public records.

Career progress I've seen:

SFR home flippers become hard money lenders.
CRE operators become RE Private Equity Fund Managers

Both come from having the capacity to raise capital beyond your own needs. 👇 A decade ago, we spent tens of thousands of dollars forming a fund to engage in hard money lending, which allowed us to lend to ourselves at 80% of future value. If anyone wants access to these documents, just donate $500 to St. Jude Children's Cancer Hospital...

If I were starting again in real estate in my 20s with no money, knowing what I know now, how would I do it differently today? (Today's DM)

I would start as an agent/broker, focusing on smaller fix-and-flip deals such as SFRs, duplexes, triplexes, and fourplexes. 👇 I would prioritize value-add deals that are attainable as a principal within 2-3 years.

The skillset required to sell deals to others is the same as the one needed to sell yourself to your capital partners.

Los Angeles' ULA 'Mansion' Tax goes into effect on April 1st, imposing an extra 5% transfer tax on the sales price. What does that mean for the LA multi-family and rents? 👇 An institutional developer who is building an apartment building and is all in at $80m on a $100m deal (with a 20% margin/equity creation) will now have to give up 25% of their profit to this new tax. As a result, the supply of new housing will slow down dramatically. Why?

Amortizing or interest-only loans: which is better?

Two of the wealthiest real estate developers I know always choose interest-only (IO) loans for as long as possible. Why? According to them, there are several reasons: 👇 - The lowest payment possible allows them a better chance to ride out a recession
- Their goal is to control more real estate and benefit from inflation (e.g., controlling $1 billion and having it increase by 10%).

Finding a mentor can speed up achieving your goals. I created a "virtual mentor dream team" of sales authors. We all sell something. There's so much that can be learned from studying real estate sales. This is one of the best BUSINESS books for entrepreneurs, period!👇 I've reread this multiple times and applied the principles to our development business. It's a must-read for any real estate entrepreneur. Just replace "listings" with "getting deals under contract," and "buyers" with "LPs."

Here is our basic spreadsheet from 2011 that analyzed house flips. The blue cells represent variable cells.

If anyone wants to have our current underwriting models, make a $500 donation to St Judes Children Cancer Hospital and I'll send it.

dropbox.com/s/rq4lxquqjc6r… If anyone is interested in both our institutional and sub-institutional underwriting models, please send me a screenshot of your donation, and I'll send you both.

$51k is roughly the cost to convert and existing rec room to an ADU. Our GC level, with zero profit and overhead added on. Quotes from 3rd party GCs $100k-$200k. We were going to outsource but when we saw the numbers, we decided against it. We do this for our capital partners, at cost.

Q: "How do you find suppliers on Alibaba?" A: I look for ones with "Trade Assurance" and "Verified supplier." I also look at the length of time they've been in business and $ Volume they do and then take a leap of faith on a small order. Build trust over time. 1/4 If I were doing a large order, I would fly to China and visit a few factories in person. My understanding is that certain regions and certain factories excel in producing certain products. 2/4

What is the most ideal CoGP structure for a younger GP to negotiate when moving up to doing institutional deals?

IMO this is the IDEAL:
- 90/10 co-investment with your CoGP from day one
- 90/10 cost-overruns with CoGP
- 50/50 on the promote - CoGP provides track record, LP relationships, and experience/advice
- CoGP allows the GP to keep majority of the fees to build the GP business
- CoGP has a balance sheet and provides loan guarantees