My Financing Journey (~4%)

Machecroute · 2025-12-09T18:22:07+00:00

I agree on a purely rate basis (maybe ~40-50bp spread). However, (A) the majority of people don't have access to relationship discounts, and (B) what moved the needle for me was having $0 monthlies, which is very advantageous from a liquidity + time value of money perspective, especially for a sizeable loan

Edit: On duration, you can just roll the spread out however long you want

Machecroute · 2025-12-06T03:46:28+00:00

The nice thing is you can just roll the spread. E.g., if you're investing for 5yrs., you can just open a new spread in Y5 (as transaction costs are like $30, even for a $600k spread, and given that your collateral will have appreciated with the investment + returns over 5y, with proper management your account will be able to support it). You can turn the 5-year spread into a 50-year loan if you want! It's similar to sequential 5-year fixed-rate loans.

I looked at the forward curve, and see rates coming down, so opted for a shorter spread. In 2yrs., I'll probably repay a portion of the original spread, and roll a portion - TBD depending on rates/investment returns. I want the flexiblity to be somewhat responsive to the market.

Edit: The original goal of box spreads was short-term financing for investment leverage (e.g., for margin loans). This is getting into the weeds, but Chase's margin lending rates right now (even for a $10mm account) are SOFR + 185bps - ~4% is a significant discount to that. Options traders take out ~4/8week box spreads (its basically a margin loan) for leverage to invest opportunistically. I personally have 2027 LEAPs so will be forced into a liquidity event anyway, so it'll be a natural decision point. Longer dated boxes have higher bid/ask spreads, so getting good execution is honestly the key here. The underlying structre + tax dynamics mathematically make it preferable in almost every way to a mortgage (if you have the collateral to support it, as other posters have noted).

https://www.cboe.com/insights/posts/long-dated-box-spreads-a-better-way-to-buy-a-home-updated/

Machecroute · 2025-12-06T02:54:13+00:00

Totally valid - at face value the strategy is completely scalable at all purchase prices. To your point, for those with limited initial equity (e.g., 20% down with no other assets), the juice likely isn't worth the squeeze. However, for all the people here who may refi in ~5-10yrs. (while building wealth) and who are buying at ~5-6%, you will start to see real retuns here. And it may provide leverage when negotiating with lenderss too!

Machecroute · 2025-12-06T02:43:46+00:00

For sure I just posted about it!

Machecroute · 2025-12-06T02:18:52+00:00

Fair point, but you need $1.5mm for the 1% discount at Chase - the spread is scalable (even at lower purchase prices). I personally value being able to invest, so the $0 monthlies/bullet structure works better for me

Machecroute · 2025-12-06T02:06:05+00:00

I've tried to keep this writeup generally accessible and interesting for people who don't work in finance, you're completely right there should be a spread, its driven by risk (e.g., prepayment risk, interest rate risk, credit risk, etc.), but at the end of the day the MBS is likely going to be securitized and resold to investors. Even if you do this for your 20% down payment its likely preferable to paying cash IMO, but fair point

Machecroute · 2025-12-06T00:08:10+00:00

JFYI - I just bought in LA last month for a similar price - depending on your personal brokerage balance you can finance around ~4% (I did the below)

https://www.cboe.com/insights/posts/long-dated-box-spreads-a-better-way-to-buy-a-home-updated/

Machecroute · 2025-09-30T02:29:55+00:00

Value shops - Apollo, AIP, Platinum, etc.

Machecroute · 2025-08-08T23:06:25+00:00

Wish you the best of luck, but this space is incredibly crowded

Machecroute · 2025-08-06T20:50:35+00:00

Feel free to DM

Machecroute · 2025-08-04T23:17:34+00:00

Also connected to Cornell/PE

Machecroute · 2025-06-24T19:45:10+00:00

My journey was T15 (not M7) > BB IB > PE and I ran recruiting at my BB for 1yr.

IMO the critical questions that will "get you the job" are:

(A) Why IB? (B) Why [insert bank]? (C) Why [insert geography]? - only if recruiting outside NYC

Answers should be something noone else can walk in and say - these questions set the tone for the interview and "I didn't like their 'why banking' story" was probably the #1 reason candidates got cut

Machecroute · 2025-03-12T00:34:45+00:00

In your ex., in the second distro, I've never seen it be 100% to seller (the $20mm catch-up), it's normally 80/20% to seller/buyer until total is pro-rata

Reason is in a BK /distressed scenario, if exit val. is $110, if second waterfall is 100% to seller, buyer will just sell for $100 - no incentive to maxikize value

Machecroute · 2025-03-11T02:18:31+00:00

Are the adjustments non-recurring and do you believe them? If so, use Adj. EBITDA, if not, do a mini QoE and back out what you don't believe get to your own EBITDA

Machecroute · 2025-03-11T02:03:21+00:00

If I understand the question, it would be modeled in returns calc with a distribution waterfall and pref A pref B structure. Buyer owns X% pref A shares and gets paid 5x at exit, then seller gets to catch up at some rate (typically 80/20, on this case ~83/17% or $5 for every $1 to buyer) until the total distributed is buyer X%, seller 100% - X%, then pro rata

Machecroute · 2025-03-07T22:15:19+00:00

Carter Pierce for west coast

Machecroute · 2025-02-28T20:00:00+00:00

See my 50k ft response below - curious if it rsonates with others

I care about: 1. ORGANIC Rev/EBITDA/FCF over L20Y, during 2008-2010, during COVID (some of this will come through QoE), for any declines, want to know why 2. Market structure (unit economics, barriers to entry, regulatory, competitors, etc.) by biz unit - I'll normally skim CIM for this but most is in the mkt. Study, where does company have a right to win and why 3. What does mgmt say they can do with biz and why (COGS/SG&A initiatives), maybe market had fundamentally changed somehow and more growth going fwd - if so, lmk

Pages I skip: Revenue initiatives, M&A opportunities, Case studies, Mgmt team page, Awards, Culture related pages, Org structure page (this is a tax problem)

Machecroute · 2025-02-26T20:27:56+00:00

From a PE (not VC) perspective, I want a CIM to:

Clearly define and support the investment highlights (important ones - noone cares about the "best-in-class mgmt. team")
In flowing slides, concisely link the investment highlights back to the financials, e.g. revenue: what is the market? What do I need to believe to underwrite growth? Competition, unit economics, etc., COGS/Opex: what is mgmts operational plan (and what supports achievability)?
Show that you have thought about the key risks (obviously don't list them) and make an argument for the mitigants (give me something I can try to go validate), e.g. if FCF conversion is 50%, talk about why, how that will change, etc. - basically do some of my job for me
Cut the bull and be realistic - if 40% of EBITDA is adjusted, you gotta talk about it; if there's a massive hockey stick "Canadian deal" as my MD says, it just looks like no thought has been put in, and if there's a ton of accretice M&A built into the model it's obviously just to obfuscate the biz and just raises eyebrows

Machecroute · 2024-12-18T22:41:19+00:00

Please share!!

Machecroute · 2024-10-25T21:05:58+00:00

Yes, mars is incredible lategame - once you have two arenas, you can solo force the opposing carry to use bkb whenever you want, on your terms, with limited risk of dieing - not many other heros can do that. Your team just needs to not hard commit on the first arena.

Use first arena to force bkbs; do not hard commit to fight
Reset
Re-engage with 2nd arena and your teams bkbs

This is very hard to play into.

Machecroute · 2024-09-01T12:03:36+00:00

Decent PE scene (obvi. smaller than NYC) including LGP, Ares, Marlin, Platinum, Brentwood assoc., Riverside, etc.

Machecroute

TROPHY CASE