How can a land for land deal happen? 107 acres of industrial land owner didn't want to sell. But he did want to activate the equity. Offered a note of $20k a month for 25 years with $6m balloon in exchange for high end lots in Santa Fe. The lots will absorb slowly because they are luxury lots for homes but few buyers due to price and speed to develop. They'll go to cash over 3-5 years at $9-10m. The owner of the lots doesn't want to wait. He would rather get income today. Now the industrial land guy owns both. He can potentially get up to $10m cash but it comes in over 5 years. What's his cost of funds? It's an uneven cashflow situation. $20k a month going out for 25 years and a $6m balloon. $10m coming in over 5 years.

Just had a builder call me about his personal house. Getting a divorce has about 65% debt. Thought he was doing me a favor offering the house to me for about 10% less than market if I just pay cash now. He just doesn't want to have to wait around. I said well usually we factor in about 8% for commissions closing costs concessions etc. So there's no room for me to make anything and I have to wait 3 to 5 months for it to maybe sell. #retwit

Who has some notes they want to trade for equity in real estate? #retwit

Today at a real estate exchange meeting. I loaded into Claude a bunch of notes with different payments and interest rates with different constants and terms in 1st 2nd 3rd and a buyer with $1m down in order to take out the institutional debt as well as cash out the sellers equity on a big building with good income from strong tenants. How long did it take for Claude to calculate the buyers cash on cash and total return over a 30y period. Could it come up with that scenario? No. Why? Because it doesn't know the people or why they are wanting to do anything.

Never used a bank to buy real estate. Looks painful.

Made an offer. Newly flipped house over 100 days on the market. Neighborhood not so great. Selling price $350,000. Owner owns it out right and lives in our town. Doesn't have a bunch of other real estate. Agent has suggested to him to owner finance but he's only gotten low down payment offers. He's already dropped it $48,000 since he listed it. I offered zero down. 5% interest only at his asking price for 10 years with a balloon. Security would be two homes that I own worth approximately $450,000 total. So he has about $100,000 of buffer if I don't pay. I believe his will net me around $300,000 cash. Mine are brand new land home packages. I can now hold them instead of selling them. He is secure, I am leveraged. But together we own this equity free and clear. We can go together into something else if we want and agree. #retwit

LP = 2nd position behind a bank. Don't confuse passive LP for secure position. Much safer to lend in first position than to be an LP with some upside. I think if you look at your LP positions over time some will be home runs. Others will immediately not pay the pref. And others will pay the pref but never really do that well. If you just lend in 1st you might do better the whole time.

Real Estate Lenders: Would you rather have.... 50% LTV - 6% interest only 60% LTV - 8-10% interest only 70% LTV - 12% interest only A 2nd at 80% LTV for 20% in 6 months, return based on the deal making a profit. You are behind a 1st at 12%. #retwit #realestate #mortgage #loan #lender

Real estate is Bad! It's either a good time because you can buy cheaper or on better terms etc. Or it's terrible because rates are high, prices are flagging, and sales are slow. Which is it for you? #retwit #RealEstateInvesting #realestate #invest

Real estate Milton Friedman: With inflation the good effects come first. Your asset values go up, what you can sell products for goes up. But then the inflation settles into daily life expenses. If you are a landlord your value went up and your rent went up some, but your expenses went up more. So you are worth more but your cash flow went down. If you are a fix and flipper your material costs go up, your labor costs go up, but you're selling price caps out. So you get squeezed on your margins and you bought your land too expensive 6 months ago before the inflation. If you are a note holder from a bunch of seller financed properties note values go down because interest rates get pushed up. So your discounted value is less. If you are an option holder on a long-term option at a fixed price you have no expenses. Your value is higher and you have no real inflation costs. It's a one-sided deal. If you hold a Master lease that says you pay the owner $300 a month per door on a multifamily property but they pay the taxes and insurance and maintenance. You keep all the upside on rents and you take on none of the expenses. Sometimes contracts are better than ownership. #retwit #realestate #inflation

Seeking a $20m warehouse, storage, flex industrial, can be value add or stabilize. Will look at other types also. #retwit

Is there such thing as a bad housing market? It kind of depends on who you are. If you are trying to buy houses and the prices are going down, it's a good housing market. If you own a bunch of houses and you're at the time of your life where you need to sell and harvest the cash, it's a bad housing market. If you are a Wheeler dealer does it really matter? You're now buying cheap but you're not selling as high. The transition might be tough. But once you go through the transition your margins come back. And if you are an exchangor you weave in and out without anybody seeing what you're doing. #retwit #realestate #housing

Constant depends on term and rate: Was running numbers on a 9 cap retail center with 30% down on 20y term with current rates at 7.5% as a guess. $5m pp 30% down - $1.5m 70% financed - $3.5m 240 months term 7.5% rate $28,195.76/mo - $21,875 int, $6320 pri Total yearly payments - $338,349.14 Constant is payments divided by balance owed - 9.67% which is higher than the cap rate. That means your cash on cash will be lower than cap rate because your constant is higher than the rate. Cap on $5m - $450,000 Cap minus yearly payments - $111,650.86 Coc calc - 111,650.86÷1,500,000 Cash on cash - 7.44% Cash flow plus amortization return is 12.68% however if monthly cash return is important to you a shorter amortization is less good. That's one of the reasons we don't like banks. We would rather let's someone else buy it. Give them the money as an option. Pay them an 8 cap with a larger buy back later. Example: 8% on $3.5m - $280,000 9% cap - $450k Cash on cash - $170k Coc % - 11.33% Can give yourself way better cash on cash by giving up amortization. Also I would rather work with someone else free and clear than have a bank stuck on there. #retwit

Going down in cash flow and obligations. We have a property in TX that has $57k net income after debt service as long as nothing big breaks and everybody pays. It's worth around 1.3 million. We have around $400,000 in equity. I go to an exchange meeting and there's somebody that has a free and clear four unit retail center in a small City in South Texas. It's worth $900,000 at below a six cap. I offer for him to give us a $400,000 first position note at 6% secured by his four unit retail center. He is going to give us that note as option consideration to purchase our Texas property. We go from $57,000 a year potential to $24,000 a year fairly secured. He goes from almost 54,000 a year up to $87,000 per year between these two properties minus our debt service. We also offered to move with him to the next property if and when he sold for cash is four unit. That means he can treat whatever he's offered in cash $900,000 or so to the next seller and we will go with him as fairly inexpensive debt. #retwit

If you're in real estate or any other business. What percentage of your day would you say is acquisition versus operations? And you tend to work on one more than the other based on your preference?