D Bill

Dad | Co-Founder M2BF | Equity Builder | Mentor | Cloud Expert

[The Driven Man @Thedrivenman]

A 93-year-old billionaire’s advice about marriage‼️

[D Bill @databass808]

@bairdk This is awesome! Thanks for the share you really demystified the different acquisition options out there.

[Baird Kleinsmith @bairdk]

At 38, I was debt-free, saving maniacally, grinding my way to early retirement.

At (almost) 42, I'm now $17.5m in debt, have loosened spending, and give no thought to retirement.

3 yrs ago, I found the power of leverage.

How I've Financed $21.5m in Self-Storage Acquisitions*:

*First, some disclaimers:

- I spent 16 yrs grinding in a corp career, saving any penny I could, building a pile of cash to do what I do now.

- I don't have outside investors - only capital at risk is my own and my lenders'.

- I keep a large liquid cushion so I don't become an over-leveraged case study if sh_t hits the fan.

- This is not financial advice and I don't recommend most take the risks I've taken.

- I'm the recipient of the benefits of good timing, good luck, and hard work. Wouldn't be here without all 3.

Let's dive in!

I've used 4 types of debt structure:
- Conventional Bank Loan
- SBA 7a Loan
- Seller-Carried Loan
- Conventional Bank Loan + Seller-Carried Loan

I've bought 10, sold 1. Here's the breakdown of each buy:

Property 1: Conventional Bank Loan
Purchase Price: $1.1m
Down Payment: $275k (25%)
Interest Rate: 3.95%
Amortization: 20 yrs
Adjust: 7 yrs

2023 numbers:
Revenue: $221k
Net Operating Income: $172k
Debt Service: $60k
DSCR: 2.9x

Closed on this first deal in Feb '21. Had no idea what I was doing at the time, but got lucky with connections. Friend intro'd me to an attorney, attorney was on board of local bank and he intro'd me to the commercial lender at bank.

Convinced bank to lend me $825k despite zero prior experience. Presented my biz plan, sold hard, got them on board.

Long story, but I refinanced this one in '22 and cashed out $350k at 4% for 10 yrs, thinking it'd be a long hold. Last year I had the opportunity to trade it up for a $12m buy and I did (see #10 below). Sold it for nearly a $1m gain in December '23 and 1031 exchanged into deal #10 for $12m.

Property 2: Conventional Bank Loan
Purchase Price: $660k
Down Payment: $164k (25%)
Interest Rate: 3.95%
Amortization: 20 yrs
Adjust: 7 yrs

2023 numbers:
Revenue: $107k
Net Operating Income: $75k
Debt Service: $36k
DSCR: 2.1x

Closed on this one in April '21. Went back to the same bank that financed #1 and they were game. Not sure why. I hadn't had time to show them what I would do with #1. But they gave me their money and I took it.

Property 3: SBA 7a Loan
Purchase Price: $700k
Down Payment: $105k (15%)
Interest Rate: 3.9%
Amortization: 20 yrs
Adjust: 5 yrs

2023 numbers:
Revenue: $112k
Net Operating Income: $82k
Debt Service: $43k
DSCR: 1.9x

This one was bought in Aug '21. At that time, the SBA was offering an incentive to waive their guarantee fee (a percent of loan amount paid at closing) and cover the first three loan payments. Got an intro to a local bank who is a "Preferred Lender" for the SBA, which means they can underwrite SBA 7a loans in-house. An advantage of SBA loans is they allow you to lever up to 90%. My bank wanted 15% down, so that's what I did.

Property 4: SBA 7a Loan
Purchase Price: $625k
Down Payment: $94k (15%)
Interest Rate: 3.9%
Amortization: 20 yrs
Adjust: 5 yrs

2023 numbers:
Revenue: $91k
Net Operating Income: $61k
Debt Service: $38k
DSCR (Debt Service Coverage Ratio): 1.6x

Bought this one in December '21. Decided to go with the SBA bank again even though the incentives mentioned above had expired. This one is the dog in my portfolio and the only one that has missed targets, but is still doing okay.

Property 5: Seller-Carried Loan
Purchase Price: $1.85m
Down Payment: $450k (24%)
Interest Rate: 4.5%
Amortization: 26 yrs
Balloon: 10 yrs

2023 numbers:
Revenue: $277k
Net Operating Income: $197k
Debt Service: $91k
DSCR: 2.2x

Bought this one 2 yrs ago this month. Someone else's loss was my gain. I picked this deal up with a well-timed cold call to the owner, just as his contract to sell to another buyer was terminated because they didn't want to agree to the seller's carry terms. The seller was only selling if he could carry the note - no idea why the other buyer didn't like the very nice terms he was offering.

This was my first experience with seller-financing, and man, it was smooth. No appraisal, no underwriting, no bank fees. Shared my Personal Financial Statement, gave proof of assets, and that was that.

Property 6: SBA 7a Loan
Purchase Price: $1.55m
Down Payment: $155k (10%)
Interest Rate: 4.55%
Amortization: 25 yrs
Adjust: 10 yrs

2023 numbers:
Revenue: $273k
Net Operating Income: $205k
Debt Service: $94k
DSCR: 2.2x

Bought this one in June '22, right as rates started to move, and it's prob the best deal I've done. For it, I shopped my two local banks against each other. The one that did the two prior SBA deals came in hot and offered the terms above if I refinanced #1 and #2 with them, so I did. We're besties now.

Property 7: SBA 7a Loan
Purchase Price: $1m
Down Payment: $150k (15%)
Interest Rate: 5.75%
Amortization: 20 yrs
Adjust: 5 yrs

2023 numbers:
Revenue: $175k
Net Operating Income: $121k
Debt Service: $72k
DSCR: 1.7x

Bought this one in Aug '22. At the time thought 5.75% was an insanely high interest rate. Now it looks great. Went back to my SBA bestie and got it done. At this point, I had a great track record with them. I did what I told them I'd do on previous deals and they trusted me.

Numbers on this one are lower in part because of the higher interest rate and in part because my revenue mgmt efforts aren't fully baked into '23 numbers. It did $17k rev last month. Take that across 12 months and it gets to $204k. At 70% NOI margin, it should do $143k NOI, increasing DSCR to 2x.

Property 8: Seller-Carried Loan
Purchase Price: $590k
Down Payment: $100k (17%)
Interest Rate: 5%
Amortization: 20 yrs
Adjust: Never

2023 numbers:
Revenue: $97k
Net Operating Income: $73k
Debt Service: $39k
DSCR: 1.9x

Bought this one in Jan '23. Educating the seller on the option to carry the loan was key to winning the deal. Seller was getting old, wasn't happy with his property manager, had considered selling, but didn't want to pay a giant tax bill. Seller-carry was the solution. He named the purchase price, I named the loan terms, we agreed.

This one's just barely a year held. Numbers are on track and will get better as rev mgmnt continues.

Property 9: Conventional Bank Loan
Purchase Price: $1.4m
Down Payment: $350k (25%) (proceeds from refi of #1)
Interest Rate: 7%
Amortization: 20 yrs
Adjust: 5 yrs

2024 Projections*:
Revenue: $216k
Net Operating Income: $151k
Debt Service: $98k
DSCR: 1.5x

For this one, I initially went to my SBA bestie, but their offer was crap. Went back to the bank that did #1 and #2 and their offer was slightly less crappy for a conventional loan. Money I had refi'd out of #1 was burning a hole in my pocket, so I threw it into this deal.

Numbers don't look as good on this one do they? If it weren't in the same town as #7, I wouldn't have done it.

*Bought it in April '23, so I don't have a full year financials, and if even if I did, they're not seasoned enough to be relevant. So I used last few months avg revenue of $18k/mo and applied a standard 70% NOI margin to get the numbers above.

Property 10: Conventional Bank Loan + Seller-Carried Loan
Purchase Price: $12m
Down Payment: $1m (8%)
Seller Note: $5m @ 4%, 25 yr amortization, 12mo of I/O, 5 yr balloon
Bank Note: $6m at 7.75%, 25 yr amortization, 5 yr balloon

Stabilized Projections*:
Revenue: $1.68m
Net Operating Income: $1.26m
Debt Service: $860k
DSCR: 1.5x

Bought this one in Oct '23, sold #1 in Dec '23, and reverse 1031 exchanged proceeds into this one. Seller was fixated on $12m number and was open to carrying a big note. Went to my bestie bank (the SBA one), got them on board with seller taking second position, then negotiated with seller on his terms.

*This one still has a long way to go before it's stabilized. If you've been following me for the last 4 months, you know how much effort has gone into cleaning it up. Currently at $106k/mo revenue at 73% occupied (after cleaning out 100+ abandoned units). New rentals are strong. Should be on the stabilized run-rate above within 6 months or less. Based on the market it's in, there's a lot of upside from there.

Pros & Cons of Loan Types:

Conventional Bank Loan:

Pros:
- Bank underwrites in-house, no sending off to a third party for approval like some SBA loans. Also helps with speed of close.
- Often lower interest rates than SBA loans.
- Fewer extra requirements and restrictions of SBA loans.
- Fewer upfront costs as compared to SBA loans.

Cons:
- Banks typically require 25-35%+ down, requiring less leverage.

SBA 7a Loan*:

*Note that there are other types of SBA loans including a 504. I only speak to my experience with 7a.

Pros:
- Enables higher leverage (up to 90%).

Cons:
- Higher upfront cost for loans greater than $1m. For loans of $1-2m, the SBA charges an upfront guaranty fee of 1.45% of the 75% portion of the loan that they guarantee. (Example: $2m loan. 75% ($1.5m) is guaranteed. $22k fee.) For $2m+ loans, the fee is 3.5% for first $1m + 3.75% for amount above $1m. (Example: $4m loan. 75% ($3m) is guaranteed. $35k fee for first $1m, $75k for additional $2m, total of $110k guaranty fee.)
- Typically higher interest rate on $1m+ loans. The SBA charges the lending bank an annual guarantee fee of .55% for loans of $1m-$5m.
- Longer underwriting and approval timeline, especially if bank doesn't have in-house SBA underwriting.
- More paperwork and restrictions than a conventional loan.

Seller-Carried Loan:

Pros:
- No appraisal, survey, environmental, etc that banks will often require (although usually good practice to do some of these anyway).
- No formal underwriting. I've always just shared personal financial statement, business P&Ls, and proof of assets.
- Can be as quick as you and seller agree.
- Complete flexibility of loan terms.

Cons:
- None that I can think of. Comment if you know any.

What I've Learned:

A couple of points of wisdom from my brief experience convincing people to lend me money:

- Get Intros to Banks - If you need to find a bank, use your network to get a warm intro to a commercial lender. I was introduced to both banks I've worked with by credible individuals. Not sure they would have taken me seriously if I were a rando off the street.

- Sell The Story - Early on, I had to sell myself as a credible borrower and future operator. A strong balance sheet helps, but they also want to know that your past professional experience is relevant. You also need to tell the story of the potential of the asset. Concise, well-though-out business plans help, but how you present them also matters. My bankers make fun of me for how enthusiastic I am about the deals I bring them. It helps.

- Know Your Numbers - By the time I've presented a deal to the bank, I've stared at the numbers for hours on hours. I've run countless scenarios. I'm ready for any questions before they're asked.

- Be An Amazing Customer - Early on, one of my bankers complained about how hard it is to get other borrowers to provide updated financials. That's prompted me to proactively provide updates before asked. My lenders get updated P&Ls, Balance Sheets, and PFSs every quarter without asking. I send them insurance renewals before asked. Anticipate what they want and give it to them proactively.

There's a lot more to this and I've missed a lot, but I'm tired of writing. Comment with your questions (and corrections) and I'll do my best to answer!

[D Bill @databass808]

@RahkimSabree Legendary!

[Charfaoui Younes @CharfaouiYounes]

Here is an amazing website I found this week!

https://t.co/eAWT8lbnfZ

It contains +1000 Public APIs for different usages:

- News.
- Books.
- Health.
- Shopping.
- Geocoding.
- Currency Exchanges.
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Make sure to bookmark it for future projects!

[Lauren | Adulting Is Easy @AdultingIsEasy]

I can use Microsoft Excel to analyze a real estate deal in under 10 minutes

My spreadsheets are like 3rd grade math. I literally add, subtract, multiply, and divide.

Let me show you:

[Tech Forward @techforwardorg]

Did you know that Tech Forward is a Salesforce Authorized Training Provider???

We look forward to exposing underserved people and students to technology & career paths to help them be more marketable, obtain higher-paying jobs & more career opptys 🤩🥳

[D Bill @databass808]

💪🏿

[Bryce @TheBryceEstate]

Here’s the strategy for the Trust I am setting up

[Pettway Estates® @PettwayEstates]

Three loans entrepreneurs can use to purchase their next investment property:

1. Bank statement loans
2. DSCR
3. Private money
🧵 👇🏾

[D Bill @databass808]

@mrshadeed @mrshadeed_ No problem brotha!

[D Bill @databass808]

This is how it’s done right. Always remember cash flow, cash flow, cash flow.

[Shadeed Q. Eleazer ⌚ | Licensing & IP Consultant @mrshadeed]

Cashflow is king.
Do not start a business with no money coming in.
✅Keep your day job
✅Work part-time
✅Do Freelance gigs

The worst position to sell your services from is desperation.

Generate a steady stream of income and build your dreams from that point

[D Bill @databass808]

👀

[James Fryman @jfryman]

The product I've been helping build for the last year has gone live. Excited to get it into the hands of folks.

Build from Anywhere with Salesforce Code Builder (Beta) | Salesforce Developers Blog https://t.co/WXjnrZwoZR

[D Bill @databass808]

💪🏿

[Rahkim Sabree | Keynote Speaker @RahkimSabree]

Oh and btw… I’ll be returning to speak at #fincon22 this year on my favorite topic. #financialtrauma

Pull up!

[Dominique T. @domstechchat]

If anyone is interested in joining the ServiceNow NextGen program (A free 12 week full time bootcamp sponsored by ServiceNow) please email [email protected] requesting information on future cohorts

[Katelyn Bourgoin 🧠 @KateBour]

12 pricing psychology tips to help you sell more stuff:

[D Bill @databass808]

@Effort_Lesley You got this 💪🏿

[D Bill @databass808]

@Effort_Lesley No doubt, one day I’ll need you to show me your skills. Perhaps setup an environment for me.

[D Bill @databass808]

@Effort_Lesley Congrats!

[Andrew Lokenauth @FluentInFinance]

Strategic Tax Planning:

If you own a business & have kids under 18, you can pay them $12,200 per year & deduct it from your taxable income

They will owe $0 federal tax & you just avoided taxes on $12,200

U.S. tax law has 75,000 pages on avoiding taxes, learn to take advantage

[D Bill @databass808]

Ohhh and this is the legendary Issac Hayes’ son.

[D Bill @databass808]

This 👇🏿 this and nothing but you guessed it… this

[Earn Your Leisure @EarnYourLeisure]

EYL 188 feat Fanbase CEO Isaac Hayes III interview on our YouTube channel & all podcast audio outlets #tech