The Ledger
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Taylor: Successful Entrepreneurs Who Deny Luck and Timing Are Lying
“Any successful entrepreneur, if they don't tell you that, hey man, there was some time and some luck involved in it, they're lying to you. Like truthfully, there's always a little bit of that.”
Taylor: Founder Naivety Is Valuable Because Knowing the Brutality Deters Starting
“I actually think there is some value in being a little bit naive because you don't know how brutal it's going to be, and so you just go and do it.”
Taylor: Service Businesses Cash Flow Well but Suffer From Depressed Exit Valuations
“Like if you're going to build a service based business, like mom and pop, it's the reverse. They cashflow very well. They just don't get the valuation. It's why so many people in their sixties now, Are trying to offload their business, but if they're pulling i…”
Taylor: Most Real Estate Investors Are Paper-Rich With Modest Cash Flow
“I would say most real estate investors, though, are rich on paper, And their cash flow is not crazy. That's most of us.”
Taylor: Real estate debt service is paid by tenants and refinanced tax-free
“When you're putting leverage on assets, you're not paying the debt service, right? Your tenant is paying the debt service. And so now you're making a different type of calculation. Do I have enough income coming in to comfortably pay my debt service? And then …”
Taylor: Home Flippers Lead Emerging Real Estate Markets; Institutions Signal the End
“The home flippers are usually the first ones in. And if you start seeing the institutional investors dumping capital, you're usually on the tail end. So I want to follow the home flippers.”
Taylor: Early investors must prioritize capital growth over passive income
“In the beginning, the calculation is this. You need to grow your wealth. So even though we're talking about passive income coming in, if you pick passive income over growth, it's going to be a smaller return. So in the beginning, I was focused on growing the w…”
Dr. Jonas Kuno: PSA Is an Imprecise Marker, Not Definitive Cancer Diagnosis
“The PSA, the prostate-specific antigen is a very crude marker. It doesn't tell you if you have cancer or not. It's, it says the likelihood is higher if we cross that four four point or mark, right? But you know, again, even benign prosthetic hypertrophy, you w…”
Morris: Underwriting requires at least 5% vacancy even in hot markets
“You still have to work in at least a five percent vacancy. Here's why. Somebody is eventually going to move out, and you're going to have to paint, and you're going to have to make it fresh.”
Morris: Real estate operating expenses can reach 35% of effective rent
“A really good rule of thumb it can be as high as 35% of your effective rent.”
Morris: The best entry-level unit in a prime neighborhood defends against vacancy
“When you're at an entry level Into a great neighborhood. Here's what entry level into a great neighborhood is. You're basically, you have the nicest unit for the least amount of money into a great neighborhood. And when you've got that, you have lots of demand…”
Morris: Pro forma expense projections never match reality in real estate deals
“I really haven't bought a building where you go back and you look at the pro forma and you're like, oh, you know, wow, the expenses are exactly what they projected. The expenses are, you know, a little less than they projected. That's just not happening.”
Morris: Multifamily investors entering hotel deals must have hospitality experts
“However, if I'm looking at a deal I would not do a hotel deal or if somebody came to me and they said, Hey, I've had all the success in multifamily. It's great. I'm looking at a hotel deal. I'd be like, stop. You must have someone on your team that knows hospi…”
Morris: How Cap Rate Adjustments and Leverage Can Double Invested Equity
“They're taking a four, they might take a four cap, you know, that's a value add, figure out how to make it, you know, a six cap, and they've only put down 40%. I mean, you can almost do that math in your head. You've now increased the total value of the buildi…”
Fifield: 200 to 250 units is the multifamily development sweet spot
“And so the sweet spot in our business, if you were going to build something today, it's like two, 250 Units is really the sweet spot because you can find families that right here in LA that want to own those.”
Fifield: Hotels require renovation cycles every seven years
“You just, with the hotels, you just, every seven years, you just keep redoing her.”
Morris: Non-Cash-Flowing Deals Require a Direct, Short Path to Profitability
“It doesn't have to cash flow, but you've got to have a real straight line, not like a, you know, change the entitlements in order to make it work. You know, you've got to have like, okay, so I buy the value add, it's underwater. It's not cash flowing. But I ha…”
Muller: Wedding photography teaches high-pressure group direction needed for movie casts
“Weddings are amazing because where else are you going to get the opportunity to practice shooting 30 people and directing, you know, how do you get practice to shoot a cast of a movie? Or when you do those big, you know, big groups of people. Okay, and then yo…”
Muller: The brain cannot simultaneously panic and focus on breathing
“Your brain can't do two things at once. It can't say, get out, and breathe. They cannot occupy the same space.”
Morris: Buying at 5% neighborhood renovation is too early; 20% is optimal
“When you're at 20%, you can still buy the shack, and I have this formula, which is like basically, you know, if you're at five percent, meaning like five percent of the neighborhood has like been, you know, Been done up again. You know, it's too early, but the…”
Morris: General partners should invest 10% of equity in syndications
“Every deal is different. You can do it any way you want to do it, but there is a rule of thumb and that rule of thumb is that the general partners really must have 10% of their own money in it.”
Morris: Eliminating syndication fees offsets a 50/50 profit split
“Splitting the upside fifty-fifty sounds crazy to an investor that's used to the usual deal, but when you take no fees, it very much washes out, but it depends on how good of a deal it is.”
Morris: Distressed properties trade at a discount exceeding their repair costs
“There's a 100,000 dollars worth of problems. You should be able to buy that house for much less than 500 grand.”
Morris: 200-plus unit real estate deals face global institutional bidding
“If it's 200 units or more, you're not, it's, this is not a mom and pop seller. They are, they're, you don't door knock those, ok? If they want to sell it, they're going to put it on the market, they're going to market it properly. Every investor that's at that…”
Morris: Real estate brokerages are highly vulnerable due to thin margins
“The business that I'm in is a great, the brokerage business is a great business, but it's so high volume,
Low margin.
That if you get a little bit of a shift in in the income, it can be really disruptive.”
Morris: Credit repair requires six months, impossible in six weeks
“If you have credit that's screwed up even if it's legitimate stuff, you can do amazing stuff in six months. But you can't do very much in six weeks. Almost nothing.”
Johnson: If a 2% margin makes the deal, you're doing it wrong
“If your margin is so small, like two percent, if that's the difference maker, then you're doing it wrong.”
Johnson: Top 20% of short-term rentals get 80% of guest traffic
“The top 20% of the listings get 80% of the traffic. And so if you're in the top 20% which if you know how to underwrite and you know how to create an experience, it's pretty easy to do. The market is softened, but very sustainable and still highly profitable.”
Johnson: Short-term rental investors should only enter pre-regulated markets
“That, that's exactly what I tell people is when you, if you're looking at a market and whether you should invest in it, you need to go to a market that's already regulated and you need to be, the deal needs to be able to play by their rules. And so if that doe…”
Johnson: Remote Airbnb investing is unwise for beginners without local partners
“Remote hospitality is significantly harder than in-person hospitality, and so starting an Airbnb investment in a location that's a really strong market that you cannot touch if you're just starting out to me is typically not the right route unless you have an …”
Johnson: Take design risks in Airbnbs you wouldn't do at home
“What I tell people when they're designing Airbnbs is take risks on your Airbnb design that make you think like, oh, this is interesting. I wouldn't do this in my own home, but this is interesting because that's what you want the guest to feel when they walk in…”
Johnson: Taking bookings off-platform immediately degrades Airbnb search performance
“You will see an immediate decrease in performance when you start taking bookings off of their platform.”
Scordo: Trendy restaurant openings serve as leading indicators for real estate markets
“I've been a food writer for many years, and, you know, I would see, like, kind of new, I'll say the word hip, restaurants kind of coming, a couple of them coming in, which I still use that as sort of a factor, you know, when I see. Yeah, a barometer. I do. Lik…”
Scordo: Vacation rental rates do not scale proportionally with home purchase prices
“Somebody who buys a ten million dollar house can't necessarily charge 10 times more Or five times more than someone at the two million dollar house. Like what, you know, so it's like, you kind of have to find that sweet spot.”
Stepp: Buyers crossing submarkets have a lower probability of closing
“If they're just a person that came from, you know, Downtown Los Angeles that wants Santa Monica or downtown Los Angeles that wants the Valley. It's just it's not a fit. It's generally speaking. So there's a lower probability of closing.”
Stepp: Pros buy from mom-and-pops and sell back to mom-and-pops
“There's only two people in the food chain and commercial real estate do really is the pros and the mom and pops. So the buy mom and pops buy from the pros and the pros buy from mom and pops over and over and over again. It's just the way it is. So pros and pro…”
Bailey: Matching new acquisitions to portfolio comps reliably predicts operating expenses
“When I'm looking at properties, what first thing I do is I say, what building is this similar to that I currently own? Because based on, you know, the year built, the flat pitched roof, blah, blah, blah. And I can generally find Two or three of my current port…”
Bailey: 10-year fixed-rate financing protects cash flow through any market cycle
“They could have hedged their investment if they had, Gone right into fixed rate financing. Going out 10 years, which rides you through any market, maintain your cash flow, whereas your equity is going up and down.”
Bailey: Flipping Pitfall Is Inability to Control Exit Timing
“One of the additional challenges with that is you can't control when you're exiting your deal. You, all of a sudden, the market turns on you, and it happens to be when your house is finished, and your profit is quickly gone.”
Bailey: Type M Copper Plumbing Fails in Residential Buildings
“For those of you who don't know, M copper plumbing is an, is a it's a cheaper form of Plumbing and it ends up getting little leaks. It doesn't do well with hot water. It's okay for office buildings. Not good for residential. And so you want L plumbing.”
David Bailey says novice real estate investors should buy two-to-four-unit properties
“If I were starting out and I was looking at my first acquisition, I would focus on a two to four unit property. That's because you're gonna get preferential financing, because up to four units is single family financing, and then look at a building where you c…”
Bailey: Property value drops do not matter if cash flow is protected
“If you focus on cashflow, cashflow, cashflow. It doesn't matter if tomorrow your property drops, 10% of value. It doesn't matter because your cashflow is still your cashflow.”
Morris: On-Market Discounts in Hot Markets Require Significant Property Defects
“So for starters, it has to be a value add. There has to be something about the house that is chasing away The buyers. Yeah. And so one of the things, one of the terms that I use is brain damage. There's gotta be significant brain damage. Otherwise, in a hot ma…”
Morris: Living directly adjacent to a school harms home value
“You want to be near a great school, because that raises the value of a house. If you're, Next to a great school, that's bad. Because, you know, there's recess, there's whatever, there's kids screaming, there's traffic is terrible at drop off and pick up, you k…”
Morris: Developers avoid properties with poorly executed renovations
“Developers don't want it cause it's already done and done poorly. Okay. That wipes them out.”
Morris: Hidden Structural Flaws Rather Than Visible Defects Are Deal-Breakers
“Everything that looks terrible, everything that is a bummer. Is easily fixable. And the one thing you can't see, if that's not right, run.”
Morris says buyers can turn a $465K fixer-upper into a $600K home.
“You've got to get the 465,000 dollar house that really only needs 50, 60 grand worth of work to make it into the 600,000 dollar house. And you absolutely can do that. It's not going to be this disastrous thing, but it's going to be the stuff that doesn't look …”
Morris: Rental flips require immediate fixes, but owner-occupants can defer cosmetic work
“If you're buying an investment property below market value, because It has stuff that needs to get done. You've got to get that stuff done right away or you're not going to get the rents that you want to get. When you're living there yourself. I mean, I've bee…”