David Marco

Art deco is the perfect blend of futuristic optimism and ancient tradition

El nuevo lujo es la capacidad de pensar con claridad, dormir profundamente, moverse lentamente y vivir tranquilamente en un mundo diseñado para evitar las cuatro cosas.

"Puede sorprenderte que en Grecia, durante la época de Aristóteles hace más de 2.000 años, el trabajo era simplemente considerado un mal necesario. El objetivo principal de la vida según los filósofos era la "Eudaimonia," que se traduce literalmente como "felicidad," pero se expresa mejor como "florecimiento." En palabras de Aristóteles, "cuanto más contemplación, más felicidad hay en una vida." Contemplar el lugar de uno en el universo era visto como una de las cosas más valiosas que se podían hacer y, como mínimo, más importante que la "vida dedicada a ganar dinero," que Aristóteles describió como "algo bastante contrario a la naturaleza… pues es meramente útil como medio para otra cosa." "The pathless path" de Paul Millerd.

How do I underwrite deals to ensure that (if I get my offer price) the deal ends up being a home-run? This is how. This is a real deal I submitted an offer on a while ago. 56 units, priced at $3.75MM If I got this deal at my price, it would’ve been nearly guaranteed to be a home-run I’ll walk you though how I priced my offer & how high I’m willing to go Let’s get into it At a base level, this is a deal with minimal in-place cashflow but one that works on a stabilized yield basis The seller bought the deal for $2.2MM in 2021 & I have no idea how they’ve operated it so poorly since then. The expenses are insanely high & the in-place rents are massively below market. Lot of owners are just incompetent - creates great buying opportunities Overall, the property is currently operating at a 4% NOI margin, which is comical There’s no way the seller is covering his debt service with $22k of NOI, which means he’s in distress, which puts the buyer in the driver’s seat // The Underwriting // The renovated rents at the property should be $1,400 based on comps, which leaves you with roughly $900k of revenue after vacancy once stabilized The expenses are absurdly high – Admin, Contract Services and Supplies should all be way lower. You don’t need $80k in Contract Services to operate a ~50 unit building Taxes were kept the same to be conservative but they would actually drop on the next assessment Utilities seem high as well but I kept them the same to be conservative Reducing the expenses to $472k takes the NOI to $431k and brings the NOI margin to 48%, which is actually still very low The in-place income is so low that a bank would never agree to lend on the property (DSCR is below 1.25x) So you’d have to get bridge debt, which is the reasoning behind the 70% LTV, 12% interest rate bridge debt (in reality you should be able to get a lower rate than this) $225k of renovation dollars are funded up front for renovations, which should allow for 15-20 renovations. The remainder of the renovations will be funded through cashflow once the expenses have been stabilized $250k is funded up front for reserves to pay debt service while the property is being stabilized All of this has been pretty basic so far, so what makes this underwriting result in “home-runs”? 1. The stabilized yield at 13%, 500bps above the market cap rate of 8%. This gives me a wide profit margin if things go right and a massive margin of error if things go wrong 2. My stabilized basis is just $59k/unit. This is extremely low for the market where comps sell for roughly $100k-$120k/unit and new development would cost roughly $250k/unit 3. Exit basis is below comps of ~$100k/unit as well 4. The stabilized DSCR is 1.5x with 70% LTC, 12% interest rate debt in place (actually DSCR will be way higher once I refinance to permanent debt) End result is sale at an 8 cap, a 2.8x equity multiple and $1.8MM of profit over 3-5 years on a very high margin deal A few other notes on this deal: - This market is one of the worst in the state. This means I’m not really willing to pay up for the real estate - The taxes kill the value of this property. This county has among the highest property taxes in the state. The taxload for this property in the rest of the state would be ~$65k, which is $800k of value at an 8 cap – pretty big deal - The in-place income is so low that it’s hard to even put more than 70% LTC of bridge debt on the property (more bridge debt you put on, the more reserves you have to fund, which creates a bit of a loop) // Summary // I maxed out my offer at just over $3MM, a 12% stabilized yield Did I win this deal? No. My offer was received relatively well by the broker but I was outbid. That’s perfectly fine with me, I don’t expect to win them all I just look to do 2-3 really high quality ‘home-run” deals a year and the reason I’m able to do that is by creating strict underwriting standards, sticking to them and swinging when the right pitch comes

I feel like this startup idea is fundable now.

This picture was taken on Mars recently.

¡Me voy de España! 🇪🇸 Sí, señoras y señores… este verano me voy de España por una buena temporada. Tengo 31 años y creo que si no lo hago ahora, no lo haré jamás. - Mejores condiciones laborales - Mejorar mi inglés - Vivir una experiencia única Por eso ya he firmado con mi nueva empresa. Se acabaron las noches, los turnos agotadores y los tóxicos que respirábamos. Algunos me han llamado loco, que no sé lo que hago, que me voy a arrepentir. Estoy renunciando a un salario bastante más alto de lo que muchas personas sin estudios tienen (+50k), dejando atrás todo lo que tengo y sin saber qué puede pasar en el futuro. Pero en esta vida hay que arriesgar. Seguiré formándome, mi mujer va con contrato y estamos abiertos a cualquier circunstancia que nos surja. ¿Qué puede pasar? ¿Tú también te irías en mi caso?