147 - Effective Intelligent Underwriting

Cash Flow Guys | Real Estate Investing & Cashflow Ideas - Inspired by Robert Kiyosaki / Rich Dad Poor Dad

In this episode of the podcast, I interview returning guest Ben Leybovich (of Bogger Pockets fame) and his partner CPA Sam Grooms. The three of us have noticed a trend of “ambitious” underwriting in the last few years of many multi-family investment opportunities. I for one, think that sometimes certain syndicators are doing deals purely for the front-loaded fees in the deal, so they can eat. A bold statement? Yes, however, if you look around, you will find tons of “moral hazard” in many of the deals being pitched in the last year or so.

Be careful of situations where the operators get paid up front. Everyone needs to eat but to suck the equity out of a deal up front, tends to increase the risk of the transaction from that day forward. Ben, like me, has been very outspoken about investors overpaying for investment properties and with good reason.

This is not to say that a sponsor should not be paid for bringing a deal together in the front end, however, some meat on the bone should be left for the middle and back end. Ben, Sam and I all agree on performance-based compensation which means being rewarded for the exceptional performance of a deal based on the sponsor’s ability to lead the team.

Ben and Sam have teamed up to educate those who are in a position to invest their own money into deals on how to understand a proposal. As a capital partner, you should take the time to educate yourself on the underwriting process in order for you to double check the opportunity that is being provided to you. In order to accomplish this, Ben and Sam have decided to build a curriculum in order to teach you exactly what you need to do in order to invest safely.

To learn more about the upcoming syndication event they will be hosting in Phoenix, please go to: https://justaskbenwhy.com/phoenix