apartment syndication taxes

The Five Tax Factors When Passively Investing in Apartment Syndications

In addition to the capital preservation and cash flow benefits, one of the main reasons that passive investors seek to invest in real estate opportunities, and apartment syndications in particular, is because of the tax benefits.

 

When a passive investor invests in a value-add apartment syndication, they will generally receive a profit from annual cash flow and the profit at sale. Being a profit, this money is taxable. However, for apartment syndications, there are five pieces of tax information that the syndicator and the passive investor need to understand in order to determine the tax advantages of investing. These are 1) the depreciation benefits, 2) accelerated depreciation via cost segregation, 3) depreciation recapture, 4) bonus depreciation and 5) capital gains tax at sale.

 

DISCLAIMER: THIS IS FOR YOUR INFORMATION ONLY. SINCE I AM NOT A TAX ADVISORY FIRM, I REFER ALL GENERAL TAX-RELATED REAL ESTATE QUESTIONS FROM PASSIVE INVESTORS BACK TO THEIR ACCOUNTANTS. HOWEVER, I WILL SAY THAT INVESTORS OFTEN SEEK REAL ESTATE OPPORTUNITIES TO INVEST IN DUE TO THE TAX ADVANTAGES THAT MAY COME FROM DEBT WRITE OFF AND LOSS DUE TO DEPRECIATION. BUT I DON’T INCLUDE ANY ASSUMPTIONS ABOUT THESE TAX ADVANTAGES IN OUR PROJECTIONS.

 

1 – Depreciation

 

Depreciation is the amount that can be deducted from income each year as the depreciable items at the apartment community age. The IRS classifies each depreciable item according to its useful life, which is the number of years of useful life of the item. The business can deduct the full cost of the item over that period.

 

The most common form of depreciation is straight-line depreciation, which allows the deduction of equal amounts each year. The annual deduction is the cost of the item divided by its useful life. The IRS considers the useful life of real estate to be 27.5 years. So, the annual depreciation on an apartment building worth $1,000,000 (excluding the land value) is $1,000,000 / 27.5 years = $36,363,64 per year.

 

Generally, the depreciation amount is such that a passive investor won’t pay taxes on their monthly, quarterly or annual distributions during the hold period. They will, however, have to pay taxes on the sales proceeds.

 

2 – Cost Segregation

 

Cost segregations is a strategic tax planning tool that allows companies and individuals who have constructed, purchased, expanded or remodeled any kind of real estate to increase cash flow by accelerating depreciation deductions and deferring income taxes. A cost segregation study performed by a cost segregation engineering firm dissects the construction cost or purchase price of the property that would otherwise be depreciated over 27.5 years, the useful life of a residential building. The primary goal of a cost segregation study is to identify all property-related costs that can be depreciated over 5, 7 and 15 years

 

For example, my company performed a cost segregation on our portfolio for 2017. On one of the properties, we showed loss from depreciation of greater than 412% than we would have seen with the straight-line depreciation using the 27.5 year useful life figure.

 

To perform a cost segregation, the syndicator will need to hire a cost segregation specialist. This can cost anywhere between $10,000 and $100,000 depending on the size of the apartments.

 

3 – Depreciation Recapture

 

Depreciation recapture is the gain received from sale of depreciable capital property that must be reported as income. Depreciation recapture is assessed when the sale price of an asset exceeds the tax basis or adjusted cost basis. The difference between these figures is “recaptured” by reporting it as income.

 

For example, consider an apartment that was purchased for $1,000,000 and has an annual depreciation of $35,000. After 11 years, the owner decides to sell the property for $1,300,000. The adjusted cost basis then is $1,000,000 – ($35,000 x 11) = $615,000. The realized gain on the sale will be $1,300,000 – $615,000 = $685,000. Capital gain on the property can be calculated as $685,000 – ($35,000 x 11) = $300,000, and the depreciation recapture gain is $35,000 x 11 = $385,000.

 

Let’s assume a 15% capital gains tax and that the owner falls in the 28% income tax bracket. The total amount of tax that the taxpayer will owe on the sale of this rental property is (0.15 x $300,000) + (0.28 x $385,000) = $45,000 + $107,800 = $152,800. The depreciation recapture amount is $107,800 and the capital gains amount is $45,000.

 

4 – Bonus Depreciation

 

One of the major changes with the Tax Cuts and Jobs Act of 2017 was the bonus depreciation provision, where business can take 100% bonus depreciation on a qualified property purchased after September 27th, 2017. Click here for more information on the qualifications and benefits of the change in bonus appreciation.

 

5 – Capital Gains

 

When the asset it sold and the partnership is terminated, initial equity and profits are distributed to the passive investors. The IRS classifies the profit portion as long-term capital gain.

 

Under the new 2018 tax law, the capital gains tax bracket breakdown is as follows:

 

Taxable income (individual or joint)

  • $0 to $77,220: 0% capital gains tax
  • $77,221 to $479,000: 15% capital gains tax
  • More than $479,000: 20% capital gains tax

 

Annual Tax Statements

 

At the beginning of the following year, the syndicator will have their CPA create Schedule K-1 tax reports for each passive investor. The K-1 is a tax document that includes all of the pertinent tax information that the passive investor will use to fill out their tax forms.

 

DISCLAIMER: THIS IS FOR YOUR INFORMATION ONLY. SINCE I AM NOT A TAX ADVISORY FIRM, I REFER ALL GENERAL TAX-RELATED REAL ESTATE QUESTIONS FROM PASSIVE INVESTORS BACK TO THEIR ACCOUNTANTS. HOWEVER, I WILL SAY THAT INVESTORS OFTEN SEEK REAL ESTATE OPPORTUNITIES TO INVEST IN DUE TO THE TAX ADVANTAGES THAT MAY COME FROM DEBT WRITE OFF AND LOSS DUE TO DEPRECIATION. BUT I DON’T INCLUDE ANY ASSUMPTIONS ABOUT THESE TAX ADVANTAGES IN OUR PROJECTIONS.

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

Secure Passive Investor Commitments

5 Step Process for Securing Passive Investor Commitments for Apartment Syndications

There are three main steps to take an apartment deal from contract to close. First, the apartment syndicator performs detailed due diligence to confirm or update the underwriting assumptions. Next, the apartment syndicator secures a loan to finance the deal. Lastly, and the focus of this blog post, the apartment syndicator secures financial commitments from passive investors in order to fund the deal.

 

For apartment syndications, and the value-add investment strategy in particular, the syndicator will get a loan to cover the majority of the project costs. Generally, the costs that are not covered by the loan are the down payment for the loan (which is 20% to 30% of the purchase price or the purchase price plus renovations, depending on the loan), general partnership fees charged by the syndicator, financing fees (which are approximately 1.75% of the purchase price), closing costs (which are approximately 1% of the purchase price) and an operating account fund (which is approximately 1% to 3% of the purchase price).

 

In total, a syndicator should expect to require 30% to 40% of the total project costs in order to close on the deal. These remaining costs come from a combination of the general partners (i.e. the syndication team) and the limited partners (i.e. passive investors), with the majority generally coming from the limited partners.

 

The purpose of this blog post is to outline the 5-step process for securing financial commitments from passive investors after an apartment deal is under contract in order to cover this 30% to 40% of the project costs and close on the deal.

 

1 – Investment Package

 

From the syndicator’s perspective, one of the first steps towards securing commitments from passive investors is creating an investment package. Before closing on the deal, the syndicator underwrote the property, conducted a rental comparable analysis, visited the property in-person and negotiated a purchase price. During this time, they become extremely familiar with the property and the surrounding area. The purpose of the investment package is to take all of this knowledge gained by the syndicator from initially qualifying the deal and consolidating it into a digestible form so that the passive investors can review the deal and make an educated investment decision.

 

The form of and the information included in an investment package will vary from syndicator to syndicator, depending on their experience and the business plan. At the very least, the investment package will include the main highlights of the deal that are relevant to the passive investor. These highlights include the purchase price, the projected returns for the project and to the passive investors, an explanation of the business plan including the exit strategy, and the partnership structure. However, ideally the investment package includes much more about the underlying assumptions behind these investment highlights.

 

For example, my company creates an investment summary package which includes the following sections:

 

  • Executive Summary: a summary of the information that is relevant to the passive investor, which is expanded upon in later sections. This includes things like purchase price, return projections and the business plan
  • Investment Highlights: an explanation on why this apartment deal is a solid investment. This includes things like our value-add business plan, the debt terms, the exit strategy and anything unique to the specific deal or market
  • Property Overview: an overview of the property details. This include things like the community amenities, unit features, a property description, the unit mix and floorplans, and a site map
  • Financial Analysis: shows the underlying analysis and assumptions of the return projections. This includes things like the offering summary, debt summary, projected returns to the investor and the detailed proforma
  • Market Overview: an overview of the submarket and market in which the apartment deal is located. This includes things like job growth, demographic data, nearby transportation of developments and the rental and sales comparables that were used to calculate the projected rents

 

Mostly everything that a passive investor needs to know in order to make an educated investment decision should be included in the investment package.

 

2 – Passive Investors Notified about New Deal

 

Once the investment package is created, which could take anywhere from a few days to a week, the next step is for the syndicator to notify their investor database about their deal.

 

I highly recommend that a syndicator gets verbal commitments from passive investors and creates an investor database prior to looking for deal (here are over 20 blog posts on how to find passive investors). In fact, understanding how much money they can raise will determine the size of deal a syndicator should pursue. For example, understanding the they will require approximately 30% to 40% of the project costs to close, a syndicator with $1 million in verbal commitments can look for apartment deals in the $2.5 to 3.3 million range.

 

For my company, once we put a deal under contract and creates the investment package, we notify our passive investors about the new opportunity via email. In this email, we include the top two to three highlights of the deal, include a link to the investment package and invite them to a conference call where we will go over the deal in more detail. We set up the conference call using www.FreeConferenceCall.com and include the date and call-in information in this email.

 

3 – New Investment Offering Call

 

A few days to a few weeks after sending the notification email, my company hosts a new investment offering conference call. Here is a blog post I wrote that outlines my 7-step approach to preparing and conducting a successful new investment offering call. Read this post for more details, but the 7-step approach is:

 

  1. Get in the right mindset
  2. Determine your main focus
  3. Introduce yourself and your team
  4. Provide an overview of the deal, the market and the team
  5. Go into more detail on the deal, the market and the team
  6. Questions and answers session
  7. Conclude the call and send the recording to the investors

 

This is my company’s approach, but it will vary from syndicator to syndicator. Some syndicators will structure their presentations differently. Some syndicators may host a video webinar. Others might just send the investment package and/or a recording to their investors.

 

4 – Secure Commitments

 

After the new investment offering presentation, however the syndicator decided to approach it, the next step is to secure financial commitments from the passive investors.

 

If you are a passive investor, if the deal aligns with your investment goals, you can verbally commit to investing in the deal. How you make your commitment will vary for syndicator to syndicator. For my company, we ask our passive investors to send us an email with their commitments and we hold their spot until they review and sign the required documentation, which I will outline in the next section.

 

If you are an apartment syndicator, this process will vary depending on your experience level. When you are first starting out, you will need to be more proactive when securing commitments. A good strategy is to send emails to your investor database every week or two, inviting them to invest in the deal and providing them a new piece of positive information. You don’t want to send them an email that only asks them to invest. You want to provide a new piece of positive information like a due diligence report came back clean, a new development that was recently announced down the street, the rental comparable report came back and the rents are higher than what you projected, etc. Then, as you gain more experience and credibility from passive investors, they will come to you. Your goal should be to have 100% of the funding 30 days before closing. And once the deal is fully funded, don’t turn away interested investors. Instead, tell them that the deal is fully funded but that you will put them on a waiting list.

 

5 – Complete Required Documentation

 

The last step is for the passive investors to make their investments official by reviewing and signing the required documentation. There are five main documents that the syndicator needs to prepare (with the help of their real estate and securities attorney) and the passive investors need to sign in order to make the investments official.

 

  1. Private Placement Memorandum (PPM)

 

The PPM is a legal document that highlights all the legal disclaimers for how the passive investor could lose their money in the deal.

 

Generally, a PPM will include two major components. One is the introduction, which includes a summary of the offering, description of the asset being purchased, minimum and maximum investment amounts, key risks involved in the offering and a disclosure on how the general partners are paid. The other section covers basic disclosures, which includes general partner information, offering description and a list of all the risks associated with the offering.

 

The PPM should be prepared by a securities attorney for each apartment deal.

 

  1. Operating Agreement

 

For each apartment deal, my company forms a new limited liability company (LLC). My company is a general partner (GP). Our investors will purchase shares in that LLC and become a limited partner (LP). However, every syndicator should speak with a real estate attorney to determine which approach is best for them.

 

The operating agreement outlines the responsibilities and ownership percentages for the GP and LP.

 

The operating agreement should be prepared by a real estate attorney for each apartment deal.

 

  1. Subscription Agreement

 

Simply put, the subscription agreement is a promise by the LLC to sell a specified number of shares to passive investors at a specified price, and a promise by the passive investors to pay that price. For example, a passive investor that is investing $50,000 would purchase 50,000 shares of the LLC at $1 per share.

 

Like the operating agreement, the subscription agreement should be prepared by a real estate attorney for each deal.

 

  1. Accredited Investor Qualifier Form

 

The accredited investor form required is based on whether the offering is 506(b) vs. 506(c). Most likely, the general partner is either selling private securities to the limited partners under Rule 506(b) or 506(c). One key difference is that 506(c) allows for general solicitation or advertising of the deal to the public, while 506(b) offerings do not. But the other difference is the type of person who can invest in each offering type. For the 506(b), there can be up to 35 unaccredited but sophisticated investors, while 506(c) is strictly for accredited investors only. That being said, a syndicator should have a conversation with a securities attorney to see which offering is the best fit for them.

 

If the general partners are doing a 506(c) offering, they must verify the accredited investor status of each passive investor, which requires the review of tax returns or bank statements, verification of net worth or written confirmation from a broker, attorney or certified account. The accredited investor qualifications are a net worth exceeding $1,000,000 excluding a personal residence or an individual annual income exceeding $200,000 in the last two years or a joint income with a spouse exceeding $300,000.

 

If the general partners are doing a 506(b), they are not required to verify the accredited investors status – the passive investor can self-verify that they are accredited or sophisticated. In addition, for the 506(b) offering, to prove that the general partners didn’t solicit the offering, they must be able to demonstrate that they had a relationship with the passive investor before their knowledge of the investment opportunity, which is determined by the duration and extent of the relationship.

 

This form should also be prepared by a securities attorney, but only on one occasion (unless the accredited investor qualifications change).

 

  1. ACH Application

 

Lastly is the ACH application. This document is optional but recommended. It will allow the passive investor to receive their distributions via direct deposit into a bank of their choice.

 

Once a passive investor has committed to investing in a deal, the general partners should them these five documents to make the partnership official.

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

 

Direct Mail Guide

The Ultimate Guide to a Successful Direct Mailing Campaign

So, you want to find an off-market deal? There are countless ways to generate off-market apartment leads, but one of the most common strategies is the direct mailing campaign.

 

A direct mailing campaign is when you send out a batch of letters to owners with the purpose of negotiating a sales price and putting their property under contract.

 

The two main aspects of the direct mailing campaign, which will be the focus of this guide, are the list and the letter. Read on for all of the tools you need to create a successful direct mailing campaign from scratch.

 

Creating a List

 

Before creating your list, you need to define your investment criteria. Your investment criteria should include factors like the market, property type, number of units and the construction date. Setting your investment criteria prior to creating your list will save you a lot of time, because you will know that every single owner on your list owns an apartment community that aligns with your business plan.

 

With your investment criteria set, it is now time to create your list. There are many sources that you can use to build your list. Listsource and CoStar are great tools for creating larger lists but they do not send out the letters for you. Postcard Builder and Open Letter Marketing are two full service direct mailing companies where you can create a list, draft your letter and send out the direct mailing campaign all in one place. Local title companies are also a good resource for obtaining a list. And if you are lucky and found the right real estate broker, they can create a list on your behalf, and maybe even send out the letters too!

 

Regardless of which resource you use, you will create a custom list of properties that meet your investment criteria. And, if you want, you can customize your list even further using hundreds of other factors like the amount of equity the owner has in the property, the demographics, the owner type or status and much more.

 

Additionally, to increase the chance of finding a seller that is interested in selling, you want to identify motivated owners. These are owners who are motivated to sell their apartment because they are distressed (i.e. have maintenance or capital expenditure issues, tenant issues, management issues, financing issues, tax issues, etc.), they are at the end of their business plan or they implemented a different business plan (i.e. they purchased the apartment for cash flow but didn’t add value to increase the rents).

 

Depending on your investment strategy, you may or may not be able to create a list of motivated sellers by solely using Listsource or similar list making services. Therefore, here is a list of additional ways to locate motivated apartment owners:

 

  1. Driving for dollars: If your target market is local, you can drive around the market and look for apartment communities that are showing signs of distress. Examples would be poor landscaping, obvious deferred maintenance, offering rent specials, broken windows, peeling or fading paint, or an apartment that stands out from surrounding properties. Find the owner’s contact information and give them a call or send them a direct mailer.
  2. Eviction Court: Locate your local eviction court and obtain a list of apartment owners that are evicting residents. Evictions are a major headache for real estate owners in general, so they may be extremely motivated to sell. Typically, the eviction list is located on the local county’s Clerk of Courts website.
  3. Building Code Violations: Locate a list of apartment owners who recently received a building code violation from the city.
  4. Delinquent Taxes: Locate a list of apartment owners who are delinquent on their taxes. Unless you are building a list from scratch, most of the automate direct mailing list providers will allow you to set “delinquent taxes” as a criterion. If you are building a list from scratch, information on the apartments with delinquent taxes can be found on the local county’s Clerk of Courts or Sheriff’s Office website.
  5. Out-of-State owners: Owning an out-of-state apartment community won’t necessarily indicate a motivated owner. However, there is a higher chance that an out-of-state owner hasn’t maintained the asset or managed the property management company effectively compared to an in-state owner whose apartment community is right around the corner.
  6. View the Profile Picture on Apartments.com: A creative way to identify motivated sellers of value-add apartments is by looking at the profile picture on the www.apartments.com listing. If the apartment was newly renovated, the owner would show off those updates online to attract residents. If there is only one picture available, that may indicate that the interiors and/or exteriors are outdated. If there are pictures of the interiors and exteriors available, scroll through them to see if the apartment is updated. If the interiors are old, you’ve identified a potential value-add deal.

 

Those are the six main methods, but other creative strategies include:

 

  1. Property owners whose tax assessments went way up this year: Search for an apartment on the local county auditor or appraiser site and locate the annual tax data. Most auditor or appraiser sites will list the annual taxes paid each year. If the taxes paid in the most recent year is significantly higher than the previous year, the owner most likely had a tax assessment. Taxes is one of the largest expenses paid by the owner, so if they had a significant increase, they may be motivated to sell
  2. Expired apartment listings: Expired apartment listings were listed for sale by a real estate broker and weren’t sold by the end of the period specified in the contract between the owner and the real estate broker. The best way to locate apartment listings that expired is on the MLS. Ask your real estate broker to send you a list of expired listing for the past 12 months.
  3. Properties that are owned without debt (purchased 20 to 30 years ago): Owners who own apartments free and clear may be willing to sell their property for a lower price, or may be willing to accept creative financing terms, like seller financing. There are a few ways to locate apartments that are owned free and clear. If you are creating a list with a service like CoStar, an automated direct mailing provider or the MLS, you will have the option to apply a filter for apartments that do not have a mortgage. Another approach is to locate the property on the local auditor or appraisal site and compare the “own name” to the “mailing name.” The mailing name is usually the name of the company that holds the debt. So, if they mailing name is the same as the owner name, the property is owned free and clear. Also, you can search for properties that were purchased over 20 years to 30 years ago, because the owner will have likely paid off the debt.
  4. Health code violators: The local Clerk or Courts website will have a list of all the properties in the county with health code violation.
  5. Owners facing foreclosure: The list of apartment owners facing foreclosure can be found on the local Sheriff’s Office website.
  6. Owners late on loan payments: The list of apartment owners who are late on their mortgage payments can be found in the same location as the delinquent taxes list, which is the local Clerk of Courts website.
  7. Section 8 approved properties: Locate the local city’s HUD website to obtain a list of section 8 approved properties. These properties are likely rented below market rates and, depending on the local regulations, can be converted into regular apartments.
  8. Properties with liens: A list of apartments with liens can be found on the local Clerk of Courts website. You might be able to use the criteria on ListSource to identify these types of distressed opportunities. But some of these strategies will require extra research – both online and in-person – on your part. If you are struggling to find the owner’s contact information, skip tracing is an effective solution. The top skip tracing services are TLO (the best and most expensive), Locate Plus and Whitepages Premium (least expensive option)

 

Creating a Marketing Piece

 

Next, you will create a marketing piece to send out to your list. There are nearly an infinite number of approaches to a direct mailing campaign. Variables include the message, frequency, letter type and color and envelope type and color. The most successful direct mailers A/B test different mailer types to determine which is the most effective. Therefore, select a few different mailer types, send them out to owners and record the success rates of each. Whichever one performs the best, continue sending. For the ones that perform poorly, change a variable and continue to send out and log the success rates. As time goes on, you will find the best combination of variables that results in the highest success rate.

 

For starters, here are two direct mailing templates:

 

  1. Template #1

 

Dear Recipient Name,

 

I am the acquisition coordinator for __________. Our portfolio consists of over ______ apartment units, all acquired within the last _______ months. With one of our principals based in ________, we are looking to expand to this area. We are familiar with your apartment complex, (name complex) and we would like to discuss purchasing this property. Please reach out if you would like to discuss further. My email is ______ and my cell phone number is ________.

 

Sincerely,

____________

 

  1. Template #2

 

Dear Recipient Name,

 

I am interested in purchasing your apartment community. Are you interested in selling?

 

I currently hold a portfolio of apartments similar to yours and am looking to add more.

 

Please contact me at your earliest convenience so we can discuss the sale of your apartment community.

 

Call me directly at _________ or email me at _________.

 

If you are not interested in selling at this time, please accept this inquiry as the highest compliment to your investment.

 

I look forward to hearing from you.

 

Sincerely,

____________

 

The important point you want to get across to the owners is that you are interested in buying their property and that you are an experienced investor who is able to close. If you don’t currently own any properties yourself, leverage the experience of your team. For example, “my property management company manages 1,000 units in the market,” or “my partner (who can be your mentor) controls 1,300 units across the country.”

 

Screening Calls from Owners

 

Once you’ve sent out the campaign, (hopefully) your phone starts ringing off the hook. Rather than freestyling, I recommend creating a script that outlines exactly what you will say when an owner calls. An example script is provided below:

 

Hi. My name is (your name). Thank you for responding to my letter. As I said, I work for a group of investors, (your company name). We were driving your neighborhood and wanted to know if there would be any interest in selling?

 

Now, you would think that because they called you, they are interested in selling. Unfortunately, some of the callers will, politely or aggressively, tell you that they aren’t interested in selling and/or ask to be removed from all future mailing campaigns.

 

If the caller is aggressively asking to be removed from the list, politely thank them for their time, hang up and remove them from their list.

 

If the caller is polite but says that they aren’t interested in selling at this time, find out a little bit more information as to why they won’t sell. Figure out why they aren’t interested in selling with the purpose of trying to identify a trigger or pain point of things that are holding them back. This will help you identify ways that they will benefit from selling the property. One example is to visit the property or perform some online research and make a note of something that stands out, like signs of distress. Then, leverage this information to identify a potential pain point.

 

For example, maybe you discover that they are an owner-operator who doesn’t like being a property manager. Or they won’t want to incur a capital gains tax by selling. Or maybe they aren’t interested in selling now, but they may be interested in six months. Depending on their response, there may be a creative way to structure the deal so that you can solve their problem.

 

If they still aren’t interested or you cannot identify any pain points, thank them for their time and hang up. However, you aren’t done yet. Unless they specifically asked you to remove them from future mailing campaigns, the next step is to mail them a follow-up letter saying:

 

Thank you for your time when we spoke on (date you called). As I said, I work for (your company name). I will follow up on (date) and I look forward to speaking with you then.”

 

Now, the next time you call them, you can start the conversation by referencing your previous call and the follow up letter.

 

If they are interested in selling, congratulations. But, you’re only partway there. Now, you need to extract more information from them about the property. At this point, the goal of the conversation is to get the owner to provide you with the trailing 12-month income and expense statement (T12) and the current rent roll. That is the information you will need in order to underwrite the deal and determine a fair offer price.

 

Regardless of whether the owner says is or isn’t interested, focus on building rapport. During the course of the conversation, make sure you talk in terms of their interests in order to begin building a relationship. If they are interested, this will help you during the negotiation process. If they are not interested, they will remember you when you call back.

 

Also keep in mind that this is an iterative process. If you’ve never spoken to an owner on the phone before, don’t expect to be perfect at first. Practice, specifically in regards to overcoming their objections, see what works and what doesn’t work, and adjust your script accordingly.

 

10 Reasons Your Direct Mail Isn’t Working

 

I asked Justin Silverio, the founder of Open Letter Markeing, “what are the main reasons why a direct mailing campaign would fail?” Based on his experience sending out his own campaigns and working with hundreds of other investors, there are 10 reasons why a direct mailing campaign isn’t working:

 

  1. Bad Messaging: Your messaging should be clear and concise. Otherwise, your content will not be read or will be confusing to your prospects, thereby reducing your response rates. Additionally, avoid using messaging that is the same as most other investors in your market; you want to set yourself apart. Finally, make the messaging about the seller, not you. Talk to them about how you will solve their problems.
  2. Low Quality Lead List: One of the most important aspects of a successful direct mail campaign is the quality of the lead list. If you are mailing to the same prospects as your competition, expect your response rates to be very low. Instead, seek out niche markets that no one else is marketing to. The general rule is that if it takes time to build a particular list, you will have less competition because most other real estate investors won’t take the time to create it.
  3. No Branding on Mailers: Branding is the number one most important thing that you should be doing and in many cases it’s a missed opportunity in direct mail. People can recall a logo much easier than a name so your chances of a seller remembering you is much higher. It’s a simple detail, but the payoff is big.
  4. Not Building Trust: One of the most important aspects of closing a deal is to build trust and rapport with the seller. Aim for this from the start with your direct mail by sending professional looking mailers with letterhead and company information. This shows your prospects that you are an actual company and not a fly-by-night operation.
  5. You’re a Copycat: If you’re mailing the same mail piece as everyone else, what makes you think you’re going to stand out from them? Step away from the copycat syndrome and use something else besides yellow letters or generic postcards. Use a mailer that will stand out and get noticed.
  6. Only Using Handwritten Letters: When sending handwritten letters, your messaging should be short and to the point. When you only send handwritten letters, you can’t fully explain how you’re able to help your prospect. Therefore, you should always incorporate longer, professional letters into a mailing campaign.
  7. Handwriting Doesn’t Look Authentic: Using handwritten fonts that don’t look realistic could have a negative impact on your response rates. Most people will read that as being deceptive and not call you back. Be sure to either handwrite your letters OR use a realistic looking font.
  8. Bad Campaign Sequence: A bad sequence will have a negative impact on your results. It’s important that you stack your letters in a way that build off of each other and create a conversation with your sellers. Provide more information as your campaign moves forward so they can learn more about how you can help them.
  9. Inconsistency: This is, by far, the worst mistake you can make. Direct mail takes time to build momentum because your prospects need to see you multiple times before most will start to call. You should budget to mail 5-6 times before expecting to see consistent results. Also, buying real estate is mostly situational so if you are not mailing your prospects consistently you may likely miss out on a deal when your prospect’s situation suddenly changes.
  10. Bad/No Follow Up: I can guarantee you are losing deals if you don’t have proper follow up. Many deals will come from consistent follow up with your prospects who weren’t ready to sell the first time you spoke with them. Make sure you have a system in place to remind you to follow up. A good solution could be as simple as a spreadsheet or calendar or as robust as a CRM.

 

If you avoid these 10 pitfalls but still aren’t receiving many responses from owners (say after 3 to 4 mailers), another strategy is rather than asking to purchase their property, invite them to your meetup group (or if they are out-of-state, a webinar).  Tell them you will be presenting information relevant that will add value to their business. For example, 10 ways to increase the NOI on your apartment building.  From there, build a relationship with them so that when they are ready to sell, you are the first person they reach out to!

 

Direct Mail Case Studies

 

Click here to read about a six-step direct mailing campaign with a twist – rather than only sending out letters, this investor will text the owner. As a result, he’s been able to accumulate a portfolio of over 300 units!

 

Click here to learn more about selecting a mailing service, creating a list and the best practices for creating an attractive marketing piece.

 

Click here to learn about how a fix-and-flip investor created a direct marketing strategy that results in a 57% response rate.

 

Finally, click here to learn about an direct mailing campaign with a twist – rather than only sending out letter, this investor cold-calls the owners on his list.

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

securing financing on apartments

How a Syndicator Secures Financing for an Apartment Deal

Once a syndicator puts an apartment deal under contract, concurrent with the due diligence process is the process of securing financing. Generally, debt is a part of the apartment syndicator’s business plan because of the benefits that arise from leverage. Rather than purchasing the apartment community with all cash, they obtain a loan for upwards of 80% of the value while benefiting from 100% ownership.

However, not all debt and financing are the same. The type of debt and financing an apartment syndicator puts on the asset is highly dependent on the business plan. Also, different types of financing bring different levels of risks. Therefore, as a passive investor or an apartment syndicator, it is important to understand 1) the different types of debt and 2) the different types of financing. In doing so, you will be able to identify which combination of debt and financing is in your best interests based on the business plan.

 

Two Types of Debt: Recourse and Nonrecourse

Before diving into the two main types of loans, it is important to first distinguish the two types of debt – recourse and nonrecourse. According to the IRS, with recourse debt, the borrower is personally liable while all other debt is considered nonrecourse. In other words, recourse debt allows the lender to collect what is owed for the debt even after they’ve taken the collateral (which in this case is the apartment building). Lenders have the right to garnish wages or levy accounts in order to collect what is owed.

On the other hand, with nonrecourse debt, the lender cannot pursue anything other than the collateral. But, there are exceptions. In the cases of gross negligence or fraud, the lender is allowed to collect what is owed above and beyond the collateral.

Apartment syndicators almost universally prefer nonrecourse debt while lenders almost universally prefer recourse debt. But, while nonrecourse is advantageous to the borrower for the reasons stated above, it generally comes with a higher interest rate and are only given to individuals or businesses with a strong financial history and credit.

 

Two Types of Financing: Permanent and Bridge Loan

Generally, an apartment syndicator will secure one of two types of loans: a permanent agency loan or a bridge loan.

A permanent agency loan is secured from Fannie Mae or Freddie Mac and are longer-term compared to bridge loans. Typically loan term lengths are 5, 7 or 10 years amortized over 20 to 30 years. For example, with a 5-year loan amortized over 25 years, the syndicator would make payments for 5 years at an amount based on a loan being paid off over 25 years. At the end of the loan term, the syndicator will either have to pay off the remaining principal, refinance into a new loan or sell the asset.

The permanent agency loan is an LTV (loan-to-value) loan at 75% to 80%, which means the lender will provide funding for 75% to 80% of the value of the apartment and the syndicator provides the remaining 20% to 25%.

Generally, permanent agency loans are nonrecourse. However, value-add or distressed investors likely won’t be able to have the renovation costs included in the loan. Additionally, depending on the physical condition and operations, the asset may not qualify for permanent financing.

Compared to bridge loans, the interest rate is lower, and you may be able to get a few years of interest-only payments. Also, since these loans are longer-term in nature, they are less risky. The permanent loan is a set it and forget it loan where you won’t have to worry about a balloon payment or refinancing before the end of your business plan.

The other most common type of loan is the bridge loan. A bridge loan is a short-term loan that is used until the borrower secures long-term financing or sells the property. This loan is ideal for repositioning an apartment, like with the value-add or distressed apartment strategy.

Typically bridge loans have a term of 6 months to 3 years with the option to purchase an extension of a year or two. They are almost exclusively interest-only. For example, with a 2-year bridge loan, the investor would make interest-only payments for two years, at which point the investor must pay off the loan, refinancing, purchase an extension or sell the property.

The bridge loan is an LTC (loan-to-cost) loan at 75% to 80%, which means the lender will provide funding for 75% to 80% of the total project cost (purchase price + renovation costs) and the syndicator provides the remaining 20% to 25%.

Generally, bridge loans are nonrecourse to the borrower and have a faster closing process. Also, since they are interest-only, the monthly debt service is lower. However, the disadvantages are that they are riskier than permanent loans because they are shorter term in nature. Before the end of the term, which will likely occur before the end of the business plan, the syndicator must refinance or sell. And if the market is such that permanent financing isn’t available or if the business plan didn’t go according to plan, the syndicator is in trouble.

When securing financing, the most important thing is that the length of the loan exceeds the projected hold period, which is law number two of the Three Immutable Laws of Real Estate Investing. In doing so, as long as the syndicator follows the other two laws (buy for cash flow and have adequate cash reserves), the business plan is maintainable during a down turn. This law will usually be covered with the permanent loan. However, if the syndicator secures a bridge loan that will come due in the middle of the business plan, they better have a plan in place well ahead of time, whether that’s an early refinance or purchasing an extension.

 

Overall, the type of debt and financing a syndicator secures is based on their business plan. Bridge loans can be great for value-add investors, as long as they buy right, plan ahead and have an experienced team in place. And permanent financing is great because it is less risky and is a set it and forget it type of loan.

But regardless of the business plan, the syndicator should always have a conversation with a lending professional before securing financing for a deal.

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

18 Creative Ways to Market Apartment Rental Listings

One of the 11 responsibilities an apartment syndicator has as the asset manager of an apartment community is maintaining and maximizing the economic occupancy. For value-add investors, this involves renovating the units and upgrading the community amenities in order to increase the rents, thus increasing the cash flow and returns.

 

However, no matter how beautiful the newly upgraded apartment community is, the syndicator still needs to implement a marketing strategy in order to fill the units with high-quality residents. Ideally, the syndicator hires a property management company that already applies the best marketing practices. But it is still their responsibility to oversee the management company and make sure the marketing strategy is being implemented properly.

 

Therefore, whether you are an apartment syndicator or a passive investor in syndications, it is helpful to understand the main ways to effectively market rental listings to attract the desired resident – one who pays rent on time and is courteous to their neighbors – and increase overall economic occupancy.

 

Here is a list of 18 creative ways to market an apartment rental listing to accomplish the above stated goals:

 

  1. Create a landing page, either standalone or as a part of your website, that captures the information of potential residents
  2. Create a direct mailing campaign and send it out to people living in similar buildings, inviting them to move into yours by offering some sort of concession (i.e. reduced rent for the first month, reduced security deposit, waive the application fee, etc.) and highlighting the major selling point of your community compared to theirs (i.e. direct garage access, new fitness center, BBQ pit, etc.). This strategy could anger local owners, so if you decide to do this, don’t expect to be popular and expect others to do it to your residents
  3. Contact the Human Resources departments at all the major employers in the area, letting them know that you own an apartment in the area and asking if they can direct new hires to your community
  4. Create a resident referral program where you offer current residents a flat fee ($300 is standard) if they refer someone that signs a lease
  5. Set up an open house and invite members of the local community to attend. Having a model unit and offering refreshments is helpful
  6. Offer special pricing to soldiers, police and first responders, like 50% off the first month’s rent
  7. Design a “for lease” banner and put it near the entry of your property, or near an area that has high foot or car traffic
  8. Design and place flyers at local establishments that are frequented by your resident demographic, like laundry mats, hair salons, nail salons, gyms, coffee shops, etc.
  9. Purchase advertisements in the local newspaper
  10. Post “for rent” listings to Craigslist, Zillow, Realtor.com, Apartments.com and other free online rental listing services
  11. Partner with a real estate broker or agent and advertise your apartment community on the MLS
  12. Create a Facebook advertisement, which allows you to select criteria to hyper-target your preferred resident
  13. Create a Facebook page for your apartment community, posting weekly content to generate a following and posting your rental listings
  14. Pay close attention to the nearby landmarks to cater to that audience, like colleges, military bases, large corporations, etc.
  15. Provide good old-fashioned customer service. Be responsive and timely with requests and questions. If doesn’t matter if you are a marketing wizard and get hundreds of responses to your rental listings if you don’t pick up the phone or respond quickly to emails, politely answer their questions and get them one step closer to viewing the property and signing the lease
  16. Call all residents who have previously notified you that they plan on leave at the end of their lease, asking them about their reason for leaving to see if it is something that can be addressed
  17. Send marketing material or gift baskets to businesses and employers surrounding your community
  18. Follow-up with old leads that are older than 90 days

 

Some of the strategies are free and just require effort on the part of the syndicator and/or property management company. Others will require an upfront investment or result in a short-term reduction in income. Therefore, it is important that the syndication team understands the marketing strategy prior to closing on the deal so that they account for these expenses in the underwriting.

 

What about you? Comment below: What strategies do you implement to fill vacancies at your rental properties?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

real estate hustle and knowledge

Hustle or Knowledge: What’s More Important for Real Estate Success?

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was “which is more important for success as a real estate investor: hustle or knowledge?

 

Hustle beat out knowledge with 15 votes to 9 votes, while 4 others said both and one rebel said neither are important (although their response was my favorite one!). However, the margin was much smaller than I expected. While the majority of the active real estate professionals think that hustle is more important than knowledge, which I believe as well, the knowledge voters made a strong case for their side.

 

That being said, the poll is closed, the responses are in and here are the results:

 

Hustle is More Important

 

Personally, I am of the belief that hustle trumps knowledge for the same reason as Slocomb Reed. He said that hustle will naturally lead to knowledge, but knowledge will not naturally lead to hustle. Similarly, Ryan Groene said that knowledge can be acquired while hustle is hard to teach. Anyone can become knowledgeable of real estate though books, blogs, podcasts, seminars, consultant/mentors and various other educational means. However, I don’t know of any course that teaches you how to hustle and persist when the going gets tough. You either have it or you don’t.

 

The other camp of investors who think hustle is more important than knowledge came to that conclusion because taking action is the only thing that brings you closer to achieving your goals, period. Grant Rothenburger said all the knowledge in the world means nothing with no action or hustle. Evan Holladay provided a powerful quote from a book he is reading, Born to Build by Gene Glick, on the importance of hustle: “Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education alone will not; the world is full of educated derelicts; persistence and determination alone are omnipotent.” If you are the most educated, talented genius in the world, without hustle, persistence and determination, it’s all for naught. And we see this time and time again when we hear the stories of the college or high school dropout who built a real estate or business empire or the athlete who was cut from their high school sports team (Michael Jordan comes to mind) and become a professional sports legend through hustle and grit alone.

 

 

Knowledge is More Important

 

I still believe that hustle is more important than knowledge when it comes to real estate success, but some of the active real estate professionals in the Best Ever Community made a strong case for knowledge being more important. One of the most common arguments is that hustle without knowledge is like a sailor without a compass or a driver without a map. Dan Handford said you can have all the hustle in the world but if you don’t have knowledge, then the hustle is just busy work without results. Glen Sutherland said he has friends with no knowledge but plenty of hustle. They don’t know what to do or how to create a business for themselves, so they end up working for someone else who has the required knowledge.

 

The other common argument is that hustle is only important in the short-term, while knowledge is vital to long-term success. Nathan Nuckols said hustle is temporary and applied knowledge is long-term, which is the difference between active and passive investing. He would take passive (which comes from knowledge) all day. Charlie Kao said hustle is important at the beginning but knowledge is important later on because you hustle to acquire the knowledge and use the knowledge to work smarter, not harder. Lastly, Michael Beeman said with knowledge and no hustle, you can grow slowly over time. He buys real estate from mom and pop landlords who built a portfolio of 20 to 25 units over the course of 30 years and who are all financially free in their retirement years. Also, Michael voted for knowledge because he’s seen investors who lack knowledge but have a lot of hustle make horrible mistakes which lead to burn outs or quitting entirely.

 

In summary, for the knowledge argument, Curtis Danskin said knowledge is power.

 

Both are Important

 

Of course, as you can see from the previous two sections, both are important. Julia Bykhovskaia said knowledge without taking action is useless and hustle without knowledge is like a high-speed, rudderless boat. It will just run aground. Chibuzor Nnaji said to have knowledge and add hustle to it, because you can know everything you need to know but what good does that do for you if you sit on your hands.

 

Neither are Important

 

I think my favorite response to this question was Adam Adams, who said that it is impossible to be successful without both. However, if you have knowledge, you can partner with hustle and if you have hustle, you can partner with knowledge. I am a firm believer that everyone has a unique talent and skill set, and that they should focus on applying that to their business while finding team members and partners who complement them.

 

What do you think? Comment below: What is more important to success in real estate, hustle or knowledge?

 

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

thee laws of investing

The Three Immutable Laws of Real Estate Investing

Ask a room full of active real estate investors what they think is the most important factor that makes for a successful investment and a significant portion will respond with “it’s all about location, location, location.” The market in which you invest is one of the most impactful decisions you will make.

 

Or is it…?

 

Real estate investors have made money in every market across the country, and more recently the world, at every point in time since the first person purchased a piece of real estate for investment purposes. So, how can two investors investing in the same market see totally different results, with one thriving and one failing?

 

The answer is quite simply: the actual market means nothing if the investor cannot execute on the business plan properly.

 

This doesn’t mean that you can blindly invest in any real estate market. To maximize your chances of success, you should always evaluate a market before investing. However, from my experience scaling from a handful of single family rentals to controlling over $300 million in apartments, and from interviewing thousands of active, successful real estate professionals on my podcast, I identified a pattern.

 

I discovered that there are three laws that, when followed, result in a real estate investors ability to thrive in any market at any time in the market cycle. These Three Immutable Laws of Real Estate Investing are 1) don’t buy for appreciation, 2) don’t over-leverage and 3) don’t get forced to sell.

 

Law #1 – Don’t Buy For Appreciation

 

The first of these three laws is don’t buy for appreciation. And in particular, natural appreciation. Natural appreciation is completely out of your control because it fluctuates up and down based on the overall real estate market and economy. Whereas forced appreciation is the bread and butter of value-add investors. Forced appreciation involves making improvements to the asset that either decreases expenses or increases income, which in turn, increases the overall property value.

 

Many investors, past and present, buy for natural appreciation, and it is a gamble. Eventually, they all get burned – unless they’re extremely lucky. Buying for natural appreciation is like thinking you’ll get rich at the casino by playing roulette and only betting on black. Yeah, maybe you can double up a few times, but sooner or later the ball lands on red or – even worse – green, and you lose it all.

 

That’s why you should never buy for natural appreciation. Instead, buy for cash flow. Because when you buy for cash flow (and as long as you have a large supply of renters), you don’t care what the market is doing. In fact, if the market takes a dip, the demand for rentals will likely increase!

 

Law #2 – Don’t Over-Leverage

 

The second law is don’t over-leverage. Although, leverage is one of the main benefits of investing in real estate. Let’s say you have $100,000 to invest. If you decide to invest all of that money into a stock, you would control $100,000 worth of that stock (you can leverage a stock by investing in options contracts, but there is significantly more risk). On the other hand, if you wanted to invest all of that money in real estate, you could spend $100,000 on a down payment at 80% loan-to-value and control $500,000 worth of real estate. That’s the power of leverage.

 

But there’s also a catch. The less money put into a deal – or more specifically, the less equity you have in a deal – the more over-leveraged you are. Consequently, the higher your mortgage payments will be. In a hot market, over-leveraging may seem like a brilliant idea, but what happens when property value or rental rates start to drop? Well, if you purchase a property with less than 20% equity at close and the market drops by 5%, 10% or 20% (which has happened in the past) by the end of your business plan, you will lose a decent chunk of change at sale – if you even survive long enough to make it to that point.

 

Of course, if you never want to sell and bought a property that cash flows, then it doesn’t matter. However, if you are a value-add or distressed apartment syndicator, you make a large amount of money when we sell, so this needs to be factored in.

 

My advice? Have 20% equity in an apartment deal at minimum. You shouldn’t run into this problem if you are getting a commercial loan from a bank, as they will typically require at least 30% down. However, if you are pursuing a creative financing strategy, you may have the opportunity to purchase an apartment for significantly less than 20% down. Don’t be tempted. Similarly, a bridge loan (a short-term loan usually used to cover the purchase price and renovation costs before securing permanent longer-term financing) may offer a higher loan-to-value ratio. In these cases, have 20% of the total cost (purchase price plus renovations) in the deal.

 

Having 20% equity in a deal isn’t a requirement but failing to do so will expose you and your investors to more risk. Although doing so, in tandem with committing to not buy for natural appreciation, will allow you to continue covering your mortgage payments or avoid having negative equity in the event of a downturn.

 

Law #3 – Don’t Get Forced to Sell

 

The final law is don’t get forced to sell. When you are forced to sell, you will always lose money or won’t be able to maximize your returns.

 

The main reason investors are forced to sell or return properties to the bank is when they speculated and bought for appreciation, or they were caught up in a hot market and were over-leveraged.

 

You could also be forced to sell if you do not have the funds to cover an unexpected expense that occurs during operations. To mitigate this risk, I recommend having an operating budget of at least $250 per unit per year in reserves.

 

Another reason you would be forced to sell is if you have a balloon payment on your loan. A balloon payment is standard for commercial real estate loans. The problem investors have is when they have a balloon payment come due during a down turn in the market and don’t have enough equity in the deal to refinance to cover that payment.

 

A way to mitigate this risk – in addition to not buying for appreciation and not over-leveraging –  is to be aware of when your balloon payment is due and plan years ahead of time for what type of exit strategy you are going to pursue. Some common exit strategies are:

 

  • Selling the property
  • Refinancing into another loan

 

By sticking to these Three Immutable Laws of Real Estate Investing, don’t buy for appreciation, don’t over-leverage and don’t get forced to sell, your investment portfolio will not just survive, but thrive in any real estate market and in any economic condition.

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

due diligence on apartment

The Ultimate Guide to Performing Due Diligence on an Apartment Building

After putting a deal under contract, the due diligence process for an apartment building is much more involved and complicated in comparison to that of a single-family residence or smaller multifamily building. For the due diligence process on an SFR or smaller multifamily building, the lender will likely only require an inspection report and an appraisal report in order to provide you with financing. And then for your own knowledge, you’ll perform your own financial audit, comparing the leases and rent rolls with the historical financials to make sure the rental rates are in alignment.

 

When you scale up to hundreds of units, the increase in the number of potential risk points is such that the lender will require additional reports prior to financing the deal and you will want to obtain additional reports before deciding to move forward with the deal.

 

For the apartment community due diligence process, you’ll want to obtain and analyze the results of these 10 reports:

 

  1. Financial Document Audit
  2. Internal Property Condition Assessment
  3. Market Survey
  4. Lease Audit
  5. Unit Walk
  6. Site Survey
  7. Property Condition Assessment
  8. Environmental Site Assessment
  9. Appraisal
  10. Green Report

 

In this ultimate guide, I will outline the contents of each report, how to obtain them, the approximate cost of each (for apartment communities 100 units or more) and how to analyze the results.

 

1 – Financial Document Audit

 

The financial document audit is an analysis that compares the apartment’s historical operations to your budgeted income and expense figures you set when underwriting the deal.

 

For the audit, a consultant will collect detailed historical financial reports from the sellers, including the last one to three years of income and expense data, bank statements and rent rolls. The output of the analysis is a detailed spreadsheet of the asset’s historical income, operating expenses, non-operating expenses and net cash flow which are compared to the budgeted figures you provided.

 

The summary will take on a form that is similar to a pro forma, with the income and expenses broken down into each individual line item for an easy comparison on your end. They will also provide you with an executive summary document, which will outline how to interpret the audit, what data was used to create the audit spreadsheet and an explanation of any figures that deviate from your budget.

 

To obtain this document, you will need to hire a commercial real estate consulting firm that specializes in creating financial document audits. An approximate cost for this report is $6,000.

 

When you initially underwrote the deal, you set the income and expense assumptions based on how you and your team will operate the property once you’ve taken over. These assumptions came from a combination of the trailing 12 months of income and expense data and the current rent roll provided by the seller and the standard market cost per unit per year rates for the expenses.

 

Once you receive the results of the financial audit report, you want to go through each income and expense line item and compare them to the assumptions in your underwriting model. Ideally, the consultant that performed the audit already compared the results to your provided budget, made adjustments based on their expertise and any inputs you provided and commented on any discrepancies.

 

If any discrepancies were found or if the consultant recommended any adjustments, discuss them with your property management company to see if you need to update your budget. If you and your management company come to the conclusion that the budget needs to change, make the necessary adjustments to your underwriting model.

 

2 – Internal Property Condition (PCA) Assessment

 

The internal property condition assessment (PCA) is a detailed inspection report that outlines the overall condition of the apartment community.

 

A licensed contractor will inspect the property from top to bottom. Based on the inspection, the contractor will prepare a report with recommendations, preliminary costs and priorities for immediate repairs, recommended repairs and continued replacements, along with accompanying pictures of the interiors, exteriors and the items needing repair.

 

Being an internal report, you will be responsible for hiring a licensed commercial contractor to perform the assessment. An approximate cost for this assessment is $2,500.

 

During the underwriting process, you created a renovation/upgrade plan for the interior and exterior of the apartment community, which included the estimated costs. Once you receive the internal PCA, compare the results to your initial renovation budget.

 

The results of the internal PCA are preliminary costs, not exact costs. However, they will most likely be more accurate than the assumptions you made during the underwriting process. Therefore, if there are discrepancies between the contractor’s estimated renovation costs and your renovation budget, update the underwriting model to reflect the results of the internal PCA.

 

Hopefully, your initial renovation assumptions were fairly accurate. And ideally, if you made very conservative renovation cost assumptions, you discover that you over-budgeted and can reduce the costs in your underwriting model.

 

3 – Market Survey

 

The market survey is a more formal and comprehensive rental comparison analysis than the one you performed during the underwriting phase.

 

For the market survey, your property management company will locate direct competitors of the apartment community. Then, they will compare your apartment community to each of the direct competitors over various factors to determine the market rents on an overall and a unit type basis. A few key points on the market survey analysis is to make sure that your property management company uses apartment communities that are upgraded to a similar degree as how your apartment community will be post renovations and not in its current condition, that are in similar neighborhoods and that were built within a similar time period.

 

When initial underwriting the deal, you set your renovated rental assumptions based on a combination of performing your own rental comparable analysis and, if the sellers had initiated an upgrade program, proven rental rates. Compare the results of the market survey to your initial renovated rent assumptions. If there are any discrepancies, update your underwriting model to reflect the results of the market survey.

 

4 – Lease Audit

 

The lease audit is the process of examining the individual leases at the apartment community.

 

Your property management company will collect all of the leases of the current residents at the apartment community and perform an audit. They will analyze each lease, recording the rents, security deposits, concessions and terms. Then, they will compare the information gathered from the leases to the rent roll provided by the owner, recording any discrepancies.

 

Unless the current property management company was extremely incompetent, the discrepancies should be minor, if there are any at all, and it should affect your financial model.

 

5 – Unit Walk

 

A question my apartment syndication clients ask a lot is “when I am performing due diligence, do I need to walk every single unit?” The answer is a resounding yes! And that is the purpose of the unit walk report. It is the inspection of each individual unit at the apartment community.

 

During the unit walk, your property management company will inspect each individual unit. The purpose of the unit walk is to determine the current condition of each unit.  So, while conducting the unit walk, they will take notes on things like the condition of the rooms, the type and condition of appliances, the presence or absence of washer/dryer hookups, the conditions of the light fixtures, missing GFCI outlets, and anything else that stands out as a potential maintenance or resident issue.

 

Once you receive the unit walk report, compare the results to your interior renovation assumptions to determine the accuracy of your interior business plan.

 

Do the number of units that require interior upgrades match your business plan? Is there unexpected deferred maintenance that wasn’t accounted for in your budget? Are there a high number of residents who will need to be evicted once you’ve taken over the operations?

 

Using that data, you can create a more detailed, unit-by-unit interior renovation plan and calculate a more accurate budget. Make any adjustments to your interior renovation assumption on your financial model.

 

Most likely, your property manager will perform the market survey, lease audit and unit walk report, and they will usually do it for free. However, ask the property manager how much they will charge you for these three reports if you do not close on the deal. And if you have to hire a 3rd party to create these three reports, the cost is approximately $4,000.

 

6 – Site Survey

 

A site survey shows the boundaries of the property, indicating the lot size. It also includes a written description of the property. The report resembles a map.

 

There are a lot of third party services that can conduct a site survey. A quick Google search of “site survey + (city name) will do the trick. I recommend reaching out to multiple companies to get a handful of bids for your project. The approximate cost for the site survey is $6,000.

 

The site survey report will list any boundary, easement, utility and zoning issues for the apartment community. Generally, if a problem is found during the site survey, the bank will not provide a loan on the property. So, if something does come up, your options are limited and should be addressed on a case-by-case basis. If the problem can’t be resolved, you will have to cancel the contract.

 

7 – Property Condition Assessment

 

The property condition assessment is the same as the internal property condition assessment, except this one is created by a third party selected by the lender. The cost is approximately $2,000.

 

Analyze this reports the same way that you analyzed the internal PCA. Then, compare and contrast the results of the two PCAs. Maybe the lender’s contractor caught something that your contractor did not, and vice versa.

 

8 – Environmental Site Survey

 

The environmental site assessment is an inspection that identifies potential or existing environmental contamination liabilities. It will address the underlying land, as well as any physical improvements to the property, and will offer conclusions or recommendations for further investigations of an issue is found.

 

The environmental site assessment is also performed by a 3rd party vendor selected by your lender. The approximate cost is $2,500.

 

Similar to the site survey, if the vendor identifies an environmental problem, the lender will not provide a loan for the property. Again, these issues should be addressed on a case-by-case basis.

 

9 – Appraisal

 

The appraisal determines the as-is value of the apartment community.

 

An appraiser will inspect the property, and then calculate the as-is value of the apartment community. The two appraisal methods that will be used to determine the value of the property are the sales comparison approach (i.e. comparing the subject property to similar properties that were recently sold) and the income capitalization approach (i.e. using the net operating income and the market cap rate).

 

The appraisal report is created by an appraiser selected by your lender. The cost is approximately $5,000.

 

Once you receive the appraisal, you should compare the appraised value to the contract purchase price. The lender will base their financing on the appraised value, not the contract price. Therefore, if the appraisal comes back at a value higher than the contract price, fantastic! That’s essentially free equity. However, if the appraised value is lower than the contract price, you will have to either make up the difference by raising additional capital or renegotiate the purchase price with the seller.

 

10 – Green Report

 

The Green report is an optional assessment that evaluates potential energy and water conservation measures for the apartment community. The report will include a list of all measures found, along with the associated cost savings and initial investment.

 

The report is created by a 3rd party vendor selected by your lender. The approximate cost is $3,500.

 

The green report, which is the only document that won’t disqualify a deal, will outline all of the potential energy and water conservation opportunities. It will list all of the opportunities that were identified, the estimated initial investment to implement, the associated cost savings and the return on investment. Deciding which opportunities to move forward with should be based on the payback period and the projected hold period of the property.

 

For example, following energy efficient opportunities were identified at an apartment project my company had assessed:

 

  • Dual pane windows
  • Wall insulation and leakage sealing
  • Roof insulation
  • Programmable thermostats
  • Low-flow showerheads and toilets
  • Interior and exterior LED lighting
  • Energy Star rated refrigerators and dishwasher

 

After analyzing the investment amount and cost savings, the opportunities we implemented, and the associated savings and payback periods were:

 

  • Low-flow showerheads: 1-year payback, $16,827 annual savings
  • Exterior LED lighting: 14.4-year payback, $3,236 annual savings
  • Pool cover: 1.5-year payback, $409 annual savings

 

The reasoning behind the low-flow showerheads and pool cover was that we planned on holding the property for 5-years, so once we paid back the initial investment amount, it was pure profit. We ended up losing money on the exterior LED lighting project. However, we installed these lights to increase resident safety.

 

You will find that the green report will list ALL opportunities, even if the payback period is absurdly long. If we implemented all the opportunities identified in the example above, the overall payback period would have been 91.9 years, with the longest payback period being 165 years for the Energy Star rated dishwashers. Unless we decided to hold onto a building until we died or unit they’ve discovered an immortality serum, we will stick to the opportunities that either result in a payback period lower than our projected hold time or address a resident safety concern.

 

How to Pay for the Due Diligence Reports

 

Usually, the costs of the due diligence reports will not be due until closing. So, when underwriting the deal, make sure you are taking these costs into account when determining how much equity you need to raise.

 

Other times, you will need to pay for a due diligence report upfront. If this is the case, you can do one of two things. You can come out-of-pocket and reimburse yourself at close. Or, you can take a loan from a third-party (maybe one of your passive investors) and reimburse the initial loan amount with interest at close.

 

Review the Results of Your New Underwriting Model

 

Based on the financial document audit, market survey report, lease audit report and green program report, you either confirmed or updated your income assumptions. Based on the financial document audit, you either confirmed or updated your expense assumptions. Based on the two property condition assessments and the unit walk report, you either confirmed or updated your renovation budget assumptions. Based on the appraisal report, you either confirmed the accuracy of the purchase price or determined that you have the property under contract at price that is below or above the as-is value. And based on the site survey and environmental survey, you determined if there is anything that disqualifies the deal entirely.

 

Once you have received the results of all 10 due diligence documents and made the necessary adjustments to your underwriting model, you need to re-review your return projections. If you had to make drastic changes to the income, expenses or renovation budgets in the negative direction, then the new return projections will be reduced. In some cases, the return projections will be reduced to such a degree that the deal no longer meets the return goals of you and your investors. Also, if an issue came up during the site survey or the environmental site assessment, which is rare, it will need to be resolved prior to closing. If the seller is unwilling or unable to address these issues, your lender will not provide financing on the property, which means you will have to cancel the contract.

 

If the updated return projections fall below your investor’s return goals, adjust the purchase price in your underwriting model until the projected returns meet your investor’s goals again. Then, explain to your real estate broker that you want to renegotiated the purchase price and state the reasons for doing so.

 

If the seller will not accept the new contract terms, don’t be afraid to walk away from the deal. At the end of the day, it is your job to please your investors, which means providing them with their desired return goals.

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

win over apartment broker

4 Ways an Apartment Syndicator Can Win Over an Experience Broker

Real estate brokers can be a great resources for finding on-market and off-market real estate deals. However, do not expect a real estate broker to automatically put you near the top of their go-to client list, especially if you haven’t completed your first syndication deal.

 

After finding a real estate broker, one of the biggest challenges you are going to face is proving that you are the real deal. From the real estate broker’s perspective, there is a lot of uncertainty. They’ll be thinking, “if I begin working with them, are they really going to pull the trigger on a deal?”

 

Therefore, in regards to your relationship with a real estate broker, your main focus needs to be proving that you are a serious, credible apartment syndicator who is capable of closing on a deal.

 

Don’t just take my word for it. Thomas “T” Furlow, who is a commercial real estate investor who has specialized in apartments for years, agrees. Experience real estate brokers won’t take a newbie investor at their word. They must prove, through action, that they are serious. In our recent conversation, he offered four tactics a newbie apartment syndication can implement in order to win over the trust of an experienced real estate broker.

 

1 – Consulting Fee

 

One tactic is to offer the real estate broker a consulting fee. To show that you are serious and that you respect their time, offer to pay them an hourly fee ($150 to $200 per hour), even if you don’t find a qualified deal. In return, you can use them as a consultant, including asking them questions, sending them potential deals to review, having them run rental or sales comp reports and – ideally – having them send you prospective off-market deals.

 

2 – Visit Their Recent Sales

 

Another tactic is to get in your car and drive to the real estate broker’s recent apartment sales. Ask them to send you a list of their most recent 10 apartment sales and visit those properties in person.

 

After visiting the 10 properties, follow-up with the real estate broker, telling them which properties meet your investment criteria and why. In doing so, you are not only portraying yourself as a serious investor but are also giving the real estate broker an idea of what type of apartment you are interested in acquiring.

 

3 – How Will You Fund Your Deals?

 

The third tactic is to provide the real estate broker with information on how you will fund a potential deal. Since we are apartment syndicators, we are raising money from accredited investors. Explain how many people have expressed interest or have verbally committed to investing. Tell them about the strategies you are implementing to find potential private money investors

 

Since you will likely be securing a loan, tell them about the mortgage brokers you’ve spoken with.

 

Anything else related to the funding of the deal should be communicated to the real estate broker to qualify yourself as a credible investor who has the financial capabilities to close a deal.

 

4 – Constant Follow-Up

 

Lastly, and most importantly, constantly follow-up. Whenever you perform a task that brings you closer to completing a deal, notify the real estate broker. A simple email will suffice.

 

For example, if you have a conversation with a lender, provide the real estate broker with their contact information and the outcome of the meeting (i.e. “I met with XYZ Lending. I told them about my business plan and they told me that I will qualify for a loan.”).

 

Once you’ve found a qualified property management company, send the real estate broker their biography.

 

Before sending out a direct mailing campaign, as well as when you start receiving phone calls from interested sellers, notify the real estate broker.

 

However, only follow-up with information that is relevant to completing an apartment deal. The real estate broker probably won’t care much about what you had for breakfast.

 

 

Overall, proving your seriousness to the real estate broker is about communicating your effort towards and commitment to finding and closing on an apartment deal. To accomplish this, you can offer a consulting fee, visit their recent sales, communicate how you will fund a potential deal and constantly follow-up with relevant information.

 

How about you? Comment below: What tactics have you implemented to win over a real estate broker?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

 

 

written goals

The Two Massive Benefits of Written Goals for Real Estate Investors

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was “on a scale of 1 to 5, how important is it to have written goals for your real estate business?”

 

Step 1 of Tony Robbins’ Ultimate Success Formula is to know your outcome. He says clarity is power because where focus goes, energy flows. Once you define and write down a desired goal or outcome and make it your main point of focus, you will begin to – almost automatically – take the right action to achieve it. Therefore, writing down our goals gives us something to focus on, which allows us to narrow down the actions required to achieve our desired outcome.

 

I can tell that we have a lot of Tony Robbins’ fans in the Facebook community. Not only did the overwhelming majority (46 out of 51 responses) of active investors say that writing down goals is very important, but they also believe that they benefit from having written goals because it allows them to focus and take the right action that will lead them to achieving their goal.

 

That being said, the poll is closed and here are the results:

 

Written Goals = Focus

 

I think the quote that sums up the benefits of written goals in regards to focus is from Youseff Semaan, who said “If I don’t write my goals down, they remain thoughts in my head. By writing them down, they become tangible!”

 

A commonly referenced survey of Canadian media consumption by Microsoft in 2012 concluded that the average attention span fell to 8 seconds in 2012 from 12 seconds in 2000. Or to put it another way, humans have a shorter attention span than goldfish! So, focusing on our thoughts (and a goal that is only a thought) just isn’t realistic. Whereas if we’ve written our goals down, we can review them and refocus. Because, like Mark Ferguson said, “not only do [goals] need to be written down, [but] you need to have set times [when] you review those goals! It is too easy to lose track of what you really want.”

 

When we review our written goals, we become more and more focused. In regards to regularly reviewing our written goals, Michael Bishop quoted Napoleon Hill saying “repetition puts thoughts into your subconscious mind, and your subconscious mind has power to transmute desire into its physical equivalent.” Similarly, Nathan Nuckols said “what you [focus on] daily will eventually come to fruition.”

 

Even Mr. Miyagi and horse trainers understand the power of focus. Jay Helms said that goals are very important “for the same reason horses run with blinders on and the same lesson Mr. Miyagi kept trying to teach Daniel son – focus.”

 

There is a caveat, however, to focusing on your written goals. Curtis Danskin gave a warning, saying “if you fail to understand that goals are meant to morph and grow and change, you will surely experience disappointment. Goals are guides, a roadway with unexpected twists and turns, so keep up on them.” In other words, focus on your goals, but don’t become so focused that you pigeonhole yourself. Which leads us to the second benefit of written goal setting, which is that it allows us to take the right action steps towards achieving our desired outcome.

 

Written Goals = Right Action

 

Staring at a piece of paper with our goals written on it is a good start, but we also need to get out there and take action. Which is why Harrison Liu, who actually thinks that written goals aren’t very important, said “I have a goal that’s financial independence. After 17 years investing in real estate, I achieved that goal but never wrote it down. Taking action is a lot more important than writing on a piece of paper.” Looks like Harrison has been able to maintain his attention span while the rest of us are going the way of the goldfish!

 

Someone else who doesn’t right down their goals, but thinks they are very important is Eric Kottner. He said “as someone who doesn’t write down their goals, I have a lot of open time not know what to work on and [I] just wing it.” That is why we need to go a step further than just writing down our goals and regularly focusing on them. We need to also create a plan of action for how we will achieve them.

 

This includes determining the higher dollar tasks that make the biggest impact on our businesses. Micki McNie said “if I don’t have my goals written out along with specific action steps, I get stuck working on low dollar activities or distracted by shiny objections.”

 

It also means breaking own our long-term goal into smaller goals. Matthew Ryan said “without goals, you have no tasks that tell you what to execute on a quarterly, weekly and daily basis.” And Matt Anices said “I always write them down, long-term, short-term and daily.”

 

To tie the “focus” and “right action” together, I will end with a quote from a fortune cookie that Justin Grimes has taped to his car speedometer: “A dream is just a dream. A goal is a dream with a plan and a deadline.” So, without writing down your goals, focusing on them regularly and creating a plan of action, it is just a dream.

 

What do you think? Comment below: Why do you think it is important to have written goals?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

How a Passive Investor Qualifies an Apartment Syndicator’s Team

One of the three main risk points associated with passively investing in apartment syndications is the syndication team (the other two are the deal itself and the market). The best deal, from a projected returns standpoint, in the best market in the country may result in failure if the team cannot successfully execute the business plan. Therefore, prior to committing to a particular apartment syndicator or to a particular deal, a passive investor should qualify the main team members involved in the deal.

 

Before asking these questions, however, you need to qualify the actual apartment syndicator. Click here for a blog post for how a passive investor qualifies an apartment syndicator.

 

There are the 7 team members involved in syndication process: property management company, real estate broker, CPA, mortgage broker, real estate attorney, securities attorney and a consultant (optional). But the main team member is the property management company.

 

The property management company is the boots-on-the-ground force that is responsible for overseeing the ongoing, day-to-day operations of the apartment community. This includes marketing efforts to attract new residents, resident relations (like hosting resident events), managing turnovers, fulfilling maintenance requests, maximizing rents and occupancy levels, etc. If the syndicator is following a value-add or distressed investment strategy, the property management company will also oversee the renovation process.

 

Prior to investing with an apartment syndicator, you want to determine the credibility of the property management company, which you can accomplish by asking the following 8 questions:

 

  1. How long have they been in business?

 

A relatively new property management company might not have enough experience managing certain sized or types of apartments. Generally, the longer they’ve been in business, the better. For example, the property management company that we use has been in business for over 75 years.

 

  1. What geographic areas do they cover?

 

The property management company MUST have a presence in the market in which the apartment syndicator is investing. That means the company must be local to the market or, if they are a national property management company, must have a regional office located in the market.

 

  1. How many units do they manage?

 

Similar to the question 1, the property management company should manage multiple apartment communities in the same market. However, bigger isn’t always better, because if they manage too many units, they might not be able to provide the highest quality service. Also, if they have been in business for decades but only manage a handful of communities, that could be a red flag.

 

  1. How many units do they own?

 

If the property management company owns other apartment communities in the same market, it could be a conflict of interest. If the syndicator’s property and their property have a vacant 2 bed, 1 bath unit at the same time, which one are they likely to fill first? Not a deal breaker, but this is definitely something that you want to be aware of.

 

  1. What asset class do they specialize in?

 

The property management company MUST have experience implementing the same business plan that the syndicator is pursuing. For example, If the syndicator is following a value-add investment strategy, the property management company must have experience with value-add apartment communities.

 

  1. What are some of the names of nearby properties they are currently managing?

 

This proves that they are actually managing apartments in the local market. But it will also allow you to perform some research to see how the apartment communities are maintained. If you are local to the market, you can visit these properties in person. If not, you can perform online research by looking at the website and by looking at the property on Google Maps. Also, you can look up the apartment community on Google or Apartments.com to read resident reviews and see the overall rating.

 

  1. Have you worked with this company in the past?

 

Since you are ideally investing with a syndicator who has previous apartment experience, this shouldn’t be the first time they used their property management company. If the property management company doesn’t manage the majority of their portfolio in their target market, that could be red flag. So, if that is the case, a follow-up question would be to ask them why this management company doesn’t manage the majority of their portfolio.

 

  1. Is the property management company showing alignment of interests?

 

Alignment of interests are always important, but they are especially important if the syndicator doesn’t have a long, successful track record with apartment communities. There are five main ways that the property management company can show alignment of interest.

 

The lowest level of alignment of interests is the management company has a proven track record managing apartment communities that are located in the local market, has worked with the syndicator in the past and has followed the same investment strategy that the syndicator is implementing. Regardless of the experience level of the apartment syndicator, this level of alignment of interest should be shown.

 

The next level up is when the property management company has an equity stake in the general partnership.

 

The third level of alignment of interest is when the property management company invests their own capital in the deals.

 

The fourth level of alignment of interest is when the property management company invests their own money in the deal AND brings on their own passive investors.

 

And the highest level of alignment of interests is when the property management company signs on the loan.

 

Again: it is ideal that the syndicator has previous experience with apartments, but if they don’t, having alignment of interests with the property management company – or with other team members, like the real estate broker or a local apartment owner/consultant – can offset their lack of experience. If the syndicator does have experience, then the level two to five alignment of interests are less important.

 

 

Over the course of your communication with a prospective apartment syndicator, these are the eight questions you want to ask in order to determine the credibility and experience of their property management company.

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

4 Ways to Acquire Real Estate with No Money Out-of-Pocket

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was “how much money do you need to do your first deal?

 

Overall, the responses fell into two camps: no money down and money down, with the former camp winning out by four. 13 investors said $0 was needed for the first deal while 9 said some form of capital was required for the first deal.

 

I think the most interesting and educational aspect of these responses was from the winning camp (the $0 downers), who offered up their creative strategies for acquiring real estate with no money down. A common theme between all of the investors who believe that one can acquire their first deal with no money down is that one’s own money needs to be substituted with something else. There is no such thing as a no money down strategy that doesn’t require a high level of effort to offset the lack of capital.

 

That being said, the poll is closed, the responses are in and here are the four substitutes to your own money that can result in the acquisition of real estate with no money down:

 

1 – Knowledge

 

The first substitute is knowledge. Brandon Moryl said that it is a balance between money and knowledge. If you don’t have the money, you need to compensate with knowledge, and vice versa. Similarly, Harrison Liu said that getting started with no money is the easy part. The difficult part is having a profitable first deal. In both scenarios, the investor who wants to acquire their first deal with no money out-of-pocket is required to invest in their education. That means reading books and articles, listening to podcasts and picking the brain of experienced investors who are actively and successfully pursuing the same investment strategy they plan on implementing.

 

2 – OPM

 

The most popular substitute for your own money is OPM (other people’s money). In regards to fix-and-flip projects, Eric Kottner said you can go in with $0, but you’ll need to have access to funds to cover the down payment and rehab costs. And for rentals, you’ll need to make sure that you have at least one-years’ worth of rent in reserves and the down payment money. But for both of these scenarios, the funds can be OPM.  Ryan Groene said that you can partner up with a private money investor to purchase real estate with zero dollars out-of-pocket, but you will need a little bit of cash to pay for gas to visit properties and to pay for coffee or lunch when meeting with potential partners. Adam Adams says that you need as much money as the deal costs but it doesn’t need to come from you. Finally, Nathan Tabor says you can enter a deal with zero money down by partnering with a private money investor or partnering with the current owner in the form of seller financing. However, most of you won’t be able to snap your fingers and, poof, has access to OPM. But as an apartment syndicator myself, I have documented proven tactics for finding OPM, which you can learn about here.

 

3 – Leverage

 

Another substitute for your own money is leverage. Glen Sutherland purchased his first investment property by leveraging the existing equity in his personal residence. Elliot Milek financed 100% of his first investment property with a line of credit from a local bank. Hai Loc said that you can leverage credit cards. And Robert Lawry II said the someone can acquire their first investment property with $0, especially when all they have is $0. All it requires is leverage, learning and strategy.

 

4 – Resourcefulness

 

The final substitute for your own money is resourcefulness. For example, click here to learn how someone was able to acquire a property with a paperclip in one year! Similarly, Ash Patel said that sometimes hustle is better than money.

 

 

In reality, all four of these strategies require resourcefulness. But what is great about resourcefulness, creativity and hustle is that – unlike money – they are essentially unlimited. As long you are willing to put in the time, anything is possible.

 

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

qualify an apartment syndicator

How a Passive Investor Qualifies an Apartment Syndicator

The syndicator, also referred to as the sponsor or general partner, is an individual or a group of individuals that puts an apartment syndication together. And, this entails a lot of responsibilities.

 

Their main responsibilities include creating the syndication team, selecting and evaluating a target market, finding a deal, qualifying or disqualifying the deal through underwriting, submitting an offer and negotiating the purchase price and terms.

 

Once a deal is under contract, their main responsibilities are to manage the due diligence process, confirm the underwriting assumptions, create the business plan, arrange the debt, secure the equity from passive investors and coordinate with the real estate and securities attorney to structure and create the partnership.

 

Once the deal is closed, they are responsible for the ongoing asset management of the project, which includes implementing the business plan, distributing the returns to the passive investors, communicating updates to the passive investors, visiting the property and frequently analyzing the competition and the market.

 

Essentially, they are responsible for managing the entire process from start to finish. Because of their heavy involvement in the process, the success or failure of the deal rests mostly on their shoulders. Therefore, rather than investing with the first apartment syndicator you find, you need to qualify them by asking questions.

 

The Business Plan

 

One of the first things you want to know is the general business plan they implement. Click here to learn more about the three apartment syndication options. This will segue into the next question, which is what is their past experience with this particular business plan? In particular, you want to know if they have taken a deal full cycle (from acquisition to sale) following this business plan and whether or not they were successful (which is determined by how the projected returns compared to the actual returns distributed to the passive investors).

 

Alignment of Interests

 

If the syndicator does not have previous experience implementing the business plan, that is not an automatic disqualifier. However, their lack of experience must be made up for by having a credible team and strong alignment of interests. And for the experienced syndicator with a proven track record of successfully implementing their business plan, having a partnership structure that promotes alignment of interests is the icing on the cake.

 

There are many other team members that are involved in the syndication process, but the three team members with the most involvement in the deal are the property management company, the real estate broker and – if the syndicator doesn’t have previous apartment experience – a consultant. And each of these team members bring different levels of alignment of interests to the deal. Generally, an experienced property management company results in the most alignment of interests, followed by an experienced syndication consultant or local owner who is active in the apartment industry, followed by an experienced real estate broker.

 

The syndicator themselves can also promote alignment of interests. For example, one of the common fees the syndicator charges in an ongoing asset management fee. If they put that fee in second position to the preferred return, that promotes alignment of interests. If you don’t get paid, they don’t get paid.

 

Additionally, they can promote alignment of interests by investing their own capital in the deal, whether that’s is their personal funds, company funds or by allocating a portion or all of their acquisition fee into the deal. By not having money in the deal, the syndicator isn’t exposed to the same level of risks as you are. If the deal performs poorly, they won’t get paid but they also won’t lose any capital either. Whereas, by having their own skin in the game, they are incentivized to maximize returns.

 

Another way to promote alignment of interest is for the syndicator, or a member of the team, to personally guarantee the loan as a loan guarantor.

 

Transparency

 

Another characteristic of a good syndicator is transparency. To determine the level of transparency, ask them about their ongoing communication process. How often do they send updates on the deal? Will they provide you with financial reports so you can review the property’s operations?

 

You also want to ask them what the communication process is when you have a question. Will they provide you with their cell phone number or direct email address? And if you do have a question, what will be the turn-around time?

 

You are trusting the syndicator with your hard-earned capital, so having transparency in regards to what they are doing with your money and how the deal is progressing is a must.

 

Credibility

 

A good question to determine the syndicators track record is to ask them how many of their passive investors have invested in multiple assets. Syndicators who have investors that continue to come back deal after deal is an indication that they have a proven track record of meeting and/or exceeding the projected returns. While the opposite may be true if the syndicator has a poor investor retention rate.

 

Similarly, ask the syndicator what percentage of their new investors come in the form of referrals. If they have a lot of referrals, that indicates satisfied investors who are motivated to share their success with friends and colleagues.

 

You can also gauge the reputation and credibility of a syndicator by their online presence. Are they easily found when you perform a Google search? Do they have a website? Do they create content in the form of a podcast or blog? You can learn a lot about a syndicator by performing online research prior to actually speaking with them.

 

 

The syndicator’s past experience with the apartment business plan, level of alignment of interests, transparency and credibility are important factors to understand when determining whether or not to passively invest in their deal.

 

If you are a current passive real estate investor, what do you think? Comment below: what do you look for when qualifying an apartment syndicator?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

Should You Focus on One or Multiple Real Estate Investment Strategies?

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was “is it better as a real estate investor to focus on one strategy or more than one?”

 

Most, if not all, investors begin their real estate careers by focusing on one investment strategy. Although, some investors will start out with multiple strategies, like fix-and-flipping and wholesaling, or fix-and-flipping and rentals, or a combination of passive and active investing, or acting as a real estate professional (i.e. real estate agent, property management, etc.) while investing on the side. But, since the majority of first-timers focus on one strategy, the question really is, “is it better to continue to focus on your initial investment type or do you expand or transition into another?”

 

Another distinction to make before getting into your responses is between the types of focus. For example, I personal own three single-family homes and have syndicated over $300,000,000 in apartments. Even though I am technically involved in two distinct investment strategies (SFR rentals and apartment syndications), I wouldn’t say that my focus is on SFR rentals. However, for someone who completes 100 fix-and-flips per year while also wholesaling 30 to 50 properties is an example of an investor who focuses on more than one strategy.

 

That being said, the poll is closed, the results are in and here are the responses:

 

Of all the responses, three individuals were of the belief that investors should focus on a single strategy. Brie Jazmin advises that you focus on one strategy and know it very well. Eric Kottner thinks that investors should be highly specialized in one investment strategy. Randy Ramadhin has sampled a few different strategies, found the one that worked best for his particular situation and focuses solely on that. So, it took trying multiple strategies before he came to the conclusion that one great strategy is the best approach.

 

All of the other responses were one the side of focusing on multiple strategies. Although, they did not believe that ALL investors should focus on multiple strategies at ALL the times. For example, Danny Randazzo thinks that, assuming you know your market and you selected a market that has really good growth potential, it I better to expand to more strategies in one solid market instead of expanding into other markets using the same strategy.

 

Two investors think that, before expanding into other investment strategies, you need to master one strategy first. Kris Ontiveros said to focus on one and automate by creating systems (or hiring great team members) before you consider moving onto or expanding into another strategy. And Neil Henderson advises that the average person should only focus on one strategy. But once they’ve mastered it, they can consider branching out from there.

 

Julia Bykhovskaia thinks that, in theory, focusing on and understanding one investment strategy makes sense. However, that is not the case in practice. If real estate is all that you do, you will have multiple goals that one investment strategy cannot achieve (or at least not easily). You need money to both live off of in the here and now, as well as to use to invest in your longer-term strategy. So, if the longer-term strategy is apartment investing, for example, then you might need to supplement your apartment investing strategy with another one, like flipping, wholesaling, short-term rentals, etc., in order to accomplish your shorter-term goals of generating profit to pay the bills and to invest in apartments with. However, on the flip side, the difficult part with this approach is avoiding the real estate “shiny object syndrome” to stay focused and not overextend yourself.

 

Similarly, Ryan Groene thinks that it also depends on your investment goals. Some people see opportunities across many asset classes while others focus on one and still make money. Sam Zell is a rare exception, because he was a top investor across many asset classes for a long time and is still the top owner of mobile home parks.

 

Finally, Ash Patel discovered, due to his experience living through two market crashes, that it depends on the timing. In terms of real estate, single family, multifamily, commercial, industrial and medical all have someone different cycles. Additionally, if you can trade in several non-real estate related investment types, like energy, equities, currency, commodities and – his favorite – startups, you can attempt to exploit those markets too.

 

What do you think? Comment below: Is it better to focus on one or multiple real estate investment strategies?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

 

 

How the General Partner Makes Money from an Apartment Syndication

The types of fees and the range of each fee will vary from syndicator-to-syndicator. But every fee that is charged should be directly tied to a task that is explicitly adding value to the apartment deal.

 

In order to identify the fairness and reasonableness of the GP compensation structure, you need to understand 1) the types and standard ranges of the general partnership fees for the industry, 2) what tasks they are performing in return for those fees and 3) if each of those fees promotes alignment of interests between the LP and GP.

 

There a lot of different fees that the syndicator could charge, but here is a list of the seven fees that you will come across most often. An important disclaimer to make is that this is not a list of the fees that every syndicator will charge every single time. Rather most syndicators will mix-and-match the types of fees that charge, depending on the project.

 

1 – Profit Split

 

Depending on the type of LP compensation structure, the general partnership may earn a portion of the remaining profits after the preferred return is distributed.

 

For example, the LP may receive an 8% preferred return and the profits thereafter are split between the LP and GP. This split can be anywhere from 50/50 to 90/10 (LP/GP)

 

If the LP invested $1,000,000 into a property that cash flowed $100,000 for the year, assuming an 8% preferred return and a 50/50 split thereafter, the LP would receive $80,000 as a preferred return, plus another $10,000 as a profit split. Then, the GP would receive the remaining $10,000.

 

The profit split promotes alignment of interests because the GP is financially incentivized to operate the apartment community such that the annual return exceeds the preferred return. Because if they don’t, they are missing out on an opportunity to make money. Then for the passive investor, when the annual returns exceed the preferred return, the LP receives a higher annual distribution and – since the net operating income is directly tied to the property value – a higher distribution at sale.

 

On a related note, you want to confirm that at sale, the profit split is calculated based on the remaining profits AFTER the LP’s initial equity is return. Also, when the GP is outlining the LP return projections, you want to confirm that those projections are net of the GP fees. This means that you want to make sure that the projections they show you are AFTER the GP has taken their fees, because if not, the actual returns will be less than what they are showing you.

 

2 – Acquisition Fee

 

Nearly every apartment syndicator will charge an acquisition fee. The acquisition fee is an upfront, one-time fee paid to the GP at closing. The acquisition fee ranges from 1% to 5% of the purchase price, depending on the size, scope, experience of team and profit potential of the project.

 

Think of the acquisition fee as a consulting fee paid to the GP for putting the entire project together. It is a fee that pays the GP for their time and money spent on market research, creating a team (lawyers, CPAs, real estate brokers, etc.), finding the deal, analyzing the deal, raising money, securing financing, performing due diligence and closing.

 

3 – Asset Management Fee

 

The asset management fee is an ongoing annual fee paid to the GP in return for overseeing the operations of the property and implementing the business plan. The asset management fee is either a percentage of the collected income or a per unit per year fee. The standard percentage range is 2% to 3% while the standard per unit per year is $200 to $300.

 

The range of the asset management fee is usually based on the business plan. If the plan is to perform interior renovations and exterior renovations/upgrades, a higher asset management fee may be justified, because the GP will be heavily involved in ongoing oversight of the business plan. But the opposite is true if the property is already stabilized and up-to-date from day one. In other words, the more effort and time required by the GP, the higher the asset management fee. And since the asset management fee is directly tied to the collected revenue, if the business plan isn’t implemented effectively, the GP doesn’t maximize what they could make, which helps with alignment of interests.

 

Additionally, there is a higher alignment of interests with the percentage-based fee as opposed to the unit-based fee. Since the percentage-based fee is tied to the actual collected income, the lower the collected income, the lower the asset management fee. So, the GP is incentivized to maximize the income, which in turn will maximize your returns. Whereas the unit-based fee is a flat fee that remains the same regardless of the amount of collected income.

 

For another level of alignment of interest, the GP will put the asset management fee in second position behind the preferred return. That means that if the preferred return isn’t distributed, they won’t receive the asset management fee. Not every GP will have a compensation structure with the asset management fee in second position. So, for the ones that don’t, the alignment of interests is lower than that of the GP that does.

 

4 – Refinance Fee

 

A refinancing fee is a fee that is paid to the GP for the work required to refinance the property. Of course, if the business plan doesn’t include a refinance, the GP will not charge such a fee.

 

At the closing of the new loan, a fee of 1% to 3% of the total loan amount is paid to the GP. However, to promote alignment of interests, this fee should only be charged if a specified equity hurdle is reached. For example, the return hurdle may be returning 50% of the LP’s initial equity. If only 40% is returned, while that is still beneficial to the LP, the GP will not collect the fee. Therefore, this type of refinance fee structure incentivizes the GP to maximize the property value such that they will hit the equity return hurdle at refinance. And the LP benefits by receiving a large portion of their equity back and – again, since the property value is directly tied to the net operating income –  higher ongoing returns.

 

5 – Guaranty Fee

 

The guaranty fee is a one-time fee paid to a loan guarantor at closing. The loan guarantor guarantees the loan. The GP may bring on an individual with a high net-worth/balance sheet to sign on the loan to get the best terms possible. Or, the GP may sign the loan themselves, collecting the fee or deciding to forgo it.

 

At close, a fee of 0.25% to 1% of the principal balance of the mortgage is paid to the loan guarantor. The riskier or more complicated the deal, the higher the guaranty fee. If the GP doesn’t have a good relationship with the loan guarantor, that individual will charge a higher fee as well.

 

Also, the size of the fee depends on the type of loan. Generally, there are two types of debts: recourse and nonrecourse. Recourse debt allows the lender to collect what is owed for the debt even after they’ve taken collateral. Nonrecourse debt does not allow the lender to pursue anything other than the collateral (with a few exceptions or “carve outs,” like in instances of gross negligence or fraud). So, the guaranty fee will be higher for recourse loans compared to nonrecourse loans.

 

Since the loan guarantor is personally guaranteeing the loan, this promotes alignment of interests. Because if they project fails, the GP is personally liable.

 

 

6 – Construction Management Fee

 

The construction management fee is an on-going annual fee paid to the company overseeing the capital improvement process. If the GP has a hands-on role in the renovation process or if the GP has their own property management company, they may charge a construction management fee.

 

This fee ranges from 5% to 10% of the renovation budget, depending on the size and complexity of the improvement plan.

 

For some syndicators, this fee will be built into the asset management fee, while others will charge a construction fee on top of the asset management fee. When a GP charges both an asset management and construction management fee, it may reduce your ongoing returns, especially while renovations are being performed.

 

7 – Organization Fee

 

The organization fee is an upfront fee paid to the GP for putting together the group investment. This fee ranges from 3% to 10% of the total money raised, depending on the amount of money raised.

 

For some syndicators, this fee will be built into the acquisition fee, while others will charge an organization fee on top of the acquisition fee. When a GP charges both an acquisition and organization fee, your overall return may be reduced.

 

 

These are the seven type of fees you will most commonly come across as a passive apartment investor.

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

The 3 Types of Real Estate “Retirement”

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was “how much do you need/want to retire?”

 

Of course, this question implies that real estate investors actually WANT to retire, and based on the responses, this is definitely not the case. In fact, real estate investor’s views on retirement can be broken into three categories: 1) I will never retire for investing, 2) I want $X in order to retire and 3) If I reach my financial goals, I will shift my focus to other work.

 

When I asked the Best Ever Community why they initially became interested in real estate, only one response was loosely associated with retirement, which was the desire for financial freedom. Besides the correlation between early retirement and death, I think this is because individuals with a strong entrepreneurial spirit are attracted to real estate, and this spirit seems to never taper off or disappear. In fact, once people get a taste of real estate success, this entrepreneurial drive may even intensify!

 

That being said, the poll is closed and here are your responses:

 

Death is My Retirement

 

The most common response was that the investor planned on NEVER retiring. Dan Hanford sarcastically quipped that he didn’t even know what “retire” meant. Matthew Seaton, while wanting a bare minimum of $1 million by the age of 57, would prefer to continue working indefinitely, as the concept of traditional retirement sounds boring and outdated.

 

Dave Roberts needs 10 gazillion dollars in order to retire. This, I assume, implies that he doesn’t plan on ever retiring either – as a gazillion isn’t a real number J.

 

Jeremy Brown kind of specified a dollar figure that he wants to retire, which is three times what he is making now. However, every time his income increases, his goal of “three times what I am making now” remains the same. Scaling in real estate investing and achieving your targets will definitely do that to you!

 

For both Charlie Kao and Stone Teran to retire, it will have to be over their dead bodies – LITERALLY. Charlie envisions himself eventually reducing his working hours, but he will remain in the real estate game until his children bury him. Stone doesn’t have a magic number either. He plans on working until he dies, but with the expectation of working less hours and less strenuously as he gets older.

 

I’ll Take the Cash

 

One investor specified a dollar figure he would need in order to retire. Eric Kottner wants a net worth of $2.5 million and $250,000 per year in passive income by the time he turns 45. However, he didn’t specify if he would continue expanding from there, shift his focus to other entrepreneurial endeavors or enjoy a traditional retirement.

 

Shift in Focus

 

The third category of retirement is when an investor hits a specified “retirement number,” but rather than setting off into the sunset, they give themselves the permission to shift their focus to something else.

 

Melvin Music wants $1,000 per day for the rest of his life. It is more than he needs, but he wants that amounts so that he can “do a lot of good and help out a lot of folks.”

 

Neil Henderson’s bare minimum number is $700,000, assuming his personal residence is paid off and he doesn’t hold bad debt. At that point, he would work to maintain his business, but it would also open up a world of possibilities that would allow him to take greater risks.

 

Lia Martinez wants $5,000 per month, which she is on pace to achieve by August 2018. Outstanding! Then, her plan is to move to Peru and shift her focus to other work while maintaining her current real estate portfolio.

 

Julia Bykhovskaia, having a go big or go home mentality, wants a net worth of $20 million and a passive income of $500,000. Her reasoning for this goal is not to achieve it and be idle. It is because she wants the freedom to do what she wants (personally and work-wise), when she wants and with whoever she wants. Also, to be able to help people that she loves and to contribute to the causes she cares about.

 

What about you? Comment below: How much money do you need/want to retire? Or do you fall into one of the other two retirement categories?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

How 5 Real Estate Investors Turned Mistakes Into Cash

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was “what has been your biggest learning opportunity (or mistake as some say) in your real estate career and what did it teach you?

 

I think Jonathan Twombly, who provided an outstanding answer to this question, said it best: “The only way to gain experience is by making mistakes.” Of course, mistakes are not the ONLY way to learn, and you should never TRY to make mistakes. But the point he is trying to make is that if all of your real estate endeavors go off without a hitch, you may begin to feel like YOU are entirely responsible for that fact. In reality, if you’ve never made a mistake in real estate, not only have you probably been lucky, but a sticky situation WILL arise eventually. When it does, if you have this sense of infallibility, it may be your downfall.

 

Whereas if you have made and successfully overcome mistakes in the past, you have gained the experiential knowledge that will allow you to avoid making that same mistake again or, if you are faced with the same or similar issue, to navigate it successfully. In some cases, facing and overcoming an obstacle may be the best thing to ever happen to your real estate business, as it forces you to reevaluate what you have been doing and determine if you need to alter your approach or entire strategy!

 

That being said, the poll is closed, the results are in and here are the responses:

 

Jonathan Twombly made two big mistakes. The first was not promoting his real estate business early enough and aggressive enough. The market is saturated with real estate entrepreneurs, so branding and promoting of your business is a must if you want to stand out from your competitors. For promotional tips, here are 8 ways to promote your real estate brand.

 

Jonathan’s second big mistake early on in his real estate career was allowing the property management company to put a manager on his property who lacked experience with that asset type, which caused a ripple effect of problems for YEARS, even after they were fired, replaced and long gone. Having one bad year, or even a few months, of management will negatively affect the operations for a long time. A large dip in occupancy results in a dip in revenue, which means you get behind on payables, investor returns, your returns and liquidity. And to make matters even worse, when you have liquidity problems, if an unexpected maintenance or capex issue occurs, you may not have the liquidity or cash flow to cover it, which results in out-of-pocket expenses, capital calls or even foreclosure!

 

In regards to the property management issue, this is overcome by properly screening the property management company prior to hiring them. Here are the best practices for interviewing and screening property management companies. In regards to the vacancy and liquidity issue, Jonathan always ensures that the cash flow on the property is high starting on day one and that he has a large reserve fund on hand to deal with unexpected issues.

 

Similarly, Ryan Gibson’s biggest mistake was hiring the wrong people in general. He learned that good people are what make your business and the world go ‘round. For the best hiring practices, check out our blog category on building your real estate team.

 

Jason Buzi is prime example of someone who realized he was making a mistake, completely changed his business model and benefited greatly as a result. In 2011, he and a friend wholesaled a property to a fix-and-flipper and made $12,5000. The buyers ended up rehabbing the property and netted $400,000. This deal made him realize that he was leaving MILLIONS of dollars on the table, so he started rehabbing properties himself in addition to his wholesaling. Based on this shift, he had his first seven figure year in 2013 and bought a personal residence worth over $1 million free and clear. If you are interested learning how you can net over $1 million per year as a wholesaler, click here.

 

Micki McNie’s biggest mistake was working with and trusting someone she didn’t know. She gave this person $40,000 to do a rehab without having looked at the house herself. As a result, she had a hard time selling the final product because this person didn’t prioritize the repairs and upgrades that actually attract buyers. Projects like updating the mechanicals or installing new windows were not performed. The lessons she learned were to always perform her own due diligence rather than trusting a partner, even an experience partner, to do it. Also, she learned to be much more cautious of new markets that she’s never worked in before. Another solution to the market problem is to use the ultimate guide to evaluating a target real estate market!

 

Lastly, Cheryl Oliphant’s biggest mistake was not buying based on positive cash flow, but for appreciation only. She learned that buying for appreciation is not investing, it’s speculation. In fact, not buying for appreciation is one of the three fundamentals to thrive in ANY real estate market. Click here to learn the other two.

 

What about you? Comment below: What has been your biggest learning opportunity (or mistake as some say) in your real estate career and what did it teach you?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

value add apartment

27 Ways to Add Value to Apartment Communities

Of the three main apartment syndication strategies, two (value-add and distressed) involve making improvements to the physical property or the operations in order to increase the revenue or decrease the expenses, resulting in an increase in the value of the apartment.

 

Regardless of whether you decide to pursue the active or passive apartment investing route, understanding the various ways to “add value” is a must.

 

As an active apartment syndicator, it is your job to identify the value add opportunities in a prospective deal in order to create a business plan that maximizes the projected returns for your passive investors.

 

As a passive investor, you need to be capable of analyzing a distressed or value-add syndicator’s business plan in order to determine if the opportunities identified are conducive with the property type, market, resident demographic, etc. and if they will result in an increase in revenue and/or decrease in expenses.

 

Five syndicators looking at the same apartment deal will create five different value-add business plans. Therefore, the ability to identity value add opportunities has a direct impact on not only the return projections but also the syndicator’s ability to even acquire the property in the first place. Generally, the most creative syndicator will underwrite the highest projected returns and, as a result, be able to find more deals that meet their investment criteria.

 

I break down the value-add opportunities into two categories – simple and advanced. Simple opportunities are more creative, require little to no capital or effort to implement and can be add to most sized apartments. Whereas advanced opportunities require more capital and more effort and usually only make financial sense on larger projects, with some only making financial sense on luxury apartment communities. However, the opportunities in both categories will result in an increase in property value and allow the community to standout against its competitors.

 

Simple Opportunities

 

1. Add washer and dryer: install washer and dryer units into all or a select number of units and charge a monthly premium. Another option is to create a laundry room and install coin-operated washers and dryers.

 

2. Stainless steel appliances: if the units have dated or black/white appliances, such as refrigerators, dishwashers, microwaves and/or stoves, upgrade to new stainless-steel appliances and charge a rental premium.

 

3. Appliance upgrade packages: for units that already have newer or nicer appliances, charge a rental premium.

 

4. Appliance rentals: offer rentals for common items like vacuums and carpet cleaners. This will also reduce the expenses associated with turnovers.

 

5. Upgrade light fixtures: installing new light fixtures is a quick and inexpensive way to make for a more aesthetically pleasing unit.

 

6. New hardware: Of course, units with new cabinetry in the kitchen and new vanities in the bathroom will demand a higher rent. However, a more inexpensive way to update the look of the kitchen and bathroom is to install new hardware, which includes new cabinet/vanity handles, sinks, toilets, faucets, showerheads, etc. Additional new hardware upgrades are new door handles and installing curtain rods.

 

7. Ratio Utility Billing System (RUBS): Implement a RUBS program, which bills back a portion of the water, sewer, trash, electric and/or gas expenses to the residents.

 

8. Parking: Rather than implementing the more advanced parking upgrades, charge a monthly or yearly fee for a guaranteed or premium location parking spot.

 

9. Pet fees: charge a one-time deposit or monthly fee for residents with pets. This strategy is best for apartments that already allow pets but do not collect a fee.

 

10. Location/view premiums: Each unit has its own unique view and location, with some being better than others. For units with better locations and views, charge a rental premium. Examples are first floor units, units near the front of the community or amenities, units with a view of a body of water or fountains, units with better surrounding greenery, etc.

 

11. Bike rack rental: depending on the market and resident demographic, install bike racks and rent them out for a monthly fee. Bike racks are best when the resident demographics are Millennial or Gen X.

 

12. Clubhouse rental: for large communities that have a clubhouse, offer to rent it to residents for special events at a flat fee.

 

13. Upgrading property management software: use the latest and greatest property management software to accurately calculate the market rents to ensure you are charging the correct rental rates.

 

14. Short-term leases: depending on the market, offer short-term leases or offer furnished units and list them on services like AirBnB or work with a corporate housing provider.

 

Advanced Opportunities

 

15. Demographic based amenities: construct specific amenities based on the demands of the renter demographic. From a generational perspective, Millennials prefer a resort-style living experience. They value convenience and flexibility so they will often seek apartment communities that offer high-tech amenities and services. These include free coffee in the common areas, high-speed Wi-Fi, in unit USB charging ports and a modern fitness center with fitness classes offered. Gen Xers also prefer high-tech home furnishings, but also concierge services and family-friendly features like playrooms, playgrounds and areas that offer family-friendly activities. Additionally, Gen Xers want easy access to washers and dryers and fenced in backyards. Finally, Baby Boomers demand larger living spaces (both individual units and common areas), state of the art fitness centers and common areas that offer fitness classes and social gatherings.

 

16. Patios or balconies: build patios for the ground level units and/or balconies for the non-ground level units and charge a rental premium.

 

17. Fenced-in yards or patios: increase privacy by constructing fences around the yards or patios of all or a select number of ground level units and charge a rental premium.

 

18. Carports: build a select number of carports and charge a monthly or yearly fee.

 

19. Extra rooms: add extra bedrooms, bathrooms, dining rooms, living rooms, sunrooms, etc. by erecting walls in larger units or building additions onto existing units.

 

20. Dog Park: if the apartment community has a large amount of unused green space and depending on the renter demographic, fence in an area and create a dog park. But don’t forget the poop bag stands!

 

21. Storage lockers: install storage lockers in the clubhouse and rent them out for a monthly or yearly fee.

 

22. Vending Machines: buy or rent vending machines and install them in the common areas.

 

23. Billboards: depending on the traffic and building codes, install billboards on the grounds and lease them to local businesses.

 

24. Daycare, after school or summer programs: attract the family demographic with the convenience of a childcare facility for daycare or after school/summer programs.

 

25. Coffee shop or convenience mart: I’m not talking about building a Starbucks or CVS/Walgreens. Just a small shop or cart that offers coffee and/or snacks, similar to those found in hotel lobbies.

 

26. Fitness center: update or construct a fitness center and offer free fitness classes like yoga, aerobics, spin, etc.

 

27. Miscellaneous: other advanced/luxury upgrades that can be offered for free (i.e. with the costs built into the rents) or a monthly/annual/one-time fee include a car-sharing service, 24-hour concierge, cooking classes, dry cleaning/laundry service, free Wi-Fi, iCafe, package delivery management, personal shoppers, pet grooming, rock-climbing wall, rooftop terrace, spa/massage center, tech/business center and a wine cellar.

 

 

Whenever you are analyzing a prospective apartment deal, run through this list of 27 simple and advanced upgrades to determine if they make financial sense based on the property type, market and renter demographic, which is accomplished by ensuring that the required capital investment is returned, and then some, during the projected holding period. And always make sure the projected rental premiums are confirmed by the property management company and are supported by the rental comps in the area.

 

What do you think? What value-add opportunities are missing from this list?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

active vs. passive

Active Vs. Passive: Which Is the Superior Real Estate Investment Strategy?

 

Originally featured in Forbes here.

 

When the average person thinks of real estate investing, they might imagine a billionaire who develops massive commercial properties, or an HGTV fix-and-flipper who turns a profit by converting a run-down property into someone’s dream home. With this mental representation, it’s no wonder more people aren’t real estate investors.

 

Obviously, this isn’t the case in reality. There are thousands of different real estate investing strategies from which to choose. The difficult part — aside from shedding the false belief that real estate investing is only for the rich —  is identifying the ideal investment strategy that fits one’s current economic condition, abilities and risk tolerance level.

 

Generally, entry-level investment strategies fall into two categories: passive and active investing. The question is, which one is best for you?

 

For our purpose here, I will define active investing as the acquisition of a single-family residence (SFR) with the goal of utilizing it as a rental property and turning over the ongoing management to a third-party property management company. Alternatively, passive investing is placing one’s capital into a real estate syndication — more specifically, an apartment syndication — that is managed in its entirety by a sponsor.

 

In order to determine which investment strategy is best for you, it is important to understand the main differences between the two. Based on my personal experience following both of these investment strategies and interviewing thousands of real estate professionals who have done the same, I’ve discovered that the differences between passive and active investing fall into three major categories: control, time commitment and risk.

 

Control

 

As a passive investor, you are a limited partner in the deal. You give your capital to an experienced sponsor who will use that money to acquire and manage the entire apartment project. You have no direct control over any aspect of the business plan, so you are putting a lot of trust into the sponsor and their team. However, this trust is established by not giving your money to a random, unqualified sponsor but through an alignment of interests. For example, the sponsor will offer you a preferred return, which means that you will receive an agreed-upon return before the syndicator receives a dime. Therefore, the syndicator is financially incentivized to achieve a return above and beyond the preferred return.

 

As an active investor, you can directly control the business plan. You decide which investment strategy to pursue. You decide the type and level of renovations to perform. You decide the quality of tenant to accept and the rental rate to charge. You determine when to refinance or sell. With for passive investing, all of the above is determined by the apartment syndicator.

 

Time Commitment

 

As an active investor, the advantage of more control comes with the disadvantage of a greater time commitment. It is your responsibility to educate yourself on the ins and outs of single-family rental investing. Then, you have to find and vet various team members. Once you have a team in place, you have to perform all the duties required to find, qualify and close on a deal. After closing, as long as you have a good property management company, it should be pretty hands-off. Although, if (really, when) something unexpected occurs, you’re responsible for making those decisions, which can come with a lot of stress and a lot of headaches.

 

Of course, it is indeed possible to automate the majority, if not all, of the above tasks. But that requires a certain level of expertise and a large time investment to implement effectively.

 

Passive investing is more or less hassle-free. You don’t have to worry about any of the actions described above. You just need to initially vet the apartment syndicator and vet the deal. From there, you simply invest your capital and read the monthly or quarterly project updates.

 

Risk

 

You are exposed to much less risk as a passive investor. You are plugging into an already created and proven investment system run by an experienced apartment sponsor who (preferably) has successfully completed countless deals in the past. Additionally, there is more certainty on the returns. You will know the projected limited partner returns — both ongoing and at sale — prior to investing. And assuming the syndicator conservatively underwrote the deal, these projected returns should be exceeded.

 

Active investing is a much riskier strategy. However, with the higher risk comes a higher upside potential. You own 100% of the deal, which means you get 100% of the profits. But, you also have to bear the burden of 100% of the losses. For example, a turnkey rental will likely cash flow a few hundred dollars a month depending on the market. The costs associated with one large maintenance issue or a turnover could wipe out months, or even years, of profits. A value-add or distressed rental has a huge upside potential. However, a common tale among distressed or value-add investors, especially the newer or less experienced ones, is projecting a certain renovation budget but finding an unexpected issue during the rehab process that drastically increases their budget, resulting in a lower or negative overall return.

 

Additionally, failing to accurately calculate a post-renovation unit’s rental premium will also result in the reduction or elimination of profits. While these profit reduction or elimination scenarios could technically occur with a passive investment, the risk is spread out across many investors, and a sponsor with a proven track record and a qualified team will mitigate these risks.

 

Real estate investing is for everyone, not just the moguls of the world. However, not all investment strategies are the same. It’s important to understand the pros and cons associated with each to determine which strategy will set you up for success.

Do You Want Financial Freedom or to Build a Real Estate Empire?

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was “would you rather a) spend minimal time per week (5-10 hours) maintaining your business that makes $500,000 per year or b) work 50+ hours per week on your business making $2 million per year and growing?”

 

I really like this question because it is a reflection of the two main reasons why people are attracted to real estate investing: financial freedom or empire building.

 

Real estate investing allows you to build a portfolio that generates enough cash flow to cover your living expenses so that you can quit your corporate 9 to 5 job and do whatever you want with your free time. Real estate investing also provides you with the opportunity to build a multimillion or multibillion dollar company, which allows you to create jobs, donate MASSIVE amounts of money, build a legacy and pass on your wealth for generations to come, and ultimately automate the business over time to gradually increase your free time.

 

Whatever financial or lifestyle goals you have, there is a real estate strategy for you.

 

That being said, the poll is closed, the results are in and here are the responses:

 

Overall, option A (the 5-10 hours per week for $500,000 per year) defeated option B  (50+ hours per week for $2 million per year) 46 to 32.

 

The majority of the people who selected option A did so for similar reasons. They would use the $500,000 per year and the extra 30 to 40+ hours per week to generate more capital.

 

Scott Bower would take the $500,000 and spend some of his free time to learn how to put that money to work to get to the $2 million per year without having to work 50+ hours per week.

 

Similarly, Charlie Kao would select option A because if he was able to generate $500,000 per year while only working 5-10 hours per week, he’d likely have great systems and processes in place that would allow him to scale, if he wanted, in the future. Kimberly Banks Fawcett agreed because she couldn’t help but imagine all the other ideas she’d have time to make a reality with all of her free time.

 

Ryan Groene would select option A, but it would only be his side hustle. He would still work 50+ hours per week in total, with the remaining 35+ hours spent on creating a business that would generate $1.5 million or more per year.

 

Jamie L. Ware likes option A because his time is more valuable than money, and he would use that time to work on other ventures that could potentially add to the pot.

 

Others selected option A because their real estate goals are to achieve financial freedom and enjoy their free time however they want. Eddie Noseworthy would take the $500,000 while working 5-10 hours per week because even though money is important, it isn’t the most important. Finally, Eric Kottner’s whole point in starting a real estate business is to eventually make enough passive income to become lazy, which is achieved with option A.

 

A few people provided a hybrid answer. Joshua Ibarra would start with option B ($2 million for 50+ hours per week of work). But, after 10 years and automating the business, he would reduce his time commitment to 5-10 hours per week while still making $2 million or more per year.

 

Similarly, Ben Steelman would put in the 50+ hours now. Then, he would work towards ensuring that he was the “dumbest” person in his organization by building a great team. This will allow him to achieve his real estate goal, which is to create a business that thrives without him being the day-to-day driving factor so that he can eventually reduce his working hours.

 

Michael Beeman selected option B because if he just maintained a business, he would feel like he is dying. Additionally, he already works 50+ hours 6 to 7 days a week between his full-time job and real estate business and doesn’t have an issue with it.

 

Finally, Carolyn Lorence would go with option B because she loves her real estate business and enjoys creating. That’s because she doesn’t work “in” her business, she works “on” her business. Also, if she is growing her business, she will be able to provide opportunities for others in the process. She’d have a blast with this and make time for all the fun stuff by putting the right systems in place.

 

Overall, people selected the $500,000 per year working 5-10 hours per week so that they could use their free time to generate additional income or just be lazy. And people selected the $2 million per year working 50+ hours per week so that they could work towards automating the process and reduce their work hours.

 

What do you think? Would you rather a) spend minimal time per week (5-10 hours) maintaining your business that makes $500,000 per year or b) work 50+ hours per week on your business making $2 million per year and growing?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

How to Create the Largest Real Estate Meetup in Your Market

In a previous blog post, which you can read here, I provided meetup three case studies that can be used as a guide, or replicated entirely, for creating your own meetup group in your market.

 

However, at the 2018 Best Ever Conference, I had an insightful conversation with Adam Adams, who created the largest meetup group in Denver. I walked away from that conversation with the four creative tactics he uses to quickly and continually grow his meetup group.

 

If you’ve already established a meetup group, no problem! Because these can be applied to both starting a meetup group from scratch or massively scaling an existing group.

 

1 – Host a Weekly Meetup

 

The first tip was to host a weekly meetup group, as opposed to monthly or bimonthly. The main assumption behind this tactic is that the more meetups you host, the faster it will grow. Therefore, by hosting weekly meetups, your group will grow 4 to 5 times faster!

 

This tactic is most effective when you are starting a meetup from scratch. The exception would be to ask the members of your existing meetup group for their thoughts on increasing the meeting frequency. Or, if you are in a larger market, you can continue hosting your monthly meetup group, but also start hosting three other meetup groups at different submarkets or neighborhoods across the city.

 

Also, this tactic is most effective when your meetup structure either involves inviting a speaker or is such that people have a reason to attend more often than once a month.

 

For example, one of the meetup case studies I outlined in a previous meetup blog post was on an investor who hosts his meetup more frequently than once a week (4 times a week). Even though most of the members only attend a few meetups per week, his success proves the weekly meetup concept.

 

On the other hand, each of Adam’s weekly meetups feature a guest presenter. Since you need to book a new speaker each a week, this structure requires a little more effort on your part. However, the reason why putting forth his extra effort is worth it ties into tactic number 2…

 

2 – Invite a Speaker

 

Inviting a guest speaker to present valuable information to the group is not only advantageous because it will naturally attract more people, but also because you can leverage the speaker to proactively attract even more attendees.

 

Out of all the tactics, this is Adam’s most creative. Let’s say you invite a multifamily investor to give a presentation on five ways to find off-market apartment deals. Once they’ve confirmed, go online, find local multifamily groups/networks and personally invite members of those groups/networks to that specific meetup.

 

On Meetup.com and Facebook, find the local multifamily group and message the most recent 30 to 50 members. On LinkedIn, either follow a similar approach or search for local individual professionals that are involved with multifamily and send them a message. On BiggerPockets, perform a search to find members who are local and involved with multifamily and invite them to your meetup.

 

Regardless of which approach you follow, you will send the same message. If you have a multifamily speaker, the message should say, “Hi. I host a real estate investing meetup group in (insert your city). At our next meeting, we have a multifamily investor that will be presenting on how to find off-market deals. I saw that you are involved in the multifamily niche and thought that you would find value in attending. Do you want me to send you a link so you can sign up for the meeting?”

 

Don’t just send them a link. Instead, ask them if they want you to send them the link. Adam has tried both strategies and found that messages where he asks to send the link have a higher response and conversion rate.

 

3 – Cap the Event Size

 

Another minor, yet extremely effective, strategy is to place a cap on the number of people who can attend the meetup. If you are posting your meetup on Meetup.com, you will have the option to limit the number of available spots.

 

The purpose of capping the event size is two-fold. One, it promotes scarcity. When someone visits the meetup page and sees that there are only a few spots remaining, they are more likely to sign up.

 

The other reason is to have a meetup that always reaches capacity. Now, you may be asking, “Well how do I determine the number of spots to offer in order to reach capacity?” Adam’s answer is that you don’t have to! Let’s say you are hosting your first meetup group. Once you create the invitation, set the number of available spots to 10. If the event sells out, you can manually move the people on the “waitlist” to the “attending list” or you can increase the number of spots. However, on the day of the meetup, before leaving your house, edit the number of available spots so that it equals the number of people attending. In doing so, you will technically always reach capacity.

 

The reason why you want to always reach capacity is so you can leverage that fact when inviting guest speakers. What invitation sounds more attractive, A or B?

 

  1. “Hi. I host a weekly meetup group. We currently average 10 members per meeting. Would you be interested in being our featured speaker next week?”
  2. “Hi. I host a weekly meetup group. Every meeting has completely sold out! Would you be interested in being our featured speaker next week?”

 

Positioning your meetup as always reaching capacity will increase its desirability in the eyes of potential speaker, which will also increase the chances of them accepting your invitation.

 

4 – What Happened and What Will Happen?

 

The last tactic is to continuously contact the members of your group. However, this doesn’t mean bombarding their inbox with useless emails. Only contact the members when you have a new piece of information to share. Adam broke down the times that it’s relevant to contact members of your meetup group into two categories: what has happened and what will happen.

 

For example, at each meetup group, take a lot of pictures. The next day, post those pictures to your social media page, tagging those in attendance and thanking them for coming. Or, if you had a presenter, write a quick blog post that recaps the top takeaways.

 

When you book at new speaker, send a message out to the meetup members, notifying them on who the presenter is and what they will be speaking on. Send a reminder a week and a day before an upcoming meetup. If you come across a piece of real estate content that will add value to your members businesses, send them a link.

 

The purpose of these messages is to create a sense of community. Because with a strong sense of community, members are more likely to continue coming back and are more likely to invite their friends or business colleagues.

 

 

Huge thanks to Adam Adams for providing these tips, and I am looking forward to hearing your success stories after you’ve applied these tactics to your meetup!

 

The 12 Greatest Mentors of All-Time

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was “you can choose ANYONE to mentor you, dead or alive. Who would it be and why?”

 

To attain your ultimate real estate or business goals, interacting with an actual mentor is vital – or, at the very least, it will aid in increasing the probability of succeeding or expediting the speed in which you achieve massive success.

 

However, an alternative or complementary strategy is to study the unique individuals, past and present, who accomplished greatness. By analyzing the lives of such people, we can determine the habits and strategies the resulted in their success and apply those to our businesses. And what better way to compile a list of history’s greatest minds than by learning about the mentors of active, successful real estate entrepreneurs!

 

That being said, the poll is closed, the responses are in and here are the answers:

 

If you know me, you already know my answer – Tony Robbins. He distills complicated psychological and mindset advice into simple and digestible tidbits and is an AMAZING motivator. If you haven’t yet, I highly recommend reading his best-seller, Awaken the Giant Within.

 

Tim Rhode chose Gandhi because he quietly led a successful movement and did not lose his soul in the process. External success is important, but internal success may be of equal or even greater importance. Click here to purchase Gandhi’s autobiography to learn about how he developed his philosophy that changed an entire country.

 

Grant Rothenburger chose Napoleon Hill for his psychological and mindset advice. A “Tim Ferriss” of his time, Napoleon compiled the principles of the multimillionaires of the 19th and 20th centuries into his world-famous book, Think and Grow Rich, which you can purchase by clicking here. Although, I am sure you’ve read it at least once in your life!

 

Dylan Borland provided a unique answer. He selected Nikola Tesla so that he could get his hands on the plans for Tesla’s perpetual energy device. Of course, I am sure Dylan would reinvest the billions of dollars in profit back into real estate. Nonetheless, click here to purchase a copy of Tesla’s autobiography for a glimpse into the mind of a creative genius.

 

Devin Elder chose Jesus Chris, as he couldn’t think of a more impactful figure in history.

 

Mitchell Drimmer chose Winston Churchill, a Prime Minister of the United Kingdom in the 20th century, because he was resolute. Click here to purchase his autobiography in which he explains how he overcome adversity and major setbacks during the first 30 years of his life.

 

Lennon Lee selected a mentor who is still living – Tim Ferriss. Through Tim, he would get curated bits and pieces of advice from a tribe of mentors. I think Lennon was implying that Tim’s newest book, Tribe of Mentors, is a must read!

 

Eddie Noseworthy picked Rob Dyrdek, who is probably most commonly known for his successful reality TV shows like Rob & Big, Rob Dyrdek’s Fantasy Factory and Ridiculousness. Eddie chose him because Rob seems to squeeze every inch of fun out of the day while being a super successful entrepreneur. Eddie also likes that fact that he has been successful in multiple industries that most people might say he has no business in, which is a testament to his drive and determination.

 

Paul Hopkins chose Richard Branson, because he has started multiple billion-dollar companies and he lives life on the edge. In his autobiography, Losing My Virginity, Richard provides a blueprint to how to balance achieving massive levels of business success and living life to the fullest.

 

Amber Peel went with Beyonce because of her admirable authenticity and legendary work ethic.

 

Going back to the grave, Ryan Groene selected John D Rockefeller. Even though many see him as a negative oil tycoon, Ryan selected him because to amass such an empire, you must know a little something (or a lot of something) about business. Rockefeller’s biography, Titan, is very popular amongst entrepreneurs.

 

Lastly, we have Randy Ramadhin, who chose John Willard Marriott because his legacy is worldwide and will endure for generations. In his autobiography, he shares both the story of and the recipe for the success of Marriott International, one of the world’s leading hotel companies.

 

What do you think? Comment below: you can choose anyone to mentor you. Who would it be?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

8 Step Process For Selling Your Apartment Community

You’ve acquired a new asset, completed your value-add business plan and have been distributing higher than projected returns to your satisfied investors – or if you’re just an apartment investor, to yourself –  for the past few months.

 

You think your investors are satisfied now? Well, they are going to be ecstatic when they receive that massive distribution upon sale! So, when and how do you sell your apartment community?

 

One of your responsibilities as an asset manager is to evaluate the market in which your property is located on an ongoing basis. Once you’ve stabilized the asset, completing all of the value-add projects, estimate the property value at least a few times a year. Find the current market cap rate and, using the net operating income, calculate the value of the asset.

 

Even if your business plan is to sell in five years, don’t wait until then to evaluate your asset. You may be able to provide your investors with a sizable return if you sold, or refinanced, before the end of your initial business plan.

 

If you get to the end of your business plan and the market conditions are not such that you can sell the asset and meet your investors return expectations, don’t be afraid to hold onto the property longer.

 

When the market conditions are right, here is the 8-step process to sell your apartment community:

 

 

1 – Be Mindful of The Sale

 

As you are approaching the end of your business plan, or when you determine that it makes financial sense to sell earlier, be mindful of the sale. The value of the asset is dependent on the market cap rate (which is outside of your control) and the net operating income. In order to maximize the value, you want to maximize the net operating income, which means maximizing the income and minimizing the expenses.

 

Once you’ve made the decision to sell, don’t start certain projects if the payback period extends past the sale’s date. For example, if you plan on selling in three months, it doesn’t make sense to renovate a unit for $5,000 to get a $100 rental premium.

 

Consider spending a little bit more money on marketing to increase occupancy. Offer more concessions than you usually would to increase rental revenue. Pursue collections a little harder than usual.

 

Overall, look at your profit and loss statement and see which income and expense line items can be improved in the months prior to listing the asset for sale.

 

 

2 – Send Your Lender a Notification of Disposition

 

When you decide to sell, you will need to notify your lender. To do so, you need to send them an official notification of disposition. This is typically two months prior to listing the apartment for sale to the public. Work with your experienced attorney to draft the notification and send it to your lender.

 

Depending on the loan program you used, you may have a prepayment penalty. Keep that in mind when deciding to sell, because a large prepayment penalty will drastically reduce your sales proceeds.

 

 

3 – Request a Broker’s Opinion of Value

 

Based on your evaluations of the market, if you are confident that you can sell your apartment at the price you need in order to get the returns you want, the next step is to find a listing broker. It’s easy to write down a value that makes you happy, so you’ll want to get a relatively unbiased second opinion without having to shell out a few thousand dollars for a full appraisal.

 

You want to find a broker who is the best fit to sell the property. Loyalty is important in this business, so I recommend using the same broker who represented you when you purchased the asset. But, there might be reasons why you want to go with someone else. If that is the case, reach out to two or three of the best brokers in the market and ask them for a Broker’s Opinion of Value (BOV). Send them whatever information they request (T12, rent roll, etc.).

 

When you receive their opinion of value, ask them a few follow-up questions. You need to be confident that they can sell the property at that value. Ask them questions like:

 

  • What valuation approach did you use?
  • What types of buyers do you typically sell to? What size and price range do they invest in?
  • Why do you feel confident that those buyers will purchase this asset at this price?
  • Have you sold similar assets recently?

 

Based on the value and follow-up questions, select a broker to list the property.

 

 

4 – Start a Bidding War

 

Over the next six weeks or so, your broker is going to create the offering memorandum and market the apartment to the public to whip up a whole lot of interest. Interested parties will come visit the property and follow the same approach that you did when you purchased the property – talk to the property manager, tour units, inspect the exteriors, analyze rent comps, run the numbers, and submit an offer. The goal is for your broker to create a bidding war in order to push up the offer price and get you the highest offer price possible.

 

 

5 – Screen Out Newbies with a Best and Final Call

 

Once you stop accepting offers, you will review the submissions and have a best and final call with the top offer or offers to qualify the buyers.

 

You want to know about their track record, funding capabilities and proposed business plan to gauge their ability to close. Ideally, you sell to a sponsor with a large track record. You don’t want a newbie that has to back out of the deal during the due diligence phase because they cannot fund the deal, did poor underwriting, etc.

 

 

6 – Negotiate a Purchase Sales Agreement

 

Select the best offer and negotiate a purchase sales agreement (PSA). Have your experienced attorney draft a PSA. Don’t let the buyer draft the PSA, because you want to start the negotiation with terms closest to where you need them to be, and not the other way around. Send them the PSA for their attorney to review. You’ll likely go back and forth to negotiate the terms of the contract, with the end resulting hopefully being reflective of what was in their letter of intent.

 

This negotiation process typically takes about a week. Sometimes longer, but usually not shorter.

 

7 – Fulfill Obligations During Due Diligence

 

When the negotiations have concluded and both you and the buyer have signed the PSA, the due diligence period begins. The buyer will be required to adhere to the schedule agreed upon in the PSA (i.e. they have X number of days to perform due diligence, Y number of days close, etc.). And you owe them whatever it is you agreed to in the PSA (i.e. they can come to the property with 24 hours’ notice, they can look at your bank statements, financials, leases, marketing material, etc.).

 

Best case scenario is that nothing comes up during the due diligence period and you sell the property at the price and terms defined in the PSA. If something does come up, there may be additional negotiations back and forth with the seller on either the terms, purchase price or both.

 

Once the due diligence is completed, the buyer will work with the lender and title company to finalize things in preparation of closing.

 

 

8 – Close and Distribute Sales Proceeds

 

A few days prior to the officially closing date, you will sign the hundreds of execution documents. Then, on the day of closing, you will be wired the sales proceeds.

 

Distribute the sales proceeds to your investors according to what you and your investors agreed to. They will then go from satisfied to ecstatic and will be ready to start the process all over again!

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

$1 million

The 6 Best Uses of $1 Million as a Real Estate Investor

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was “you’ve just been given $1,000,000. What’s the first thing you do?”

 

Thank you to everyone who responded. While most of us won’t be handed $1 million any time soon, I do believe this is a good thought experiment. How we answer this question can shine a light on our top priorities or help us clarify our real estate goals.

 

That being said, the poll is closed, the responses are in and here are the answers:

 

1 – Invest

 

The most common response was to invest the $1 million into some sort of real estate product.  Some answers were general, like finding another deal that adheres to a current investment strategy (Craig Hyson), upgrading from single-family or smaller multifamily investing to apartments (Barri Griffiths, Mark Alexander Davidson) or investing in real estate to live off the interest (Andrew LeBaron).

 

Others had more specific action plans. Justin Shepherd would grow the $1 million to $10 million by investing in a deal with 30% cash-on-cash return, and then rinse and repeat. Justin Kling would use the $1 million for a 25% down payment on a $4 million apartment complex at $50,000 per door. The 80-unit ($4 million / $50,000 per unit) would ideally cash flow $200 per door, which is $16,000 per month or $192,000 per year. That’s enough cash flow to live off of if you ask me. Iqbal Mutabanna would take half and reinvest in his real estate business by purchasing an asset that produces a 10% cash-on-cash return

 

Spencer Leech’s strategy would result in the largest investment. He would find a cash flowing C-class apartment community in a secondary market that is stabilized or required light rehabs. At 75% LTV with 20% of the down payment being private equity and 5% being his $1 million, he’d acquired $20,000,000 in apartment assets.

 

Two other active investors would also invest, but in a non-real estate related product. Deren Huang would lock into a 1-year CD. Glen Sutherland would go to a lender to secure a larger loan to invest with. And Eric Kotter would invest in other real estate investors by offering private lending and transactional funding.

 

2 – Pay Off Debt Obligations

 

Another popular use of $1 million is paying off existing debt obligations. Craig Hyson and Deren Huang would pay off the mortgages on their current investment portfolio, which would drastically increase their cash flow and leveraging abilities. Eric Kotter and Amy Wan would pay off their personal debts. Eric would eliminate all personal debt, while Amy would pay off her and her husband’s student debt. By paying off their personal debt, they can redirect those monthly debt payments into real estate investments.

 

3 – Save

 

One of the less aggressive approaches is to save the $1 million. Eric Kotter would set aside a portion of the $1 million for taxes, and Iqbal Mutabanna (who used $500,000 to invest with) would add $200,000 to a rainy-day fund.

 

4 – Gratitude and Contribution

 

The most altruistic first step after receiving $1 million is to express gratitude or donate a portion of the proceeds. Since someone just gave you $1 million, it only makes sense to pass that on, right?

 

The first thing Jason Scott Steinhorn and Dave Slaughter would do is say thank you to whoever gave them the money. In terms of contribution, Andrew LeBaron would pay tithing, Justin Kling would give away 10%, and Iqbal Mutabanna would use his remaining funds for tithing ($100,000) and donating to charities ($200,000).

 

5 – Strategize

 

A very rational first step after acquiring $1 million is to take some time to strategize and come up with the most effective use of the money.

 

Neil Henderson would make an appointment with his accountant to discuss tax strategies. Nick Fleming would hire a world-class mentor/business coach and start hiring really talented employees, both of which will 10x his business. Charlie Kao would refocus by creating new goals and a new business plan, working towards growing his money long-term. And Deren Huang would make sure he remained level headed and didn’t make any impulsive decisions, because he doesn’t want to live out the reality of many lotto-winners who end up bankrupt after a couple of years.

 

6 – Minor Adjustments to Business or Life

 

Two investors wouldn’t make a massive change. Tyler Weaver would hit up the gym, get a good night’s sleep and have a reasonable breakfast, because he needs a solid state of mind to take good care of his money. Devin Elder wouldn’t make any fundamental changes either. He would just put the money in the operational account of his house flipping business. The only changes he would consider making is to discontinue using private money lenders on a few deals or expedite a few fix-and-flip projects with the extra capital.

 

 

I think all 6 of these strategies are great ways to use $1,000,000, but what do you think? Comment below: If someone gave you $1 million, what is the first thing you would do?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

What is Your Ideal Passive Apartment Investment?

After reviewing the differences between active and passive real estate investing, assessing your current economic condition, ability and risk tolerance level, you’ve decided to passively invest in apartment syndications.

 

Great! You are one step closer to investing in your first deal. So, what’s next?

 

Similar to determining your ideal general investment strategy (i.e. active vs. passive), you need to establish your ideal passive investment. And in order to establish your ideal passive investment, you need to know what your options are first. In particular, you need to learn about the different types of apartment syndications in which you can passively invest your money and the benefits and drawbacks of each.

 

Generally, apartment syndications fall into one of three categories: turnkey, distressed or value add.

 

1 – Turnkey Apartment

 

Turnkey apartments are class A properties that require minimal to no work after acquisition. These properties are fully updated to the current market standards and are highly stabilized with occupancy rates exceeding 95%. Therefore, the turnkey business model is to take over the operations and continue managing the asset in a similar fashion to the previous owners. No renovations. No tenant turnover. Nothing fancy.

 

Of the three apartment syndication strategies, investing in turnkey apartments has the lowest level of risk. The property is fully updated and fully stabilized at acquisition. The risks associated with performing renovations, which include overspending, unexpected capital expenditures, bad contractors, incorrect rental premium assumptions, etc., and turning over a large percentage of tenants are minimized. Additionally, the asset will achieve the projected cash flow from day one, because the revenue pre- and post-acquisition remains the same.

 

The drawbacks of the turnkey apartment syndication strategy are the lower ongoing returns and the lowest upside potential compared to the other two apartment types. Because the property is fully updated and stabilized, there isn’t room to increase the revenue of the property. Therefore, the ongoing returns are and remain in the low to mid-single digits. Additionally, since the value of the asset is calculated using the net operating income and the market cap rate, unless the overall market naturally appreciates, the property value will remain the relatively stable. As a result, there is little to no upside potential at sale. Most likely, you will receive your initial equity back with no profit.

 

2 – Distressed Apartment

 

On the opposite of the end of the spectrum is the distressed apartment. Distressed apartments are class C or D assets that are non-stabilized with occupancy rates below 90% and usually much lower due to a whole slew of reasons including poor operations, tenant issues, outdated interiors, exteriors, common areas and amenities, mismanagement and deferred maintenance. Generally, distressed apartment syndicators will take over and, within a year or two, stabilize the asset by addressing the interior and exterior deterred maintenance, installing a new property management company, finding new tenants, etc. Then, they will either continue their business plan to further increase the apartment’s occupancy levels and/or rental rates or they will sell the property.

 

The major advantage of passively investing in a distressed apartment is the upside potential at sale. Once the asset is stabilized the revenue – and therefore the value – will increase dramatically, resulting in a large distribution at sale.

 

The drawbacks of distressed apartments compared to the other two types are being exposed to the highest level of risk and receiving the lowest ongoing returns. The high upside potential at sale also comes with the risk of losing ALL of your investment. There are a lot of variable to take into account with a distressed apartment, which means there are a lot more things that could go wrong. Additionally, since the asset is not stabilized at acquisition, there will be little to no cash flow – and may even negative cash flow. That means you won’t receive ongoing distributions unless the syndication structure is such that you receive interest on your investment before the sale.

 

3 – Value Add Apartment

 

Lastly, we have value add apartments. Value add apartments are class C or B assets that are stabilized with occupancy rates above 90% and have an opportunity to “add value.” Generally, the value add apartment syndicator will acquire the property, “add value” over the course of 12 to 24 months and sell after five years.

 

“Adding value” means making improvements to the operations and physical property through exterior and interior renovations in order to increase the revenue or decrease expense. These renovations are different than the ones performed on a distressed apartment. Typical ways to add value are updating the unit interiors to achieve higher rental rates, adding or improving upon common amenities to increase revenue and competitiveness like renovating the clubhouse or pool area, adding a dog park, playground, BBQ pit, soccer field, carports or storage lockers and implementing procedures to decrease operational costs like loss-to-lease, bad debt, concessions, payroll, admin, maintenance, marketing, etc.

 

Compared to the other two apartment types, value add apartments have a lower level of risk, the highest ongoing returns and a high upside potential at sale. At acquisition, the property is already stabilized and generating a cash flow. So, at the very least, the property will continue to profit at its current level and your passive investment is preserved. That also means that you will receive an ongoing distribution (typically around 8%, depending on the syndication partnership agreement) during the renovation period. Once the value add projects are completed, the ongoing distribution will increase to the high single digits, low double digits and remain at a similar level until the sale. Additionally, the increase in revenue and decrease in expenses from the value add business plan will increase the overall value of the asset, which means there is the potential for a lump sum distribution at sale.

 

What’s Your Ideal Passive Investment?

 

Your ideal passive investment will be in an apartment type with the benefits and drawbacks that align most with your financial goals.

 

Are you content with tying up your capital for a year or two with minimal to no cash flow and willing to risk losing it all in order to double your investment? Then I would consider passively investing with an apartment syndicator that implements the distressed business plan.

 

Are you more interested in capital preservation and receiving a return that beats the inflation rate? Then I would consider passively investing with an apartment syndicator that purchased turnkey properties.

 

Are you attracted to the prospect of receiving an 8% to 12% cash-on-cash return each year with the prospect of a sizable lump sum profit after five or so years?  Then I would consider passively investing with an apartment syndicator that implements the value add business model.

 

COMMENT BELOW: What is your ideal passive investment – turnkey, distressed or value add? 

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

Do Real Estate Investors Need Good Sales Skills?

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was “is it important to have good sales skills as a real estate investor?”

 

Thank you to everyone who responded.

 

The poll is closed, the responses are in and here are the answers:

 

An overwhelming majority (26 out of 30) active investors said good sales skills are very important as a real estate investor.

 

One of the dissenting views was Harrison Liu, who believed good sales skills were somewhat important. In particular, he believes location trumps sales skills. Someone with zero or minimal sales skills will have more success investing in a good location with a good school district compared to a sales superstar that invests in a challenging neighborhood. Here is a blog post with a guide to evaluating and finding such a location.

 

However, he does believe the marketing skills are required in the current market in regards to finding, renting and selling deals. Whether marketing and sales are two-sides of the same coin is a conversation for another day.

 

Joe Cornwell held an opposing opinion for slightly different reasons, using Donald Trump as an example. He said “Trump doesn’t have to sell any of his units anymore, and he is arguably one of the most ‘famous’ real estate investors ever.” In other words, once you build up a large enough portfolio of cash flowing rental properties, buying new assets or selling off parts of your portfolio are no longer a requirement. Therefore, sales skills are not always needed.

 

However, as a counterpoint, does an investor need good sales skills to generate leads and find qualified buyers and/or renters to acquire enough properties to reach the point where their portfolio is so large that they no longer need to utilized those sales skills? In my opinion, and in the opinion of 26 other active investors that responded to the poll, the answer is yes.

 

For example, Nick Armstrong said “I think building your sales foundation builds your negotiation skills, which is obviously a must in my opinion.” Negotiations occur more often than just at the offering table. If you are performing renovations, you are negotiating with contractors. If you are a passive investor, you are negotiating with a syndicator. If you are a small rental or apartment investor, you are negotiating with your tenants and/or property management company. And as a real estate investor in general, you will negotiate with lenders, brokers, city officials, business partners, among others – property even your significant other as well.

 

To put it another way, in the words of Dale Archdekin, “I think that true sales skills are really people skills. The ability to hear and be heard. So, if you as an investor are dealing with people, then YES, it’s a good idea to have sales skills.”

 

In regards to raising money for apartment syndications, I commonly hear a similar question: “Can I raise money if I’m not good at sales?” My short response to the question is STOP BEING SELFISH! Watch this YouTube video for my full reasoning behind this answer.

 

Want to learn how to hone your sales skills? Here are over 25 blog posts on that topic.

 

What do you think? Comment below: Is it important to have good sales skills as a real estate investor?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

 

Why Did You Become a Real Estate Investor?

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was what was the first thing that piqued your interest in real estate investing?

 

The polls are closed, the responses are in and here are your answers:

 

1 – Taxes

 

Mark Slasor became interested in real estate investing because of the various tax benefits. More specifically, because of the tax write offs allowed against his W2 income.

 

However, tax write offs, also referred to as deductions, are just one of many tax benefits that come from investing in real estate. Brandon Turner over at BiggerPockets wrote an in-depth article on the tax benefits that come from investing in real estate, which include deductions but also long-term capital gains, depreciation, 1031 exchanges, no self-employment or FICA (Federal Insurance Contributions Act) tax and “tax free” refinances. For more details on these six tax benefits, you can read his post here.

 

2 – Control

 

When compared to other investment avenues, like a 401k, stocks, bonds, money market account, etc., investors have more control over real estate.

 

The investor decides which of the many strategies to pursue. They select the property. They pick the type of financing. They control the entire business plan. Etc. Because of all of this control, the investor has the ability to directly influence the profitability of their investment project.

 

Jeremy Brown became interested in real estate because of this control factor. He realized the stock market was a lot like gambling. Generally, the value of the stock is tied to factors over which the individual investor as little to no control. Conversely, you have the ability to directly affect the returns of a real estate project.

 

Chris Mayes became interested in real estate for similar reasons. Not only did he love the thought of passive income and an early retirement, but also his ability to be actively involved in the investment in order to directly impact the returns.

 

3 – Opportunities

 

There are such a variety of opportunities in real estate, whether it’s different investment strategies, property types, business plans, etc., that investors frequently suffer from shiny object syndrome. “I want to fix and flip houses. But oh look, what if I kept the house as a rental? Or I could just skip single-family investing in general and jump straight to apartments. Hmmm. Maybe I should just take my capital and privately invest in a syndication…WHAT SHOULD I DO?!”

 

For the past 50 or more years, investors have reached the highest levels of success using every investment strategy and investing in every asset type, which far outweighs the drawbacks of shiny object syndrome

 

Stevie Bear became interested in real estate because of this abundance of opportunities. He was attracted to the innumerable potential avenues to pursue for profitability in nearly any market or economy.

 

4 – Friends or Family

 

Some investors were lucky enough to be born into the real estate business. Leilani Moore was a property manager for her family’s business, learning the value of real estate investing over the years. Similarly, Barbara Grassey’s father was a real estate investor, and she enjoyed hanging around the properties he was renovating.

 

Another personal relationship that leads investors into real estate are friends. Harrison Liu became interested in real estate because of a close friend who had been investing for years. In fact, this friend helped Harrison find his first deal and he’s been investing ever sense.

 

Theo Hicks also became interested in real estate through a friendship. One night, over pizza and videogames, two of his buddies mentioned the value of real estate investing. In particular, they said “sometimes, I forget I even own the property until I receive a check at the end of the month.” He was intrigued and ended up putting his first property under contract in less than a week.

 

5 – Infomercial

 

Infomercials may be a fading industry, but many active investors became interested in real estate from these flashy 30-second advertisements. Robert Lawry II is a perfect example. He saw guru Tom Vu’s infomercial when he was 14 years old. He learned that once he bought his first investment, he could drive fancy cars, go on expensive boats and, most importantly, meet beautiful girls in bikinis! How do you say no to that?

 

6 – Financial Independence

 

Lastly, one of the main reasons why people are attracted to real estate is due to the prospect of financial independence. Purchase enough cash flowing real estate to replace your corporate income and you’re FREE. Stone Pinckney became an investor to pursue financial independence. Dave Van Horn wanted a way out of a dead-end job and a life of mediocrity. Eddie Noseworthy wanted the ability to create his own epic life and have more time to do the things he loves to do.

 

How about you? Comment below: Why did you initially want to become a real estate investor?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

Flowchart planner

What’s the Superior Investment Strategy – SFR Rentals or Apartments?

Real estate is the most exciting investment vehicle because there are nearly an infinite number of way to get started, achieve financial freedom and/or launch a business to create generational wealth.

 

There are many investment types to invest in, but which one is the most conducive to long-term success?

 

Today, I want to determine the answer to this question by looking at two investing strategies in a particular – single family residence rentals and apartment investing.

 

I will define SFR investing as purchasing a single-family home using your own capital and renting it out, and apartment investing as purchasing an asset with 50 or more units and raising capital from passive investors and renting it out.

 

For the purposes of this blog post, I will assume that an individual has set out to achieve a goal of $10,000 per month in cash flow (or $120,000 per year), which will replace their current corporate salary.

 

So, based on this goal, which strategy is superior? Let’s compare both across three important factors: scalability, barrier to entry and risk.

 

Scalability

 

Scalability is how efficiently one can grow their real estate portfolio. The more difficult it is to scale a business using a certain investment strategy, the longer it will take to attain a cash flow goal.

 

Both SFR and apartment investing will allow you to generate $10,000 per month in cash flow, but which strategy will reach this goal the fastest while reducing the number of headaches?

 

For SFR rentals, the average cash flow per property per month is in the $100 to $200 range (depending on the market of course). Therefore, 50 to 100 SFRs are required to make $15,000. We immediately run into a few problems. First, you can only take out a limited number of SFR loans. Once you’ve purchased 4 to 10 homes (depending on the bank use and if they use Fannie Mae or Freddie Mac), you no longer qualify for a standard residential loan. However, a simple solution is to find a local community bank, who – once you’ve established a successful track record – will provide ongoing financing for your deals.

 

Although, you haven’t completely solved your financing problem. How will you afford the 20%, 25% or 30% down payments required to purchase 50 to 100 SFRs? This is the biggest drawback of SFR investing in terms of scalability. If you’re buying all $100,000 properties, that’s $1,000,000 to $2,000,000 in 20% down payments. Even if our sample individual saved up half their corporate salary to cover these down payments, it would take them 17 to 33 years to purchase 50 to 100 SFRs, and that’s assuming everything else goes according to plan. This timeframe can be reduced through refinancing, lines of credit or other creative financing strategies, but it will require a large amount of capital for down payments nonetheless.

 

For apartment investing, since you’re receiving commercial financing, you can obtain an unlimited number of loans (as long as the numbers pencil in for the lender). However, you will run into the same funding problem if you plan on using your own money. That’s where raising private money and syndicating an apartment comes in to save the day!

 

As an apartment syndicator, one of the ways you make money is from an acquisition fee, which is a percentage of the purchase price paid to the syndicator at closing. The industry standard is 2%. Therefore, to make $120,000 in one year, you would need to syndicate $6,000,000 worth of deals. To break it down even further, since an apartment deal generally required 35% down, you must raise $2.1 million from private investors to achieve your annual goal. And that’s not even accounting for the other ways you’ll get paid as a syndicator (i.e. asset management fee, a portion of monthly cash flow, a portion of the sales proceeds, etc.), which you could then use to purchase your own properties or reinvest into future syndications.

 

Technically, you could also raise private capital for SFR investing. However, the problem is that you’ll need to find multiple cash flowing deals at the exact same time in order to attract private capital or make the same amount of money compared to an apartment community. It’s possible but much more difficult to find 50 to 100 SFRs than finding an equivalent sized apartment community.

 

Unless you believe it will take you multiple decades to raise a few million dollars or you win the lottery, apartment investing is more scalable than SFR investing.

 

Winner: Apartment investing

 

Barrier to Entry

 

Barrier to entry means how easy it is to get to the point where you are capable of investing in your first deal. From a personal finances perspective, the barrier to entry is lower for apartment investing than SFR investing. To syndicate an apartment deal, investing your own personal capital will promote alignment of interests with your investors. However, this alignment of interests can be achieved in a variety of different ways (having your property manager invest in the deal, having your broker invest in the deal, having an experience syndicator as a general partner, etc.). Therefore, it is possible to syndicate a deal with zero dollars out of pocket. Although, I always recommend investing some of your own money in the deal for alignment of interest purposes but to also benefit for the profits! Whereas for SFR investing, as I outlined above, you will need to save up millions of dollars to afford the number of down payments required to generate $10,000 a month in cash flow.

 

From an educational and experience perspective, apartment investing has a much higher barrier of entry. No one is going to invest with you if they don’t know who you are or if you haven’t proven yourself to be a credible apartment syndicator. The solution to the former is creating a thought leadership platform. The solution to the latter, however, is more difficult (although, establishing a name for yourself through a thought leadership platform will not happen overnight). From my experience, before you can even entertain the idea of becoming an apartment syndicator, you must have a successful track record in real estate, business, or preferably both. Once that’s established, you need to educate yourself on apartment investing and syndications, which requires a lot of reading and research (but that’s what this blog is for!). Then, you need to surround yourself with credible team members who have an established track record in apartment investing. Only then will you be ready to search for your first deal, which could take anywhere from a few months to a few years! Whereas for SFR investing, as long as you have the money, you can buy a deal.

 

The barrier to entry for apartment syndication is easier from a personal finances perspective, but much more difficult from an educational and experience perspective compared to SFR investing. And there isn’t a way to fast track this process. It will take time.

 

Winner: SFR rentals

 

Risk

 

Investing, in general, will always have risks. However, not all investment strategies are the same in that regard.

 

As I mentioned in the section on scalability, the typical monthly cash flow generated by a SFR is $100 to $200 per month, or $1,200 to $2,400 per year. However, those low margins are very vulnerable to being drastically reduced or wiped out completely. One unexpected maintenance issue (let’s say a broken HVAC system) will cost thousands of dollars. Even minor maintenance issues of a few hundred dollars (replace an appliance, plumbing problems, electrical problems, etc.), when added up over time, will cost thousands of dollars. The same goes for turnovers. Some turnovers are relatively smooth and cost a few hundred bucks. However, if you have to repaint walls or replace carpet/refinish hardwood, those expenses add up quickly. An unruly resident may stop paying rent or violate the lease, and the resulting eviction process can be quite costly. Any one of these scenarios will eliminate months or even years of profits! Some of these risks can be mitigated with proper due diligence, but most of them are just the costs associated with investing in SFRs.

 

For apartments, these risks are spread across tens or hundreds of units. One maintenance issue, one turnover or one eviction has a much smaller impact on your profit and loss statement. Unless you are hit with a large amount of these problems at the same time, the apartment will cash flow. Whereas for SFR investing, you will not be able to benefit from this risk reduction until you’ve created a portfolio of at least 10 to 20 properties.

 

An apartment community is susceptible to risk when you don’t have a solid property management company or you failed to perform proper due diligence on the asset. As long as you have these pieces in place, and you follow the three fundamentals of apartment investing, the asset will not only survive, but thrive – even in a down market or if a handful of major or minor maintenance or tenant problems occur.

 

Winner: Apartment investing

 

Conclusion

 

Apartment investing has a higher barrier of entry. However, once you’ve addressed your education and experience, apartments are advantageous in terms of scalability and risk when compared to SFR rentals.

 

COMMENT BELOW: Which investment strategy do you think is superior between SFR rentals and apartments, and why?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

crying woman

Overcoming 6 Obstacles Faced by Aspiring and Growing Real Estate Investors

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was what is the biggest obstacle you face with either beginning investing or growing your investing business?

 

Instead of simply listing out your responses, we decided to provide you with the answers as well!

 

1 – Tracking Passive Investors

 

Allison Kirschbaum is an established real estate investor who is trying to scale her business. Her biggest obstacle is keeping track of all the new investors her company meets without having them fall through the cracks.

 

There are many CRM providers who offer tracking services, but they can be quite costly, especially if you are just starting out. That’s why I created my very own investor tracker, which I am willing to give out FOR FREE. Not only does this spreadsheet allow you to keep track of potential and current investor information, but it also automatically creates data tables to track the cities with the most investors (in terms of people and dollars) and the sources that generate the most investor leads. You can even use it for tracking the money raising process for a specific apartment deal.

 

If you are facing a similar obstacle as Allison, email info@joefairless with the subject line “Money Raising Tracker” to receive my custom investor tracker spreadsheet.

 

2 – Finding Deals in an Expensive Market

 

Two investors are finding it difficult to locate qualified deals in their local market. Sarah May lives in the highly competitive Denver market, and Killian Ankers also lives in an expensive real estate market. Both are open to investing in an out-of-state market, but would prefer to remain local, because they know their home markets like the back of their hands.

 

My company faced a similar obstacle in mid-2017. My target market is Dallas, TX, which was and remains highly competitive. Our solution was to get creative. We found an on-market opportunity that was highly publicized and marketed by a broker, which resulted in an ever-increasing price. Instead of walking away from the deal, we had our broker reach out to the owner of the apartment community across the street, and we were able to negotiate and put the property under contract at a significant discount! If we had only purchased the on-market opportunity, it wouldn’t have made financial sense. But due to the cost saving associated with purchasing two apartment communities on the same street, we were able to close on both.

 

On the other hand, if you do decide to pursue investment opportunities in a market outside where you currently reside, finding credible, experienced team members is a must! This process begins by selecting and evaluating a market, and then interviewing and hiring a property management company and a broker.

 

3 – Shiny Object Syndrome

 

Micki McNie is facing an obstacle to which everyone can relate – focusing on a single real estate strategy. Shiny object syndrome befalls investors of all experience levels. The near infinite number of potential investment strategies can paralyze an aspiring investor. Then, the longer you’re in the industry, the more people you build relationships with, which naturally results in being presented with a greater variety and volume of new and exciting investment opportunities.

 

How does the aspiring investor decide which investment strategy to initial pursue? Well, I think you need to identify the root of the problem first. Are you truly struggling with selecting the best investment strategy or are you just using that as an excuse to not take action? If it is indeed the former, pick the investment strategy that aligns most with your current interests and unique skill sets and show up EXTRAORDINARY, always keeping in mind that investors have had success in every investment strategy for the past 50 years! If it is the latter, you need to learn how to identify and crush your fear barriers!

 

How does the established investor avoid chasing after opportunities that are outside of their skill set? Accountability! And if you’ve found that holding yourself accountable is a challenge, outsource that responsibility by either starting a meetup group (social approval is a powerful way to keep you on track) or hiring a mentor.

 

4 – One Person Team

 

Neil Henderson has hit a barrier in growing his business because he’s trying to wear too many hats at once. He’s a loyal employee at his full-time job, father, husband, underwriter, marketer, capital raiser, negotiator and thought leader. Similarly, Vince Gethings struggles with finding the time to operate his business as he adds more units to his portfolio and balances his remaining time between family and work.

 

Whether you want more time to explore other non-real estate related passions or spend more time focusing on the long-term vision of your real estate business, the solution starts with outsourcing and/or automating some or all of your business, in addition to building a solid, trustworthy real estate team.

 

5 – Us!

 

Curtis Danskin believes that the number one obstacle keeping real estate investors from starting and scaling their business is themselves! They know what actions they need to take, but – for whatever reason – chose not to.

 

To overcome this challenge, identify the self-sabotaging behaviors in which you are partaking and implement strategies to rid ourselves of these bad habits.

 

6 – No Experience or Money

 

Scott Hollister lacks the experience, net worth and liquidity to enter the real estate arena. He’s already identified a solution, which is pursuing seller financed deals, but doesn’t know where to get started. In particular, he doesn’t know how to find seller financed opportunities.

 

Fortunately, success leaves clues. Here’s how an active real estate investor was able to close on seven seller financed deals.

 

Another strategy for those who lack capital is house hacking, where you purchase a two to four unit property with a low down payment owner-occupied loan and live in one unit while renting out the other/s.

 

COMMENT BELOW: What is the biggest obstacle that is keeping you from starting or scaling your real estate business?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

 

 

 

dangerous stranger on the road

Real Estate Horror Stories From Five Active Investors

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was what is your worst real estate story?

 

 

Michael Beeman and a Rotten Contractor

 

Michael’s first investment was a large single-family home. The plan was to follow the BRRRR (buy-rehab-rent-refinance-repeat) strategy, as it was a distressed asset that required approximately $25,000 in renovations.

 

Unfortunately, nothing went according to plan. Because he hired a terrible contractor who botched the renovations, Michael had to tear down everything and start from scratch. As a result, he went $25,000 over budget. While he technically didn’t lose any money, this did wipe out any equity he could have pulled out with a refinance.

 

Michael did learn a valuable lesson (always screen a contractor), and consequently, a year after this incident, he had built a portfolio of 31 cash flowing units.

 

Glen Sutherland and The Flood

 

Glen had a troublesome tenant who broke the terms of the lease and wouldn’t voluntarily vacate the premises. He successfully filed for an eviction. But one week before the scheduled eviction date, the tenant decided to leave. Great news, except for the fact that on the way out, without Glen’s knowledge, the tenant opened the valve on the hot water heater. By the time Glen realized what had happened, over three feet of water had accumulated in the basement.

 

Luckily, the basement was unfinished, which mitigated the damage. One dumpster, three days of shop vacuuming and a few dehumidifiers later, the basement was usable again. But, being a tenant-friendly real estate market, Glen was unable to take legal action against the tenant…

 

Julia Bykhovskaia and the “Philanthropic” Contractor

 

Julia purchased a fully furnished property with the intentions of using it as an AirBnB. It did require a few renovations, so she hired a contractor to perform the work. When she checked in on the status of the rehab, she noticed that all of the living room furniture had vanished. She asked the contractor what happened, to which he response that someone stopped by and really liked the living room furniture, so he let them take it all – even though Julia explicitly told to keep the furniture.

 

After a week of screaming and yelling, Julia and the contractor negotiated a solution. She withheld money in lieu of the furniture from the contractor’s payment. As a result, she was able to purchase furniture of a higher quality for the living room.

 

Theo Hicks and Niagara Falls  

 

Theo’s first investment was a value-add duplex in Cincinnati that required around $25,000 in renovations. He closed on a cold and dreary Thursday afternoon in February. His intentions were to begin the renovations that Saturday, but decided to take the weekend to celebrate his first deal instead.

 

Theo showed up on Monday to rip out the carpet and paint the walls. But once he opened the front door, he heard an unexpected noise – a faint whooshing sound. As he approached the stairwell to the basement, the sound became louder and louder. He walked down the stairs, turned to face the bathroom and was confronted with a waterfall!

 

Being his first deal, Theo didn’t understand what the real estate agent meant when she told him to “put the utilities in your name.” As a result, the heat was off the entire weekend. The pipes froze, thawed and burst, leaving him with a mini Niagara Falls in the basement bathroom.

 

Grant Rothernburger and The Kentucky Derby

 

The winner (or I guess loser) of the worst real estate story is Grant.

 

Grant was touring a prospective investment property in Kentucky that smelled like a barn. He walked into the basement and discovered the source of the smell…HORSES! That’s right. There were three horses wandering around the basement. The property was located in a small town, but it was not a rural area. There shouldn’t have been horses in that area in general, let alone the basement.

 

Needless to say, Grant decided to pursue other investment opportunities, but did walk away with a pretty hilarious story!

 

 

COMMENT BELOW: What is your worst real estate story?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

urban multifamily syndication

The Most Unique Way to Find Off-Market Apartment Deals

There are countless ways to find apartment deals, from common methods like brokers to unique approaches like cold calling to meetup groups.

 

However, the most unique approach I’ve come across is a lead generation strategy by James Kandasamy – who I interviewed on my podcast. Using the following seven step process, James found the majority of the assets that make up his 340-unit portfolio, including two apartment communities. What’s his secret? He texts the owners!

 

This process can be used to find any type of deal, whether you are a fix-and-flipper, wholesaler, SFR investor, etc. But for the purpose of this post, you will learn how to apply this approach to finding apartment communities.

 

1. Identify a target area

 

First, select a target market. If you haven’t already, check out this blog post where I outline a step-by-step process for selecting and evaluating a real estate market.

 

2. Identify a property class

 

As a value-add apartment syndicator, I invest in class B property types. If you are a turnkey investor, you’ll pursue class A opportunities. If you are a distressed apartment investor, you will pursue class C or D opportunities.

 

3. Define additional investment criteria

 

For me, my additional investment criteria are the number of units and age of the property. We want properties that are 150+ units and that were built in 1980 of newer. Based on your investment strategy, what factors do you look for in a potential deal (i.e. equity, delinquent taxes, recent evictions, signs of distress, sales date range, etc.)

 

4. Obtain a list of properties

 

Using online resources like the county auditor site or ListSource, create a list of properties using the three pieces of information above (market, property type/class and investment criteria).

 

Additionally, you want to find properties that were purchase 5 years or more ago. James has found that owners who’ve purchased a property in this time frame will have likely built up enough equity to accept a below market offer price because they’ll still make a profit.

 

5. Find the owner’s contact information

 

For properties listed in an individual’s name, you should be able to locate the owner’s contact information when you pulled the list. If it is listed under an LLC name or a property manager, use skip tracing software to get the owner’s phone number and/or mailing address. Here’s a good resource for how to track down owner information, JF1065: How to Track Down Vacant Property Owners with Larry Higgins

 

6. Conduct a marketing campaign

 

Send marketing information to the list of property owners, either via direct mail, phone call or text message. That’s right. A text message!

 

James actually obtained the majority of his deals via text messaging. His initial message is, “Hi. I’m a prominent investor in (insert target area). I saw your property at (insert property address) and am interested in buying it. You can sell it directly to me without any broker’s commission. Would you like to talk further?”

 

Standard replies he’s received and that you can expect to receive are:

 

  • If they are interested
    • You can talk to XYZ member of me team
    • Can I have more information about you and your business?
    • What can you offer me?
  • If they aren’t interested
    • I am not interested in selling right now
    • I am not selling anytime soon

 

7. Follow-up

 

Regardless of the response, follow-up is key. James said that most people will send out one batch of letters and then forget about it.

 

If the owner is interested, you need to obtain the rent roll and the trailing 12 months financials to determine an offer price.

 

If they aren’t interested, James recommends following-up (via direct mail, phone call, or text message) every 3 to 6 months to gauge their interest in selling again, to build rapport and be top of mind for when the owner is interested in selling. It’s all about timing.

 

For every 500 marketing pieces James sends, he receives a 1% response rate. Of the 1%, he will close on less than 0.1%. But as long as you’re persistent and follow-up, you’ll find that 1% of owner’s who are interested in selling.

 

COMMENT BELOW: Do you use or have you come across a lead generation strategy more unique than texting owners?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

microphone

12 Go-To Podcasts of Successful and Active Real Estate Entrepreneurs

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was what are your favorite real estate and/or personal development podcasts?

 

Many of the responders chose my podcast, Best Real Estate Investing Advice Ever, as one of their favorites, which is an honor for which I am very grateful! However, even though I host a daily podcast, I still enjoy consuming the content produced by other entrepreneurs and am always on the lookout for podcast recommendations.

 

In fact, out of all the responses, only a single person provided the name of one podcast (although I assume they listen to numerous shows), while the overwhelming majority provided a list of their favorite podcasts. Therefore, since the Best Ever Show Community is made up of active entrepreneurs, whether you’re the owner of your own podcast or not, listening to multiple podcasts across a variety of content is correlated to real estate success.

 

The poll is closed, the responses are in and here are your answers:

 

The Brian Buffini Show is Kyle Burnett’s favorite podcast. This is a personal development podcast exploring the mindset, motivation and methodologies behind true success.

 

The Real Estate Guys Radio Show is Maurico Rauld’s favorite podcast. This podcast delivers no-hype education and expert perspectives on real estate in a fast-paced, entertaining style.

 

Simple Passive Cashflow Podcast with Lane Kawaoka is one of Bo Kim’s and Ryan Gibson’s favorite podcast. This podcast, hosted by active Best Ever Show Community member Lane Kawaoka, promotes passive real estate strategies to give the listeners the freedom to quit their jobs and do what they truly want.

 

Happier with Gretchen Rubin is Neil Henderson’s favorite podcast. This podcast is hosted by a #1 best-selling author who, as the title implies, provides good habits that encourage a life of maximal happiness.

 

The Tim Ferriss Show is probably a top podcast for everyone, including Lennon Lee and Ryan Groene. This podcast deconstructs world-class performers from eclectic areas and digs deep to find the tools, tactics and tricks that listeners can apply to their daily lives.

 

Investing in Real Estate with Clayton Morris is Glen Sutherland’s favorite podcast. This is another podcast that offers passive real estate investment strategies to help listeners quit their 9 to 5 jobs.

 

Real Wealth Show with Kathy Fettke is a favorite of Carolyn Lorence, Ryan Gibson and Bill Tomesch. This show also interviews guests who shares advice on how anyone can build enough passive income from cash flowing real estate to quit their day job.

 

Apartment Investing with Michael Blank is one of Harrison Liu’s, Julia Bykhovskaia’s and Carolyn Lorence’s favorites. This podcast’s focus is on all things commercial real estate investing

 

Landlording for Life is Sean Morissey’s favorite podcast. A relatively newer podcast, it offers advice direct towards, as the name implies, landlords.

 

Real Estate Investing For Cashflow with Kevin Bupp is another one of Ryan Groene’s favorite podcasts. This show is for passive and active investors who are interested in learning the industry secrets of commercial real estate investing.

 

Old Capital Real Estate Investing Podcast with Michael Becker & Paul Peebles is one of the favorites of Julia Bykhovskaia, Carolyn Lorence and Ryan Gibson. This show is targeted at new and seasoned multifamily investors who are interested in or are actively acquiring and operating apartment complexes.

 

So Money with Farnoosh Torabi is Paresa Stewart’s favorite podcast. This podcast, hosted by an award-winning financial strategist, brings money strategies and stories straight from today’s top business minds.

 

My recommendation is to pick at least one podcast from this list and subscribe (of course, starting with my podcast :). Because, as I said, it is a trend amongst the most successful real estate entrepreneurs to listen to multiple podcasts to stay up-to-speed and competitive in the ever-changing economic landscape.

 

In the comment section, post your favorite real estate or personal development podcast, either from this list or something new.

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

 

Best Ever Real Estate Conference

Five Game-Changing Quotes from The Best Ever Conference 2018

Thank you to everyone who made the Best Ever conference a great success – the speakers, the sponsors, the attendees and the Best Ever team. If you were unable to attend this year’s conference, you missed out on some game-changing real estate, business, and personal success advice.

 

Here are just five of the many takeaways from the keynotes, presentations and panel discussions, with much more to come in future blog posts.

 

Scott Lewis Quote

 

Scott Lewis, Spartan Investment Group

 

Scott understands that ample planning is vital to business success. However, as he learned in is time in the military, a plan never survives first contact. When you go to implement a plan and you get an uppercut to the face, you need to either have a backup strategy in reserve or have the resourcefulness to problem-solve on your feet.

 

In other words, for every project, you need a primary plan, a backup plan and a plan in the event that both the primary and backup plans fail.

 

Andrew Cambell

 

Andrew Campbell, Wildhorn Capital

 

You don’t need a doctorate’s degree to become a real estate investor. If that was the case, the majority of the speakers and attendees at the Best Ever Conference, including Andrew Campbell, would be bankrupted. A Proper education, experienced team, proven investment strategy and the willingness to take massive, consistent action trump intelligence, period.

 

Terrell Fletcher Quote

 

Terrell Fletcher, Entrepreneur and Former NFL Pro

 

Terrell attributes his business and NFL success to his love for the day-to-day grind. The majority of our business lives are spent in the pursuit of our desired outcomes.  These are the routines we perform and the actions we take on a daily and weekly basis. Life’s too short to do things that we don’t want to do. So, instead of torturing yourself, direct your time to the things that you love to do (and, ideally, are good at) and find experienced team members to do the things you that you don’t.

 


Trevor Megegor Quote

 

Trevor McGregor, Trevor McGregor International

 

We all have that little voice in our head that tells us why something is difficult or impossible to do. Because where focus goes, energy flows, if you listen to that voice, you will act as if it is telling the truth. In reality, that voice in our head is BS. It is your Belief System. Recondition your belief system from the “I can’t” to the “I can and will” mindset and your business will flourish.

 

Joe Fairless Best Ever Real Estate Conference

 

Joe Fairless

 

Forced appreciation is great, but betting on natural appreciation is a big no-no in my book. When you buy for cash flow, as long as the asset is in the right market, you don’t have to worry about what the overall real estate market is doing. In fact, if the market takes a dip, the demand for your cash flowing rental property will likely increase.

 

QUESTION: Which of these five quotes gives you the most inspiration and/or value?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

money investment

What’s the Best and Highest Use of $20 Million in Real Estate Investing?

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was someone is handing you $20 million in property for FREE. Which asset class would you choose?

 

This week’s question was a little different. We conducted a survey in addition to asking for written responses to the question, particularly for those who selected “Other.” The breakdown of the answers were as follows:

 

  • Multifamily: 58
  • Self-Storage: 15
  • Commercial offices, retail centers, etc.: 11
  • Other: 5
  • Mobile Home Parks: 4
  • Single Family: 2
  • Urban Mixed Use: 2

 

Mitchell Drimmer is one of the 15 people who selected self-storage, mainly because he has purchased multifamily in the past and is not a fan. He admitted that multifamily may perhaps have a higher cap rate but are nothing but problems day in and day out, especially in “value neighborhoods.” Mitchell hasn’t purchased self-storage in the past. But as an outsider, he says self-storage is seems like a business with almost no clients, no hard luck stories from residents, no evictions, no complaints about certain maintenance issues and very little code enforcement issues. Done properly, at the right price and in a good location, Mitchell believes self-storage is a great business model.

 

Ryan Gibson also selected self-storage for similar reasons – it is an asset class with the lowest “resting heart beat” (no tenants, little maintenance, minimal employees). But additionally, he picked self-storage because it has the most automation and the highest returns.

 

Brandon Moryl was one of only two people who selected their $20 million to be in the form of single family homes. And in particular, luxury homes. According to him, that part of the real estate market has yet to fully recover, meaning there is the potential for a lot of growth. Additionally, there is less competition in the high-end SFR space compared to your typical $75,000 fixer upper. He also said, “with the stock market killing it and the overall economy rocking, combined with programs like 5% jumbo [loans], that’s is where I would be.” Finally, and maybe most importantly, he says it’s sexy owning million-dollar homes. Indeed!

 

The investors who selected “other” offered more creative or niche investment strategies.

 

Danny Randazzo went with a diversified approach. Chibuzor Nnaji Jr. concurred. Danny would look for a deal in each asset class and invest in a few of the most attractive opportunities. “It could be one deal requiring $20 million or it could be a deal in each. Share the love!”

 

Deren Huang, with the support of Michael Nerby, would invest in NNN, or triple net leases. According to Wikipedia, a triple net lease is a lease agreement on a property where the tenant or lessee agree to pay all real estate taxes, building insurance and maintenance (the three “nets”) on the property in addition to any normal fee that are expected under the agreement (rent, utilities, etc.). He said NNN is the true passive investment.

 

The last two individuals left the real estate market entirely – at least in part.

 

Lane Kawaoka selected two answers. He would invest in multifamily because it “it’s the sweet spot in terms of the sharp ratio risk reward matrix. Not too hot, not too cold…just what the baby bear likes.” However, he would consider accepting the entire $20 million amount in the form of a savings bond and just live off the interest.

 

Finally, Diogo Marques would forgo real estate altogether and purchase solid, stable companies that he could see operating in 10 years’ time with a 10% to 15% net profit margin annually.

 

COMMENT BELOW: Someone is handing you $20 million in property for FREE. Which asset class would you choose?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

Complex clock and gears

If You Had a Time Machine, What Would Be Your First Investment?

Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was if you  were starting real estate investing over again, what would be your first purchase?

 

The poll is closed, the responses are in and here are your answers:

 

 

Brandon Moryl

 

Brandon would acquire as many turnkey single-family residences as he could. In his market, Cincinnati, he can purchase a $100,000 turnkey SFR with $15,000 in out-of-pocket costs that rents for $1,250 per month.  Great cash-on-cash return, longer tenants compared to multifamily, and easy to sell.

 

 

Harrison Liu

 

16 years ago, Harrison acquired his first investment – two triplexes situated right next to each other in a class C market. Today, the area is going through gentrification, so the rents have doubled and the property values have tripled. However, being in a C market, Harrison has had a few tenant issues over the years, including two evictions and being taken to small claims court.

 

Therefore, if he was starting over, he would have purchased a fourplex in a B location. Instead of two loans, he would have one. Also, he would have had access to higher quality renters, which means he likely wouldn’t have been taken to small claims court.

 

 

Ryan Murdock & Glen Sutherland

 

If they were starting over, Ryan and Glen would have purchased a three or four-unit property with an owner-occupied loan, living in one unit and renting out the others. Also known as housing hacking, they would have been able to acquire a rental property with little money out-of-pocket (generally 3.5% of the purchase price) and lived “rent free.”

 

 

Devin Elder & Whitney Sewell

 

Both Devin and Whitney said, if they were starting over, they would find a mentor.

 

 

Neil Henderson

 

Neil Henderson would have skipped over the single-family residence and smaller multifamily investments and went straight for a 100-unit apartment community.

 

 

Charlie Kao

 

When Charlie was starting out, he considered purchasing a condo from a bankrupt builder. Originally, the builder was offering the condos for $356,00 to $410,000. However, the people who agreed to purchase the condos couldn’t qualify for financing. So, the builder greatly reduced the sales prices.

 

Charlie was considering a 2-bedroom condo listed at $160,000. If he could go back, he would have purchased that condo, because today the current value exceeds $650,000.

 

 

Robert Lawry II

 

Robert kept it simple and humorous. If he was starting over, his first investment would have been business cards.

 

Make sure you join the Best Ever Community on Facebook. Check the group page every Wednesday and answer the weekly questions for an opportunity to be featured in next week’s blog post!

 

In the comment section, post what your first purchase would be if you were starting over again.

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

 

 

topographical map

Five Ways To Find Your First Off-Market Apartment Deal

Previously Published in Forbes Here

 

In a previous blog post, I outlined the benefits for both a seller and buyer of completing an apartment transaction off-market, as opposed to on-market through a broker. Although off-market deals are highly attractive on both sides of the transaction, when it comes to ease, they lose the edge.

 

Finding on-market deals is a fairly passive approach: All that’s required is sending a broker your investment criteria and asking them to subscribe you to the “for sale” apartment lists. Then, any current or future listing that meets your criteria will be automatically sent to your email inbox. However, you won’t have control over the number of opportunities you receive. Since it’s solely based on the number of owners who happen to list their property with a broker, you could see a bunch of opportunities one week and then go a few months without seeing any.

 

The more active and beneficial approach is to pursue off-market apartment opportunities. Generally, there are two ways to find these deals: by either speaking directly to the owner or to someone who knows the owner. Your prospecting tactics should only target these two groups.

 

Here are five methods apartment investors use to successfully find and close on off-market deals:

 

1. Direct Mailing Campaigns

 

One of the most well-known tactics for acquiring off-market deals is through direct mailing campaigns. A direct mail campaign consists of sending out a batch of letters to a list of apartment owners with the purpose of sparking a conversation that results in the acquisition of their property.

 

There are two keys to a successful direct mailing campaign. One is your mailing list. A high-quality mailing list will only include owners whose apartment communities meet your investment criteria and who show at least one sign that they’re interested in selling. For example, we only mail to owners who’ve purchased their property five or more years ago. They will have likely built up enough equity to sell their property at below market value while still making a sizable profit and/or they could be coming to the end of their business plan. Another option is only mailing to distressed owners. Indications that an owner is distressed is their inclusion on the eviction court, building code violations or delinquent tax list or living in a state other than the one in which the apartment is located.

 

The second key is your mailing frequency. Decide what frequency you will mail to your list of owners — monthly, quarterly, every six months, etc. — and commit to the system. Sometimes, you may receive a reply on your first mailer, while other times it won’t be until you’ve been mailing to the same owner for a year that you receive interest.

 

2. Cold Calling

 

Rather than sending direct mailers to your list of distressed apartment owners and waiting for the phone to ring, call the owner directly.

 

With cold calling, compared to direct mail, you’ll have more control over the number of conversations with owners. It is also less expensive, as you are avoiding the costs of letters, envelopes and stamps.

 

Cold calling can also increase your conversion rate. With direct mail, if an owner isn’t interested in selling, they won’t reach out. Whereas with cold calling, you can follow-up by sending the owner a letter referencing the conversation, providing your contact information and notifying them that you will call again in X months (2, 4, 6, whatever you decide) to see if they are interested in selling.

 

3. Thought Leadership Platforms

 

A thought leadership platform can be a great source for off-market deals. With an interview-based podcast, blog or YouTube channel, you can form relationships with your guests and build a large audience, conveying to both your interest in purchasing apartment communities. With a meet-up group, you can network face to face with attendees and handpicked speakers who are active in real estate investing.

 

Regardless of the platform you pursue, as a thought leader, you will be reaching and cultivating relationships with both apartment owners and the professionals who know the owners, which are the only two ways to find off-market deals.

 

4. Call “For Rent” Ads

 

Calling the apartment owners of rental listings on online services such as Craigslist, Apartment.com, Zillow, etc. or on “for rent” signs scattered across your local market to gauge their interest in selling is a great way to find off-market deals.

 

If an owner has a unit listed for rent, you’ve automatically identified a pain point. The unit is vacant, which means they are losing money. You might catch them at a moment in time where they are motivated to sell.

 

5. Apartment Vendors

 

Electricians, carpet installers, roofers, plumbers, HVAC professionals, pool repairmen, lawn care professionals, etc. — anyone involved in the servicing of apartment communities is on the front lines and will likely have insider information on communities that are being neglected.

 

First, use their services or refer them to other apartment owners to build rapport. Then, ask them to notify you about potential distressed owners or neglected communities.

 

Overall, I recommend selecting two methods from this list and focusing on generating leads from those for at least six months. We live in a culture of instant gratification where people expect quick or immediate results. In general, that isn’t the reality, and it’s especially true when you’re dealing with million-dollar properties. It takes time to generate apartment leads. It requires constant action, constant tracking and constant improvement.

 

During your six-month trial period, log your results for each of the marketing methods. If one or both of the marketing methods have poor results, either tweak it or try another tactic. All of these tactics have worked, but all of them might not work for you because of your market or because of your unique skill set. You’ve got to find a tactic that aligns with what you’re uniquely good at, which may take some trial and error. Ultimately, it’s not about having five lead sources. It’s about finding the few that work best for you.

 

What is your favorite method for generating apartment or other real estate deals?

 

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

 

 

library architecture

What’s Your Favorite Real Estate or Personal Development Book?

 Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.

 

What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was what’s your favorite real estate or personal development book?

 

The poll is closed, the responses are in and here are your answers:

 

Garrett White:  The Compound Effect by Darren Hardy

 

 

Ryan Gronene: Think and Grow Rich by Napoleon Hill

 

 

Lennon Lee of BLD Capital Group, Carlos Altamirano of CFA Investment, Mauricio Rauld and Harrison Liu: The One Thing by Gary Keller

 

 

Whitney Sewell: Never Eat Along by Keith Ferrazzi

 

 

Ryan Gibson of Spartan Investment Group: Tax-Free Wealth by Tom Wheelwright

 

 

Chibuzor Nnaji Jr.: The Go-Giver by Bob Burg

 

 

Danny Randazzo of Randazzo Capital: Mistakes Millionaires Make by Harry Clark

 

 

Dave Van Horn of PPR Note Co.: Leading an Inspired Life by Jim Rohn

 

 

Charlie Kao of MCK Property Management: Maximum Achievement by Brian Tracy

 

 

Justin Kling: Investing in Duplexes, Triplexes and Quads by Larry B. Loftis


Make sure you join the Best Ever Community on Facebook. Check the group page every Wednesday and answer the weekly questions for an opportunity to be featured in next week’s blog post!

 

In the comment section, post your favorite real estate or personal development book.

 

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

 

location circled on a map

How to Find Private Money Regardless of Where You Live

Last week we closed on our 12th property and our company portfolio is now valued at more than $250,000,000 (click here to see the lesson I learned on my last deal). Since this quarter billion dollar mark is sort of a milestone I thought it would be interesting to look at where my potential and current investors live to see if there is anything interesting we could learn from it.

 

Yes. Yes, there is.

 

Before we look at the stats, let’s define a couple things.

 

I define Potential Investors as investors with whom I have a relationship, are accredited and have expressed interest in investing with me but have not invested yet. Current Investors are accredited investors with whom I have a relationship that are currently investing in my apartment deals.

 

Now let’s dig into the stats of my investor database.

 

Top 5 Cities with the most Current and Potential Investors:

  1. New York City: 18%
  2. Dallas-Fort Worth: 10%
  3. Los Angeles: 9%
  4. Houston: 5%
  5. San Francisco: 4%

 

So, out of all my Current and Potential Investors across the United States, 18% live in NYC, 10% live in DFW, etc. This makes sense for a handful of reasons.

 

First, they are large cities (ex. Population of NYC is 8M+).

Second, I lived in NYC and DFW so have family and friends there.

Third, our properties are in Texas so DFW and Houston investors have a level of familiarity with the market they are investing in. They see the same thing we see in terms of population growth, job growth, economic outlook, etc.

 

Now let’s look at the Top 5 cities with the most Current Investors (removed Potential Investors).

 

Top 5 Cities with the most Current Investors:

  1. New York City: 18%
  2. Dallas-Fort Worth: 11%
  3. Los Angeles: 6%
  4. San Francisco: 5%
  5. Tied- Houston, Miami, Austin and Seattle: 4%

 

Ok, still making sense and for the reasons stated above. Large cities, places I lived, have family and friends residing, and, in three cases, are in the same state as our multifamily deals (Austin, Houston and Dallas-Fort Worth).

 

But here’s where the wrinkle occurs.

 

Let’s look at all the equity my investors have invested in my apartment syndications and what % of the total invested dollars is attributed to each city where investors live.

 

Top 5 Cities with % of Investment Dollars in Deals

  1. New York City: 18%
  2. Cincinnati: 13%
  3. Dallas-Fort Worth: 11%
  4. Miami: 7%
  5. San Francisco: 6%

 

…what in the Cincinnati just happened?!?!

 

Cincinnati isn’t a top 5 city of mine in terms of total # of Current Investors and/or Potential Investors.  In fact, to dig deeper Cincinnati only has 2.5% of my Current and Potential Investors living there. And only 3.5% of my Current Investors living there.

 

I am not from Cincinnati and, in fact, have only lived here for approximately 3 years. So, why does it represent 13% of all the equity invested in my apartment deals? The short answer is because I am actively involved in the local community. But that short answer doesn’t do the real lesson learned justice so let me elaborate more.

 

Here’s how I did it:

 

  • Host a local meetup. The first month I officially moved to Cincinnati (because my wife is from here and she’s the love of my life so I followed her to the city and now we’re here for the long-term) I started a meet-up. If you have time to ATTEND a meet-up then you have time to HOST a meetup. It doesn’t take that much more effort to HOST than it does to simply ATTEND and the rewards for HOSTING are exponentially greater. I did this to make friends in Cincy. I didn’t do it necessarily to generate investor relationships but that’s exactly what it did.
  • Host Board Game and Drinks nights at your house. This Friday my wife and I are having friends of ours, some of which are investors, come over to our house for a night of board games, drinks and dinner. Hosting events at your house as couples, along with couples, is fun and goes a long way to continue to build your friendship with those locally.
  • Consistent online presence that has an interview component to it. Or, in short, my podcast. I interview someone Every. Single. Day. on real estate investing and have released an episode for the last 1,197 days. There are multiple benefits for doing this and I won’t get into all of them but I will focus on one of the benefits and that is that every time I interview someone they then want to share it out to their audience which helps expand my reach. And, if I interview people in my local market that introduces new, local connections to me which can then turn into business relationships since I get to have dinner, drinks, etc. with them. Here’s a post I wrote on the step-by-step process to create a real estate thought leadership platform.
  • Volunteer then become a board member for that non-profit. I had no intention to meet investors when I started volunteering for Junior Achievement. But I have since realized that by volunteering for a cause I feel strongly about (Junior Achievement helps kids in underserved communities learn financial and entrepreneurial skills) I was able to connect with like-minded people and then become friends with them. I got on the board for JA in Cincinnati and have built friendships with people on the board which then turned into business relationship where they invest in my deals. You could take the same approach but make sure you genuinely believe in the cause and are doing it for the right reasons (i.e. helping further the cause’s mission) vs trying to grow your biz, otherwise it will fall flat and won’t be fulfilling for you.

 

By doing these simple things, you can build an investor network in your city that is perhaps stronger than any other network. When people personally know you they are more likely to trust you, recommend you to others, and invest larger. The beauty in this is that it’s helpful for you regardless of where you live.

 

Cincinnati is approximately the same size as St. Paul, Minnesota, Toledo, Ohio, Stockton, California and…Anchorage, Alaska. So, if you live in a city that is larger then there’s really no excuse to not having all the capital you need for your deals. If you live in a city that’s smaller than Cincinnati (300k population) then you can still apply these principles although it might require you to host your meetup in the next largest city next to where you live, that way you get better return on your time.  Regardless, apply these principals and you will quickly build a local investor network than can help you fund your deals.

 

In the comment section below, tell me how you will implement these proven money-raising tactics in your real estate business.

 

Make sure you subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

buying apartment large buildings over conference call

16 Lessons On Buying Apartment Buildings From Over $300,000,000 in Apartment Syndications

Since completing my first apartment syndication (raising money from private investors to purchase 100+ unit multifamily buildings) a little over threes ago, I’ve completed an additional six deals. Currently, my company controls over $300,000,000 in assets, and I’ve learned some key lessons on how to buy an apartment complex.

 

After completing each deal and buying these apartment buildings, I took inventory on the valuable lessons I learned and made sure that I applied any solutions or outcomes moving forward in order to ensure that each subsequent deal went smoother and was more efficient than the last. In total, I have learned and applied 16 invaluable lessons to my syndication process, which I can attribute to my continued success.

 

From my first deal, which was a 168-unit in Cincinnati, OH, and my second deal, which was a 250-unit building in Houston, TX, I had my first two main takeaways:

Lesson #1 – Get the Property Management Company to Put Equity in the Deal

If you are not managing the property yourself, then have the local property management company you’ve hired put their own money into the deal. This is something I didn’t do on my first deal, which was a mistake, but I did apply it to the 250-unit deal in Houston.

It is true that you will have less equity in the deal when buying apartment buildings this way, but the advantage is that, since the management company has their own skin in the game, it is human nature that there will be much more accountability due to an alignment of interests. If the property management company also brings on other investors on top of putting equity into the deal, that adds another layer of accountability and alignment of interests.

 

When following this strategy, it is even more important that you’ve adequately vetted the property management company. If you aren’t completely comfortable with your selection, then you’ll be stuck with them as both a manager AND a general partner – a double whammy.

 

In return for equity, you can try to negotiate with the property management company for the lowering or elimination of certain fees, such as management fees, lease-up fees, and/or maintenance up-charges.

Lesson #2 – Prime Private Money Investors Prior to Finding a Deal

If you have a good deal when buying apartment buildings, money will find you. But, that doesn’t mean you should wait for the deal before starting the money-raising process. On my first deal, I raised over $1 million and did so after finding the deal. It was, shall I say, a character-building experience. As a result, I don’t recommend to others that same approach.

 

Leading up to my second deal, I prepped the majority of my investors so that, once I had a deal under contract, the money-raising process flowed more smoothly. I still brought on new investors after getting the deal under contract, but overall, the process is much more efficient when you prep investors beforehand.

 

Note: I don’t actually receive money before I have a deal. I only speak to investors about a hypothetical deal, or past deals, in order to gauge their interest level in investing.

 

Here is the exact process I use for priming investors before finding a deal and buying apartment buildings:

 

  • Schedule a meeting with investors
  • Ask questions to learn their financial goals and how they evaluate success with their investments
  • Talk to them about your business (What is your real estate background? What do you invest in? Why do you invest? What is multifamily syndication? Etc.)
  • End the conversation with the following question: “If I find something that meets your financial goals, would you like me to share it with you?”

 

When I’ve asked this question at the end of investor conversations, I’ve never had anyone say no.

 

Moving forward, keep the interested investors (which should be all of them) updated as you look at properties. A simple email will suffice. Then, when you find a property, they are already well aware of how your business operates and how multifamily syndication works. As a result, they are more inclined to invest.

 

My third syndication deal was a 155-unit apartment in Houston, TX, where I took away three more lessons:

Lesson #3 – Go farther faster by playing to your strengths

For my first syndication deal (168-units in Cincinnati, OH), I did it all.

 

  • I found the deal
  • I performed the underwriting
  • I raised all the private money
  • I conducted the due diligence
  • I hired all the team members and was the main point of contact moving forward
  • I closed the deal
  • I was the asset manager.

 

While it was a great learning experience on how to buy an apartment complex, doing it all myself didn’t set the deal up for optimal success. Quite frankly, I am not an expert at many of those duties. For example, I am not a proficient underwriter. I am competent and know how to evaluate a deal and determine if it is good or not. However, I haven’t spent hundreds or thousands of hours focusing strictly on underwriting deals. Like most things, the more you do it, the better you get.

 

So on this deal, I learned that I needed to partner with someone who is phenomenal at underwriting large multifamily deals. Actually, I partnered with this person on my second deal – the 250-unit. This third deal only reinforced the need to do it again moving forward because it allows me to do what I’m good at and allows him to do what he’s good at. Again, we’re both capable of doing each other’s job, but we wouldn’t perform as proficiently.

 

As long as no missteps are made when selecting who to partner with, it allows the business to go farther faster because you are both focused solely on your crafts. Yes, there is overlap (for example, I triple check all the underwriting and review it in detail), but it’s better for someone with lots of experience to be the primary underwriter.

 

In good at buying apartment buildings with accredited investors. What’s something you’re really good at? What’s something you’re not good at? Do more of the former and less of the latter because it’s likely that you enjoy doing what you’re good at, which is why you’re good at it, and vice versa.

 

Lesson #4 – Do something consistently on a large distribution channel

If you are a real estate investor, you’re in the sales and marketing business. Fix-and-flippers, wholesalers, multifamily syndicators, etc. are all in the sales and marketing business. Perhaps passive buy-and-hold investors aren’t, but I’m sure there’s a creative way we could connect them to it. Regardless, since we’re in this business, we must have a consistent daily presence in order to gain exposure and build credibility with our customers/clients/leads.

 

Some large distribution channels (with some ideas for each) are:

 

  • BiggerPockets (official BP blogger, being an admin, posting, commenting, adding value, offering assistance, being insightful)
  • Amazon.com (writing books and publishing them)

 

Related: Self-Publishing Your Way to Thought Leadership, Leads, Money, and Much More

 

  • iTunes (podcasting)
  • YouTube (video blog, tips, interviews, make real estate music videos…?)
  • Facebook (create a community around an in-person event you host and then open it up to a larger audience)
  • Instagram (pictures of renovations before & after)
  • Twitter (proactively answering real estate related questions)
  • Meetup.com (host a frequent meet-up group)

 

Related: The 4 Keys to Building Relationships Via Social Media

 

Whatever you do, do it DAILY.

Do it consistently.

And do it on a large distribution channel.

Many people want the shiny object, the golden nugget, the Super Secret Plan that will let them retire on the beach in Tahiti. I think that’s ridiculous. We live in an instant-gratification culture. The truth is that to make a good living in real estate, you MUST be consistent with strategic, proven actions. That’s it, especially when it comes to buying apartment buildings and selling them later for a profit.

Lesson #5 – There is major power in doing a recorded conference call when raising money

This is going to be a super simple lesson, and you might even say “duh.” If you do, I don’t blame you, BUT it’s something I didn’t do on my first two multifamily syndications. I figured, if you don’t do it either, then mentioning this lesson briefly would help you out when raising money.

 

 Here’s the tip: have a conference call with qualified investors to talk about your deal and record it!

 

When we were in the middle of raising money for this 155-unit apartment community, my business partner and I decided to have a conference call to present the deal to accredited investors. We did a similar call on our previous deal, but we didn’t record it. For this one, however, I did. It was tremendously helpful with raising money for the deal, mainly for two reasons:

 

  1. Most accredited investors are busy making money rather than going out and actively buying apartment buildings, which is why they actually have money to invest in the first place. This helps them listen to the presentation on their schedule.
  2. The questions being asked are from a group of people, which is beneficial to others who are listening but didn’t think of those questions.

 

Here’s how I record the conference call:

 

  • First, I make sure the attendees have the presentation prior to the call so that they can review it and come up with questions.
  • Next, I used freeconferencecall.com (I have no affiliation with them) and simply set up the call.
  • During the call, I have the attendees email me questions. That way, I know who is asking the questions, and I can follow up with them afterward.
  • At the end of the call, we do a Q&A session, and my business partner or I answer all the questions that are asked.

 

As you’re raising money, I highly recommend this simple approach. I’ve personally seen a benefit, and I’m confident you will too!

 

My company’s fourth syndication deal was the largest deal we’d closed. Around the time I closed this 320-unit deal (and still to this day), many people started to ask me how to buy an apartment complex and, more specifically, how they could break into the multifamily syndication business (i.e. raising money and buying apartment buildings with investors). So, I put a list together for anyone who wants to do bigger deals but doesn’t know how to use their special talents (we all have them) to make it happen.

 

So, as the read these six ways to creatively get into the business, try and think about which of these areas appeal to you the most? Which do you want to do? How do you want to spend your time? Remember the earlier lesson, if you’re going to be a successful multifamily syndicator then you’ll need to choose your primary area of focus. If you try to do it all, then you’re doing your investors and yourself a disservice. Why?

 

We all have special talents. We are all wired differently and process information differently. The key is to have a business where you have team members doing what they love to do and what they are good at (surprise, they go hand-and-hand), while you are doing the same. Yes, I have working knowledge of ALL 6 areas, and I recommend you do too before trying to buy apartment buildings. But, you can break in the business by having a specific focus and being strategic about how you leverage that focus.

So, here you go, the 6 ways to break into the apartment syndication biz:

Lesson #6 – Find an Off-Market Deal

By finding an off-market deal, you can bring it to an experienced investor who can close on it. But, before you actually look for deals or bring one to an experienced investor, figure out WHOM you should bring it to and qualify them to ensure you’re not doing unnecessary work. Your time is valuable.

 

To qualify them, make sure they:

 

  • Have closed on similar properties that you’ll be looking for
  • Are willing to structure the agreement in a way that meets your goals (more on this below)
  • Are trustworthy and provide references – don’t enter into an agreement lightly. Any partnership has major implications because you’re bringing in investor money.

 

Should you ask for a one-time fee or equity in the deal? Well, it’s nice to get a fee for finding a deal, but don’t you want the long-term benefits of being in a deal? I would. So while you might need to get a fee on the first couple deals because, well, you need to eat and have shelter, the more you do it, the more you should transition to being an equity partner for finding the deal. Don’t take a single-family home wholesaler’s approach. Rather, take a buy-and-hold investor’s approach because that is what ultimately sets you up for long-term financial freedom.
Practically speaking, if someone came to me with an off-market deal, then I would think it would be worth about $25k – $100k depending on some of the details (i.e. size, how good of a deal it really is, etc.).

 

Related: 4 Legal Ways to Get Paid Raising Capital for Apartment Deals

Lesson #7 – Conservatively Underwrite Deals

By conservatively underwriting deals, you can get into the business by taking your talents to a group (or person) who is getting tons of deal flow and needs help underwriting deals. My business partner and I get a ton of deal flow, so we brought on a couple MBA students at UCLA to help us with the initial underwriting. After they do the initial underwriting, we then take it from there and complete the analysis. We pay them $10k once we close on a deal, and then there’s long-term potential for them to be in on the deals as we grow our business.

So, if you’re a numbers nerd…ahem…numbers guy/gal, then this is a way to break into the industry of buying apartment buildings using syndication deals. I interviewed a 20-year-old who did this and helped close a $2.3M deal. I mean, come one, if a junior in college can do it, then why not you??

Lesson #8 – Negotiate Terms and Get all Legal Documents in Order

Getting a law degree is another way to get into the business. If you’re not an attorney or don’t want to get a law degree, then skip to the next lesson.

Here are some points to guide you along the way:
Seriously, this isn’t the most practical way into the business, but if you already have a law degree, then it might work. First off, the person responsible for the acquisition is likely the one who negotiates the terms, so really all that’s left are the legal documents.

 

Paying the cost of legal on syndicated deals makes more financial sense than bringing an attorney in on the deal as a General Partner in most cases. However, perhaps you can find a group that has grown to the point where it makes financial sense to have an in-house counsel. It’s likely even if you’re an attorney that you’ll need to combine this lesson with other things you bring to the table in order to make for an appealing partner for someone buying apartment buildings and other real estate deals.

Lesson #9 – Raise Capital for a Deal and Be the Ongoing Point Person for Capital Sources

By raising capital for a deal and being the asset manager, you can get into the business by partnering with someone who has a proven track record in the multifamily syndication business. You bring the money, and they bring the deal. If you have a network of high net worth people, AND they think of you as a savvy business person, then this could be your ticket into the business.

Here are some points to guide you along the way:

  • Identify partners that are already buying up apartment buildings and have a successful track record.
  • Get an idea of how much you would make on a past deal of theirs if you raised XYZ amount of money – this gives you some benchmarks for how much you’ll make on future deals when you bring in the money.
  • Make sure the partner has money in the deal – otherwise, what do they have to lose if you bring in your money and your investor’s money and the deal flops? Always have alignment of interests.

 

Remember: if you’re raising money for other people’s deals, you must be on the General Partnership (GP) side. If you are not on the GP side and you are raising money then that’s against the law unless you have a Securities License. Be careful here. Make sure you’re on the GP side if you’re raising money for a deal.

 

I’ve written multiple posts on proven methods successful investors I’ve interviewed are using to raise capital:

 

  1. My Four-Step Apartment Syndication Money-Raising Process
  2. 3 Ways to Raise Over $1 Million for Your 1st Apartment Syndication
  3. A 5-Step Process for Raising BIG Capital For Multifamily Syndication
  4. 4 Principles to Source Capital from High Net-Worth Individuals
  5. 4 Non-Obvious Ways to Raise Private Money for Apartment Deals
  6. How to Overcome Objections When Raising Money for Multifamily Investing

Lesson #10 – Secure Debt Financing

Being a mortgage broker and securing the debt financing is another way to get into the business. If you aren’t a mortgage broker or don’t want to be one, then skip to the next lesson.

 

Even if you are a mortgage broker, similar to lesson #8, you’ll most likely get paid a fee (i.e. commission) instead of being brought on the GP side. That being said, I know of some groups that comprise of mortgage brokers, and they get in the deals by putting in their brokerage fee as the equity in the deal.

Lesson #11 Do Property Management

Become a property manager. As a property manager, you have lots of ways of breaking into the business of buying apartment buildings. Here are some:

 

  • Networking with local, aspiring investors who want to do deals but don’t have the track record. You can bring your team’s track record of turning deals around, and they bring the money for the deal. You have a lot of leverage here because, without you or someone like you, they couldn’t get approved for debt financing (and likely wouldn’t be able to raise the equity).
  • Work with an experienced group, and tell them you’ll exchange your property management fees for being in on their next deal. This could help them sell in the deal to their investors because it shows an alignment of interests. You have less leverage than the above scenario, but you still provide a lot of value.

 

You could even combine a couple methods and raise money for the deal while also trading your property management fees for being in the deal. The more money you raise, the more equity you get in the deal.

 

Or, you could raise money for the deal and get equity but not trade in your property management fees even though you’re managing the deal. Basically, you can slice it a lot of different ways. It’s only limited by your creativity and ability to add value to the deal. Ultimately your ownership should be proportionate to the value you add to the deal.

Bonus Lesson – Some Other Ways to Break into the Business:

  • If you’re a broker then put in your commission to be part of the deal. On my first multifamily deal (a 168-unit), the brokers on the deal put in their commission of $317,500 to become owners with us in the deal. It was a win-win because my group had to bring less money to the closing table, and they got to re-invest their commission into something that had major upside.
  • If you have experience in multifamily investing but don’t want to deal with the headaches of finding deals, you could do asset management for other investors.
  • You could also just do your own deal and all aspects of that deal (i.e. find it, get money for it, get financing for it, get right management partners, do asset management) similar to what I did when I started buying apartment buildings.

My company’s fifth syndication was a 296-unit, as well as our fourth purchase in a 12-month period. For this deal, I had two major discoveries. When I conducted my post-deal analysis, I looked at the investors who invested. More specifically, I looked at if they were new or returning investors, as well as how much each (new vs. returning) investor contributed to the total money raise.

 

For this deal, I found that 69% were new investors, and 31% were returning investors. However, the interesting thing I discovered was that the percentage of capital contributed to total money raise was almost split 50/50 between new and returning investors.

 

  • % contribution to total raise for new investors: 49.6%
  • % contribution to total raise for existing investors: 50.4%

So, here are a couple takeaways for anyone in the biz of raising money for their projects:

 

Lesson #12 – How to Keep Investors Coming Back

Investors new to buying apartment buildings likely won’t invest as much per person as returning investors. On this deal, 31% of my returning investors invested 50% of the total equity raise. However, after the 1st deal, the new investors were no longer new investors! So as long as you deliver and/or exceed expectations, it’s likely the amount invested will increase over time.

Lesson #13 – Top Investor Lead Generation Sources

Always have 3 ways to bring in new investors. Then convert them to returning investors. My 3 largest lead generation sources for new investors are:

Referrals from my current network. I don’t ask for referrals from my current investors or clients, but I do get them. One suggestion is to provide your investors (or potential investors if you don’t have them yet) with content that they can and want to share with their friends. For example, I wrote a book (Best Real Estate Investing Advice Ever: Volume 1) and mailed out TWO copies to each of my investors. I wrote a personal note to the investor on one of the books and told them the other book is for a friend of theirs that they’d like to give it to.

 

My podcast – Best Real Estate Investing Advice Ever Show. My podcast is the world’s longest-running daily real estate podcast. This daily show has provided me with a consistent presence via iTunes and Google searches. Most importantly, it helps people get to know me even though we’re not having a one-on-one conversation.

BiggerPockets. Since joining BiggerPockets, I’ve posted over 2,500 times and have been rewarded 10x over via the new friendships and relationships I have formed.

 

The sixth syndication deal my company closed on was a 200+ unit in Richardson, TX, which is a submarket of Dallas. After adding 200+ units to our portfolio, my company broke the 1,000-unit mark! As for this deal, the lesson I learned is simple. But before I mention it, let me tell you a quick story…

 

I had lunch with someone who asked me to meet with him. He was interested in raising money for fix and flips and was wondering how to go about doing so. He asked me a bunch of questions about where to find investors, what type of paperwork is needed, how to structure the investor conversations, etc., and I gave him answers to all the questions he asked.
He told me at the beginning of our meeting that he also wanted to see what I needed. And, true to his word, at the end of the conversation he asked me, “What can I do to help you out?”

 

I tend to get that question a fair amount of times, so I have three things I tell most people.

  1. Buy my book (all profits are donated to Junior Achievement).
  2. Listen to my podcast and write a review on iTunes
  3. Be on the lookout for off-market deals that are 150+ units

 

I appreciated him asking and was curious which one he’d pick and/or what he would say/do. He said he loved listening to audiobooks and that he would get the audio version of my book after he finished up with two or three other books he was currently listening to. I then had to leave, so we parted ways.
Question: How well did he do at adding value to my life?

 

Answer: To Be Determined. 

 

I sincerely applaud his effort and intention but there was no execution that I could see.

 

Is there a different approach that really impresses the person who you’re attempting to add value to? 

 

Yes.

 

It’s slightly different but has dramatically different results.

 

Here’s how:

 

Even though he’s in the middle of listening to two to three audiobooks, instead of saying “I’ll get to it after I’m done with the other books,” I would say, “I’m going to buy your book and will have it purchased by the time you get in your car in the parking lot!” BOOM.

 

Or, even better, “Joe, hold on one second. I’m ordering your book right now. That way I can write a review by the end of the month.”

 

Holy cow. What a difference that would’ve made from a perception standpoint. Is he spending the same amount of money and time regardless of which approach he takes?

 

Yep.

 

Is there a big ole difference between the perceived value that each of the approaches provides?

 

Oh yeah.

 

THAT leads me to the lesson I learned that was reinforced on this 217-unit deal.

Lesson #14 – Immediately Add Value

 When you have an opportunity to connect with someone, it’s important you IMMEDIATELY add value to his or her life. It takes the SAME amount of time but generates DRAMATICALLY different results compared to if you wait.

 

The 217-unit deal was a syndicated deal. However, it was only with one investor. I met that investor because he reached out to me after hearing me on someone else’s podcast. I was able to get on that other person’s podcast because when we met, I immediately referred him to people who I thought could help him get more business.

 

It’s simple. But lessons don’t need to be complicated in order to be effective.

 

Please note: I am NOT calling out the person I met with. I applaud him for asking what he can do to add value and saying he’ll do it. I’m simply saying there is ANOTHER LEVEL to go in order to be outstanding. And that level is to IMMEDIATELY add the value in order to stand out. 

 

Tim Ferriss said on his podcast, “Be unique before trying to be incrementally better.” That’s exactly the lesson here. People simply don’t follow through with what they say most of the time. Therefore, instead of saying you’ll do something later, just do it then. You’ll be unique and the results can lead to BIG things.

 

The seventh deal was a 200-unit in Dallas, TX. That purchase put my company at over $100,000,000 in assets under management (1,438 units). And per usual, I conducted a post-purchase analysis to uncover any lessons or takeaways.

 

I realized that there’s a way to communicate with investors about deals that really resonates. I boiled it down so I could use it during my investor communications moving forward, and so that others can use it during their deals when they are raising private money.

 

But first, I need to provide some backstory.

 

What’s your favorite book? Mine is Crucial Conversations. The book explains how to navigate conversations when opinions vary and when the stakes are high. The main solution discussed is to come up with a mutual purpose, and then, build up from there.

 

What is the central theme of your favorite book? After looking at my bookshelf, I realized most of my favorite non-fiction books have one or, at most, three central themes. Then, the author uses the rest of the book to simply elaborate or add additional context to those themes.

 

Some examples…

 

  • Four Hour Work Week by Tim Ferriss: optimize your time by creating a system for things that you currently do manually
  • Investing for Dummies by Eric Tyson: Stocks, start-ups, and real estate are the three main ways to invest. Pick which path you want to take.
  • Blink by Malcolm Gladwell: You can make informed decisions in a blink of an eye because of what Gladwell calls “thin-slicing”.

 

So, what does this mean for us as real estate investors who are buying apartment buildings using the syndication structure? It means that if we can boil down our main talking points into central themes, then we can communicate more effectively and get more transactions closed.

Lesson #15 – Three Talking Points when Communicating a Deal to Investors

I’ve identified three themes to talk about ANY deal. They are market, team, and deal. Then, I focus on the top 1 to 2 selling points for each of those categories. Here is how I applied this during my last deal I closed – the 200-unit in Dallas:

 

Market

  • DFW is home to 25 Fortune 500 headquarters and has been a top growth market in the country for years

 

Team

  • My company currently controls over $70,000,000 in apartment communities in Dallas

 

Deal

  • Off-market deal being purchased at 26% below the sales comps
  • Projecting the same rent premiums on upgraded units that the current owner is achieving

 

By organizing your conversation talking points with investors into these three themes, it addresses all the relevant aspects of buying apartment buildings. Of course, you’re going to need to elaborate on each of them, but at least you’re making sure you’re covering all your bases and leading with the most important selling points on the deal.

 

This strategy helped me close on this past deal, and I’ll continue to use it moving forward. You get a lot of value from using it as well!

 

For further details on this strategy, listen to JF857: How to Communicate Succinctly through Complex Deals and In General #followalongfriday

 

More recently, I closed on my eighth and ninth deals, both in Dallas, TX. In fact, they are directly across the street from one another. After closing on these two deals, the value of assets under my company’s control was over $175,000,000. After reflecting on these two deals, I had one major takeaway. But before getting to that lesson, I want to provide some context.

 

There was an on-market deal that was highly publicized and marketed by a broker. My partner and I loved the deal. However, due to competition, the price kept creeping higher and higher, so we weren’t sure if the deal would make financial sense.

 

Directly across the street from this on-market deal was another apartment complex. The on-market deal was over 300-units and the majority of units are 1-bedroom. The property across the street was over 200-units and is primarily 2 and 3-bedroom units. Therefore, the two buildings naturally complemented each other.

 

Fortunately, we have a very good relationship with a broker in Dallas who also happened to know the owner of the apartment across the street. The broker reached out to the owner and, since it was an off-market deal, we were able to negotiate and get the property under contract at a significant discount.

 

At the same time, we were in negotiations for the on-market deal. Since we were purchasing the property across the street at a significant discount, we were comfortable bidding higher on the on-market property because we would have the cost savings that come from economies of scale.

 

One of the savings that results from economies of scale, for example, is the lead maintenance person. Instead of having one person onsite and paying them let’s say $50,000/property, you can split that cost. There are also economies of scale for marketing and advertising, leasing staff salaries and commissions, and property management.

 

Also, since one building is primarily comprised of 1-bedroom units and the other is comprised of 2 and 3-bedroom units, we have a natural referral source. If someone is looking for a 1-bedroom unit, we’ve got it covered. If someone is looking for a 2 or 3-bedroom unit, rather than saying “no can do,” we can send them across the street!

 

Now to the lesson I learned.

Lesson #16 – Find Deals in a Hot Market By Creating Opportunities

In order to find deals in a hot, competitive market, create opportunities. Don’t just look at what the brokers are giving you. Instead, get creative. Look at what else is around the on-market property, and maybe you can package two deals into one transaction.

 

I can almost guarantee nobody on the face of this earth was doing that for this deal. Everyone was looking at the on-market deal, but nobody looked across the street (or elsewhere in the surrounding area) and thought to themselves, “Hmm, I wonder if I could buy that property too?” Because if they had, they might have seen the same thing we saw – a natural opportunity to combine the two deals.

 

I can also tell you that this is the first time we’ve ended up buying two apartment buildings simultaneously. We had to self-reflect and say to ourselves, “Okay. If we get this one deal, then we can definitely pull it off from an equity standpoint, but what if we get two deals? We know we can do one, but can we really deliver on two?”

 

We had to have faith based on our track record of delivering on our previous deals. Lo and behold, we had one investor who had invested with us in the past few deals put up all the equity that we needed for both deals (minus the money that we put in).

 

Overall, it was a learning experience across the board, from how to find deals in a hot market (you create opportunities) and also when to strategically stretch yourself based on the situation at hand.

 

Conclusion

In total, I’ve completed seven multifamily syndication deals in a little over 3 years. Currently, I control six different buildings with a value of over $100,000,000. From these deal, I’ve learned 16 invaluable lessons regarding how to buy an apartment complex real estate:

 

  • Lesson #1 – Get the Property Management Company to Put Equity in the Deal
  • Lesson #2 – Prime Private Money Investors Prior to Finding a Deal
  • Lesson #3 – Go farther faster by playing to your strengths
  • Lesson #4 – Do something consistently on a large distribution channel
  • Lesson #5 – There is major power in doing a recorded conference call when raising money
  • Lesson #6 – Find an Off-Market Deal
  • Lesson #7 – Conservatively Underwrite Deals
  • Lesson #8 – Negotiate Terms and Get all Legal Documents in Order
  • Lesson #9 – Raise Capital for a Deal and Be the Ongoing Point Person for Capital Sources
  • Lesson #10 – Secure Debt Financing
  • Lesson #11 – Do Property Management
  • Lesson #12 – How to Keep Investors Coming Back
  • Lesson #13 – Top Investor Lead Generation Sources
  • Lesson #14 – Immediately Add Value
  • Lesson #15 – Three Talking Points when Communicating a Deal to Investors
  • Lesson #16 – Create Opportunities to Find Deals in a Hot Market

 

Did you like this blog post? If so, please feel free to share is using the social media buttons on this page.

 

I’d also be VERY grateful if you could rate, review, and subscribe to the Best Ever Show on iTunes by clicking this link: http://bit.ly/2m2XyM1

 

That all helps a lot in ranking the show and would be greatly appreciated. And if you have any comments or questions related to buying apartment buildings, syndication deals, or anything else investment related, leave a comment below.

tropical real estate location

What the NFL, NBA and NASCAR Can Teach Us About Real Estate

According to HuffPost, the average career length of a professional athlete is only 10 years. That means that by their late-20s, earlier-30s, a professional athlete is forced into finding another career path and, more importantly, a revenue source.

 

Unfortunately, even with the multi-million dollar contracts that are standard today, the statistics aren’t on their side. A Sports Illustrated analysis found that 78% of former NFL players were bankrupt or under financial stress within two years of retirement, and an estimated 60% of former NBA players were broke within five years of retirement. However, the athletes that do overcome the odds and successfully transition into the business realm have done so by using skillsets that are valuable to real estate entrepreneurs of all stripes.

 

On my daily podcast Best Real Estate Investing Advice Ever Show, where I interview and extract the best tactical business advice from investors and entrepreneurs, I asked four professional athletes about their keys to success. Here’s what they shared.

 

Explore New Ideas Fearlessly

 

Carl Banks, a former NFL linebacker, earned the football equivalent of the Holy Grail twice, winning two Super Bowls with the New York Giants. What you may not know is that while still playing in the NFL, Carl was the first athlete to host a post-game radio show, The Carl Banks Giants Report, where he provided an insider’s analysis of his games. Consequently, he was the pioneer of the plethora of pre- and post-game sports panels led by athletes and coaches today.

 

Additionally, upon retirement, Carl took the business world by storm with his involvement in G-III Sports, the largest licensed sports apparel company in the world. However, when starting out, Carl and G-III lost over $3 million worth of licensing business to Reebok. Instead of throwing in the towel, he hustled to gain the business of mom-and-pop retailers. By providing them with such a high level of service, after 18-months, G-III was re-awarded the licensing rights, which – in combination with his newly won mom-and-pop customers – doubled G-III’s business.

 

Carl attributes both his radio and licensing success to his willingness to fearlessly explore new ideas. He told me, “As painful as it can be, don’t be afraid to fail, because entrepreneurism is about exploring every idea you have. It’s about blazing a trail, breaking new ground and having a better idea.”

 

Click here to listen to my full interview with Carl Banks.

 

Give 100% Effort

 

Another Super Bowl winning former athlete who found similar success in the business world is former defensive end Marvin Washington. After he exited the league, he delved into a relatively new business endeavor – a hemp-derived CBD product company Isodiol, where he leads the promotion of their IsoSport line – a hemp-based nutrition line that supports both mind and body wellness in training and competition used by high profile athletes.

 

Marvin became a Super Bowl winning athlete and navigates the ever-changing cannabis industry by his ability to put forth maximal effort, even when things aren’t progressing as quickly or as smoothly as expected. He said, “You have to give 100%. You have to really work hard and apply yourself, because if you think you’re going to work 9 to 5 and have success, you’re misleading yourself.”

 

Tactically, this is accomplished by sufficient planning and visualizations. Marvin writes out a plan for his days the night before so he knows that if he adheres to his schedule, he’ll have a successful day. Additionally, on the weekends, he reviews the previous week to see what he could have done better, which he then incorporates into the next week. Finally, whether it was before a big game or an important business meeting, he performs visualizations. For NFL games, he visualized himself making the right play in specific situations. For business meetings, he visualizes himself going over talking points and getting the proper narrative across to his audience.

 

Click here to listen to my full interview with Marvin Washington.

 

Persistence

 

Unlike most professional sports, there isn’t a defined career progression for becoming a NASCAR driver. Nonetheless, Kurt Busch was not only able to become a NASCAR champion, but he’s also a self-made millionaire through his racing brand. The key to his success was persistence.

 

Kurt told me, “When people are telling you to do this, do that, and yet you know what you’re focused on – that’s persistence. When it takes over your life, that’s when you know you’ve got to go that route.”

 

Similar to NASCAR, there isn’t a predefined blueprint for real estate success. Moreover, real estate investors can face a lot of resistance and negativity from their family and corporate career driven peers. Kurt wants you to know that you aren’t alone. When he was in college, everyone told him that racing was taking over his life and he needed to study more. At his first job, he was told that racing was taking away from his focus and work ethic. Yet, he persisted, which ultimately led to him winning 27 NASCAR races and counting, including the 2017 Daytona 500.

 

Click here to listen to my full interview with Kurt Busch.

 

Empowered by Failures

 

Jay Williams is considered one of the most prolific college basketball players in history, which is reflected by his 2nd overall selection in the 2002 NBA draft. However, his career was ended prematurely after a devastating motorcycle accident. Yet, against all odds, Jay owned this negative experience and used it as something empowering. He pivoted to become a multi-talented ESPN college basketball analyst, motivational speaker and best-selling author.

 

Jay told me, “I think a lot of people run away from bad things that have happened in their life, instead of documenting it, recognizing it, thinking through it and then using whatever experience they’ve been through as a positive driver in their life to push them to be more.”

 

It’s about not letting failures define you and instead, analyzing what went wrong and applying those lessons to the future, which reminds me of a powerful goal setting technique. Instead of a goal’s success relying fully on the outcome, 50% is based on that and the remaining 50% is about identifying systems, skills, techniques or lessons learned from the process of striving for that outcome and incorporating those into your approach for pursuing future goals.

 

Click here to listen to my full interview with Jay Williams.

 

Question: Which of these four lessons can you attribute to your current level of real estate success, and why?

 

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

 

If you have any comments or questions, leave a comment below.

 

physics on a chalkboard

The Ultimate Success Formula for Apartment Syndicators

I attended the Tony Robbins’ Unleash the Power Within seminar and one of my biggest takeaways was the Ultimate Success Formula. If you reflect back on anything you’ve accomplished in your life, no matter how big or small, I can guarantee you that you followed this formula.

 

What follows is the outline of the 5-step formula and how it can be used for finding deals and private money. Although, it can also be easily applied to any business, personal, relationship, fitness or overall lifestyle goal you pursue.

 

1.    Know your outcome

 

First, know what you want. Clarity is power, so you want to be as specific and detailed as possible.

 

As apartment syndicators, our outcome will be a desired annual income. Since we want to be as specific as possible, determine the exact amount of money you need to raise to achieve your annual income goal. Let’s say your goal is to make $100,000 this year. One of the primary ways apartment syndicators make money is with an acquisition fee. The standard fee collected at closing is 2% of the purchase price. To get a $100,000 acquisition fee, you’ll need to close on $5,000,000 worth of apartment buildings. Generally, the amount of equity required to close, including the down payment and closing fee, is 30%. 30% of $5,000,000 is $1,500,000. Therefore, to achieve a goal of $100,000, you will need to raise $1,500,000.

 

To determine the exact apartment purchase price and amount of money you need to raise in order to achieve your annual income goal, email info@joefairless.com and request a FREE Annual Income Calculator.

 

With this approach, instead of having a vague goal, you’ll know the exact number of leads and investor money we need to attract, and can take massive intelligent action (see step 3) to get there.

 

Tony Robbins says “where focus goes, energy flows.” Once you define your outcome and make it your main point of focus, you will begin to – almost automatically – take the right steps and identify the right opportunities to achieve it.

 

2. Know your reasons why

 

Jim Rohn says, “How comes second. Why comes first.” Now that you know your outcome, before formulating a plan of action for how you’ll achieve it, you need to know the reasons why you want to achieve it. Human beings can do amazing things when they have a strong enough why.

 

What are the reasons behind your outcome? Do you want to leave a legacy? Use your earnings to have a positive impact on the world?  Set your children up for success? Whatever the reason is, make sure it is consciously understood and articulated.

 

With a strong why comes a strong emotional attachment to your outcome. And those emotions will be what allow you to celebrate victories and keep you going when you experience setbacks along the way.

 

3. Take massive intelligent action

 

After defining the what and why, the how is to take action. Not a little bit of action. Not a lot of random action. And not sporadic action. But massive, intelligent and consistent action.

 

Massive intelligent action is consistently taking the small steps that, when added together, ultimately lead to the realization of an overall goal and vision.

 

By defining your overall annual income goal, you’re able to reverse engineer the smaller, day-to-day steps required to achieve it. You’ll know how much money you need to raise, which means you know you’ll need at least that amount in verbal interest from private investors.

 

You also know how many deals you need to complete to achieve your goal, which means you can calculate the number of leads you need to generate following the 100:30:10:1 lead process – for every 100 leads, 30 will meet your initial investment criteria (i.e. number of units, age, location, etc.), 10 will qualify for an offer and 1 will be closed on. So, you’ll need to generate at least 100 leads for every transaction. If you’re using direct mail, for example, how many marketing pieces must you send in order to receive the number of leads required to close on an apartment community that would result in you achieving your annual income goal?

 

The goal here is to build habits and routines that become second-nature so that you not only take massive intelligent action automatically, but even begin to crave it!

 

4. Know what you’re getting

 

As you begin to take action towards your goal, it is important to analyze and track your progress. If you aren’t tracking your results, you won’t know if you’re on the right path.

 

A powerful Tony Robbins’ anecdote is about two different boats starting off at the same point. One boat continues on to the destination while the other veers off by just one degree. A few hours later, the two boats are miles apart. Applied to apartment investing, if you are slightly off-track at the start of your journey, the longer you go without recognizing the error, the more off course you’ll be AND the more effort it will require to get you back on track.

 

So, you should routinely check in and see if your massive action is getting you closer or farther away from your money-raising and lead generation goal.

 

5. Change your approach

 

Based on your routine check ins, you may need to make adjustments to get yourself back on course. Or, you may see great results with a certain approach for a while, but it may begin to taper off and plateau, putting you in a rut. When faced with either one of these situations, celebrate the fact that you had the awareness to identified the error and then change your approach.

 

Inspirational Examples

 

Don’t just take my word or Tony’s word for the power of this success formula. Here are four inspiration examples of people who set out to achieve a certain outcome, faced adversity and barriers, changed their approach and ultimately reached a level of success far above that which they initially set out to achieve.

 

  1. Walt Disney

 

At 22 years old, Walt Disney was fired from a Missouri newspaper for “not being creative enough.” One of his early entrepreneurial ventures, Laugh-O-Gram studios, went bankrupt after only two years (but Walt did later credit his time at Laugh-O-Gram as the inspiration to create Mickey Mouse). Also, he was denied by 302 banks for a loan to start Disneyland because he “lacked originality.” But, by the end of his career, he won a record 22 Academy Awards and was in the process of opening his second theme park, Disney World. Today, the Walt Disney Company holds over $92 billion in assets with a market capitalization of roughly $150 million

 

  1. Michael Jordan

 

Michael Jordan was CUT from his high school basketball team, before going on to win an NCAA championship and 6 NBA championships and finals MVPs. He once famously said, “I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”

 

Michael Jordan is also a branding wizard. Between his shoes, the highest grossing basketball film of all-time Space Jam, and his part ownership of the Charlotte Hornets, MJ became the first billionaire NBA player in history, with a current net worth of $1.39 billion.

 

  1. Stephen King

 

Stephen King is an uber-successful author of horror, supernatural fiction, suspense, science fiction and fantasy, selling over 350 million book copies and having many books adapted into featured films, including the number 1 ranked movie on IMDB Shawshank Redemption. But, did you know that when he was 20, his manuscript for Carrie was rejected by 30 publishers, with one saying “We are not interested in science fiction which deals with negative utopias. They do not sell.” He actually threw the manuscript in the trash, before it was retrieved by his wife, who convinced him to resubmit it. Once published, the paperback sold over 1 million copies in its first year, and the rest is history.

 

  1. Harland “Colonel” Sanders

 

In 1955, at the age of 65, Harland Sanders, who was a retiree collecting $105 a month in social security, decided to attempt to franchise his secret Kentucky Fried Chicken recipe. He traveled the country looking for a restaurant interested in his recipe, often sleeping in the back of his car. After 1009 rejections, he finally found a taker. By 1964, there were 600 franchises selling his chicken recipe, and by 1976, he was ranked as the world’s second most recognizable celebrity. By the time of his death, there were 6000 KFCs across 48 countries with $2 billion in annual sales.

 

Conclusion

 

There isn’t a cookie-cutter strategy for being a successful apartment syndicator. We are all investing in different markets and asset sizes with different investors, and we all have different unique talents, strengths and weaknesses, and skills. That’s why there are multiple money-raising and lead generation tactics and strategies available on the resources site. You’ll need to find the techniques that are ideal for your particular situation.

 

So, once you’ve defined your outcome, articulated your why and began taking massive action, analyze your results. Keep doing the things that are working and try out new things for those that aren’t.

 

What are your 2018 goals and how will the Ultimate Success Formula help you achieve them?

 

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

 

If you have any comments or questions, leave a comment below.

 

large nuclear testing mushroom cloud

22 Self-Sabotaging Behaviors That Lead To Entrepreneurial Extinctions

Recently, I’ve come across a handful of entrepreneurs who are making extremely poor business decisions. It’s quite obvious that these self-inflicted wounds are undermining their businesses, stunting their long-term growth potential and may even kill their business altogether.

 

With 8 out of 10 entrepreneurs who start a business failing within the first 18 months, the statistics are already not on your side. Creating a business is hard enough as it is, so we shouldn’t be making in unnecessarily harder.

 

So, if you want to avoid an entrepreneur meltdown and join the ranks for the 20% of entrepreneurs who successfully launch and maintain a business, here are the 22 habits to avoid.

 

  1. Don’t read (or listen) to books and applying lessons from those books: Not reading books is a self-sabotaging behavior in and of itself. But it may be even worse if you take the time and effort to read but fail to apply any of the lessons to your business. My advice – after reading each book, have at least one actionable takeaway that you immediately implement in your business. Need a place to start? Here’s a list of my top 14 Best Ever apartment investing books.
  2. Isolating yourself: Because teamwork makes the dream work. You literally have a better chance of winning the lottery than you do launching and scaling a business by yourself. If you are going to isolate yourself, you might as well start buying your lottery tickets now.
  3. Closed minded towards new business practices: With more competition and technology than ever before, what worked for your business last year may already be sub-standard 5 time over. So, if you aren’t open to change, your business will go the way of the dinosaurs.
  4. Don’t like to apply new learnings to your business: It’s one thing to be open minded toward new business practices and ideas. It’s another to actually take action and apply them to your business.
  5. Don’t quickly test things out and kill it if it doesn’t work: Don’t have an obsessive relationship with new business practices and ideas. If it improves your business, great. If not or once it stops, have the awareness to identify that fact and discard it like you would a stale piece of gum.
  6. Don’t attend seminars, meetups, conferences, mastermind groups, etc.: Don’t be a basement dweller or spreadsheet millionaire. Get out of the house and meet other entrepreneurs face-to-face.
  7. Don’t model your success after someone who has “been there, done that” before you: Success leaves clues. And you need to be an expert investigative detective.
  8. Don’t invest more in yourself than you do in your craft: Relationships, tools, software, money strategies, basically everything in your business will come and go, but as unfortunate as it may be, you can’t get rid of yourself. So, wouldn’t it be great if the one thing that’s always there was a Golden Tool rather than just a tool?
  9. Don’t think you can learn something from anyone: Interesting fact: There are over 16 million books in the Library of Congress. Still think you’re a know-it-all? It would be delusional to think you know everything, or even 0.1% of everything. Don’t let an inflated sense of your knowledge be your downfall.
  10. Aren’t easily reachable to your team members: Because if you aren’t easily accessible to your team members, you’ll likely be even less accessible to your customers.
  11. Don’t have perspective when life hits you with a sledgehammer: Whether it’s in your business or in your personal life, major disasters, failures and setbacks are guaranteed to present themselves. The life vest that will save you from drowning is keeping your “why” in perspective.
  12. Don’t have a vision for where you are going: Not only will your “why” help you and your business survive the future sledgehammer attacks, but it will also direct your decisions and actions, pulling you closer and closer towards your desired outcomes.
  13. Don’t connect with people in a meaningful way: Surface level relationships are not satisfying. Moreover, deep meaningful connections enable reciprocal, value add relationships where both parties help each other achieve their business goals.
  14. Don’t want to give before you get: Selfishness sacrifices long-term growth for seemingly short-term wins. Whereas selfless contribution results in short-term satisfaction (because let’s be honest: giving feels good) and 10 to 100-fold payback over the long run.
  15. Aren’t a person who stands by your word: Psychologically, people can easily forget when you met a commitment, but they will NEVER forget a lie.
  16. Simply say you will add value: There’s nothing worse than the person who is a servant in words but a greedy pirate in action. If you’re going to talk the talk, you must walk to walk, because actions speak louder than words. Proactive add value, and then you can talk about it later.
  17. Don’t prioritize relationships over everything else: Since you can’t build a business on your own (see #2), forming and maintaining relationships should be the foundation of the majority, if not all, of your business decisions.
  18. Don’t put in the consistent work, day in and day out: You are rewarded in public for the massive, consistent action you take in private.
  19. Trip over dollars to pick up pennies: Prioritize your time so that the majority of your effort is directed towards the money-making activities. Don’t spend all of your time on the $10/hour or $100/hour tasks while neglecting the $1000/hour tasks.
  20. Let challenges overwhelm you: They always come as entrepreneurs. If you act as if a challenge or failure is the end of the world, then that will be your business’s reality.
  21. Aren’t the most resourceful person you know: You should be able to solve any problem yourself or have the ability to find a solution. Anything less and your success is restricted.
  22. Don’t know your competition can replace you: Don’t obsess over your competition to the point of paranoia. Instead, let it be a motivator that keeps you evolving and at least one-step ahead.

 

What else should be added to the list? What are deadly business mistakes you see entrepreneurs making?

 

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

 

If you have any comments or questions, leave a comment below.

 

 

high-end rental complex real estate investment

Three Ways An Owner Benefits From Selling Their Apartment Off-Market

Originally Featured In Forbes Here

 

The most common type of real estate transaction is an on-market sale. An apartment owner who is interested in selling their property lists it with a broker, the broker markets the deal to the public, in today’s competitive market a bidding war ensues and the contract is generally awarded to the highest bidder. The more uncommon transaction type is an off-market sale, where an apartment owner who is interested in selling their property does so without enlisting the help of a broker.

 

If you’re an apartment investor who’s looking to expand your portfolio, to find the best deal, focus on off-market opportunities. It is true that an on-market opportunity is much easier to find. However, due to being highly marketed by a broker, the proceeding bidding war will result in an artificially high sale price. Conversely, off-market opportunities can be more difficult to find, but the financial benefits of acquiring an apartment directly from an owner are worth the time investment.

 

If an owner can get a higher sales price by listing their apartment with an agent, common sense dictates that they’ll be resistant to selling it off-market. However, by bypassing a broker and selling directly to a buyer, there are three main ways the apartment owner will benefit. By understanding these benefits, you, the buyer, can put yourself in the best position to negotiate with pure intentions — since both parties will benefit from the transaction — and the better you’re able to communicate these benefits to the seller, the better chance you have of securing a contract.

1. Higher Profit

 

The first benefit an apartment owner has by selling their property off-market is that they will actually achieve a higher profit. That’s because of the cost savings associated with not hiring a broker.

 

Generally, in a real estate transaction, the seller is responsible for paying the broker’s fee. A listing broker charges anywhere between 2% and 6% of the purchase price. Moreover, listing on-market increases the chances of the buyer being represented by a broker who charges the same fee. On a $5 million sale, the seller would lose between $200,000 and $600,000 in pure profit.

 

But, by purchasing the apartment off-market, the seller will benefit by saving between 4% and 12% of the final sale price.

 

2. Faster Closing

 

When an owner is interested selling a property, don’t automatically assume that their primary motivation is to make as much money as possible. If the owner is facing a distressed situation, which could be due to delinquent taxes or mortgage payments, facing many evictions, low occupancy, deferred maintenance or a multitude of other reasons, their main interest may be to unburden themselves of the property as quickly as possible. Even if they aren’t distressed, a faster close means they’ll get their money quicker, which they can then use for other purposes.

 

If an apartment owner lists a property with a broker, the broker will have to create an offering memorandum (OM). The OM is a detailed report that outlines important information about the apartment community — the financials, sub-market information, a competitive analysis and more — that can take weeks, if not months, to complete. Additionally, the time horizon widens if there is a competitive bidding situation. Then, the contract could be awarded to a buyer who, for some reason or another, backs out.

 

Instead of waiting for their broker to complete the OM, as well as to avoid the other potential time-consuming occurrences, the owner can sell off-market. They’ll send their rent roll and trailing 12-month expenses to the buyer, who can quickly underwrite the deal and submit an offer, expediting the closing date in the process.

3. Less Hassle

 

Finally, selling a property off-market has much less of an overall hassle. Again, not every owner is primarily motivated by getting the highest offer price. They may just want the least stressful exit.

 

By selling off-market, there are no open houses or property tours scheduled with several interested parties. There aren’t multiple question and answer sessions with prospective buyers. Random buyers and their contractors aren’t poking around the property and disturbing the tenants. And, there are no rumors floating around about the apartment community being sold to an unknown party, which could negatively affect resident and/or vendor relationships. Instead, the owner has to deal with one buyer, which eliminates much of the hassle of listing on-market.

From the buyer’s perspective, there are three ways that they will benefit by purchasing an off-market opportunity. First, they will save money by avoiding a bidding war and the broker’s interest in finding the highest paying buyer who will close. Second, they have more opportunities for creative financing since they’re working directly with the owner and can identify their pain points and goals for selling. Finally, the overall closing process is faster with the broker out of the equation.

 

But ultimately, an owner’s willingness to sell their apartment off-market will come down to how it will benefit them. If you can sufficiently convey these three benefits — more profit, faster closing and less hassle — to the seller, you’ll succeed in creating a win-win scenario for both parties and add a new apartment to your portfolio.

 

Have you ever persuaded an owner to sell you their property off-market, and if so, how?

 

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

 

If you have any comments or questions, leave a comment below.

 

apartment community real estate investing

So You Just Closed On Your First Apartment Community…Now What?

You just closed on your first apartment community. Congratulations!

 

Now what are the next steps?

 

As the asset manager, in return for your asset management fee (the industry standard is 2% of the collected income), it is your duty to ensure the successful take over and ongoing management of the apartment community. To do so, here are the 11 things you need to do:

 

1 – Implement the Business Plan

 

As the asset manager, your main responsibility is to ensure the successful implementation of the business plan. This starts by forming a budget (i.e. the ongoing expenses) and calculating the projected rental premiums based on your rehab plan (through a rent comp analysis) – both of which should be completed via underwriting and due diligence – and running these figures by your property management company for approval, all before actually closing on the deal.

 

Once the management company has confirmed your budget and rental premium assumptions and after you close on the deal, it is your responsibility to oversee the budget. I recommend gaining access to your property management company’s online reporting systems so that you can review the monthly financial statements. You will be comparing the budgeted expenses and projected rental premiums to the actual figures on an ongoing basis, making adjustments when necessary.

 

2 – Notify Investors at Closing

 

The weeks leading up to closing, my company always prepares a “Congrats! We Closed” email that we will send to our passive investors once we’ve officially closed. The purpose of this email is to not only notify the investors that the deal is closed, but to also set ongoing expectations.

 

In the email, we explain how often they should expect to receive update emails (we prefer once a month, but quarterly or annual updates are also an option) and the financial statements (we prefer sending the trailing 12-month income and expenses and a current rent roll on a quarterly basis). We will also include links to relevant articles that reinforce the project and/or market.

 

We will also attach an Investor Guide to this email. The purpose of the investor guide is to proactively address common investor questions about the project. The guide will inform the investors about ongoing investor communication in more detail, tax information, distribution frequency and amount and any other piece of information deemed relevant to the investors.

 

I strongly recommend preparing both the email and the investor guide before you close so you can send it out immediately.

 

3 – Weekly Performance Review

 

Before closing the deal, you want to schedule a weekly call with your point person at the property management company to go over and track the property’s key performance indicators. Examples of KPIs to track are, but not limited to:

 

  • Money related: gross potential income, collected rent, delinquent rent
  • Marketing: number of new leases, notices, renewals, waiting list
  • Maintenance: vacancy, rent ready units, units not rent ready
  • Management: current occupancy, move-ins and move-outs

 

4 – Investor Distributions

 

On either a monthly or quarterly basis, whichever you’ve negotiated with your investors, you will need to send out the correct distributions. Before closing on the deal, make sure you know who will be responsible for sending out the distributions and where they need to be sent. Ideally, your property manager handles the distributions with your oversight.

 

5 – Investor Communication

 

You will be responsible for ongoing communication with your investors. Each month, we provide our investors with an email that recaps the previous month. The information we include in these emails are:

 

  • Distribution information
  • Occupancy and pre-lease occupancy rates
  • Renovation updates (i.e. how many units have been renovated?)
  • Rental premium updates (i.e. are we meeting or exceeding our projections?)
  • Capital expenditure updates
  • (i.e. holiday parties, resident events, local business or real estate news)

 

Additionally, on a quarterly basis, we provide the financials (trailing 12-month income and expenses and a current rent roll). Finally, we provide our investors with their tax documentation, the K1, on an annual basis.

 

6 – Managing Renovations

 

If you purchase the asset with a bridge loan, meaning the renovation costs are include in the financing, or another loan type that includes renovation costs, you will have constant communication with the lender during the renovation period. You won’t get a lump sum of money upfront for renovations and capital expenditure projects. Instead, you will receive draws from the bank. So, you will be interacting with the lender about the construction draws as you implement your capital expenditure projects.

 

If you’re renovations are not included in the financing and you’re covering the costs by raising equity from your investors, you’ll have control of the capital expenditures budget and won’t have to go back and forth with the lender.

 

7 – Maintaining Economic Occupancy

 

Assuming you’re a value-add investor like me, once you take over a property, you will begin to implement our value-add business plan. Since you are performing renovations, you should have already accounted for a higher vacancy rate during the first 12 to 24 months. However, it is your responsibility to make sure you’re maintaining occupancy so that you can hit your return projections.

 

Hopefully, your property management company is implementing the best practices for maintaining occupancy, like advertising and marketing to local business and competitors, adjusting rental rates as occupancy dips and doing weekly market surveys to determine the market rents. But as the asset manager, it is your responsibility to advise the management company on the speed at which renovations are made. You don’t want to handicap your property management company by forcing renovations. So, don’t be too aggressive with the pace at which you do your renovations.

 

Generally, you will renovate vacant units (ones that are vacant at closing or due to turnover). Other strategies include offering newly renovated units to residents who are living in nonrenovated units so that you can renovate their unit once they move, or increasing nonrenovated rents to promote turnover. However, if you have a large influx of vacant, nonrenovated units, don’t feel forced to renovate all of them. It’s okay if for every five or six units that become vacant, you only renovate half and lease the remaining units back to the market unrenovated, because you’ll get them next time people move out.

 

Overall, you want to renovate at a pace that will not adversely affect occupancy rates and won’t put an unnecessary burden on the property management company.

 

8 – Frequently Analyze the Competition

 

You want to set up a process for doing rent surveys of the competition in the area. The goal of the rent survey is to compare your property’s rental rates to those of surrounding apartments, as well as the overall market rates, to determine if you can further increase your rates while remaining under the leading competitor. Hopefully, this is something your property management company will perform and will provide you with the results and advice on rate increases.

 

9 – Frequently Analyze the Market

 

You will also want to pay close attention to the market in which your apartment is located. Where are the prices and cap rates at? What would you get if you sold right now, or refinanced? Even if your business plan is to sell in five years, don’t wait until then to look at the market. You may be able to provide your investors with a sizable return if you sold after two years, or three and a half years. But you’ll never know if you aren’t constantly analyzing the market conditions. I recommend determining how much return you’d achieve if you sold at least a couple times a year.

 

10 – Plan Trips to the Property

 

I recommend visiting the apartment community at least once a month. However, don’t announce every one of your trips. If the management company is aware of your visit, they will have time to prepare and you may not get a true representation of how the property is typically managed. Whereas if you visit unannounced, you’ll see how the property is actually operated on a day-to-day basis.

 

11 – Expect the Unexpected

 

Finally, as unexpected issues arise (and you can guarantee that they will), you are responsible for making the proper decision to resolve the problem. For example, if you receive a call from the property manager, notifying you that the boiler unexpectedly broke down, you’ll have to decide if you will use money from the operating budget to replace, refurbish or repair it.

 

 

QUESTION: What do you think is the most important asset management duty, and why?

 

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

 

If you have any comments or questions, leave a comment below.

 

 

football stadium

3 NFL Lessons That Entrepreneurs Can Bring to Their Businesses

Originally featured in HuffPost

 

We’ve all heard this story: small town guy is drafted into the National Football League and has an outstanding career in the spotlight, making a boatload of money. Then, they retire and lose it all. However, we sometimes hear the exceptional tale of an athlete who made it big in the league, retired and then leveraged the skill sets acquired from the NFL to launch a career as a business person, achieving similar or even higher levels of success.

 

Most people have trouble mastering one area of life, let alone two. So, what is it that differentiates these two types of athletes?

 

As the host of a real estate podcast where I interview guests and share advice, I’ve wondered what some of the sports superstars turned business titans would attribute to their attainment of the highest levels of success in multiple industries. Here’s what they shared with me.

 

Start From the Ground Up

 

Undoubtedly, one of the most famous plays in NFL history was the “Immaculate Reception,” which was caught by NFL Hall of Famer and four-time Super Bowl Champion Franco Harris. After a legendary NFL career, Franco transitioned into the business world. Harris believes that the main reason many NFL athletes fail after retirement is that they try to purchase companies, as opposed to starting at the bottom and building from the ground up. “The advice I provide to NFL players when they’re transitioning out of the league is don’t buy your way to the top. Learn the business. Learn every aspect of the business,” Harris told me.

 

He attributed this philosophy to his ability to successfully scale superfood. Instead of just buying his company and immediately assuming the duties of a CEO, he started off by learning the day-to-day operations. He spent time working in the warehouse, delivering products and unloading trailers in order to truly understand the job duties that made the business function properly.

 

Unless you have access to a large amount of capital, you won’t be tempted to buy your way to the top of a company. But Harris’s experience shows us that going through the day-to-day grind of a startup is meaningful and necessary to scaling and maintaining a business. Moreover, once you do assume a higher-level role, you’ll have a more humble and gracious perspective of the lower-level roles in the company, which will ultimately make you a better leader.

 

Always Stay the Course

 

Former San Diego Chargers running back Terrell Fletcher has cultivated a skill that enabled him to successfully make the arduous transition out of the league: the ability to overcome adversity and stay the course. After a brief stint as an NFL coach and sports commentator, Fletcher found his new identity and purpose as a motivational speaker, author and Senior Pastor of the City of Hope International Church.

 

He said, “Barriers, enemies to our success, whether they’re external or internal, are guaranteed to show up on the journey. But don’t give into them. Fight them, because those barriers are not there to stop you. They’re designed to make you stronger.”

Facing and overcoming challenges is a vital part of growing as an entrepreneur. In fact, if you aren’t running into barriers in your business, that means that either your goal isn’t big enough or you aren’t taking the risks that are part and parcel of every business person’s journey towards success. And in the long run, you will look back with gratitude on these barriers because of the skills you obtained and the person you’ve become from gaining victory over them.

 

Don’t Underestimate the Value of Teamwork

 

Emmitt Smith is arguably one of the greatest NFL players of all-time. After setting three rushing records (career yards, touchdowns and attempts), winning three super bowls and being inducted into the Hall of Fame, he began to build his off-field legacy as the owner of a real estate investment and development company.

 

A trait Smith learned in the NFL that he’s applied to his business endeavors is teamwork. He said, “Checking your ego at the door and understanding that you do not become successful by yourself. I did not hand the football to myself. I did not block for myself. I did not call the plays. And the same thing applies to business.”

 

Each employee on a business team has their own unique abilities and responsibilities, and when in harmony together, it results in a smooth and successful organization. Moreover, one superstar cannot carry you to the promise land.

 

Additionally, in today’s competitive landscape, having key people who can competently perform multiple functions is extremely advantageous. In football, the best running back can convert on a one-yard fourth down play, but when called upon, he can also catch a quick swing pass or throw a block to avoid a sack. Having a team member who can do high-level strategy and understand the day-to-day operations is a beautiful thing.

 

Interestingly, something that none of the NFL players stated as the main contributor to their business success was the money they earned while in the league. Instead, they found success by learning the day-to-day ground level operations, never giving up and surrounding themselves with a stellar team, which is something that the novice entrepreneur with little or no capital is capable of acting upon immediately.

 

If you transitioned from a full-time, 9 to 5 job into real estate entrepreneurship, what skill sets did you obtained from the former that you successfully applied to the latter?

 

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

Episode of Best Real Estate Investing Advice Ever Show

Top 5 Best Ever Blog Posts of 2017

Here are the top-5 blog posts (determined by page views) of The Best Ever Blog in 2017.

 

  1. 16 Lessons From Over $175,000,000 in Multifamily Syndications 
  2. 6 Creative Ways to Break Into Multifamily Syndication
  3. How to Raise $1,000,000 For Your First Apartment Syndication
  4. Formula to Buy 5 Rental Properties in 2 Years and Payoff in 7
  5. 7 Principles for Attaining a $500 Million Net Worth

 

What was your favorite blog post of 2017?

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD                       

If you have any comments or questions, leave a comment below.

youtube video playing

Top 5 Best Ever YouTube Videos of 2017

Here are the top-5 YouTube videos (determined by views) from the Best Ever YouTube channel in 2017.

 

1. NFL Legend, Emmitt Smith, Shares His Developmental Real Estate Secrets

 

 

2. Tony Hawk Shares His Not-So-Easy Path to Becoming the Premier Skater Brand

 

 

3. Learn the Secrets that took CNBC TV Star Sean Conlon From Assistant Janitor to Real Estate Mogul

 

 

4. Morning Routines, Tips for Accomplishing Your Goals and Your Questions Answered with Jillian Michaels

 

 

5. How 9 MILLIONAIRES Were Made with This Simple Trick with Sam Ovens

 

 

What was your favorite YouTube video of 2017?

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD                 

If you have any comments or questions, leave a comment below.

Real Estate conference guests

Top 10 Best Ever Podcasts of 2017

Here are the top-10 most popular episodes (determined by downloads) of Best Real Estate Investing Ever Show in 2017.

 

  1. How He Bought Over 100 Units in Nine Months with Todd Dexheimer
  2. How This Kid Used GOOGLE to Fund 11 Properties in a Year and a Half! with David Zheng
  3. What Your Financial Planner Isn’t Telling You About Retirement with Charlie Jewett
  4. Defer Your Taxes with the 1031 Exchange! with Leonard Spoto
  5. From Living in Her Parents House, to Complete Lifestyle Freedom Through REI with Julie Broad
  6. How to Buy, Hold and Sell Seller Financed NOTES with Dawn Rickabaugh
  7. He Moved to the US From Israel and Now Owns Over $120,000,000 in Real Estate Internationally!! with Nizan Mosery
  8. Hack Your Brain For Financial Success with Joan Sotkin
  9. Make Enough Money in Real Estate to Quit Your Job!! with Drew Kniffin
  10. Thoroughly Evaluating Multifamily Buildings and Areas Before Your Buy with Omar Ruiz

 

What was your favorite episode in 2017?

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD               

If you have any comments or questions, leave a comment below.

 

fancy letter

The Real Estate Lead Generation Secrets of a Direct Mailing Specialist

One of the most popular real estate lead generation tactics are direct mailing campaigns. But with its popularity comes a high level of competition. So, to separate yours from the tens, hundreds, or even thousands other direct mailing campaigns in your market, it helps to have a basic understanding of the best practices that experienced investors are implementing across the nation

 

Craig Simpson, who’s the owner of a direct marketing company that is responsible for overseeing 30 million pieces of direct mail sent out over 300 different promotions each year, is a direct mailing expert. In our recent conversation, we discussed the three important factors involved in a direct mailing campaign and the best practices for maximizing your response and conversion rate.

Selecting a Mailing Service

 

Since Craig built his direct mailing service from scratch, he has a behind-the-scene’s perspective on the characteristics of the good, bad and ugly direct mailing services. His advice on selecting a mailing service in your local market is “I would shy away from anybody who uses words like ‘guarantee’ or ‘ensure that you’re going to get the best kind of response rate’.”

 

There isn’t a one-size fits all method to direct mail. It depends on various factors like the target customer, the product, the market, etc. So, if a mailing services is “promising” or “guaranteeing” a certain outcome…RUN! They cannot know whether or not their service is a right fit for you until they understand what it is you’re trying to accomplish.

 

Instead, Craig said, “the things you’re looking for is people who talk about testing, because all direct marketing boils down to a lot of testing.” We will dive into the best practices for testing different mailer strategies and types in the sections below. If you decide to forgo the DIY direct mailing campaign, make sure the direct mailing service you use doesn’t offer guarantees, but focuses on testing instead.

 

Once you’ve selected the ideal direct mailing service, or made the decision to conduct your own campaigns, the next step is to understand the three main factors to a successfully direct mail, which are the list, the copy and the offer.

 

The List

 

The list contains who it is you are mailing to, and is the most important piece of any direct mail campaign. Craig said, “you want to make sure you have a targeted list of prospects that will look like the type of customers you want to go after.”

 

If you’re interested in distress property leads, make sure you have a list of distressed owners. If you’re going after property’s whose owners live elsewhere, make sure you have a list of absentee owners. It may seem obvious, but if you obtain a list from a bad source, you’ll be surprised at how much money you can waste by mailing to unqualified leads. So, make sure you’re getting your lists from reputable sources, like CoStar or the local auditors site.

 

The next natural question is, how often do you mail to your list? Like most things in real estate investing, the answer is that it depends. The frequency in which you send out your mailing campaigns will depend on the quality of your list and your response rate. The standard response rate for direct mailing campaigns is three quarters of a percent. For every 1000 pieces of direct mail, expect 7 to 8 owners to reach out for more information.

 

Let’s say you find a list from a reputable source of 10,00 distressed property owners. Craig said that if you receive the 0.75% response rate and a majority of those responses are very interested owners, you have a great list. With great lists, he recommends sending out mailers once a month. If your first mailer, or second campaign with a good list, results in a response rate of below 0.75% and/or a minority of the owners who do respond are interested in selling, you have a decent list at best. For these types of situations, Craig recommends that you send out direct mailing campaigns once ever 60 to 90 days. Then, if you continue to see poor results, scrap that list or send out mailers on a less frequent basis, find a new one and repeat the process.

 

The Copy

 

The copy is what is it you say in your mailer. The key point here is to create a copy that speaks directly to owner’s needs. Craig said, “When you’re talking to a prospect, you always want to talk about the pain points, the things that they may be struggling with … and then you can address the solution.”

 

If you’re mailing to absentee owners, for example, they will have renters. When formulating your direct mail copy, the theme should be about renters. They’re probably worrying about people destroying the house, failing to pay rent, turnover costs, cost of property management and other renter related headache. So, you can address their pain point by stating that you can take these problems off their hands and put extra cash in their pockets at the same time.

 

Once you’ve converted a few leads into transactions, another unique approach is to include testimonials in your copy. “Offer testimonials,” Craig said, “having past clients that you’ve worked with rave about you and sharing that with others. People are always convinced and encouraged when somebody else has had a good experience.”

 

To determine what does and doesn’t work, test different mailing campaigns. Use different letter types (yellow letter, handwritten, postcards, etc.), copies (i.e. the message), colors, etc. and track the results, ultimately getting closer and closer to the ideal mailer for your specific market and niche.

 

Overall, you want your copy to directly connect with the particular owner’s potential pain points, as opposed to a vague “We Buy Houses” message, and conduct tests on an ongoing basis to see what does and doesn’t work.

 

The Offer

 

The offer, which will be included in your copy, is what it is you want them to do. Do you want them the call, text or email you? Do you want them to visit your website or a landing page? Do you want them to request a free report or consultation? Whatever action you want an interested owner to take, make sure it is clearly stated in your copy. And you can also test out different offers to see which ones result in the highest response and conversation rates.

 

For those of you who have closed on a deal as a direct result of a direct mailing campaign, what the list, copy and offer did you use?

 

Check out the Lead Generation topic section on my blog for more than 25 articles on the Best Ever lead generations tactics and strategies.

 

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

social media profile on phone

How a $10 Million Agent Generates FREE Leads With Facebook

Spending hundreds of thousands of dollars on online marketing is a great way to obtain quality real estate leads. However, some real estate professionals – and I would say especially those who are just starting out and are strapped for cash – implement creative strategies to reduce or even eliminate their marketing budget, either out of necessity or to just increase their overall bottom line. But regardless of your experience level or spending capabilities, all real estate professionals and investors should be actively searching for ways to decrease their cost per lead.

 

Trish Williams, an agent and broker out of Las Vegas, started her real estate career in 2014. She devised a FREE marketing tactic which accounts for 90% of her $10 million in real estate transactions. Trish’s primary source of new customers are through referrals from Facebook. Essentially, she offers intriguing content on her personal Facebook page on a consistent basis, building up her credibility, so that whenever someone is ready to buy or sell their home, or personally knows someone who is, she’s the first person they reach out to. In our recent conversation, she explained her process for obtaining referrals through her personal Facebook page. You can apply these techniques to your business, regardless of the real estate niche you pursue.

 

How to grow your Facebook friend’s list?

 

One of the main focuses of Trish’s referral process is to build and grow your personal Facebook friend’s list. The more friends you have, the more potential direct and indirect referrals you’ll receive (as long as you’re posting the right kind of content, which will be discussed in the next section).

 

Besides organic growth, she has two active methods for adding new friends. First is through networking…EVERYWHERE. She said, “Every time when I meet somebody, if I meet you at the grocery store [for example] and we have a conversation, I ask you your name and I’m going to add you as a friend to my Facebook.”

 

Two is through her business page. She said, “I haven’t really figured out how to convert those people or grab them, so I add them as friends. I just add them to my personal page, because I have such a better conversation rate of converting people through that.”

 

Both of these tactics can be applied to any real estate niche. When you’re out and about, talking to people with passion about your real estate business, ask them for their name and add them to your friend’s list. Also, you should already have a business page or group on Facebook, so every time you receive a new like or a new member joins your group, add them as a friend.

 

What should you post?

 

The key to Trish’s referral process is the type of content you post. Since the goal is to establish credibility and trust with your followers, she said, “I’m not marketing. I don’t ever want to sound like a commercial. I’m just talking about what I do.” So, your content should be natural, genuine, authentic and add value, as opposed to gimmicky marketing or obvious advertising.

 

The specific content you post will vary depending on your niche. Since Trish is a real estate agent, her posts simply show what she is doing on a day-to-day basis. One approach she uses is to post pictures. “If I have an experience, if I’m out at a house and it has an amazing kitchen, I’m going to post it. If I see something that has great investment potential, I’m going to post it,” she said. “If I get an award, I’m posting a picture of me with the award, or if something happens – every success I’m posting about.”

 

Another approach that has a great response rate are videos. Trish posts videos all the time. She said, “If I’ve been out door-knocking, I post a video. I show people the yard of the neighborhood or the view of the street. If I’m at a new construction home, grand opening for a model home, I post a video of it.”

 

The video approach is a great way to build relationships without actually having to meet people in person. “People get used to seeing me,” Trish said. “They know me because I’m always posting videos, and they’re not professional videos. Sometimes my hair is crazy or whatever, but I’m still a person and people really like that.”

 

Since it is her personal Facebook page, not everything she posts is business related. She will post things about her personal life too. However, she did recommend that you avoid posting about divisive topics. She said, “I stay out of politics. I stay out of any kind of things that are controversial. I never ever post about anything that has to do with those. I don’t want to alienate people whatsoever, so I always keep a neutral stance, stay positive, and try to be that person that people really want to work with.”

 

When should you post?

 

Trish posts the type of content outline about at least every other day.

 

On top of that, she is on Facebook every day, commenting and liking other people’s content. However, that doesn’t mean she’s mindlessly scrolling through her news feed, liking and commenting on every single post. Remember, the goal is authenticity and genuineness. If you like every post, eventually people are going to catch on to what you are doing. Instead, Trish said, “I take interest in what other people are doing. I see what’s going on in their life and that helps me too to know who may need assistance. I do just make it a habit every day to scroll through, take a few minutes, see what people are doing. Whatever is at the top of my newsfeed.”

Finally, she always reaches out on birthdays. “Just Happy Birthday! If there’s something I know special about them, or what’s going on in their world, I mention it.”

 

Conclusion

 

Trish attracts the majority of her real estate business through Facebook referrals. She accomplishes this by networking to build her friend’s list, then posts genuine, natural content at least every other day, as well as likes and comments on other people’s posts and wishing people happy birthday.

 

Besides being simple and low cost, an advantage of this approach, as Trish mentioned, is that you’re establishing rapport with people before meeting them in person. It’s a completely different conversation when someone already knows you prior to sitting down or jumping on a call with them, compared to being complete strangers and then have to build up from nothing.

 

What FREE marketing tactic have you used with success in your real estate business?

 

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

magnifying glass

Find Higher Quality Apartment Leads with This Proactive Marketing Approach

Dylan Borland – listen to my full interview with him here – is a fix-and-flipper turned apartment investor. He currently controls $10 million in real estate and is aiming to control $100 million of the next five years. His best ever advice and what he believes to be the key to his success is his unique prospecting approach.

 

The typical marketing approach for finding off-market deals is building a list of owners, sending out a direct mailing campaign and sitting back to wait for the phone to ring. While there is nothing inherently wrong with this tactic, Dylan prefers to take a much more proactive approach to finding deals. Instead of sending out mailers, he calls the owners directly.

 

Dylan obtains his list from CoStar. It includes the owner’s name, address and phone number. However, it doesn’t really matter where you get the list from, as long as it includes the owner phone number. Click here to download your free copy of 24 Proven Ways to Get Off-Market Deals, or check out all of my blog posts about lead generation to start building a list of motivated sellers.

 

On rare occasions, the CoStar list doesn’t include the owner’s phone number. If that is the case, Dylan finds the phone number by doing a reverse address lookup using either White Pages Premium or Vulcan 7.

 

When Dylan makes the phone call, he opens by saying, “Hey (owner name). I just want to introduce myself. My name is Dylan over at the Borland Group. We’re looking at buying properties in your particular area, and that’s how we found out about yours. We wanted to see if you have any interest in selling?”

 

Similar to direct mailing or any other prospecting technique, the majority of people won’t be interested in selling. But, you are looking for the one that does. All the person has to say is “Yeah, I have a slight interest” or “What would you offer me?”

 

If there is any inclination that they are interested in selling, the next step is to collect the relevant information – profit and loss statements and rent roll –  to underwrite the deal and determine an offer price.

 

Dylan’s prospecting approach is easy and straightforward – just pick up the phone and ask if they’re interest in selling. However, he did admit that it can be frustrating. Generally, 99 out of 100 owners won’t be interested in selling. But, since we are dealing with larger properties, you don’t need to have a high conversation rate. You just need to hit 1 out of 100, or even 1 out of 200, especially since you can easily make 100-200 phone calls in a week.

 

An additional advantage of this strategy is that since you are taking an active approach, you control how many conversations you have, rather than hoping an owner calls you. And then it is also less costly, because you don’t have to pay for letters, envelopes and stamps. Besides the cost of his CoStar subscription (which he pays $350/month through his brokerage), Dylan’s overall marketing budget is $1000 per month. If you find that one deal out of 100, 200 or more, you’ll more than recoup your costs.

 

To add to Dylan’s approach, if a specific owner isn’t interested in selling, don’t give up just yet. Follow-up by sending the owner a letter. Reference the phone conversation, provide your contact information, and tell them that you will reach out again in X months (2, 4, 6, whichever you decide is best) to see if they are interested in selling.

 

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

ecommerce packages

A Digital Nomad’s Scientific Approach to Promoting Your Personal Brand

In a well-known study conducted by Psychologist Dr. Albert Mehrabian, our ability to communicate effectively can be broken into three categories: spoken words, voice and tone, and body language. According to the study, when attempting to convey a message, only 7% of your success is based on the actual spoken words, while the remaining 93% is based on our tone and body language.

 

Amber Renae, a civil engineer turned branding expert, applies the conclusions of Dr. Mehrabian’s study to brand building. In our recent conversation, she outlined her three-pronged approach to effectively and efficiently promoting your personal brand to grow your real estate investing business.

 

Why Build a Brand?

 

Ultimately, the idea behind building a powerful brand is that it will allow your ideal customer to find you. How they’ll find you will vary, but generally, it’ll be through your website or social media platform. Once they do, Amber says, “they’ll immediately click over to the other one to see if there’s consistency. If they find that your social channels look like your website, then they start to see consistency. Then, they look for evidence of you showing up in person or in real life – on things like videos, live events, podcasts, speaking engagements, things like that. If all three of those are cohesive and consistent, then they start to depend on you, and once your audience depends on your, they have confidence in you. Once they have confidence, then they start to trust you, and you know what comes after trust…sales.”

 

Therefore, the key to increasing your bottom line is to create a cohesive and consistent online and offline person brand.

 

In order to tip that first domino in the buying funnel (i.e. attracting your ideal customer), Amber teaches a three-pronged approach that focuses on the communication factors that impact 93% of a messages or brands success, which she’s broken down into presentation, performance and publicity.

 

1 – Presentation

 

The first factor of a powerful brand is your presentation. More specifically, it is about forming a unique signature style.

 

Amber said, “some inspired actions that you can start taking today is to just start thinking of yourself through the lens of a personal brand – what makes you unique? What makes you stand out from the competition? What are you doing differently from the rest of the marketplace?”

 

Ask yourself these questions, write out the answers and use them to develop your brand objectives. Then, based on your personal brand objectives, start to think about how you can incorporate them into a signature style that is unique to you.

 

Amber says to take your signature style and apply it “across your body language, your vocal performance, how you engage in conversations and how you treat other people.” You want to be that person who has great body language and who holds themselves with really high confidence and self-esteem, which is accomplished when you have defined a signature style and apply it to your online and offline presentation.

 

2 – Performance

 

The next factor is your performance. A performance is anything you are actually presenting to your ideal audience – podcasting, videos, public speaking, Facebook live, Periscopes, etc.

 

Amber said, “No longer can you just write a blog post or do a social media share and expect that your ideal client is going to find you and connect with you. As a society, we crave connection, and it’s our responsibility as entrepreneurs to create a brand that connects half-way with people. The way that you do that is by creating things like a podcast, videos, doing live streams, etc. Anything that builds authority and thought leadership, because this is the way that you ignite a movement. This is the way that you get trust with your audience.”

 

When “performing,” this doesn’t mean you’re being fake or unauthentic. But since the goal of our brand is to ultimately build trust and gain confidence from our audience, this cannot be accomplished without an online and offline presence. We must use our signature style to get our faces in front of our customers.

 

3 – Publicity

 

Finally, once we’ve identified our unique style and our presentation approach, the last step is to publicize our brand. Building your own platform will be time-consuming, expensive and laborious. But a good short-cut is to leverage other people’s audience, which will get your message spread a lot faster and to a much wider audience.

 

“It’s really just a matter of finding people that are creating great content and reaching out to them and going, ‘Hey, I’m going something interesting. Do you want to connect?’,” Amber said. For an exact process for how to get on other people’s podcasts, for example, read this blog post – The Ultimate Guide to Getting Booked as a Guest on ANY Podcast – which is based on an interview I had with Jessica Rhodes, the founder of a premier guest booking agency.

 

Now that you know the three main factors to focus on, it’s time to build out your thought leadership platform. Here is a link to the “Branding and Thought Leadership” section, which includes multiple posts on creating and growing a thought leadership platform.

 

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

location on a map

How to Find Private Money Regardless of Where You Live

Last week we closed on our 12th property and our company portfolio is now valued at more than $250,000,000 (click here to see the lesson I learned on my last deal). Since this quarter billion dollar mark is sort of a milestone I thought it would be interesting to look at where my potential and current investors live to see if there is anything interesting we could learn from it.

 

Yes. Yes, there is.

 

Before we look at the stats, let’s define a couple things.

 

I define Potential Investors as investors with whom I have a relationship, are accredited and have expressed interest in investing with me but have not invested yet. Current Investors are accredited investors with whom I have a relationship that are currently investing in my apartment deals.

 

Now let’s dig into the stats of my investor database.

 

Top 5 Cities with the most Current and Potential Investors:

  1. New York City: 18%
  2. Dallas-Fort Worth: 10%
  3. Los Angeles: 9%
  4. Houston: 5%
  5. San Francisco: 4%

 

So, out of all my Current and Potential Investors across the United States, 18% live in NYC, 10% live in DFW, etc. This makes sense for a handful of reasons.

 

First, they are large cities (ex. Population of NYC is 8M+).

Second, I lived in NYC and DFW so have family and friends there.

Third, our properties are in Texas so DFW and Houston investors have a level of familiarity with the market they are investing in. They see the same thing we see in terms of population growth, job growth, economic outlook, etc.

 

Now let’s look at the Top 5 cities with the most Current Investors (removed Potential Investors).

 

Top 5 Cities with the most Current Investors:

  1. New York City: 18%
  2. Dallas-Fort Worth: 11%
  3. Los Angeles: 6%
  4. San Francisco: 5%
  5. Tied- Houston, Miami, Austin and Seattle: 4%

 

Ok, still making sense and for the reasons stated above. Large cities, places I lived, have family and friends residing, and, in three cases, are in the same state as our multifamily deals (Austin, Houston and Dallas-Fort Worth).

 

But here’s where the wrinkle occurs.

 

Let’s look at all the equity my investors have invested in my apartment syndications and what % of the total invested dollars is attributed to each city where investors live.

 

Top 5 Cities with % of Investment Dollars in Deals

  1. New York City: 18%
  2. Cincinnati: 13%
  3. Dallas-Fort Worth: 11%
  4. Miami: 7%
  5. San Francisco: 6%

 

…what in the Cincinnati just happened?!?!

 

Cincinnati isn’t a top 5 city of mine in terms of total # of Current Investors and/or Potential Investors.  In fact, to dig deeper Cincinnati only has 2.5% of my Current and Potential Investors living there. And only 3.5% of my Current Investors living there.

 

I am not from Cincinnati and, in fact, have only lived here for approximately 3 years. So, why does it represent 13% of all the equity invested in my apartment deals? The short answer is because I am actively involved in the local community. But that short answer doesn’t do the real lesson learned justice so let me elaborate more.

 

Here’s how I did it:

 

  • Host a local meetup. The first month I officially moved to Cincinnati (because my wife is from here and she’s the love of my life so I followed her to the city and now we’re here for the long-term) I started a meet-up. If you have time to ATTEND a meet-up then you have time to HOST a meetup. It doesn’t take that much more effort to HOST than it does to simply ATTEND and the rewards for HOSTING are exponentially greater. I did this to make friends in Cincy. I didn’t do it necessarily to generate investor relationships but that’s exactly what it did.
  • Host Board Game and Drinks nights at your house. This Friday my wife and I are having friends of ours, some of which are investors, come over to our house for a night of board games, drinks and dinner. Hosting events at your house as couples, along with couples, is fun and goes a long way to continue to build your friendship with those locally.
  • Consistent online presence that has an interview component to it. Or, in short, my podcast. I interview someone Every. Single. Day. on real estate investing and have released an episode for the last 1,197 days. There are multiple benefits for doing this and I won’t get into all of them but I will focus on one of the benefits and that is that every time I interview someone they then want to share it out to their audience which helps expand my reach. And, if I interview people in my local market that introduces new, local connections to me which can then turn into business relationships since I get to have dinner, drinks, etc. with them. Here’s a post I wrote on the step-by-step process to create a real estate thought leadership platform.
  • Volunteer then become a board member for that non-profit. I had no intention to meet investors when I started volunteering for Junior Achievement. But I have since realized that by volunteering for a cause I feel strongly about (Junior Achievement helps kids in underserved communities learn financial and entrepreneurial skills) I was able to connect with like-minded people and then become friends with them. I got on the board for JA in Cincinnati and have built friendships with people on the board which then turned into business relationship where they invest in my deals. You could take the same approach but make sure you genuinely believe in the cause and are doing it for the right reasons (i.e. helping further the cause’s mission) vs trying to grow your biz, otherwise it will fall flat and won’t be fulfilling for you.

 

By doing these simple things, you can build an investor network in your city that is perhaps stronger than any other network. When people personally know you they are more likely to trust you, recommend you to others, and invest larger. The beauty in this is that it’s helpful for you regardless of where you live.

 

Cincinnati is approximately the same size as St. Paul, Minnesota, Toledo, Ohio, Stockton, California and…Anchorage, Alaska. So, if you live in a city that is larger then there’s really no excuse to not having all the capital you need for your deals. If you live in a city that’s smaller than Cincinnati (300k population) then you can still apply these principles although it might require you to host your meetup in the next largest city next to where you live, that way you get better return on your time.  Regardless, apply these principals and you will quickly build a local investor network than can help you fund your deals.

 

In the comment section below, tell me how you will implement these proven money-raising tactics in your real estate business.

 

Make sure you subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

Joe Fairless Podcast Collection

5 Most Popular Best Ever Podcast Episodes for November 2017

Here are the five most popular Best Real Estate Investing Advice Ever podcast episodes for the month of November 2017

 

 

5 – JF1168: Have Your Tenants Pay Taxes, Insurance, and Maintenance! With Dave Sobelman

Triple net leases allow investors to be very close to passive. The three nets; taxes, maintenance, and insurance, are all paid by the tenants. You can imagine the headaches that could save the building owner! While this strategy does offer less risk, it also comes with a little less return on your money.

 

What you’ll learn:

  • The definition of a triple net lease
  • Debunking the stigmas of triple net leases
  • How to increase the value of a triple net lease property
  • How to evaluate a real estate market
  • Best Ever advice for investors who want to pursue triple net leases

 

4 – JF1156: How To Build Wealth Through Single Family Investments With Paul Thompson

When Paul realized that the perfect time to start investing was never going to come, he jumped in! Now doing about three deals per month, Paul is able to help himself, as well as helping others build wealth with passive cash flow.

 

What you’ll learn:

  • How he purchased 9 rental properties in 2 months, and the specifics on a few of those deals
  • How to manage low-income properties
  • Seller-financing case study
  • What to watch out for with seller-financed deals
  • Best Ever advice for those who are looking to do their first deal

 

3 – JF1175: He Buys For Appreciation vs. Cash Flow With Tim Shiner

Tim specializes in high end SFR rentals, and contrary to popular belief, he prefers to buy his properties for the appreciation. He’ll even lose $200 to $300 per month if he believes the property will appreciate and be worth more in the long run. He has another different strategy for when his tenants lease comes to an end.

 

What you’ll learn:

  • The BAD investment strategy
  • How to evaluate a market’s school district
  • Why he buys for appreciation and not cash flow
  • Why and how to get your tenant to buy your property
  • Best Ever advice on the type of property you should buy

 

2 – JF1170: Multifamily Syndication 201: Finding Off Market Properties & Structuring The Deal With Dylan Borland

Dylan has a unique way to structure a syndication, and how to find off market apartment communities. His team has a great system in place, (wholesaled an apartment community for $400k profit) but it didn’t come easy. They prospect properties every day, and you’ll be surprised by how they do it.

 

What you’ll learn:

  • How he structured the acquisition of $10 million worth of investment properties
  • Apartment syndication case studies
  • Is it a bad time to invest in multifamily?
  • How to protect your investments against rising interest rates
  • How to communicate with private money investors after closing on a deal
  • Proactive approach to finding off market deals

 

1 – JF1162: Get Out Of Debt Through Real Estate! With Joe Turney

4 years ago, Joe had a negative net worth (had more debt than income and assets). Joe self-educated himself by reading real estate books and taking online courses. He took another full-time job for one year to gain some capital, after a year of working 16 hours a day, he had enough saved up to purchase his first rental property. Now, 3 years later, Joe has accumulated $2 million class A single family homes.

 

What you’ll learn:

  • His strategy for getting out of the “red”
  • Case study of his first rental investment
  • Definition of a class A single-family home
  • His rinse and repeat strategy for accumulating 20 rental units worth $2 million
  • How he handles renovations and ongoing maintenance of his rentals and fix-and-flip projects
  • The secret to quickly scaling your real estate business
  • How to find single family deals and buy at 70% of the retail value
  • His daily routine
  • Best Ever advice about designing your lifestyle

 

Which Best Ever podcast episode this month added the most value to your real estate business?

 

Subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

Greek-inspired building

The 3 Pillars for Building Relationships with High Net-Worth Investors

Any real estate investor can attest to the fact that relationships are one of the keys to growing a business. As an apartment syndicator myself, one of the main ways I have directly benefited from relationships has been my ability to meet potential passive investors.

 

Being a key to our success, we should be actively seeking out tactics and techniques for sharpening our relationship building skills. And if we are raising money for our deals, this should be one of your top priorities – how can we meet potential passive investors?

 

Jason Treu is an expert in this field. He is an executive coach who specializes in teaching his clients how to strengthen their relationship building skills. Through his coaching, his clients have built relationships with industry titans such as Tim Cook, Bill Gates and Richard Branson. In our conversation on my podcast, Jason provide his expert opinion on where to find high net-worth individuals and outlined his three pillars for building relationships with them.

 

How to Find High-Net Worth Individuals?

 

Building relationships, like building a business, is all about strategy. You need to have a plan, which starts with knowing where to go to maximize your chances of meeting the high net-worth individuals or entrepreneurs who can help you along your real estate journey. Jason said, “I’ve found through a lot of research [that] some of the best people to meet are in charities and non-profit groups.

 

Not only are these places where the people in attendance will have money, but they will also likely be altruistic. If it is a nonprofit or a charity, the whole premise is built around giving. “When you’re around people that have the mindset of giving and you build a relationship,” Jason said, “they’re much more open to helping you.”

 

Jason recommends Googling terms like “young professional,” “charity,” and “non-profit,” building a list of organizations and places in your local market and attending the ones that aligns with your interests the most. Go one or two times and determine if you like the people, the cause and spending time there. If you do, get more involved. If the answer is no, find another one and repeat the process.

 

I can back up Jason’s advice with my personal experience. I’ve found that volunteering at local non-profits and charities is an effective, long-term approach to building relationships with high net-worth individuals. And I’ve raised millions of dollars through these relationships. You can read more about my specific strategy here.

 

Additionally strategies that I have found to be an effective ways to meet high net-worth individuals is to attend real estate conferences (more on this below), create a thought leadership platform (to build relationships in your sleep), get interviewed on other people’s thought leadership platforms and start a meetup group.

 

Now that you know where to go, what are you supposed to do when you get there? How do you approach the conversations? Instead of winging it, follow Jason’s three pillars for successfully building relationships: 1) rapport, 2) likability and 3) trust.

 

1 – Rapport

 

First, you need to build rapport. To build rapport, you need to focus on your non-verbal and verbal communication skills.

 

Strengthening your non-verbal skills – like body language – is time intensive, but well worth the effort. Amy Cuddy, a social psychologist, specializes in non-verbal communication. Here is her TedTalk, where she introduces her ideas. For a more in-depth explanation, Jason recommends reading her book “Presence.”

 

Effective verbal communication is all about asking the right questions. When meeting someone for the first time, instead of the standard “how are you doing?,” Jason advises that you ask questions like “what’s the most exciting thing that’s going on in your life right now?” or “what are you passionate about outside of work?” or “what projects are you working on that you’re passionate about?”

 

Jason said that asking these types of questions will “connect them to their emotional side, and we’re all emotionally-driven people.” Have them talk about the thing in which they’re most interested. Then, draw something from your experience or interests to find common ground. Jason said, “that person will instantly like you significantly more because you found some common ground and you’re discussing something that they want to discuss, not what you want to discuss.” At that point, the conversation will flourish naturally.

 

2 – Likability

 

The second pillar is likability. The easiest way to get the other person to like you is just listen. It’s not rocket science. “If you just look at someone and practice being present and don’t worry about who else is walking behind them, around them, you’d be amazed at how the tenor of your conversations and interactions will change, because they can tell when you’re distracted in the back of their mind.”

 

This pillar is simple – when having conversations, act as if the person sitting or standing in front of you is the most important person in the world. Listen intently and then, following the advice in pillars 1 and 3, build rapport and trust from there.

 

3 – Trust

 

Finally, the third pillar for building relationships is trust. The key to building trust is by showing them that you care. The most effective way to show that you care is by adding value.

 

Jason said, “You add value in the conversation in ways by suggesting things like maybe there’s a book, maybe there’s a person you can introduce them to, maybe you can say ‘I may have some ideas, let me follow up’ and then follow up with some ideas. You can also introduce them to people at the event.”

 

For those of you who are extroverted (or want to become extroverted), you can follow one of Jason’s favorite ways to add value to others, which is specific to events or conferences – he introduces strangers to other strangers. He will start a conversation with a stranger and, after asking the questions outlined in the section on rapport, will get the attention of another stranger nearby and say “Hey! You two should meet each other. I think you’d get along.” In doing so, next time he runs into either one of the strangers, they will introduce him to any one they know, or even other strangers. With this tactic, two relationships can turn into 10 or 20.

 

Another level to this approach is to invite a group of strangers out for a meal. Again, this is specific to an event of conference, but it could also work at a charity or nonprofit event or meeting too. “[My] other option is inviting people to go and get together for brunch, for dinner, for lunch, and just inviting a bunch of people along, because everybody wants to meet new people.”

 

Even if nothing comes out of the actual meal (which is unlikely), by being the influential hub that brought all these people together, they will be more open to hearing your ideas and will likely return the favor by inviting you to other events. One of Jason’s friends used this tactic and met the nephew of Jerry Jones, the owner of the Dallas Cowboys. Now, he gets invited to a few Cowboy games each year and sits in the owner’s box!

 

What is your most effective tactic for building relationships? Where do you go and how to you approach conversations?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

planning a trip

The Secret To Finding Real Estate Deals In A Hot Market

Originally Published on Forbes.com

 

If you’re having difficulties with finding on-market deals at the price points that meet your investment goals, you aren’t alone. In today’s competitive market, relying on available listings as your sole source of new deals is not viable or effective, as an investment strategy.

 

As of September 2017, the median list price of homes is up 10% year-over-year, while the number of days on market and inventory are down 10% and 9%, respectively, according to research by Realtor.com. In hot markets, these numbers soar far higher. Fewer deals are available, and they are selling faster and at higher prices than just a short year ago. It’s a trend that shows no signs of waning soon. In fact, CNBC recently reported that 2017 will likely turn out to be the fastest housing market on record.

 

The inability to find on-market deals is a frequent concern of my clients and the listeners of my podcast, Best Real Estate Investing Advice Ever. It was also the number one challenge identified at the annual real estate conference I host, the Best Ever Conference, where I survey each attendee to find out the most difficult investment challenge they’re facing and aim to solve specific investment challenges.

 

Finding deals in a hot market is a challenge I have faced and overcome, and now I’m able to help others do the same. Here’s my secret:

 

For every on-market deal an investor comes across, they should reach out to the owner of the surrounding properties and attempt to purchase two properties: the on-market property and an off-market property. More specifically, they should pursue off-market properties that naturally complement the on-market deal.

 

I was sent an on-market opportunity in a Dallas sub-market: an apartment building with more than 300 primarily one-bedroom units. The property’s characteristics fit perfectly into our business plan. However, due to its high publicity and it being marketed by a broker, the building price inched higher and higher. We were not confident in our ability to manage the project in a way that would achieve our investor’s goals.

 

We found that there was another complex directly across the street from this on-market deal: a 200-plus unit building of primarily two-and-three bedroom apartments. Our broker contacted the owner of this off-market building, and after a brief negotiation, we secured a contract to purchase the property at a significantly discounted sale price. We were concurrently in negotiations to purchase the on-market deal and felt secure in offering a higher bid than we otherwise would have if it weren’t for the complementary off-market property across the street. As a result, we were awarded the on-market deal.

 

Aside from finding a deal in a hot market, here are three more advantages of this strategy: 

 

  • Economies of scale: One major advantage to this approach is the cost savings that result from economies of scale. For example, a major apartment building’s expense is the cost of a lead maintenance supervisor. Therefore, rather than paying an on-site maintenance function to manage one property for $50,000 a year, we can split that cost across both properties. Additionally, these economies of scale can apply to many other fixed and variable expenses, including advertising and marketing, salaries and commissions for leasing office personnel, property management teams, etc.
  • Referral source: Another advantage — and the reason why I advise you to pursue complementary properties — is having a natural referral source. This applied to my particular case because the on-market property is primarily comprised of one-bedroom units and the off-market property of two-and-three bedroom units. If a potential resident is interested in a one-bedroom unit, we are covered. If they decide instead that they want more bedrooms, rather than turning them away, we send them to our property across the street.
  • Flexible underwriting: Finally, the most obvious advantage I see is the ability to be flexible with the underwriting to create a competitive offer. Essentially, you are able to tap into the discount you are receiving on the off-market property — in combination with the previous two advantages — to offset the premium paid for the on-market opportunity.

 

So, the advice I offer to those who are having difficulties with finding deals that are compatible with their financial goals is to create your own opportunities. Don’t just look at the on-market listings. Instead, search for properties in immediate areas surrounding the on-market deal, reach out to the owners and work toward packaging two deals into one.

 

Ultimately, because of our willingness to create our own opportunities in this competitive market, we were able to add two cash flowing assets to our portfolio. By following this approach on the next on-market deal you come across, you can too.

 

What is your secret to finding deals in today’s competitive real estate market?

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

paprika plant

8 Ways to Promote and Grow Your Thought Leadership Platform

After you’ve created your thought leadership platform (read here to learn how), one of the next steps is attract your target demographic. Through over a thousand of conversations with business and real estate thought leaders, as well as from building a large following of my own, I’ve discovered the most effective ways to attract people to a thought leadership platform.

 

Here are the top 8 ways to promote your thought leadership platform and grow your audience.

 

1. Build an opt-in page

 

First, build an opt-in page or button for your website. The main purpose of an opt-in is to capture email addresses and build an email list.

 

The key to a powerful opt-in page is the offering. You need to give people a reason to provide you with their email address. A poor opt-in page, for example, would read “Please enter your email address to be sent an update when new content is posted.” Instead, you want to create a piece of valuable content and exchange that for their contact information. For example, on the main page of my website, I have an opt-in banner presented front and center that reads “Free Download of 24 Proven Ways to Get Off-Market Deals” and a button that reads “Get Access!” I’ve also place the banner at the top of certain pages on my website, like the podcast and blog page. Once someone enters their email address, they are automatically sent a document with 24 ways to find off-market deals.

 

Additionally, I’ve created a pop-up opt-in that appears a few seconds after a visitor views a page other than my main page. Currently, the opt-in reads “How do I break into the multifamily syndication business? is the most common question I receive. These 6 amazing powerful ways are proven to get your foot in the door! Are you ready? Don’t miss this!” Again, once someone enters their email address, they are automatically sent a document with 6 ways to break into the syndication industry.

 

As you can see, both of my offerings are related to apartment syndication. That’s because my secondary target audience are individuals interested in becoming apartment syndicators. Therefore, you should create an offering that is specific to your target audience, rather than something general to real estate investing. That way, you’ll know that every email address captured is a qualified lead.

 

If you are an apartment syndicator, your primary target audience are accredited investors. So, you also want to create a lead capture page where accredited investors interested in passively investing in your deals have a way to provide you with their information. For an example, here is the opt-in page I have for my website: www.investwithjoe.com. It can be accessed either on my main page or by Googling Invest With Joe. Considering purchasing a domain name like www.investwith(your name).com. If you aren’t an apartment syndicator, create a separate lead capture form based on your target customer or primary outcome (e.g. a form for home owners who are interested in selling their primary residence).

 

2. Create a BiggerPockets Pro Account

 

A BiggerPockets Pro account is another great tool for promoting your thought leadership platform.

 

First, create a forum signature, which allows you to input your contact information, company name, logo and website/thought leadership platform link. Then, set up forum keyword alerts so that you will be notified whenever someone submits a post that is related to your niche. As an apartment syndicator, the important keywords I have are “market name,” apartment,” “multifamily,” “syndication,” and “accredited.”

 

Whenever you are notified of a new post that contains your keyword, you can submit a reply and anyone who reads that thread will see your response, as well as the link to your website or thought leadership platform. Also, you can start a forum thread of your own, making sure you include the relevant keywords so other apartment investors or syndicators who have keyword alerts setup will be notified and will read your post. Both of these strategies will drive traffic to your website or thought leadership platform.

 

Additionally, you can use the BiggerPockets member blog function to publish or republish your thought leadership content. You can even include crosslinks back to content on your website, but I recommend reading the rules of the blog before doing so.

 

3. Send out a newsletter

 

Generate and send out a newsletter to the email list you’re building from your opt-in forms. Since you are already creating valuable content on a consistent basis, the newsletter is an opportunity to repurpose that content. Depending on how much content you’re creating, you can start with a monthly newsletter, but the goal is to eventually work towards sending out a weekly newsletter.

 

A great tip for increasing the amount of content you create is repurposing previous published content. For example, if your thought leadership platform is a podcast, write a blog post that summarizes the main takeaways from the interview and include both the podcast and the blog post in your newsletter.

 

The service I use to create my newsletters is MailChimp. Click here for an example of my weekly newsletter, where I include all of the new content I created the previous week.

 

4. Promote content through others people’s platforms

 

If are doing an interview-based thought leadership platform, which I strongly recommend, ask your guests to promote your content on their website, social media and newsletter. Just be sure to include links back to your website or an opt-in button to capture email addresses.

 

I’ve found that having your content featured in other people’s newsletters is the best approach. So, when you are reaching out to individuals to be a guest on your thought leadership platform, ask them to commit to publishing the content in their next newsletter or simply sending the link to their email list after the interview has gone live.

 

5. Become a guest on other people’s platforms

 

In addition to having other people promote your content in their newsletter, you can also reach out to other thought leaders and become a guest on their platform – whether it is being interviewed on their podcast or writing a guest post for their blog.

 

I interviewed Jessica Rhodes, the founder of a premier guest booking agency for podcasters, on my episode 1013 of my podcast (click here for the full interview). From this interview, I created a blog post entitled “The Ultimate Guide to Getting Booked as a Guest on ANY Podcast” (click here to read the post) where I outline – as the title implies – how to approach getting on other podcasts.

 

6. Leverage social media

 

The simplest way to promote your thought leadership platform is to publish new content on social media. At first, you can manually publish content across multiple social media sites like Facebook, Twitter, and LinkedIn. Or, if your thought leadership platform is a podcast, the hosting site you use should have a function that will automatically submit a post to the different social media sites each time you post a new episode. And you can do the same on YouTube.

 

As you build up a library of content, you can begin to republish old content. There are many online services that will allow you to create a schedule to automatically post old content at a specified time. Two providers that I’ve had success with are MeetEdgar and SmarterQueue. Currently, I have two older pieces of content scheduled to be posted on Facebook, Twitter and LinkedIn each day, on top of posting a new blog post and podcast.

 

7. Build a Facebook community

 

A great way to not only attract new listeners or viewers, but to also create loyalty with your current followers is to build a Facebook community. For example, I created a Facebook community called “Best Ever Show Community.” It is a place where the Best Ever listeners can interact with me, each other, and my guests.

 

My goal for the group is to create a community where everyone is helping each other reach the next level in their business and lives. Along with that, it is a place where I encourage everyone to ask and answer questions, add likeminded individuals, post any asks or needs they have, share insightful articles, books, videos, podcast, etc., tell us about themselves and their focus and post success stories. Additionally, a few times a week, I will create posts with the purpose of creating conversations within the group. For example, I will ask a question, like “where do most of your deals come from?”, and members of the group will provide their answers. The more interactions and conversations you have, the more valuable the community and the larger it will grow.

 

8. End with a call-to-action

 

Finally, for any content you create, end with a call to action. You should tell everyone listening to your podcast, watching your YouTube video or reading your blog post to perform a specific task.

 

Examples of call-to-actions are:

 

  1. A strong question to promote a conversation in the comment section
  2. A link to a related piece of content
  3. Send them to your website page
  4. Subscribe and leave a review
  5. Opt-in page that offers a valuable piece of content in exchange for their email address

 

For more information on how to increase traffic to your website and customer conversion, read this Q&A with Online Marketing Expert Neil Patel: 6 Ways to Increase Your Website Traffic

 

What have you found to be the best way to promote content?

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

thought bubble and light bulb

The Guide to Creating a Real Estate Thought Leadership Platform

Any long-time listener of my podcast knows that my guests and I constantly stress the importance and strength of creating a thought leadership platform. In fact, I believe that if you want to achieve massive levels of success as an apartment syndicator (or really any entrepreneurial endeavor in general), having an online presence as a thought leader is a MUST. Therefore, I wanted to create a post that outlines why you should create a thought leadership platform and how to actually do so.

 

What is a thought leadership platform?

 

Essentially, a thought leadership platform offers unique information, insights and ideas that will position the owner of the platform as a credible and recognized expert in a specific business niche.

 

Personally, I have and continue to greatly benefit from creating a thought leadership platform. It allows me to build new friendships and business relationships and maintain existing ones. It allows me to stay top of mind of real estate entrepreneurs because I am constantly providing valuable, free information. And it essentially has allowed me to continuously network with people on a global level – even while I am asleep.

 

A thought leadership platform may take many different forms. Examples that other investors and I have found successful are:

 

  • A YouTube channel – interviewing real estate investors and entrepreneurs and/or providing daily/weekly/monthly insights
  • Write a book and self-publish in the Amazon store
  • Create an interview-based podcast and post to iTunes, Soundcloud and other popular podcast platforms
  • Create a blog, posting to your own personal site and leveraging existing platforms like social media sites, LinkedIn, BiggerPockets, etc.
  • Starting an in-person meet-up group in your local market
  • Hosting an annual real estate conference
  • Weekly or monthly newsletter

 

What should my thought leadership platform be?

 

I actually do all seven. However, I didn’t wake-up one morning and say to myself, “I am going to start a YouTube channel, podcast, newsletter, blog, meet-up group and write a book today.” I took it one step at a time, starting with a podcast and pursuing additional platforms once the previous ones were already established. Therefore, I recommend selecting one and using that as your launching point.

 

The key to determining which thought leadership option to initially pursue is simple: ask yourself, “What would I enjoy doing?”

 

For example, if you enjoy writing, start a blog. If you enjoy speaking, but are camera shy, start a podcast. If you enjoy speaking and are good on camera, start a YouTube channel.

 

How to structure a thought leadership platform

 

Once you’ve selected a platform, the next step is to build out its structure, which I’ve distilled into a simple six-step process:

 

Step 1 – What is the goal?

 

Obviously, one of the goals will be to create a thought leadership platform. But what is the larger, overarching goal? How does this goal extend outside simply adding value to your own business?

 

Before doing anything else, brainstorm and create a list of goals. Then, condense that down into a paragraph or two that clearly communicates the intentions of the platform.

 

Step 2 – What is the name?

 

Once you’ve defined a goal, the next step is to generate a name. The ideal name will quickly communicate the goal to your followers.

 

Pick 3 to 5 potential names, and then ask for feedback from friends and colleagues to find the most popular, attractive name.

 

Step 3 – Who is the target audience?

 

Also based on the goal, determine your target audience. Be specific here. Who will benefit most from the information, insights and ideas you will offer? What will be the demographic? What are their interests? Etc.

 

Step 4 – Why will they come?

 

This step is key. Why will anyone follow your thought leadership platform? If you cannot provide an answer to this question, your followers – or lack thereof – won’t be able to either.

 

This question ties into your goal also. Why does your target audience NEED the information you will be offering? What is in it for them? How will they benefit? Why should they consume your content and not the thousands of other thought leadership platforms in the marketplace?

 

Step 5 – How will it flow?

 

What will be the structure of the platform? Will it be interview-based? If so, how will the conversation start? How will it end? How long will it be? Will you have a list of questions you will ask every guest? How often will you produce content? These are the types of questions you should be asking to ensure a successful thought leadership platform.

 

Step 6 – How will it be unique?

 

Last and certainly not least, how will it be unique? For example, naming a podcast “Millionaire Mindset” and interviewing millionaire investors – in my opinion – is too generic. When creating a thought leadership platform, make it unique to your area of expertise. For example, if you have a construction background. Interview landlords that are hands-on and ask for tips on how to increase revenue by being an active investor. Or if you’re in sales, provide tips on applying sales techniques to real estate investing. Or if you are a marketing executive, make a marketing real estate show on how to find more deals.

 

The goal is to be specific and unique. Based on your area of expertise (or interests or passions), see if there is a narrow idea on the types of people you can interview and the types of topics you can discuss.

 

The 3 keys to long-term success

 

After you’ve selected and structured your platform, your work has just begun. Now it’s time to actually start producing content. As you do, there are three important things to keep in mind to ensure long-term success and effectively build a large following.

 

First is consistency. Once you’ve established a posting frequency, whether it’s daily, weekly, biweekly, monthly, etc., make a conscious commitment to stick to it. This will be difficult at first because the only people who will follow your platform are your family and friends – and maybe your dog. Don’t expect to see a massive uptick in followers for at least 6 months, and likely even longer.

 

Next, to increase your chances of reaching your target audience, tap into a large, built-in audience. For example, if you start a podcast, make sure you’re posting to iTunes, Libsyn, SoundCloud, etc. to leverage their existing listenership. Or if you create a real estate blog, post to social media and BiggerPockets.

 

Finally, Tony Robbins says, “Success leaves clues.” Someone out there has already accomplished what you are also trying to do. So, go out, find established thought leaders, extract out their best practices and apply those to your platform.

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

highrise apartment real estate from the ground

Should an Apartment Syndicator Invest in Their Own Deal?

As an apartment syndicator, you raise money from accredited investors to purchase apartment communities and share in the profit. However, should you rely on private capital to fund the entirety of the deal, or should a portion of the investment come out of your own pocket? Based on my experience as a syndicator and interviewing syndicators on my podcast, I believe a syndicator should invest in all of their deals.

 

First, it benefits the syndicator from a monetary standpoint. By investing their own capital in the deal, they will make the same projected returns as your investors. So, by neglecting to do so, they’re decreasing their overall profits.

 

Secondly, and most importantly, investing in your own deal results in an alignment of interest with your investors. If you have your own skin in the game, your investors will have more assurance in the investment. In fact, it may be a requirement for them to actually invest their own capital.  If you don’t invest in your own deals, why would someone else have the confidence to do so?

 

But what happens if you don’t have enough money to invest in your deals? This was the situation I was faced with on my first deal – I just didn’t have enough money saved up to invest. So, if the reason you aren’t investing in your own deals is because you don’t have enough money, you’ll need to achieve an alignment of interest in other ways.

 

For example, on my first deal, I had the brokerage that represented the seller invest their commission into the deal. Because they had over 20 years of experience and believed in the deal, this made up for my lack of investment in the minds of my investors. Therefore, if you don’t have enough money to invest in your own deal, consider offering the broker/s the opportunity to reinvest their commissions and become a limited partner. Similarly, another option is to have the property management company invest in the deal. They can either invest their own capital or bring on their own private investors. The idea for both of these approaches is to have an experienced party invest to provide your investors with additional faith in the strength of the deal.

 

Another way to show alignment of interests is to invest your acquisition fee into the deal. Generally, a syndicator is paid a fee of 0.5% to 3% of the purchase price at close for finding, analyzing, evaluating, financing and closing the investment. Instead of cashing in on this fee, reinvest it back into the deal. This accomplishes the alignment of interest and will increase your overall profit on the deal too.

 

Finally, offer a preferred return. A preferred return isn’t a guarantee, but it signals to your investors that you believe the deal’s performance will not only achieve, but also exceed the level of preferred return. And to take it a step further, something my company does is we put our asset management fee in second position to the preferred return. If the asset doesn’t achieve the specified preferred return, we don’t collect our asset management fee. If our investors don’t get paid, we don’t get paid.

 

Ultimately, to attract private capital, it boils down to an alignment of interests. You want to show your investors that they take a priority over your interests. Having your own skin in the game is own way to accomplish this, but if you don’t have enough capital to invest in the deal, you must achieve an alignment of interests in other ways, like having the broker or property management company invest in the deal, reinvesting your acquisition fee or offering the preferred return before collecting an asset management fee.

 

How do you show alignment of interest to your private money investors?

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

Leeza Gibbons and Joe Fairless

Secrets to Starting a Company: Q&A with A-List Celebrity Leeza Gibbons

Leeza Gibbons is an all-around business success. In the entertainment industry, she’s won an Emmy as a daytime television host, has been the co-host for Entertainment Tonight for 16 years, won Celebrity Apprentice in 2015 and has a star on the Hollywood Walk of Fame. As an entrepreneur, she’s been inducted in the Direct Response Hall of Fame and won the Icon Award for crossing the billion-dollar mark and is a New York Times Best Selling author. And finally, as a philanthropist, she started a nonprofit, Leeza’s Care Connect, which supports family care givers.

 

In our recent conversation, Leeza offered up her best practices for not only building and maintaining for-profit and nonprofit businesses, but for becoming a stronger, more resilient human-being as well.

 

How did you come up with the idea for creating your non-profit organization, Leeza’s Care Connect?

 

After my mother was diagnosed with Alzheimer’s, my family and I realized that we didn’t have the education required to effectively battle the disease. And we felt as if we should have been prepared because my mother’s mother died due to the same condition. Therefore, I was determined to create in the world what we wished we had.

 

Common entrepreneurial advice is to create products and services that you yourself want. In following this advice, the creation of Leeza’s Care Connect was able to fulfill our wish and our need for an Alzheimer’s educational service. It is a place for people to learn what the challenges are, where to find support, where to learn the skills to make life easier. Ultimately, it’s where we could really connect people to their own strengths in such a difficult time in their lives.

 

Navigating such a trying time as your mother being diagnosed with Alzheimer’s must have required a lot of resilience on the part of you and your family. What’s your secret for staying motivated in the face of a seemingly all-encompassing challenge?

 

For me, the key component and driver was to really engage my optimism. This advice is applicable to all challenges – both personal and business related. Being optimistic is going to give you the ability to find answers and solutions. You’ll be able to bounce back and fight back quicker than most people who throw in the towel and are pessimistic and negative. And when facing a crisis, such as Alzheimer’s, you’ll be willing to engage with the tools and technologies out there that are designed to help you overcome the challenge at hand.

 

Additionally, I used – and continue to use – mantras. They really help you deal with your feelings when you’re completely overwhelmed with negative emotions. For example, when I was on Dancing with the Stars and surrounded by other female contestants with near perfect bodies, my mantra was “My body is strong and healthy. My body is strong and healthy.” When my mom was sick, my mantra was “I’m doing the best I can. I love my mom. I’m doing the best I can.” Since my family has two generations of Alzheimer’s, my ongoing mantra is, “My brain is sharp. My brain is sharp.”

 

I am a huge fan of Tony Robbins. He says that you always get what you focus on – end of story. If you focus on how you’re failing and how you’re underwater and how you’re overwhelmed, that’s what you’re going to attract. That’s why I believe it’s important to engage in day-to-day life with optimism and build yourself up with positive, affirming mantras.

 

How do you work towards increasing your resilience and bouncing back from challenges or failures quicker than others?

 

Aside from engaging with optimism and utilizing mantras, you need to edit the toxic people out of your life. The truth is that we become like the five people we associate with the most. So, surrounding yourself with the right, handpicked people is very important.

 

Business, and really life in general, is not a solo sport. You really need to form a team and find coaches that will not only help you achieve your goal, but also help you overcome the challenging times. In doing so, you’re to be more invested in your outcome than you’ve ever been before, in part because of the benefits of those with which you’re associated and in part beause you don’t want to let your team, your coach, and yourself down.

 

What advice do you offer to entrepreneurs who want to start a for-profit or nonprofit, philanthropic organization?

 

Often times, when attempting to start something new, we stop ourselves because we convince ourselves that we don’t know enough. So, my advice is to not wait until you know everything – which is never going to happen anyways – and don’t wait until you feel ready.

 

The saying “getting your ducks in a row” is instructive, but it is not true. The mother duck never waits for her ducklings to follow behind her. She just starts walking and the baby ducks fall in line. Similarly, I think that whatever journey you’re starting on, it’s never going to be perfect and you’re never going to feel 100% ready. But just launch it anyways.

 

What is your Best Ever advice for entrepreneurs?

 

Talk less and listen more. Typically, if you look around the room in committee meetings, boardrooms or negotiations, the most powerful person in the room is often not the one talking the most.

 

There’s a lot of strength in silence. There’s a lot of power in the things that we don’t say. Therefore, instead of talking, listen intently. In doing so, you can analyze situations, you can analyze your role in the situation and you can get to know the players around the table a little better.

 

What tips do you have for confronting challenges with resilience and optimism?  

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

 

stop sign

When to NOT Work with a Passive Investor on an Apartment Deal

When I first started raising money from investors to purchase apartment communities, as long as the individual was interested in a passive investment and met the accredited qualifications, I accepted their capital without hesitation. And if you are just launching your syndication career, perhaps you’re doing the same. However, as you begin to gain experience and your list of private investors grows, it is beneficial to be aware of the red flags that may indicate the potential for future disputes and, if necessary, to not add or remove the investor from future new investment offering correspondences.

 

To understand these red flags, it is first important to define the ideal syndicator/passive investor relationship. The typical life cycle of an apartment syndication is 5 years. Therefore, when forming a relationship of this length, I want a passive investor who both trusts me as a person and treats me as a partner, as opposed to considering me as their vendor. Based on my experience from hundreds of accredited investor conversations and completing more than ten apartment syndications, I’ve found that there are two main factors that indicate to me that our relationship will not meet these requirements.

 

Red Flag 1 – Contempt

 

A famous study published in 1998 by marriage researcher John Gottman videotaped newlywed couples discussing a controversial topic for 15 minutes with the purpose of measuring how the fought over it. Then, three to six years later, Gottman and his team checked in on these couples’ marital status – were they together or were they divorced? As a result, they determined that they could predict with an 83% accuracy if newlywed couples would divorce. The study found that there are four major emotional reactions that are destructive to marriages and of the four, contempt is the strongest.

 

If there is contempt in a marriage, it will not last. And I believe that the same applies to business relationships.  According to Dictionary.com, contempt is the feeling that a person or a thing is beneath consideration, worthless, or deserving of scorn.

 

How I identify contempt is based on my initial gut reaction. Do I get the feeling that this person sees me as an equal and as a partner? Or do they look down on me and see me as a vendor? For example, I recently had an email correspondence with a potential investor. He led off the conversation by saying, “My standards are high. My patience for slick marketing is low.” Then, after I provided him some information about my company, including past case studies of the returns I provided to my investors, his reply was, “So what I need to hear is why do some deals with you as opposed to (the company with which he currently invests)?” I felt that this individual’s replies had traces of contempt and politely explained that we wouldn’t be a good fit. If I was earlier on in my career, I would have likely brought this individual on as a partner, but since I already have strong relationships with my current investors, I didn’t find the potential issues worth pursuing the relationship any further.

 

If you are having a conversation with an investor and your gut is telling you that this person holds you in contempt, I would consider passing on the relationship. To set the relationship up for success, only work with investors who treat you as an equal and who want a mutually beneficial partnership.

 

Red Flag 2 – Lots of accusatory questions that don’t convey that they trust me

 

The second red flag I’ve come across is when a potential investor asks a laundry list of questions in an accusatory tone. For example, I have an investor who literally sends me a list of 50 or more questions that are written in an accusatory fashion for every new investment offering. After taking the time to answer each question on multiple deals, they have yet to invest. Because they are asking questions in that manner, regardless of my answer, they will still be suspicious.

 

An important distinction to make here is that I have no issue with my investors sending me a list of questions, no matter how long. In fact, that is encouraged, because the more information I can provide about the deal, the more confidence they will have in the investment. The red flag is when the questions are asked in an accusatory manner. That conveys that they don’t have trust in me and that they’ll likely never invest in a deal. At the end of the day, the key to a successful, long-term relationship is trust, and when my instincts are telling me that there is a lack of trust, I decide to no longer pursue the relationship.

 

Conclusion

 

The two red flags to look for when having conversations with investors is contempt and the asking of a long list of questions in an accusatory tone that conveys that they don’t trust me.

 

Keep in mind that both these factors are highly subjective. Each syndicator and each investor has a different personality and will get along with different types of people. Just because you get the feeling that someone holds you in contempt or asks questions in an accusatory tone does not mean that they are a bad person. However, what it does indicate is that you will have an issue connecting in such a way that builds a relationship that is capable of surviving the course of a syndication deal. So, if either of these red flags arise, be polite, but strongly consider not working with that investor on your apartment deal.

 

If you have had a rocky business relationship in the past that came to an unfortunate end, what did you identify as the cause?

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

social network apps on smartphone

5 Ways to Optimize Your LinkedIn Profile to Attract More Business

Unlike other social media type sites, LinkedIn’s sole mission is to connect the world’s professionals to make them more productive and successful. With a user base of 467 million professional from 200 countries across the global, LinkedIn is the world’s largest professional network. And if you create the optimal LinkedIn profile, you can tap into this vast network of professionals to expand your real estate business.

 

Donna Serdula, the owner of LinkedIn-Makeover.com, leads a team of 40 writers who help thousands of LinkedIn users strategically write their profile to grow their brand. In our recent conversation, she outlined the top six ways you can immediately improve your LinkedIn profile to grow your business.

 

1 – Know your why

 

First, know the reason why you are on LinkedIn in the first place. This may seem like commonsense, but when creating a profile, most people will mechanically fill out the different fields with generic answers and that’s it.

 

“Why are you on LinkedIn? What are you really trying to achieve? What’s your goal?,” Donna said. “Some people are on LinkedIn for a job; others are on LinkedIn for prospecting and sales, and there’s others who are on it for reputation management, to be found and be seen as expects.”

 

Only once you know what you want to accomplish with your LinkedIn profile can you create a profile that directly pertains to that goal.

 

2 – Define a target audience

 

Next, you need to figure out who your target audience is. “Who is going to be reading that LinkedIn profile?,” Donna said. “Once you know who’s going to be reading it, who we need to target for, … we know what we need to say, because it’s not just what we want to say about ourselves, it’s what does our target audience need to know about us?”

 

Your why and target audience are used in tandem to optimize and streamline your LinkedIn profile so that you are attracting the results and professionals that you desire.

 

If you don’t know who your target audience is, here is a blog post I wrote about how I defined my primary target audience to help you get started.

 

3 – Understand your top keywords

 

LinkedIn is more than just a social network. It is a search engine. People use LinkedIn for a specific purpose, which is usually to either find someone who provides a service they need or to provide that service. That means that out there somewhere, someone is using LinkedIn to fulfill a need that your business is capable of solving. However, since they don’t know your name or the name of someone like you, they search for keywords instead. Therefore, you need to determine which keywords your target audience is searching for and make sure you’ve included those keywords in your profile. Additionally, these keywords need to describe what you actually do.

 

Donna said, “I want people to find me if they’re searching for ‘LinkedIn,’ ‘LinkedIn profile writer,’ ‘branding,’ ‘social media,’ – those are the types of phrases that describe what I do, so those are the words that I sprinkled throughout my profile.”

 

You want to always think in terms of your target audience, because sometimes your target audience describes you differently than how you would describe yourself. For example, Donna had a CPA client who thought her top keyword was CPA. However, they realized that her target audience (people in need of a CPA) were searching for bookkeeper, accountant and tax advisor more frequently than CPA. Therefore, you want to be smart and strategic when describing what you do, while always keeping your target audience in mind.

 

4 – Headline and Profile Picture

 

Now that you’ve determined the top keywords for which your target audience searches, you want to optimize your profile’s SEO by including these keywords throughout. Specifically, Donna said, “you want to make sure that you have a great headline – that’s like your tagline; it’s 120 characters and it really should contain more than what the default LinkedIn gives you, which is just your title and your current job, which is boring. So, you want to infuse it with your keywords, you really want to give a benefit statement.”

 

Additionally, since the first thing people will see is your profile picture, you want to use a great-looking picture too. Please no selfies people!

 

5 – Your profile isn’t a resume

 

When writing the rest of your LinkedIn profile, besides the best practice of including the top keywords, avoid reproducing your resume. Donna said, “What most people do … is they look at their LinkedIn profile and they say ‘Well, it kind of looks like my resume. Let me get out that old resume of mind, let me just copy and paste all those fields in there and I’ll be done with it.’” However, if you are on LinkedIn for more reasons than just a job, your resume won’t help much. And if you are using LinkedIn to find a job, a recruiter or prospective employer will be disappointed when they ask for your resume and see that it is the exact same as your LinkedIn profile.

 

“Really look at your profile not as an online resume,” Donna said. “Look at it as your career future. Look at it as a digital introduction. Look at it as a first impression and really write it like a narrative and just give that audience information that makes them respect you, that makes them feel impressed and makes them feel confident in who you are and what you bring to the table.”

 

Conclusion

 

To get the most out of your LinkedIn profile, optimize it in these five ways:

 

  • Know why you are on LinkedIn
  • Defined your target audience
  • Understand the keywords searched by your target audience
  • Input those top keywords into your profile, especially your headline
  • Don’t use LinkedIn as a resume, but as your career future

 

What is it that you are trying to accomplish with your LinkedIn profile?

 

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

 

real estate podcast microphone

5 Most Popular Best Ever Podcast Episodes for October 2017

Here are the five Best Real Estate Investing Advice Ever podcast episodes with the most downloads in the month of October.

 

 

 

#5 – JF1143: How to Be Successful When Just Starting Out with Dan Plant

Worried about his future as a W2 worker and wanting to take more control of his future, Dan started looking into real estate. He started with a flip, then another, and made money on both of his flips. Now with a child, he has moved into multifamily rental properties, still successfully making money there too. A fantastic episode to learn from, especially for the newer investor or completely new investor that needs to hear a newer investor success story. Dan is living proof that with the right mindset and education, you can start investing in real estate and be successful from the beginning.

 

What you’ll learn:

 

  • How Dan made 50% profit on his first two fix-and-flip deals
  • Why and how Dan transitioned from active fix-and-flipping to “passive” rental investing
  • How to approach taking over a rental property when inheriting residents
  • Dan’s Best Ever advice – budget for property management and capital expenditure expenses

 

#4 – JF1127: Josh Dorkin, Founder & CEO of BiggerPockets is Back For Part 2 of Our Interview

In Part One, we learned about the history of BiggerPockets and its founder, Josh Dorkin (click here to listen to part 1). In Part Two, Josh answered the top questions asked by the Best Ever Listeners.

 

What you’ll learn:

 

  • What feature of the BiggerPockets platform does Josh think is most underutilized?
  • When you were considering starting BiggerPockets, what was a number one fear holding you back from starting?
  • How has podcasting enhanced your business and opened up doors and connections that you wouldn’t have had otherwise?
  • What are your morning routines or daily practices that you do on a regular basis?
  • Josh’s Best Ever advice – figure out your why

 

#3 – JF1134: Below Market Rents Make More Money in The Long Run with Chris Heller

Chris is an agent and investor, and uses all his available resources and knowledge to succeed in the San Diego market. From REO’s to MLS listed houses, he’ll look at anything that makes money. He has a unique strategy for pricing his rental units, and it seems to work really well.

 

What you’ll learn:

 

  • The primary way Chris makes money
  • Types of properties Chris has had success investing in
  • How to price your rental rates
  • How to avoid or minimize facing challenges after purchasing an investment property
  • Best performing investment deal Chris has done
  • How to identify a shift in the market
  • Chris’s Best Ever advice – Make sure you get a great buy

 

#2 – JF1129: Buy Cash-Flowing Properties Online with Gary Beasley

Gary created Roofstock with intentions to attempt to democratize the real estate investing world. Not only does his company and the technology help him with his investing, but also helps anyone who would like to invest in single family homes anywhere in the country. They have already negotiated deals with property management companies, an important aspect when 90% of his investors are investing in markets they don’t live in

 

What you’ll learn:

 

  • How to manage out-of-state rental properties
  • How to measure the quality of renovations when purchasing a turnkey property
  • How to qualify a potential resident or requalify a resident you’ve inherited after purchase a rental property
  • The biggest challenges Gary’s faced launching a turnkey rental company
  • Top mistakes Gary’s made in his real estate business
  • Gary’s Best Ever advice – develop conviction around a thesis and then execute, even if other people don’t agree with you

 

#1 – JF1128: How to Purchase 4 to 10 Properties Per Month With Lease Options with Chris Prefontaine

It takes 120 leads just to close 4 to 5 properties. Chris has built an amazing company and team that finds those leads, makes the calls, closes properties, and helps with other aspects of the business. From an online automated bird dogging campaign to a dedicated full-time phone VA. If you want to invest at a high level, listen to this episode and take notes!

 

What you’ll learn:

 

  • How to generate lease-option and seller-financing leads
  • How to find a high-quality virtual assistant
  • How to structure lease-option and seller-financing deals
  • Chris’s long-term wealth building strategy
  • How to convince a seller to do owner-financing instead of selling outright
  • Chris’ Best Ever advice – don’t personally sign the loan and don’t use your own cash on deals

 

Which Best Ever podcast episode this month added the most value to your real estate business?

 

bunch of money in hands

Top 5 Essentials for Raising Private Capital

Written By David Thompson, Thompson Investing

 

After 8 deals and $13 million raised in 18 months, I condensed my top ten tips to five essentials for successfully raising capital.  I continue to learn new things on every deal, but this is the best of the best so far.

 

If you can master the art and skill of raising capital, you have a big advantage.  It’s one of the top 3 skills in demand in this highly competitive and increasingly complex world according to Cal Newport in his book Deep Work.

 

Everyone seems to need capital to grow including startups, businesses, communities, nonprofits, you name it.  Even companies I’ve talked with that have a ton of experiences and rich capital sources are interested in talking with me because at the end of the day, it’s just human nature to grow.  A small firm can also negotiate better win / win terms from the operator’s standpoint versus wall street private equity that often may negotiate less than favorable terms with them.

 

Companies either want to grow bigger, faster, or take advantage of opportunities that often come in bunches instead of at systematic intervals.  Lack of capital stops ideas, companies and people from growing.  If you focus on this one skill you will have folks wanting to partner with you in a variety of areas.  Your goal will be to stay focused, establish key relationships with a few very experienced operators, build your reputation and network of investors by honing your craft and providing them with sound and logical opportunities while taking care of their needs.  So, here are my top 5 essentials for being successful in this area.

 

1) Partner with experts

  • You increase your experience and credibility faster when you are working with partners that are experts in what they do
  • You will be sharing good deals with investors in strong markets behind an experienced team
  • Your learning and development accelerates because experienced partners can share their knowledge. You’ll avoid newbie mistakes that can harm your reputation
  • Your brand becomes more known and credible building on an experienced partner’s track record

 

2) Be Yourself  / Authentic

  • Focus on education with investors as the primary objective
  • Don’t sell or appear needy. You have something that investors want
  • Being knowledgeable increases confidence and the investor will feel that you know what you are talking about. You will be more relaxed and natural when sharing the idea with investors.
  • Keep the message logical and simple. Frame the opportunity around a good market, a good deal with an experienced team behind it.  Share with them what’s driving value creation.
  • Prepare for investor questions: review my blog on 25 FAQs

 

3) Play to your strengths

  • Analyze your network and know where your investors are coming from
  • Focus on getting stronger in the areas of your strengths. Pick the top two areas you are finding most of your investors and develop a more comprehensive plan to further develop those areas
  • Don’t waste time in areas that aren’t working or are not natural paths for you
  • Bonus: Read StrengthsFinder 2.0 (Tom Rath) to help you understand the importance of playing to your strengths
  • Return customers and referrals are 85% of my business now so understand it gets easier over time

 

4) Raise min 25% more than you need

  • Know investors may change their mind for a variety of legitimate reasons such as pending job uncertainty, health or family emergency, unable to get liquid in time, etc.
  • Don’t be surprised when investors change their mind. Be mature and empathetic with the investor
  • Focus on building that long-term relationship so they are ready next time
  • To avoid big investor decommits, take half and put the rest on backup reserve in case you need it
  • Demand and interest increases when folks are put on backup. Psychologically, folks want in more when they can’t get in.  They assume they are missing out on a great opportunity

 

5) Develop a thought leadership platform for long term success

  • Building your brand requires a long-term strategy of developing content and knowledge share
  • Create good content for free and focus on educating others to increase awareness of your brand
  • Thought leadership ideas are blogging, podcast interviews, newsletters, videos, special reports, website, online forum or meetup group participation or start your own meetup group.
  • Most of my new leads today come from my thought leadership platform

 

In summary, building a foundation on these five essential factors will accelerate your capital raising efforts and enable you to add significant value to the partners you work with in your business while building an investor base that has confidence in the ideas you share with them.

 

gummy bears

3 Ways to Separate Yourself from Other Apartment Syndicators

 

There are thousands of qualified syndicators who raise money from accredited, passive investors and purchase apartment deals. With so many options available, how should you differentiate yourself from the competition to win an investor’s business?

 

There’s no secret and magic formula that, if applied, will allow you to easily attract millions of dollars in private capital. However, if you follow these three tactics, you can slowly start to separate yourself from the pack, build relationships with high net worth individuals and ultimately build a sustainable and successful apartment syndication business model.

 

Is there an alignment of interests?

 

The first way to differentiate yourself from other syndicators is making sure there is an alignment of interest. What are you doing to show your investors that their interests are just as important, if not more important, than yours?

 

There are many different ways to accomplish this, but one thing that my company does that many others don’t is putting our asset management fee in second position to the investor’s preferred return. In other words, if the project doesn’t meet the investor’s preferred return, which is typically 8% on an annual basis, then we don’t collect our asset management fee.

 

Now, that may seem like it’s common sense – if the project is performing for the investors and they aren’t receiving the projected returns, why should we get paid? However, this actually isn’t a common practice. And it’s certainly not a common practice to explicitly state this in an operating agreement. But that is what my company does. Our operating agreement says that if the project is not on track to achieve the investor’s preferred return, we do not collect the asset management fee.

 

Hopefully, it never comes down to this, but having this in the operating agreement reinforces the alignment of interest with our investors and differentiates us from other apartment syndicators.

 

Are you transparent with your investors?

 

Another way to differentiate yourself from the competition is by having a high level of transparency. Now, you obviously don’t want to bother your investors with every single aspect of the operations, but how often do you send out updates to your investors? I know some syndicators provide quarterly updates, while others offer annual updates. But for my business, we send out detailed email updates to our investors on a monthly basis, including occupancy rates, renovation updates, rental rate actuals vs. projections, capital improvement updates, issues with proposed solutions and any other updates relevant to the project. Then, we send out detailed financials on a quarterly basis so investors can have a granular level look at the operations.

 

Additionally, we are extremely responsive to investor questions and concerns. The last thing a passive investor wants is to ask a question and be ignored or receive a response a few days or weeks later. Therefore, if an investor sends you an email, quickly find the answer and reply to them in a timely manner. This may seem minor, but again, this can go a long way in differentiating yourself from other apartment syndicators who take forever to reply to investor concerns.

 

Can your investors trust you?

 

Finally, and certainly most importantly, the private investor must trust the person leading the charge, which – as an apartment syndicator – is you.

 

One of the main ways to build trust – I know this isn’t earth shattering advice – is to be yourself. There’s no reason to put on a show for your investors. Instead, you will build the best relationships if you just be your authentic self.

 

Besides authenticity, the best way for investors to trust you the fastest is through your online presence. And this is accomplished by creating a thought leadership platform, whether it’s a podcast, YouTube channel, blog, etc. Whenever I jump on a call with a prospective investor, most of them say, “I feel like I’ve already talked to you because of your podcast.” That’s music to my ears, because we’ve already established rapport before even having our first conversation.

 

 

Ultimately, differentiating yourself from other apartment syndicators boils down to building trust and credibility and determining how to do so in a scalable way.

 

What are some tactics you’ve discovered that enable you to differentiate yourself from other investors in your niche?

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

The Secret to Eliminating Competitors in a Hot Real Estate Market

How do you approach finding, underwriting and acquiring deals when there’s so much competition that you cannot find a deal at a price that will meet your investment return goals?

 

This was the exact situation that my apartment syndication business faced in mid-2017. We had a lot of leads coming in that met our initial investment criteria, but the competition was such that the purchase price kept creeping higher and higher until the deal was projected to achieve returns that were below our passive investor‘s goals.

 

So, what did we do? Like any effective entrepreneur, we went into problem solving mode. More specifically, we reassessed our investment criteria.

 

The four questions we would ask for any deal we came across to determine if it met our investment criteria were:

 

  • Was it built in the 1980s?
  • Are there 150 or more units?
  • Is it in or near a major city?
  • Is there an opportunity to add value?

 

If we didn’t answer “yes” to all four of these questions, the deal would automatically be eliminated from contention. The benefits of setting initial investment criteria is that you don’t spend an inordinate amount of time underwriting deals that do not align with your business plan.

 

Up until mid-2017, we didn’t have much of an issue finding and purchasing properties that met this criterion. However, as of late, we have. In particular, we had a challenge finding apartment communities that were built around 1980, mostly due a high level of competition. So, we decided to adjust our investment criteria to include apartment communities that were built in the 1990s and the 2000s. And as a result, we purchased an apartment community built in the 2000s for the first time.

 

We like to look at properties built around 1980 because we are value-add investors. Generally, anything built earlier than 1980 would be to distressed to fit into our value-add business model. Conversely, anything built later than the 1980s wouldn’t have enough value-add opportunities or wouldn’t be sold at a price that would allow us to meet our investment goals. Or so we thought.

 

After reviewing all the potential deals in our pipeline, regardless of age, we realized that these newer deals – the ones built between 1995 and 2005 – were actually projecting returns similar to those that were built in the 1980s. Generally, since they are newer buildings, the opportunity to add value was lower, but that was offset by the reduction of certain expenses, like ongoing maintenance, management issues, vacancy rates, resident turnover and overall risk.

 

I think the reason why, in our current market, 1980s properties have comparable returns to 1990s and 2000s properties is because value-add apartment investors are conditioned to make the former property type a priority. Most value-add investors (including us at the time) wouldn’t even look at communities built in the late 1990s or early 2000s because they think the numbers won’t work as well because there will be less opportunity to add-value. However, we were able to apply our value-add investing knowledge to a property built in the 2000s and create a business plan that would enable us to achieve the desired returns of our passive investors. Whereas most investors pursuing deals in this age range aren’t looking at them through the value-add lens, we were able to identify areas that could be improved that the other, non-value-added investors had missed.

 

In other words, we leveraged our unique skillset (understanding how to recognize opportunities to add-value) to defeat the competition and be awarded the deal.

 

So, if you are having trouble finding deals that achieve your desired returns, reassess your acquisition criteria. Start looking at deals that fall outside your criteria and see if you can project similar returns. You may end up discovering what we did, which will lower your risk in the deal since it is newer and comes with lower risks and ongoing expenses. Or you might discover that deals in smaller markets, or smaller in size or another investment strategy all together is a better fit.

 

All that being said, our priority is still properties built in 1980. And we’ve only purchased one apartment community outside that range. So, we’re keeping our eyes out for our initial criteria but also now acknowledge that sometimes it makes sense to upgrade, especially when everyone else is looking at the same types of deals as us.

 

What about you? Comment below: What unique strategies have you implemented in your business to out compete your competition?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

aparment real estate from the ground

The 3 Secrets to Attract and Keep Your Passive Apartment Investors

Before raising money for my first deal, I thought the primary reason accredited investors would passively invest in my deal would be because of the return. However, after raising $1 million for that deal, I discovered that the return on investment was not the major concern. Because there are other syndication and investment avenues to which an investor can go, offering solid returns cannot be the driving factor.

 

So, if returns aren’t their primary motivation, what is?

 

Since my first deal, I’ve partnered with hundreds of accredited investors on more than ten apartments communities worth nearly $200,000,000. From this experience, I have narrowed down the passive investors’ three primary reasons for investing in an apartment syndication:

 

  • My money is in good hands
  • I will be updated on relevant information on the deal
  • The process is hassle-free

 

Need #1 – Is my money in good hands?

 

My first need is to know that my money is in good hands. First and foremost, that means I want to know that – at the very least – you won’t lose my money. Billionaire investor Warren Buffett has two rules for investing: 1) Never lose money. 2) Never forget rule number 1. Therefore, your main focus when managing other people’s money should be capital preservation.

 

Like any investment, there are never guarantees – not for returns or the preservation of capital. So, I need to know that you are proactively mitigating any major risks. The syndicator accomplishes this by adhering to the three principles of apartment investing:

 

  • Don’t buy for appreciation
  • Don’t overleverage
  • Don’t get forced to sell

 

Follow these three principles and I will be confident that you will not only preserve my capital, but maximize my return as well.

 

Along with this, I want to know that my money is in the hands of an experienced syndicator. So, before you’re ready to raise money for your first deal, you must establish a solid educational foundation and have a track record in business and/or real estate. If you are lacking in either or both of these areas, you can make up for your deficiencies by surrounding yourself with a trustworthy, credible team, like a mentor, property management company and broker who have experience in the apartment industry and have successfully completed syndications. For me to invest in your deals, I must be confident in you and your team’s ability to return my capital and provide me with the projected return.

 

I also need to trust you as a person. I need to have a good feeling about you and truly believe that you have my best interests in mind. This trust is established by the length and quality of our relationship and by you demonstrating your expertise through your experience, your team or your thought leadership.

 

With this trust, I will be confident that you will have common sense, make good decisions, conservatively underwrite the deal, perform all the required due diligence before purchasing an apartment and at a minimum, meet the projected returns you outlined.

 

Finally, I want to know that you are a responsive communicator. If there is a problem with the deal, I want you to not only notify me of the issue, but have a proposed solution as well. And if I reach out to you with a question or concern, I expect that same lightning quick response with an answer.

 

Overall, I want to know that my money is in good hands. The syndicator will convey this to me by proactively mitigating the risks, having the relevant experience, building a trusting relationship and being a responsive communicator.

 

Need #2 – Will I be provided with status updates on the deal?

 

Additionally, I want to be provided with ongoing status updates of the project. On a consistent basis, I want a director level – not a CEO or entry-level employee level – update on the deal with supporting data.

 

To accomplish this, the syndicator needs to provide their investors with a monthly email update (I use MailChimp) that includes the following information:

 

  • Distribution details
  • Occupancy and pre-leased occupancy rates
  • Actual rents vs. projected rents
  • (If you are a value add investor) actual rental premium vs. projected rental premiums
  • Capital expenditure updates with pictures of the progress
  • Relevant market and/or submarket updates
  • Any issues, plus your proposed solution
  • Any community engagement events

 

Then, on a quarterly basis, provide me with the profit and loss statement and rent roll so if I want, I can review the operations of the property and dig deeper into the details. My company actually provides monthly distributions – as opposed to quarterly or annual distributions – so our investors are not only provided with updates on a monthly basis, but are paid as well.

 

Need #3 –  Is the process hassle-free?

 

Finally, I want a hassle-free process. The reason I am a passive investor is because I want to park my money in an investment and not have to worry about doing any of the day-to-day operations. I am busy making money with other business endeavors, so I want to minimize my time investment in the deal.

 

After performing my initial due diligence on the deal prior to investing, I want a boring investment with little to no surprises. All I want to do is read the monthly email updates and receive my distributions. So, to effectively provide investor distributions, set up a direct deposit, as opposed to sending checks in the mail, so all I need to do is look at my bank account rather than going to the bank each month to deposit a check.

 

If I do reach out with a concern, I want a quick resolution with minimal back and forth. Therefore, you should proactively address potential concerns in your monthly updates and if an investor has a concern, have a solution in place prior to replying.

 

Conclusion

 

In summary, I’ve completed nearly $200,000,000 worth of apartment syndications with hundreds of passive investors, and if you set your business/deals up so your investors answer YES to these 3 questions, you’ll be well on your way to closing more deals:

  • Is my money in good hands?
  • Will I be provided with status updates on the deal?
  • Is the process hassle-free?

 

If you use private money investors for you deals, what have you found to be their top motivations for investing with you and not with another qualified investor?

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

 

city skyscrapers

How to Build a High-Quality Sales Team That Consistently Brings You Leads

Are you having trouble finding quality leads? Or conversely, do you have so many leads that it’s impossible to contact and qualify them all? If so, hiring an inside sales person may be the solution to your problems.

 

A dedicated inside sales person can man the phones, contacting and qualifying incoming leads or cold-calling property owners to find off-market deals. However, you don’t want to bring on just anybody as your inside sales lead. Like hiring for any job, there is a specific process you want to follow to screen out the duds and only hire the most qualified individual.

 

Dale Archdekin, who has 10 years of experience selling and investing in residential real estate, is an expert at coaching and training real estate investors on building high-quality inside sales team. In our recent conversation, he provided his three step process for recruiting, interviewing and training candidates for a real estate inside sales team.

 

Step 1 – Recruitment

 

Like any hiring process, the first step is recruitment. And lucky for you, the internet allows you to complete this step with relative ease. When Dale needs to hire a new inside sales person, he simply posts advertisements on the popular job recruitment websites. “Just running different ads. Using Indeed, using ZipRecruiter, using anything that you have, pushing the ads out there just like any other job ad,” he said.

 

To maximize the number of potential candidates, Dale recommends that you do not only advertise for individuals with prior real estate experience. Instead, your ideal candidate only requires a background in any type of sales. He said, “That’s the one secret that I’ve figured out. A lot of teams get hung up on trying to find somebody who’s already licensed [as an agent], and in some states, there’s some very heavy requirements around actually getting a license. So, what we do is we look for people that just have sales experience, because we can teach them about the real estate process.” Dale finds that it’s difficult to teach sales skills, but learning the real estate process is much easier for most people to grasp.

 

Prior to conducting long-form phone or in-person interviews, in order to simplify the hiring process, Dale has interested candidates send in a verbal audition. “What you want to do is you want to get as many inquires as you can coming in, and then you want to streamline your process,” he said. “I prefer to have people calling to a phone number and leave a voicemail about themselves. I’ll just have an outgoing message that says something like ‘Okay, give me your name and your best phone number to reach you at, and then in your own words, tell my why you are the best fit for our inside sales department and why you are a sales rockstar?’.”

 

Once Dale receives the verbal audition, his team reviews the recording and determines if the candidate is worth pursuing further. This verbal audition approach will save you a lot of time. You don’t have to read through a bunch of resumes. Moreover, since the majority of their job will be spent on the phone, you can get a good idea of their communication style too.

 

Step 2 – Interview Qualified Candidates

 

The candidates that the pass the audition phase will move forward to step two of the hiring process, which is a role play over the phone. The first portion of the phone call is answering the standard questions about the job –  pay, location, and responsibilities. Once the candidate has an understanding of the job and are okay with the fact that they will be on the phone for over six hours per day, the role play begins. Dale said he will tell the candidate, “I’ve sent you a for-sale-by-owner script. You’re going to be the agent and I’m going to be the for-sale-by-owner. You have to set up an appointment with me. And the only way that you fail this exercise is if you let me off the phone before you ask all of the questions on the script.” In particular, they need to ask the two most important question, which are “are you interested in selling your property at this time and can we schedule an appointment to discuss this further?” When a lead comes in or when cold calling a lead, Dale’s main outcome is to determine if the lead is worth investing time in. So, if the candidate doesn’t achieve this outcome on the roleplay, they fail the interview.

 

The role play recreates the actual situation the candidate will be in if they are hired, so this approach will indicate if they are the right fit for the job. “If I give you explicit instructions that if you let me off the phone you fail, and you let me off the phone because you didn’t want to be too rough on me, you fail,” he said. “If you can’t do it when I specifically tell you not to get off the phone, you sure aren’t going to do it once I give you the job and I’m not listening all the time.”

 

Also, Dale said, “most of these people have zero real estate sales experience. So, going through that script with them … tells us what the level of sales skill they have. Because somebody with more sales skills can basically BS you through anything that they haven’t sold before. They will stay on the phone with you and they will set up an appointment with you even if they’re selling 3D laser prints and they have no idea what that is.”

 

If the candidate asks the money questions and passes the roleplay, Dale invites them into the office for a three-hour calling session. He said, “for the first hour or so, we teach them the script, and for the next two hours, we put them onto a recorded line and have them make real outbound calls to real consumers. Then we get to listen to that and see how they actually did.”

 

After making it through the entire process, which includes the verbal audition, roleplay and real phone calls to leads, Dale has enough information to make an educated decision on whether or not he should offer this individual a position.

 

Step 3 – Training

 

Once a candidate is hired, they are put through a training process. For Dale, he wants his inside sales person to be like an agent, so they are taught everything on which an actually agent would be trained. During this training, he said they’ll learn things like “How does the process work, how does financing work, mindset, time-blocking, understanding the types of leads that they’re calling and receiving, what the mindset of those leads that they’re calling and receiving, and then scripting.”

 

However, what Dale doesn’t want are robots that never deviate from the script. Scripts are to get them started and for them to have something to say when they call somebody. But at that point, Dale wants his sales people to use his three core principles – experience, process and outcome – to guide the conversation. He said, “For any person who’s trying to do anything or who’s objecting to you, that person has some type of experience that they’re drawing from [and] they’ve created a process in their mind that they think is going to get them an outcome that they’re trying to achieve. If you can ask enough questions to understand what their experience is, how they put that process together and what the outcome is and what it means to them, you can show them a different process that can get them to a better, faster, cheaper or easier outcome, and then you can say ‘Would you like that?’.”

 

Here is an example: You are speaking to a for-sale-by-owner and they say “My neighbor sold their home by themselves. They didn’t use an agent, which saved them a lot of money. I’m going to sell the house myself without an agent and I’m going to save a lot of money too.” So, an inside sales person needs to identify their experience, process and outcome. In this example, the experience is “my neighbor sold his house without an agent.” The process is “I am going to sell my house without an agent too.” And the outcome is “I want to save a lot of money.” Now that the three principles have been identified, the goal is to offer a different process that accomplishes the same or better outcome. A simple response would be “Hey, you’re absolutely right. You totally could sell this home yourself, and that’s great that your neighbor did that too. If I could show you how I could not only net you more money that it costs you to hire me and make this easier for you to do, would you consider meeting with me to discuss potentially listing your home with me?”

 

Who would say no to that?

 

How Much Do You Pay an Inside Sales Person?

 

It is important to understand the cost of having an inside sales team in order to determine if it is affordable. Dale pays his sales people around $2,000 to $2,500 a month as a base salary.

 

Since he is acquiring leads with the purpose of becoming the listing agent, his sales people are also paid percentage of the commission on a closing at the end of sale – between 5% and 10% of the gross commission income. On average, depending on the market, Dale pays between $60,000 and $120,000 annually.

 

Depending on your business model, your pay or bonus structure may differ – hourly, strictly commission-based, etc.

 

Conclusion

 

A great inside sales person will help you screen, qualify, and find high-quality leads. The three-step process for hiring this team member is:

 

  • Recruiting – posting ads online and obtaining a verbal audition
  • Interview – phone roleplay and in-person calling session
  • Training – teaching the experience, process, and outcome principles

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

urban river real estate

Should I Buy An Investment Property In A Flood Zone?

Originally Featured on Forbes.com here.

 

Through late August and into early September, Hurricane Harvey, a Category 4, devastated parts of Texas and Louisiana. Next, it was Irma, a Category 5 hurricane, that hit numerous islands off the coast of the Southeastern United States, eventually making landfall in Florida. That same week, Hurricane Jose grazed several Caribbean islands, stalled in the Atlantic Ocean, then began making its way to the East Coast. It’s possible that the U.S. will be effected by three catastrophic hurricanes in a period of less than a month.

 

The damage incurred by the first two hurricanes was apocalyptic. With over 80 deaths from Harvey, more than 60 deaths from Irma and hundreds of thousands of displaced families and businesses, the aftermath will remain significant for years to come. Certainly, our thoughts are with those who were affected by the hurricane.

 

The economic losses caused by the hurricanes are also shocking. Preliminary estimates for Harvey and Irma damages are in the hundreds of billions. And to make matters worse, a large portion of the economic damage is on properties without flood insurance.

 

Therefore, as real estate investors, we must take the possibility of flood damage into account when considering an investment. A property located in a flood zone by no means automatically disqualifies a potential investment. However, it will require additional upfront due diligence on your part so that if a hurricane or flooding occurs, you have your bases covered and your investment isn’t negatively affected.

 

Should I buy flood insurance? 

 

For a property that is in an area designated a high risk for flooding and will be purchased with a mortgage, it is required by federal law to have flood insurance.

 

However, with Hurricane Harvey, neighborhoods not considered flood zones were impacted. Since flood insurance wasn’t required, many families will have to bear the tremendous financial burden themselves. According to FEMA, more than 20% of flood claims come from properties not located in high-risk flood zones. Therefore, if an investment property is on the border of a flood plane, you may still want to consider buying flood insurance.

 

For information on flood hazards and official flood maps, use the FEMA Flood Map Service Center. This tool allows you to enter an address or area to obtain the most up-to-date flood map. And when in doubt, contact a local insurance agent to determine if the property is at risk for flooding.

 

How much does flood insurance cost?

 

Compared to the economic burden placed on those without flood insurance, it’s relatively inexpensive. A study conducted by FEMA found that just one inch of interior flooding can result in nearly $27,000 in damage. The amount reaches over six figures if the flooding is a few feet or more.

 

Contrast that to the typical cost of flood insurance. According to Cincinnati Insurance board director Ron Eveligh, a flood policy with $250,000 in coverage will run you about $500 a year for a residential building. So, to determine if a property in a flood zone is a good investment, it is vital to account for the cost of flood insurance during the underwriting process.

 

If the addition of the monthly expense results in a financial return that’s outside your investment goals, you need to pass up on the deal or investigate ways to increase income or decrease expenses elsewhere. In other words, plan for flood insurance the same way you do for other expenses, like maintenance, property taxes and vacancy.

 

How do I buy flood insurance?

 

Damage from flooding is not covered under your basic homeowners’ or renters’ insurance. It must be purchased separately, and you can only buy flood insurance through an insurance agent. If a property is in a high-risk flood zone, it will require flood insurance before a lender will close on the loan. So, the purchasing of flood insurance will need to be taken care of prior to close in that case.

 

If a property is not in a high-risk flood zone, but it’s either in a moderate to low-risk flood zone or just outside the border of a flood zone and you want a quote for how much insurance will cost, it’s a good idea to reach out to your local insurance agent for a quote. If your insurance agent doesn’t offer flood insurance, you can request an agent referral from the National Flood Insurance Program Referral Call Center by calling 1-800-427-4661.

 

 

In general, owning investment property requires proper planning. With underwriting, lender communications, inspections, etc., your list of duties fills up quickly. However, do not neglect to determine if the property is at risk of flooding.

 

Taking the time to figure out if a property needs flood insurance, how much it costs and the process of obtaining it upfront can save you tens of thousands of dollars and a huge headache should disaster strike.

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

north america on a globe

Should You Go Big in One Market or Diversify Across Many?

I recently closed on an apartment community, which increased my company’s portfolio to over $190,000,000 worth of apartment communities under our control. We have 11 apartment communities and… 11 out of 11 are in Texas. In fact, 9 out 11 are in Dallas Fort Worth (DFW). I’ll get to the relevance of this in a second.

 

But first, after every closing, I document a lesson learned with the purpose of helping others who want to pursue apartment syndication or multifamily investing. You can read about the 16 lessons from those deals here: 16 Lessons from Over $175,000,000 in Multifamily Syndications

 

Now, let’s look at my company’s portfolio a little closer and dig into this lesson learned – or really, an observation I had. We have 2,613 apartment doors in total with 85% (2,208 doors) in DFW. So clearly, we are going deep in one market and are not currently diversifying across multiple markets. But, I frequently hear about how real estate investors should diversify.

 

I don’t agree.

 

As apartment owners and operators, if we diversify across other cities/states just for the sake of diversification, then I believe we would actually incur more risk, not less. Here’s why: all real estate deals have risks, which can be separated into three categories:

 

  1. Risk in Market and Submarket
  2. Risk in Deal
  3. Risk in Team

 

By sticking to one market that we know very well and have a proven management team in place with economies of scale, it allows us to mitigate risk factors 2 and 3 – not eliminate, but mitigate. Conversely, if we were to branch outside of one market, we’d have to find the following:

 

  • Property management – one of the biggest keys to success. Yes, we have a plan, but it must be properly executed
  • Vendor contacts – not as big of a deal if you hire a 3rd party management company since they can provide these contacts, but it is a big deal if you don’t
  • Local legal experts for contracts – a bad one can burn you
  • Knowledge of tax assessments – fairly easy to figure out, but still a learning curve
  • Build a reputation among the brokers – intangible and is vital to finding the best deals

 

Additionally, we’d have to evaluate and qualify the market and submarket. Basically, we’re opening ourselves up to all three risk factors by branching out. So, when we decide to go deep into one market, the key is to make sure that market is solid.

 

Here are the primary things I look for in a market:

 

  • Job diversity – no one industry makes up more than 20% of the jobs
  • Population – growth over the last five years and current projections show a continued growth
  • Supply and demand – look at vacancy trends and absorption rate

 

Of course, as with all generalizations, there will be exceptions. Here is a couple I can think of:

 

  • This is only in reference to being an owner/operator (i.e. active investor). If you are a passive investor and can passively invest with multiple owner-operators (i.e. syndication or turnkey companies) who have the systems in place in different markets, then that seems like a good strategy to me. In this scenario, the deal and the team (risk factors 2 and 3) are already given to you. Knowing if they’re good and reputable is something you’d obviously still need to qualify, but it makes conceptual sense to diversify if you’re a passive investor
  • While we are going deep in DFW, that doesn’t mean we’ll always only be in DFW. In fact, we actively get sent deals across the country every week – lots of them. However, in order for us to branch outside of DFW, it’s going to take an extraordinary deal combined with a local expert partner to compel us to pull the trigger.

 

To summarize, I believe you lower your risk when you go deep in a market. It’s better not to diversify across multiple markets unless the opportunity is significantly better than what you can get in the market in which you are already investing.

 

What do you think? Should you go big in one market like us, or are you finding success by diversifying across multiple markets?

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

wrapped gift

3 Investing Secrets from a Nation’s Top Broker

As you complete more and more deals, you will begin to accumulate the insider secrets of what it takes to be a successful investor. Once you’ve eclipsed a billion-dollars’ worth of deals, then those secrets are worth billions too!

 

Karen Briscoe, a Principal of the Huckaby Briscoe Conroy Group, is an individual full of billion dollar secrets. Her group has sold over 1,000 homes valued over $1 billion. It’s also been named to the Wall Street Journal Top Realtor Team list. Karen condensed these secrets into a published book – Real Estate Success in 5 Minutes a Day: Secrets of a Top Agent Revealed. In our recent conversation, she provided the top three secrets to her success and how you can apply them to your investing business.

 

Secret #1 – Invest in the up-and-coming markets

 

Karen’s first secret can be explained through the lyrics of a Frank Sinatra song. “One of the top tips that applies to investors in particular is what I call ‘New York, New York’, the song by Frank Sinatra with the chorus ‘If you can make it there, you can make it anywhere’,” she said. “If you look at the fundamentals of a certain market and you find that investors are being successful in that market, then you want to go to the next market [over], or like Wayne Gretzky says, ‘Go to where the puck is going’ – if you want to go where the market is going, then find the markets that have similar fundamentals but are on the edge, or soon to be the next place where everybody wants to be, because that’s where the best values are.”

 

This “New York, New York” strategy is followed by corporate giants like Starbucks and McDonalds. They search for the fundamentals and trends that hallmark an emerging market, set up their locations there and wait for the market to surge.

 

The fundamentals Karen says to looks at are the rental pool, jobs, schools and metro access. Or, for a hack, she said, “you could just apply the Starbucks effect, the Frappuccino effect that is talked about – how there has been found that there’s a halo effect around Starbucks. So, you could maybe go to that next ring around it and look in that area for what is upcoming neighborhoods that could be trending into better values over time.”

 

For a comprehensive guide for evaluating and selecting a target market, click here.

 

Secret #2 – Start a meetup group

 

Karen’s second secret, and my favorite, is to host a meetup or seminar. They type of individuals you’ll invite will depend on your business model and investment niche. As a broker, Karen said, “we’ve done investor seminars in conjunction with local lenders and other professionals like CPAs and financial advisors, because they too have a pool of clients who want to have real estate as part of their portfolio.”

 

There are many ways to structure a meetup group, and I wrote a piece for Forbes outlining a few successful methods. The main way Karen differentiates her meetup from her competitors is that hers is invite-only. She said, “I know that there are many agents that have done seminars that they open up, but we keep it invitation-only, and then that way these professionals are inviting their clients and offering a value-add service for their clients who have an interest in real estate.”

 

Secret #3 – Take Immediate Action

 

Karen’s final secret, which is also her Best Ever advice, is to start now. “There’s a Chinese proverb that the best time to plan a tree was 20 years ago, and the second best time is now,” she said. “I would say the same thing about real estate investing. I think the best time to invest in real estate was 20 years ago, and the next best time is now. I think many people become paralyzed with it, and I’m not discounting the fact that it has a lot of logistics associated with it, but the idea is just find yourself a real estate professional that you trust, find a lender that can work with you on getting financing that you can structure that works for you, and do it.”

 

Conclusion

 

Karen Briscoe, a billion-dollar broker, has three secrets to her success. They are:

 

  • Investing in the up-and-coming markets
  • Hosting an invite-only meetup group
  • Taking immediate action

 

Apply these secrets to your investment, which may require creativity on your part, and replicate her massive success.

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

making a business deal

The 5 Secrets of an Award-Winning Sales Closer

Whether you like it or not, if you’re a real estate investor, you’re also an entrepreneur. And as an entrepreneur, you’ll need to be a proficient salesperson. You’re selling products and services, whether it’s an actual property, a rental unit, a consulting service, etc. You’re negotiating on deals with sellers, buyers and other real estate professionals. You’re selling yourself to sellers, buyers, accredited investors, brokers, and property managers. Etc. Nearly everything you do requires some variation of sales. Therefore, we can all benefit from learning about the most up-to-date best practices in sales.

 

Stephanie Chung, an award-winning executive coach with 25 years of team management, business development and sales experience, is an expert at teaching others how to improve their sales skills. In our recent conversation, she provide her top five sales tips for selling high-ticket items, like real estate.

 

1 – Ask, don’t tell

 

First, ask a lot of questions. Stephanie said, “the fact of the matter is the best people in sales are the ones who do a lot of asking and very little telling… You want to focus on asking your questions, and not surface stuff but getting down into the core.”

 

You want to ask a lot of questions because the more questions you ask, the more information you’ll obtain. “If you ask people enough questions, they’ll tell you everything you ever wanted to know about them,” Stephanie said.

 

There are also scientific reasons for why asking questions is the ideal sales approach. Stephanie said, “you and I can probably talk at a speed of – if we’re lucky – 300 words per minute. That’s how fast we can speak. But the brain can process anywhere from 1,000 to 3,000 words per minute. So, the reason why you don’t want to be the one talking all the time and you want to be the one asking is because you have the unfair advantage based on you being the asker and the buyer having to speak.”

 

Your unfair advantage is that as they are speaking, not only can you process the words they’re speaking, but you can also analyze their body language and tone, which helps you guide the conversation in the right direction.

 

Also, Stephanie said “another reason why you do it is when you ask someone a question, especially if you’re asking them a question about themselves, the fact of the matter is the brain produces like a dopamine effect. That’s why we all like to talk about ourselves; we actually feel good about it.”

 

Essentially, the more questions you ask, the more information you’ll obtain and the better the other party will feel, which are the keys to identifying their needs, building rapport and making the sale.

 

2 – Control your financial beliefs

 

Secondly, you need to gain control over your own financial beliefs. “We all have them,” Stephanie said. “We were brought up, and it’s a matter of how we were brought up in our home. Were we brought up where money was based on scarcity? ‘Turn those lights off, money doesn’t grow on tree.’ Or were we brought up where money has spoken about in abundance?”

 

Limited financial beliefs are rooted in fear that was instilled in us in an early age. But like all fears, they can be overcome. Here is a blog post with strategies on crushing these types of fear barriers.

 

We all have our own financial beliefs and must ensure that we never let our beliefs leak into the conversation. “Unless you grow up around money, which most people did not, it can sabotage the results and sabotage the sales, and you end up actually not selling the high dollar, but you come in and you settle for something less, because that’s where you’re comfortable,” Stephanie said.

 

To keep your financial beliefs out of the conversation, you need to focus all of your attention on the buyer. Stephanie said, “you really want to be about the buyer in front of you. The more you can focus on what exactly do they need – not so much what I feel comfortable selling them, but what they need. When you can focus on that, then the conversations takes a whole different direction.”

 

The example she provided was about a company who sold memberships between $50,000 and $100,000. Stephanie discovered that the top sales person would often times sell the $50,000 membership when the $100,000 membership would have better suited the customer. Their reasoning was that they believed they could get in the door with the less expensive $50,000 membership and sell the higher end $100,000 membership at a later date. So, they were relying on their own beliefs rather than the actual needs of the customer. Instead, they should have left their beliefs at the door, focused on the customer’s need and sold the $100,000 membership from the start.

 

3 – Exude confidence

 

Third, exude confidence. And this is mostly accomplished by knowing your product or service inside and out. “Long gone are those days that you could wing it,” Stephanie said. “What’s going to separate us [from the competition] is our ability to get the job done for our results, and knowing our stuff, and having that swagger, if you will; you’re confident.”

 

She said, “you’ve got to know your stuff, you’ve got to stand firm on whatever your price is, and you have to have that air about you – not arrogance, because nobody likes that, right? But you definitely have to have that air about you where they feel comfortable that you’re competent in what it is that you do.”

 

Your ability to exude confidence is also based on your psychological health. Here’s a blog post with five ways to enhance your mindset to become an unstoppable real estate entrepreneur.

 

Since we’re supposed to be asking questions, you’ll show your confidence by asking high quality questions. “You want to be able to ask those questions that get your buyer to literally stop for a second and go ‘Huh? I’ve never thought of that before,’ or ‘That’s a good question.’ You want that awkward silence, and that’s when you know you’re really getting somewhere, because everyone else is asking the normal questions,” Stephanie said.

 

4 – Call out stall tactics

 

Next, do not crumble in the face of stall tactics. Stephanie said, “We always know it’s never about the money, but a lot of times people will use stall tactics – ‘Let me talk to my wife, let me talk to my investor, let me talk to my dog…’ That’s just stall tactics, they don’t need to talk to anybody, so always keep that in mind.”

 

When someone uses a stall tactic, she said your comeback should be “That’s great, it makes complete sense. Just for my own knowledge though, can you tell me specifically what is it that you need to think about specifically?” That way, you know what their true objection is and can work on addressing it.

 

“Don’t just let people off the hook when they say that. Always know there’s no such thing as next week,” Stephanie said. “So, narrow them down. ‘Great, would you like me to call you Tuesday? I’ve got Tuesday at 2 or 4.’ Narrow that next week stuff down.”

 

Regardless of what we are selling, most of the stall tactics we face as real estate entrepreneurs probably cannot be resolved by Tuesday. For example, as an apartment syndicator, one of the most common stall tactics I received from potential passive investors when I first started had to do with a lack of experience. When raising money, we are selling trust. And in order to gain that trust, the passive investor needs to know that their money is in good hands, which doesn’t necessarily happen overnight. Here is a blog post on how to overcome this type of objection or stall tactic when raising money for deals.

 

5 – Proactively address objections

 

Lastly, control the narrative by using what Stephanie calls the pre-emptive strike – proactively addressing your top objections. “We’ve all been in business, and that’s to know that we’re going to get the same one or two objections all the time. So what you want to do – this comes with your confidence and you being in control, and your swagger – is bring up the objection ahead of time.”

 

For example, Stephanie is one of the more expensive coaches in her area. When someone calls and asks about her coaching services, she always brings up her pricing. She’ll say, “Something you need to know is I’m actually one of the more expensive executive coaches in the area, but here’s why.” She brings up the objection to control the narrative. That way, she’s not on the defensive or stumbling over herself trying to answer it. “You bring it up, you’re in control, you’ve got the confidence, and it will usually go really well because they appreciate the fact that you brought up the objection.”

 

A good exercise is to create an exhaustive list of objections you could receive from a potential customer and write out a script for how you will answer them when they come up. It may seem tedious, but you will gain that trust factor more quickly than if you respond to multiple objections or stall tactics with, “I don’t know but I will get back to you.”

 

Conclusion

 

The five secrets of sales, especially for high-ticket items, are:

 

  • Ask, don’t tell
  • Control your financial beliefs
  • Exude confidence
  • Call out stall tactics
  • Proactively address objections

 

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

train with smoke

5 Steps to Become an Unstoppable Real Estate Investor

We’ve all heard the concept “it’s 80% mental and 20% physical,” or some variation applied to nearly every endeavor under the sun – sports, business, relationships, etc. And I’ve even heard some people say that it’s upwards of 90% mental.

 

If that is true, then how we should enhance on our mindset and psychology?

 

Everyone has their go-to technique. But Tina Greenbaum, a peak performance and executive coach and a dynamic optimal performance workshop leader, has created a tried and true five step process – which has improved the mindset of business leaders, athletes, artists, and speakers over the past 30 years – for developing an unstoppable mindset.

 

Tina said, “Any kind of business that you’re going to invest money in, you take a risk. And in order to take a risk, we’re now in the unknown. We take what we call calculated risks, we kind of do our homework and put our money where we think that it’s going to make money for us, but the truth is we don’t know what’s actually going happen tomorrow, none of us do. So, when we get caught up in trying to control the future, we get into trouble.”

 

In order to provide you with the techniques required to successfully navigate the unknown, In our recent conversation, Tina outlined her five-step curriculum for cultivating your mindset.

1 – Focus on what you want

 

Number one, and the foundation to the entire process, is focus. Tina said, for almost everything we do, “We kind of lose focus, we bring it back, we get distracted, we bring it back.” So, the question you need to ask yourself is, what do I focus on? Or, am I focusing on what I am supposed to be? Also, what happens to you when you lose focus? And how do you even know when you aren’t paying attention?

 

A really important concept, Tina said, is “whatever we focus on expands.” So, if we are focusing on the wrong thing, or constantly lose our focus, or are unaware of what we are focusing on, that’s what our experience of life is going to be.

 

To work on honing your focus, Tina said, “as the day goes on, or you’re with family, or you’ve in a business meeting, just notice, ‘How am I talking to myself?’ because you’ve got to be your own best friend.”

 

I find that the remaining four steps are a continuation of this step. They will guide you towards maximizing the amount of time spent focusing on the right things, and minimizing the time spent focusing on the wrong things or being unaware of what it is you’re focusing on, which is the key to the unstoppable mindset.

 

2 – Relaxation to eliminate negative emotions in the moment

 

Next is relaxation. Tina is a firm believer in the mind/body connection. She said, “in order to manage stress, we have to be able to manage our nervous system. And in order to manage our nervous system, we have to know how to do that.”

 

“If our system is on overload, we can’t think clearly. So, if you’re in a negotiation and you want to have your best foot forward, you want to be very grounded and you want to know exactly what you’re taking in, and be conscious of what’s happening internally.”

 

Tina provided a relaxation exercise called the three-step breath that – when practiced repetitively – will allow you to instantly calm down your nervous system when you get anxious, worried, etc. I recommend listening to that part of the podcast here, but here is a summary:

 

  • Place your hands on your belly, breath in through your nose, and allow your belly to fill up. Then, let out all the breath before you take in the next breath. In through your nose, out through your nose.
  • Once you’ve mastered the belly breath, repeat the same process, but this time, the first half of the breath should fill up the belly and the second half should fill up your rib cage. Then breathe out, letting the belly go first, followed by the rib cage.
  • Once you’ve mastered the belly-rib breath, repeat the same process, but this time, the first third of the breath should fill up the belly, the next third is the rib cage, and the finally third is the upper chest. On the breath out, let the belly go first, followed by the rib cage, followed by the upper chest.

 

Tina said, “if you’re starting to feel anxious and you’re not sure which way to go and what you want to say, you just take a moment, nobody will see it; you don’t have to put your hands on your body, just take a nice deep breath, let it go, and all of a sudden now your mind is back.”

 

3 – Use mindfulness to create an emotional vocabulary

 

Three is mindfulness. Tina said, “we operate, automatic, but there’s so much going on; there’s so much under the surface that if you become a student of really being curious [and mindful] about your own unconscious material, your own self, what’s driving you, what’s calling you, what are you scared of? How do I react in a certain situation? What kind of negotiator am I? What is my tolerance for risk? What happens when I feel I am over the line, I’m risking too much?”

 

Again, like relaxation, building up your mindfulness muscle takes practice. You can perform mindfulness mediation, where you sit and pay attention to everything that comes into your awareness. Or, more practically, when you are feeling a strong emotion, anxiety, stress, etc., notice the sensations it gives your body. Then, Tina said, “once I learn to identify what those sensations mean to me, then I’ve got a new language.”

 

4 – Eliminate negative self-talk and take responsibility

 

Four is your self-talk. “Negative self-talk,” Tina said. “Sometimes we get really annoyed with ourselves. ‘Ugh, I can’t believe I did that’, or ‘That was really stupid.’ Or ‘I don’t really have anything to say here.’ There’s a million different ways that we undo ourselves. So again, if we don’t even know how we’re talking to ourselves, then the mind just does what it does – you’ve heard the term ‘monkey mind’, it jumps all over the place. [If] it’s not managed, it’s not controlled.”

 

This brings us back to focus. If we focus on the negative self-talk, we will self-sabotage ourselves – sometimes without even being aware of it.

 

Sometimes, our self-talk may not be negatively directed towards us, but towards others. The example Tina provided was bringing a package to the post office on Saturday at [12:10]pm and getting there to realize it closed at noon. Negative self-talk would be beating yourself up for being the idiot that didn’t realize the post office was closed, blaming the post office for not adhering to your schedule, or cursing the universe. Instead, Tina said, “you could say to yourself … that ‘I take responsibility for my own experience. I am in charge of what happens to me. I’m in charge of what I create.”

 

Taking responsibility for everything negative that happens will ultimately lead you to asking yourself how you may have played a part in creating the dilemma. In the post office example, it is your fault for not looking up the operating hours. Then, once you identify your level of culpability and a solution, now you have a new piece of information you didn’t have before, and you should never face this predicament again.

 

Now, use that concept of taking responsibility, determining how you played a role, identifying the solution and apply it moving forward to everything you do rather than falling down the negative self-talk rabbit hole.

 

5 – Create Powerful Visualizations

 

Finally, create powerful visualizations. Imagine the way you want your life to be and where you want to go. You may not have a clue of how you will get there, but once you have a vision in place, Tina said, “ask yourself ‘is what I’m doing going to take me to that end result? … Am I moving in that direction, or am I way off? Am I just kind of getting lost in making agreements and decisions about things that don’t take me where I want?’… If our whole body and our minds are in alignment and we’re looking at what we want to create – again, everything that we focus on expands – and we use the power of visualization, you can create a visualization and even if it hasn’t happened yet, your brain already has had that experience … and then we walk it.”

 

While you should create visualizations for your overarching vision, this technique has day-to-day applications as well. Tina said, “every time I do a workshop, or I’m getting ready to do a talk, or a lecture, I sit down in the morning and I visualize, ‘what do I want to create? What’s the environment that I want to create? What do I want to have happen?’, and I walk through it step-by-step. And then when I’m actually doing it, it’s like I’ve been there.”

 

Conclusion

 

Mastery coach Tina Greenbaum’s five-part curriculum for creating an unstoppable mind is:

 

  • Focus on what you want
  • Relaxation to eliminate negative emotions in the moment
  • Use mindfulness to construct an emotional vocabulary
  • Eliminate negative self-talk and take responsibility
  • Create powerful visualizations

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

apparment community real estate investment

How to Get Deals from the #1 Broker in Your Market

If you’re currently active in the real estate market, whether you’re an experienced investor or in the process of doing your first project, you can relate with the fact that it’s extremely difficult to find deals that pencil in.

 

A great approach to find cash flowing deals in a hot market is to partner with a local brokerage. But not just any brokerage. Good brokers are a dime a dozen. Because of the nature of the current real estate market, you want to partner with the number 1 brokerage in your market. Someone who has an established track record and a market strategy that locates the best deals in the market.

 

Samer Kuraishi, a broker who manages a team of over 40 agents and has done over $800 million in sales since 2012, is the type of broker you want to partner with. Samer and his team have ranked number one in the extremely competitive Washington, DC market for four years in a row. In our recent conversation, he explained how he qualifies interested investors who want to leverage his team to find deals.

 

When interviewing a broker, regardless of the current market conditions, it is important to realize that the ensuing relationship will be reciprocal. They are interviewing you as much as you are interviewing them. However, when you are pursuing a relationship with the number one broker in the market, the pendulum swings more to the side of the broker interviewing you. Therefore, with Samer being such a high caliber broker, his investor qualification process can give you a clear understanding of the types of questions you should be prepared to answer when asking for a top broker’s business. Here are the five main questions he asks when qualifying a potential investor as a client.

 

Question #1 – Have you completed a deal before?

 

Samer said, “my first question is ‘have you ever done this before?’ You want to kind of gauge who you’re dealing with. Everybody wants to be an investor, everyone watches the HGTV shows and everyone wants to make some type of money.”

 

If you haven’t done a deal before, you will probably have an issue working with the number one broker in the market. However, you can offset your lack of experience by talking up the expertise of your team – property manager, mentor/advisors, etc. – and their past business success.

 

Questions #2 – Can you send me examples of what you’ve done?

 

For investors who’ve completed a deal, Samer said, “I usually ask them to send me some of [their] properties. ‘Can you show me examples of what you’ve done? What did you buy that for? What did you end up making? Were you happy with that investment?’ Because you have to understand what they are used to.”

 

Since you know these questions are coming, you should proactively address them prior to meeting with the broker. Review the numbers on your previous deals to refresh your memory, or – even better – create a print out that shows the outcome of your deals.

 

Question #3 – Do you understand the market?

 

Samer also wants to know the investors knowledge of the market. He said he’ll ask, “Do they even understand this market, or are they coming from a different city that’s across the county and they’re coming here? Do they even understand the price points?”

 

The number one broker in the market is not going to want to take the time to educate you on the ins and outs of the market. Therefore, performing a market evaluation, and maybe even preparing a market summary, is advised.

 

Questions #4 – How would you finance a potential deal?

 

Additionally, Samer will question an investor about their financing situation. “Is it your money that you’re deal with? What type of financing are you doing? Are you getting a loan? Are you paying cash? If you’re paying cash, is it your capital?”

 

Ultimately, the number one broker will want to confirm that you are capable of financing a deal and that you are the main decision maker. They likely won’t have the patience to work with someone who can’t close or to play the game of telephone to reach the person who call the shots.

 

Questions #5 – What are your goals?

 

Lastly, Samer wants to know about the investors goals. This includes their overarching vision, but also their deal criteria. For example, if an investor is looking for distressed properties, Samer wants to know if they have their own contractor and construction crew, or is that something they will be asking Samer to provide? Or, if they want to invest $500,000, do they have realistic expectations for the property type and size and returns from that sized investment?

 

Conclusion

 

If you want to find deals in a hot market, partner with the best brokerage in your market. However, unlike your typical broker conversation, the outcome depends heavily on your answers to their questions, rather than the other way around.

 

Samer Kuraishi, the number one broker in Washington, DC, asks these five questions when interviewing an investor who is interested in becoming a client:

 

  • Have you completed a deal before?
  • Can you send me examples of deals you’ve done?
  • Do you understand the market?
  • How would you finance a potential deal?
  • What are your goals?

 

Expect these questions going into the interview and prepare accordingly.

 

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

 

business conversation

How to Approach Hiring an Apartment Property Manager

As an apartment syndicator, one of the most important members of your team is a property management company. A property manager will obviously manage the apartment for you upon closing, but a great property manager should offer additional services. They should advise on attractive or struggling neighborhoods within your market, offer locations of prospective properties based on your business model, and even provide pro formas (projected financials) on prospective properties based on how they would manage.

 

During the process of hiring a property management company, it’s important to realize that the relationship goes both ways. A prestigious management company will have other investors swarming them for business. Therefore, this must be taken into account when preparing for an interview, because you are being analyzed as well.

 

What follows are the best practices for approaching these property management interviews. First, I will provide a list of questions you need to ask, followed by an outline for winning them over, and finally, a list of questions you should be prepared to answer.

 

Questions to Ask a Property Management Company

 

Prior to conducting your interview, you need to define an outcome. Or in this case, a few outcomes. Obviously, your main objective is to find the right property management company that fits your style, business plan and budget. To accomplish this objective, here is a list of 32 questions to ask during the interview:

 

  • How long have you been in business?
  • What geographic area/s do you cover?
  • How many units do you manage?
  • How many properties does each regional office manage?
  • How many do you own yourself?
  • Do you specialize or concentrate in a particular class of property?
  • What kind of due diligence services do you provide? What is the potential cost if the deal doesn’t close?
  • Do you take on value-add properties?
  • Describe your process for managing a moderate property renovation (How is the status of the work tracked? Who manages the contractors? How are invoices tracked and verified against bids? Who approves the work before the contractor is paid? What fees do you charge for renovation/cap ex expenses?)
  • What are some of the names of nearby properties that you are currently managing?
  • Has your firm been sued by one of its clients in the last 5 years?
  • Have you managed any properties that went into foreclosure and if so, why do you feel this happened?
  • What special training do your managers receive from your company?
  • How do you manage a property’s online reputation?
  • What do you see as the on-site manager’s duties? (turnover, cleaning, repair)
  • Can I interview and approve the on-site manager?
  • What kind of relationship do you want your property manager to have with the owner?
  • How often do you communicate with owners?
  • What is the protocol for communication? Will I be talking to you, the regional or the property manager?
  • Will you provide a written management plan?
  • What % of gross rent do you charge for management fee?
  • What is included with the monthly management fee?
  • Which property management software do you use?
  • How much time do you typically take to do a make ready?
  • Can tenants pay with auto-withdrawal? What other methods are available to them?
  • Do you require me to list the property with you upon its sale?
  • Will you give me your cell phone number or home number?
  • What are some of the reasons we should use your company?
  • What are the growth goals of your company over the next 5 years?
  • Describe some of your weaknesses and how you hope to improve?
  • Can you send me some redacted financial statements of properties you’re managing?
  • Can you give me contact information for 3 current clients who have buildings like mine?

 

 

How to Win Over the Property Management Company

 

Again, when interviewing a property management company, remember that they are interviewing you too. They want to be confident that if they bring you on as a client, you will satisfy their business needs.

 

Since property management companies are typically paid a percentage of rental income, their main motivator is to have a client that will close on a deal. At the same time, they don’t want a client with unrealistic expectations of the services they will offer, or to not get fairly compensated.

 

Besides finding a property management company to bring on your team, your other objective is to get them to let you send them deals and offer their expert advice. So, they will only agree to this if you are able to prove that you are capable of fulfilling their wants. You must convey that you are a credible investor who is serious about closing on a deal so that they are confident that you can fulfill their business want. Therefore, prior to asking if you can get their feedback on prospective deals, you need to prove your worthiness. They will accomplish this by asking you questions. However, you can be proactive during the conversation by selling yourself, your relevant experience and/or your team.

 

If you have past investing experience, you shouldn’t have an issue selling yourself. If you don’t however, what relevant experience do you have that will convey to the property management company that you are serious about closing deals? Have you successfully completed projects in a non-real estate related field? Have you started a business in the past?

 

If you are struggling to come up with relevant experiences, this is where having a reputable team comes into play. Sell your team members. Talk about your real estate mentor or advisor’s real estate experience. Tell them about the number of apartments that your broker has closed on. And bring up any other relevant relationships you’ve formed.

 

Finally, I recommend preparing an opening statement or elevator pitch. If you already have a deal in the pipeline, say “I’m buying a property in (city name) and am in the process of making offers.” Or another example if you don’t have a deal is saying, “I’m working with ABC broker and will be buying a property in (city name) in the next few months.” Then say, “I’ve done my research on you and would love to learn a little more about you.”

 

You need to get their attention by conveying that you are interested in doing business with them first. Then, you can ask about sending them prospective deals and getting their feedback.

 

Questions to be Prepared to Answer

 

To qualify you as an investor, an interest property management company will pepper you with questions too. Here is a list of 7 potential questions you should be prepared to answer during the interview:

 

  • Who is your broker?
  • Have you (or someone one your team) purchased an apartment building before?
  • What types of properties are you looking for? What markets/neighborhoods are you looking in?
  • How did you find me?
  • Are you currently working with any other property management companies?
  • What are your expectations for a property management company’s duties and obligations?
  • Can I see a biography of you and your partners?

 

As you interview management companies, if you cannot answer a question, make a note and tell them you will find the answer as soon as the meeting is over and send it to them.

 

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

calculator and spreadsheet

Why and How to Hire the Best Real Estate CPA

If you don’t want to have a heart attack in ten years, or maybe even sooner, I highly recommend hiring a CPA and bookkeeper.

 

When searching for CPA, first and foremost, you want to make sure they already work with clients who are doing what you are doing, which in my case are apartment investors, or more specifically, apartment syndicators. Therefore, the first question I would ask in an introductory email or phone call is, do you currently work with other apartment syndicators?*

 

*If you aren’t an apartment syndicator, whenever it is referenced in this post, exchange it out with your focus. The process can be applied to hiring a CPA in any niche.

 

If they don’t know what apartment syndications is, that’s obviously an indicator that they don’t work with syndicators.

 

If they know what apartment syndication is, but they don’t work with any syndicators, that’s not necessarily a deal breaker. However, I would recommend finding someone else because you don’t want them learning the ins-and-outs of apartment syndication on your dime. You want a CPA who already knows the types of tax deductions you can take and knows the apartment syndication business model.

 

If they do know what apartment syndication is AND they currently represent syndicators, then the next step is scheduling an in-person interview, with the purpose of getting into their tactics. To accomplish this goal, ask the following 9 questions:

 

  • How are your fees structured? Get an understanding of exactly how you will be charge. Will there be fees for each time you call in? Can you give them a quick call every now and then and not be charged? Do their fees include the tax return at the end of the year or is that separate? Do they charge a monthly retainer for conversations? How do they structure bookkeeping fees?

 

  • Who will be your point person? When you sign up for their services, who will you be engaging with? Will it be someone right out of college, a partner, or a mid-level CPA?

 

  • How conservative or aggressive are you with the tax positions you take? Additionally, does the conservative/aggressive nature of the CPA align with your desires? If taking aggressive stances, how will that be communicated to you for you to understand and accept? You may rely on the CPA to prepare your tax returns, but ultimately when you sign your tax return, you are taking responsibility for it.

 

  • Does the CPA offer a secure portal to transfer sensitive files back and forth? Tax documents contain a lot of personally identifiable information (social security numbers, adjusted gross income, etc.) via regular email. Stolen identifies can wreak havoc on your personal and professional lives for years

 

  • How proactive are you with tax planning and how to your tax planning services work?

 

  • Are you able to file tax returns for all state and local governments in the country?

 

  • If you previously had a failed relationship with another CPA, be upfront with your new prospective CPA about why it failed

 

  • What is expect of me as a client? Expectations should be set early and communicated clearly

 

  • May I have some references? No matter how great the interview goes, always ask for references in order to make sure they are legitimate.

 

After interviewing a handful of CPAs, analyze their responses, determine which one aligns with your interests and goals the most and move forward with using their services.

 

One final note about CPAs/bookkeepers: as your business grows, your needs evolve. Moreover, a CPA who you selected as a beginner wholesaler may not be the best CPA after you’re wholesale business has grown dramatically, or if your business model has expanded to include other niches. So, as these changes occur, it may make sense to conduct additional interviews – even if only to confirm that you’re current CPA is still the proper choice – and make any personnel changes if necessary.

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

 

business deal

The Ultimate Guide to Finding an Apartment Broker

One of the real estate professionals you want as a part of your real estate team is a broker. A great broker is one that sends you deals, and more specifically, sends you off-market deals. However, like all relationships, it must be reciprocal. Most likely, the broker will have countless investors asking them for deals. Therefore, when approaching a conversation with a new broker, it is important to realize that they are interviewing you as much as you are interviewing them.

 

Read on for tips on how to approach these broker conversations. First, I will provide a list of questions you need to ask them. Next, I will outline how you can win the broker over to your side by focusing on coming across as a serious, credible investor who will close a deal. Finally, I will provide a list of questions the broker may ask and that you should be prepared to answer.

 

Questions to Ask the Broker

 

When interviewing a broker, you need to know your outcome of the conversation. For me, as an apartment syndicator, my main goal is to determine their level of experience and success with apartment communities that are comparable to my investment criteria.

 

To accomplish this goal, here is a list of 11 questions to ask during the interview:

 

  1. What is your transaction volume?
  2. How many successful closes have you experienced in the last year?
  3. How long have you been working as an agent? How long have you focused on apartments?
  4. How many listing do you currently have?
  5. How do you find deals?
  6. Do you offer both on-market and off-market deals?
  7. What stage is the local apartment market in?
  8. What is your specialty?
  9. What are the top three things that separate you from your competition?
  10. Will you please provide references?
  11. What haven’t I asked you that I need to know?

 

Ideally, we want to find a broker that will send us an endless supply of off-market apartment deals. However, don’t bank on this, especially in the beginning phases of the relationship. But after you’ve proven to the broker that you’re the real deal, successfully closing on a few deals, it will become more and more likely that you will be the first person who is notified when they have a new off-market deal. It just comes with time.

 

How Do I Win Over a Broker?

 

Again, when interviewing a broker, it’s important to realize that they are interviewing you too. Therefore, put yourself in their shoes and ask yourself “what are they looking for when deciding whether or not to bring on a new client?”

 

Since brokers are paid a commission at the sale of a property, their number one motivator is to close on a deal as quickly and as easily as possible. They don’t like tire kickers, wannabe investors who waste their time asking a bunch of questions but never close on a deal. Their ideal client is an investor who has a proven track record of closing on deals. So, if you don’t have previous investing experience, that will be your number one challenge.

 

To win over a broker during a conversation, you need to sell yourself and your business and build rapport. If you have past investing experience, you shouldn’t have an issue selling yourself. If you don’t however, what relevant experience do you have that will convey to the broker that you are serious about closing deals? Have you successfully completed projects in a non-real estate related field? Have you started a business in the past?

 

If you are struggling to come up with relevant experiences, this is where having a reputable team comes into play. Sell your team members. Talk about your real estate mentor or advisor’s real estate experience. Tell them about the number of apartments your property management company manages. And bring up any other relevant relationships you’ve formed (i.e. contractors, attorneys, CPAs, your meetup group or thought leadership platform, etc.)

 

Along with the asking them business questions, to build rapport, get to know something personal about them. Find out something that’s important to them and bring it up with genuine interest next time you meet. A quick way to accomplish this is to ask, after having already established yourself, “what’s been the highlight of your week?”

 

Finally, I recommend preparing an opening statement or elevator pitch. If you already have a deal in mind, you can say, “I’d like to discuss making an offering on ABC apartment.” Or, another example would be saying “I am working with ABC Property Management and will be buying a property in (city name) in the next few months.” The purpose of the opening statement is to grab the attention of the broker, come across as a serious investor, and address their “want” – which is to close on an apartment – from the start.

 

Questions to be Prepared to Answer

 

Don’t expect the broker to simply answer your questions, chat about their business and personal life and then get up and walk away. If they are seriously interested in bringing you on as a client, they will want to ask you questions as well. Therefore, you need to proactively brainstorm questions they may ask and have ready-made answers.

 

Here is a list of 9 potential questions an interested broker will ask you during the interview:

 

  1. Who is your property management company?
  2. How many units to they manage?
  3. Are they local?
  4. Have you (or someone on your team) purchased an apartment building before?
  5. What type of deals are you looking for? What markets are you looking in?
  6. How did you find me?
  7. Will you sign an exclusive agreement with me so I can get you the best deals?
  8. What are your expectations?
  9. Can I see a biography of you and your partners?

 

And as you interview brokers, if you are asked questions you’re not prepared to answer, make a note and tell them you will find that answer right after the meeting and send them an answer.

 

In today’s market, buyers are a dime a dozen. So, many brokers will simply brush off an investor who is looking to purchase deals. Ultimately, a broker will bring more deals to buyers that they like to work with, and the types of buyers that like to work with are the ones who will close and not lose a deal due to inexperience, laziness or passivity. However, by following the approach outlined above, you will come across as a credible investor who can make aggressive offers and back them up by closing the deal.

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

answers and questions sign

The Fundamentals of Scaling a Business: Q&A w/ BiggerPockets CEO Josh Dorkin

Josh Dorkin knows a thing or two about growing a business. Not only is he the CEO of BiggerPockets, which boasts more than 825,000 members and landed at #400 on the Inc. 5000, but he also produces the top-rated real estate podcast on iTunes, which raked in $7 million in ad revenue last year, and founded a publishing firm.

 

I had the opportunity to pick Josh’s brain (part 1 and part 2) for his Best Ever entrepreneurial success habits.

 

Read on for Josh’s advice on growing a company, his Best Real Estate Investing Advice Ever, his morning routine, and more.

 

 

Is there one person that sticks out in your memory as having been helped by BiggerPockets in all the work that you have done?

 

The one person that sticks out, the instant answer to that is Brandon Turner. Those of you who are unfamiliar, Brandon Turner is co-host of The BiggerPockets Podcast. He works for us, and initially, when I came to know Brandon years and years ago, he was a user on our platform; he was trying to find financial freedom and used the BiggerPockets platform to get there.

 

He was the pure representation of who we were and what we strived for. He was this guy living in the Pacific North-West who had been kind of floundering around in his life. He was trying to figure it out, like the rest of us. He came across BiggerPockets and the idea of real estate, and used BiggerPockets to help him build this passive portfolio of real estate.

 

Of course, living in the area that he lived in, he was at a point where he no longer needed a job. He had created that freedom for himself. He was writing for BiggerPockets, and at that time I was in need of help. I needed to hire somebody to come and join me as my first employee, and we got to know each other and I brought him on.

 

Brandon really just is that pure representation of who we are, but there’s countless stories. Not a day goes by where we don’t hear from somebody who’s like “You guys are transforming my life. You guys are helping me out. You guys have helped me quit my job” or “Helped me retire” or “Helped me build income for my family”, or whatever it is. That’s why we do it. We’re here to help people succeed.

 

 

What are the 3-5 most important things in your experience to growing and scaling a company?

 

One, having a good idea that’s scalable – start there.

 

Two, having some kind of plan, whether or not it’s written… I don’t think you need necessarily a written plan from zero (I didn’t).

 

Three, your business has to solve some kind of need for the customer that somebody else is not serving. I say that out loud and I think about McDonald’s versus Burger King. Burger King is solving a need, McDonald’s is solving the same need, but now it’s flavor choices, right? So, do you like A or B better? But having a USD (unique selling proposition), something that is unique or that you believe to be unique about what it is that you’re doing – you’re building, you’re offering service, products, you name it.

 

Four, being passionate, or having a team of people that are absolutely passionate about that idea. It’s pretty rare to see successful companies get to a point of success where the founders or creators or people running the show that don’t have some kind of passion for it, it’s too hard; it’s too much work, it’s too difficult to struggle through that without having that passion. Also, having a dedication to people and to your own people. You can’t build a scaling company without taking care of people, and I’m saying that and I can think of examples of companies where they have a really crappy culture and I’m like “Hmm, maybe not…”, but at the end of the day I think what goes around, comes around.

 

Five, I think something that we didn’t do in the past – and by “we” I mean businesses in general – is becoming very data-oriented. Metrics and data and understanding your business from a data perspective. I think you often see small businesses where they don’t get it struggling a lot. Knowing your numbers — let’s take real estate investors. If you’re a real estate investor and you market by mail, if you don’t know your send and open rates and your cost per send and your funnels, you’re just throwing money out the window. You don’t know what you’re doing, you have no way to measure whether or not what you’re doing is successful or not.

 

 

What feature of the BiggerPockets platform do you think is most underutilized?

 

I would have to say the member notes. Here’s what member notes are – you can go to anybody’s profile and take a note on them. I can go to your profile, Joe, and make a note and say “Yeah, Joe and I had a conversation about X, Y and Z.” Only I can see it, nobody else can see it on the platform. It’s almost like a mini CRM, right? The next time I come back and the next time I interact with you I can be like, “Hey, Joe… Remember we talked about X, Y and Z the last time we connected?”

 

I think partially that’s due to people not knowing what it is. We have not updated that in a very long time; we are working on some really nice and sexy redesigns of certain parts of the site, including user profiles and our onboarding, and as part of that, I think we’re going to be creating a little more clarity in that tool. I think it’s extremely useful, I use it all the time. I talk to you about whatever I talk to you about, I put it on there, and the next time I come back and I’m ready to talk to you again, I know exactly what we chatted about.

 

 

When you were considering starting BiggerPockets, what was a number one fear holding you back from starting?

 

There was no fear that held me back from starting. I didn’t start BiggerPockets to create a business. I started BiggerPockets to help me stop screwing up in real estate. So, my biggest fear was continuing to screw up in real estate.

 

There was nothing that was kind of “Alright, if I create this thing and nobody shows up, then nobody shows up. I’ll figure something else out, I’ll find my answers in some other way.”

 

 

How has podcasting enhanced your business and opened up doors and connections that you wouldn’t have had otherwise?

 

I think by having a big show that has a big audience, it gives you the ability to talk to and reach out to people who you may not have had the opportunity to do that with. So, it builds your name, it builds your brand, and especially if you do a good job and stay true to who you are and what you’re doing, then ideally that continues.

 

I’ve gotten to talk to authors that I may have not otherwise met. There’s not a show that we have where I don’t learn something. So, for me as a person not affiliated with BiggerPockets, it’s so powerful. And as the CEO of BiggerPockets, obviously having those people and those stories inspire other people is also so powerful.

 

 

What are your morning routines or daily practices that you do on a regular basis?

 

I go back and forth with a miracle morning – or non-miracle morning – routine; it depends how spent or burnt out I am. I don’t ever get up and then go to my phone, or go to my internet or anything like that. I like to get up, I like to stretch. On the good mornings, I like to exercise. This is all before anyone else in the house is awake.

 

Then get up, get dressed, do my thing, take care of my kids, get them ready for school, driving to school, and then at that point I will look at work. I don’t do work before my kids are off to school; I’m there, I’m present… I’m not playing on my phone, stressing about e-mails, dealing with any of that stuff. The morning is for me, followed by family, and then I head to work, and then work begins. After work, when I get home – four, five, six o’clock, whenever it is, I’m present again; phone’s away, not working. I may jump on social media from time to time, because it’s a hobby, but I’m not doing work per se until my kids are asleep. Family time is family time, and then when the kids go to bed, I usually like to thaw for a little bit, and then maybe I’ll do some work, as needed.

 

It’s very different than had you asked that question four years ago, which would have been “I get up, I work, I take a shower, I work some more while my kids are getting fat (or whatever) and then I leave to work, and then I come home and I work, and then I work through dinner, and then after dinner I continue to work, and even though I’m with my family, I’m not there.” I came to the realization that I was doing that, and hated myself for it, and said “This is just not who I want to be. I am a father first and foremost, and my family is the most important thing to me and my life, so I’m not going to let anything, especially my company, get in between that.”.

 

On those good mornings, when I’m fully miracle-morning-ing, I don’t actually do the full miracle morning, which refers to a book called The Miracle Morning by Hal Elrod, for those of you who don’t know… But I’ll stretch, I’ll do some meditation, I’ll do some exercise, and I’ll do some reading. Those tend to be the four things that I do.

 

 

What’s your Best Real Estate Investing Advice Ever?

 

Figure out your why. Why is it that you’re getting into this for? If you don’t have a strong why, then you’re not ready to begin. If you’re already an investor and you’re thinking about scaling your business or growing your business, what’s the why? What’s driving you? What’s motivating you? Because if you don’t have it, do you know who’s not going to have it? Your partner, your spouse, your family. So, you’d better have a solid why that everybody can buy into, because otherwise there’s going to be opposition at every step from those people who should be supporting you.

 

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

 

boxer victory

50/50 Goals: Turning Short-Term Failures into Long-term Wins

The concept of 50/50 goals is that 50% of a goal’s success is based on achieving the quantifiable outcome and 50% is based on identifying a lesson or skill that you can apply to your business to improve results in the long run. As opposed to 100% of a goal’s success being determined by the achievement of the specific target.

 

For example, let’s say you set a goal to syndicate 5 deals this year, but you only complete 3. If 100% of your success is tied to completing 5 deals, then you’ve failed. You feel discouraged and letdown. Maybe you even drop out of the investment game all together. However, if 50% of your goal is completing 5 deals and 50% is the takeaways you can apply to your business moving forward, you are successful, or at least “feel” successful. By going through the entire process of closing 3 deals, the experience gained, lessons learned, and new skills adopted will have a positive effect on the business 1, 5, and 10 years down the road, even though you technically failed to meet your short-term goal.

 

Since we are committed to long-term success and thinking in terms of decades and not years, these skills and lessons can be, and likely will be, more important than the quantifiable result, especially in your early years. It is like the compound interest effect, but instead of money, it’s skills. If you learn a skill year one, it’s a part of your repertoire indefinitely. For example, you create a podcast and your goal is to record a podcast once a week for a year. But at the end of the year, you only recorded 40. Again, if you’re success is 100% dependent on recording 52 podcast episodes, you’ve failed. However, with the 50/50 goals concept, all the skills you obtained and relationships created account for 50% of your success, and will likely have a greater long-term impact on both your podcast and your business than not having launched the podcast at all.

 

Back to the first example, if you fail to complete your 5 syndication deals, but on your third deal, you met a 5-star property management company, that additional team member may earn you more money in the long run than you would have made on those two extra deals without finding the manager.

 

Ultimately, this concept, and the resulting mentality shift, allows you to approach situations with a “glass half full” mindset rather than “glass half empty” mindset. Two people who set the same goal and achieve the same quantifiable outcome (i.e. 3 syndication deals in one year instead of 5) can feel the exact opposite. The individual whose success is 100% dependent on completing 5 deals will feel awful. Whereas the individual whose success is 50% dependent on completing 5 deals and 50% dependent on identifying skills to apply moving forward will identify what they did right, what they did wrong, what they need to do more of, and what they need to do less of, and will feel motivated going into the next year.

 

Reframe the way you look at goals. No longer think of success as being 100% dependent on reaching a specific outcome. Instead, cut that in half and focus the other 50% on identifying systems, skills, techniques, or lessons learned from the process of striving for a specific outcome.

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

mentor

How to Approach Hiring a Real Estate Investing Mentor

Ask a successful investor for their opinion on hiring a mentor and you’re not likely going to receive the same answer twice. One investor will swear by mentors, saying it’s impossible to reach the highest levels of success without one. Another investor will say that mentors are unnecessary and a complete waste of money. And yet another investor will have an opinion of mentors that is somewhere in-between these two extremes.

 

My personal philosophy is more similar to the former than the latter. However, I can find truth in the arguments from both sides, because like most things in real estate, it depends. It depends on what your expectations are of a mentor. It also depends on why you want to hire a mentor in the first place.

 

In this post, I outline what to and not to expect from a mentor, as well as when it is the right time to hire one. You will also learn how to find a mentor, which you should pursue only if you’re expectations and current situation align with the reality of what a mentor actually does.

What should I expect?

 

There are four main things you should expect to get out of a relationship with a mentor.

 

Number one is expertise on how to do what you’re wanting to do. The mentor should not only have experience in the same field you’re pursuing, but they should be active as well. If you are a wholesaler, for example, a good mentor is someone who has a successful track record as a wholesaler and is still completing deals to this day. A poor mentor is someone who has never wholesaled a deal or someone who has stopped wholesaling, even if they have a long list of clients who are actively and successfully wholesaling deals.

 

Secondly, you should expect a mentor to provide you with a do-it-yourself system for how to replicate their success.

 

Thirdly, and – in my opinion – most importantly, a mentor should be an ally that you can call upon to only talk to about yourself and work out any problem you’re facing, real estate or personal. Since you are paying this person, you don’t have to feel guilty about being selfish or asking questions about the other person. You don’t even need to be interesting. You can and should talk about whatever it is you need at the moment.

 

The fourth thing you should expect are connections. Since the mentor should be active, they will have relationships with all the movers and shakers in your investment niche. Therefore, they should connect you will team members relevant to growing your business.

What shouldn’t I expect?

 

There are two main things you should NOT expect when hiring a mentor.

 

A mentor will not be your savior or your knight in shining armor. Do not expect to hire a mentor and poof, have all of your problems solved. Yes, they should offer expertise, be an ally, and provide connections, but you will still be required to take action. Moreover, the best mentors, rather than being your knight and shining armor, should give you the tools and knowledge so that you become your own savior!

 

Also, do not expect a “done for you” program. Actually, if you find a mentor who indeed does offer such a program, run! If a mentor promises you anything that doesn’t require any work on your part, run! The problem with “done for you” programs, assuming it truly is and is not just a scam, is that you’re not learning anything. You are not building the foundation of knowledge required to sustain a business. Even if you are able to attain a high level of success using one of these programs, it is unstable. And once you lose that program, you lose your progress as well.

 

When do I hire a mentor?

You are ready to hire a mentor when you have defined a specific outcome you want to achieve by hiring a mentor. Do you want immediate access to expert advice about your investment niche? Do you want a system for reaching financial freedom? Do you need an unbiased person to selfishly speak with? Do you need to find connections people in the industry? These are all defined outcomes that can be solved by hiring a mentor.

 

Do you want a mentor because you were told you were supposed to? Do you want a knight and shining armor who will do all the work for you? Do you want a “done for you” program so that you can sit back, relax, and enjoy the returns? These are wrong reasons to hire a mentor.

 

How do I find a mentor?

 

There is really only one effective way to find a mentor – word of mouth referrals. That is the only way that I have found to verify the legitimacy of a certain mentor.

 

If you don’t know someone with a mentor, or if you don’t know where to go to get a referral, then you’re probably not ready to hire a mentor. You’ll need to get out in the field and start meeting investors.

 

Conclusion

 

There are many differing opinions on the benefits of a hiring a mentor. I believe that a mentor can be extremely useful as long as you have the correct expectations and have defined a specific outcome.

 

Assuming your expectations and outcomes are in line with the reality of what a mentor can offer, the most effective way to find one is through word of mouth referrals.

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

Ultimate Guide to Selecting a Target Real Estate Market

A well-known and widely accepted dictum in real estate investing is “it’s all about location, location, location.” That’s because the exact same property in two different cities can have drastically different rents, quality of residents, and values. And the same is applicable for two sub-markets in the same city, or two neighborhoods in the same sub-market, or two streets in the same neighborhood.

 

With this being the case, how do you determine which city, sub-market, neighborhood or street to target?

 

That’s where a market evaluation is performed in order to select a target market. A target market is the primary geographic location in which you search for potential investments.

 

Specifying a target market is important for more reasons than the one mentioned above (real estate is all about location, location, location). If your target market is undefined or is the entirety of the United States or a certain state, the number of opportunities will be so large that your deal pipeline will be unmanageable. If it is too large, it will be extremely difficult to gain the level of understanding required to make educated investment decisions. If it is too small, you’ll have problems finding enough deals that meet your investment criteria. Like the porridge in the story of Goldilocks and the three bears, your target market must be just right.

 

When attempting to select a target market, for both my clients and for my business, I advocate a three-step process. First, identify 7 potential target markets. Then, evaluate those markets using 7 variables. Finally, analyze the results and narrow down to 1 or 2 target markets.

 

Step #1 – Identify 7 potential target markets

 

First, identify at least seven potential target markets to evaluate. There are a few strategies for selecting these initial markets. One method is simply choosing the city in which you live as a potential target market, especially if you’re just starting out or are uncomfortable with the prospect of investing out-of-state. But even if you’re fearful of out-of-state investing, it is still important to select additional markets to evaluate so you can compare your city’s data to that of other cities to ensure that your city has a strong real estate market.

 

A second strategy is to Google “top real estate markets in the US.” If you’re an apartment investor, search “top apartment markets in the US.” Or substitute “apartment” with whichever investment niche you’re pursuing.

 

A third option is to review detailed real estate reports and surveys, created by different companies, about the condition of the real estate markets. Even if you are selecting potential markets at random or are using the Google approach, I would still recommend reading these reports for a deeper understanding of the overall real estate economy.

 

If you’re an apartment or multifamily investor, the reports I recommend are:

 

Step #2 – Evaluate 7 markets

 

Next, once you’ve selected seven potential target markets, you will perform a detailed demographic and economic evaluation of each. What follows is each of the seven market variables I analyze, including what to look for, where to find the data, and how to log the data.

 

 1 – Unemployment

 

Specifically, you want to calculate the unemployment change over a five-year period. This will require the unemployment percentage for city for the last five years.

 

A decreasing unemployment rate is ideal. A low, stagnant rate is acceptable. A high and/or increasing rate is unfavorable.

 

This data can be found on the Census.gov website under the “Selected Economic Characteristics” data table.

 

2 – Population

 

You want to calculate the population growth for both the target market city and metropolitan statistical area (MSA). This will require the population data for the last five years.

 

An increasing population is ideal. A stagnant or decreasing trend is unfavorable, especially if supply and/or vacancy is on the rise.

 

Both the city and MSA population data can be found on the Census.gov website. The city data is located in the “Annual Population Estimates” data table. The MSA data is located in the “Annual Estimate of the Resident Population” data table.

 

3 – Age

 

You want to calculate the population change for the different age ranges. This will require the population age data for the most current year and the year five years earlier.

 

The increasing or decreasing of specific age ranges will dictate the property types that will be in the most demand. For example, an increasing population of 25-to-34-year olds will put luxury apartments with nicer amenities in demand, while an increasing retirement age population will put assisted living facilities in demand.

 

This data can be found on the Census.gov website under the “Demographic and Housing Estimates” table.

 

4 – Jobs

 

You want to determine how diversified the job market is. This will require the employment data for the different industries for the most current year.

 

A market with outstanding job diversity will have no one industry employing more than 25% of the employed population. 20% is even better. If a certain industry is to dominate, the market will struggle or even collapse if that industry were to be negatively affected.

 

This data can be found on the Census.gov website under the “Selected Economic Characteristics” table.

 

5 – Employers

 

You want to determine who the top 10 employers are in the market.

 

Similar to job diversity, a market with one company that employees the majority of the city is unfavorable. Also, understanding who the top employers are will allow you to track and developments with that company (i.e. are they creating a new facility, cutting jobs, etc.).

 

This data can be found by Googling “(city name) + top employers.”

 

6 – Supply and Demand

 

You want to determine the change in rental vacancy rates over a five-year period and the number of buildings permits created for 5 or more unit buildings.

 

A low, decreasing vacancy rate is ideal. A high vacancy rate that is decreasing is also a positive sign. A stagnant vacancy rate is okay too. But an increasing vacancy rate is unfavorable. If the vacancy rate is decreasing, you will likely see an increase in new building permits, and vice versa. A high volume of building permits and an increasing vacancy rate is a huge red flag.

 

The vacancy data can be found on the Census.gov website under the “Selected Housing Characteristics.” The building permit data can also be found on the Census.gov website. Locate the MSA annual construction page and select the data table for the most current year.

 

7 –Insights

 

Based on the “what to look for” standards outlined above, you will analyze the data and create “market insights” for each of the six market factors. For each factor, here are the types of questions you should be answering:

 

  • Unemployment: Has the unemployment rate increased or decreased over the last five years? Is it currently trending upwards or downwards?
  • Population: Has the city population increased or decreased over the last five years? What about the MSA population?
  • Age: What age range has the largest population increase? Largest decrease? Based on the largest increasing and decreasing age range populations, is your target investment type in demand? For example, if the largest population increase is the 45-to-54-year old range, assisted living facilities would be an attractive investment type.
  • Jobs: Which industry employees the largest portion of the population? Does that percentage exceed 20%? 25%? 30%?
  • Employers: Does one company employ a large percentage of the population? Are the top employers in similar or differing industries?
  • Supply and demand: Are there a large or small number of new buildings permits? Is the trend going up or down? Is the vacancy rate increasing or decreasing? Is it higher or lower than five years ago?

 

Step #3 – Narrow down to 1 or 2 target markets

 

Finally, after logging the data for all seven potential target markets, analyze and compare the results and determine the top one or two best/ideal markets. Keep in mind that the markets you select will depend on your investment criteria as well.

 

A simple analytical approach is to rank each of the seven markets 1-6 for each of the variables. Then, add up the scores, and the market with the lowest total ranking is the “best.” For markets with similar rankings, use the market insights to determine which is superior, again, based on your investment criteria.

 

Conclusion

 

In order to select a target market, you will first identify seven potentials. Next, you will evaluate each market by obtaining certain economic and demographic data. Finally, you will analyze and compare the target markets in order to select the best or ideal one or two markets that you will target for investment.

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

cash in a hand

The Top 10 Values of a $600 Million Apartment Investor

It’s important to define what your values are. Because if you don’t, you are like a marionette whose strings are being pulled by an unknown force. Hence, why Gandhi once famously said “Your values become your destiny.”

 

Your values shape how you perceive everything in the world – how you approach new relationships, how you react to failure and ultimately determines whether you will attract or repel success.

 

The number one value I live my life by can be summed up in my favorite Tony Robbins quote: “The secret to life is giving.” For every endeavor I undertake, I automatically focus on how this will benefit others. And the resulting inspiration and passion has gotten me to where I am today.

 

What are your values?

 

Carlos Vaz, who is the CEO of a multifamily company that controls nearly $600 million across around 5,000 units, attributes his business and life success to defining and living out his top values. In our recent conversation, he provided the top 10 values that took him from an immigrant waiter and truck loader to a multimillion dollar entrepreneur.

 

1 – Faith

 

Carlos’ number one value is faith. In fact, his said his Best Ever book is the bible. “My faith is important because it has really shaped me.”

 

2 – Excellence

 

Number two is excellence. That means, Carlos said, “doing your best in all you touch. It’s not about quantity. It’s about quality. Sometimes people say, ‘Well, I’m going to do this halfway.’ Really? It takes twice the amount of time and effort to come back and fix something that you didn’t do well the first time, so take the time to do well he first time around so that you don’t need to come back.”

 

Everything you do in real estate needs to be done at 100% effort and with 100% of your attention.  Because If you approach things halfheartedly, you may land yourself in more trouble than if you wouldn’t have something in the first place.

 

In fact, you need to show up outstanding, which is one level higher, in order to achieve excellent results. Want to achieve outstanding results? Click here to learn how.

 

3 – Perseverance

 

Number three is perseverance. And in order to persevere, especially when the going gets tough, you must minimize the time you spend complaining. Every second spent on complaining could have been used to get yourself out of the situation you’re complaining about.

 

“It’s so easy for people to complain about what they have in front of them, ‘I hate my job, I hate this here,” Carlos said. “If you work at a job that you don’t like, and you get home and you just watch TV and you go to bed, and the next day you do exactly the same thing, guess what? Five years from now, where are you going to be? Exactly in the same place. I think at the end of the day, it’s up to us to make decisions, right? Not [complaining] because the world is fair, [but] we need to look at your habits and say, ‘How can I improve? How can I make things better?’”

 

When Carlos was early on in his career, working as a waiter and unloading trucks and working on construction sites, instead of complaining about his current situation, he was grateful for what he had and was determined to continue moving forward. For every job, he told himself that “this is going to give me some money so I can take another class or this is going to give me some knowledge that I can take somewhere else.”

 

4 – Establish Great Relationships

 

Number four is to establish great, reciprocal relationships. This goes hand-in-hand with my number one value about giving.

 

“Be a team player and help others, and let others help you,” Carlos said, “because nobody wants to be around a jerk.”

 

5 – Effective Communication

 

Number five is having effective communication skills. Carlos said, “I think many times [when] there’s an issue, it’s because of lack of communication. It’s not [about] communication itself, it’s what you call effective communication.”

 

6 – Integrity

 

Many successful entrepreneurs say that your word is all you have. That brings us to number six – integrity.

 

“You always do the right things, even if it means making hard choices,” Carlos said. “Integrity is everything. When I shake your hand and we do business, we’re going to do something together. It’s not a contract that’s going to put us together. That contract is just going to be a formality. I think that you have to have the integrity to do the thing that’s important.”

 

Integrity and trust is one of the best ways an apartment syndicator can attract and keep their passive investors.

 

7 – Love for Family and Country

 

Number seven is the love for both your immediate family and your extended family – your community or your country. Carlos said, “I always say, ‘What can I do to provide for my family, for my parents, to my mom and to my brothers?’ And also, I do believe that this country, in my books, is the best country in the world. Seriously. We live in an amazing country called the USA. There are opportunities every day as long as you’re willing to wake up in the morning and go get them. So, I think that it’s important to give back and help this country.”

 

8 – Knowledge

 

Carlos’ best ever advice is to never stop learning, which is value number eight – knowledge.

 

“What are you doing to pursue growth and learning?,” Carlos said. And not just learning more about real estate. It’s also about “how to become a better leader, how to become a better friend, a better father, a better brother. There’s so many things that we can become better [at],” he said. “There’s so many good nuggets, there’s so many things if you’re looking for learning from other people that are actually doing things. That helps me not to make mistakes.”

 

Carlos creates his foundation of knowledge for continuing his formal education (he’s currently enrolled in a three-year program at Harvard), skills and lessons from past jobs and surprisingly, his kids. “It’s funny. Now that my kids are young – 2 and 4 – sometimes just talking to them and learning from those little guys. It’s amazing how much a child can teach you sometimes, and I love that.”

 

Click here for my recommended book list.

 

9 – Health

 

Number nine is health. Carlos said, “Health is really important when I look at my life and everything. If I don’t have health, there’s nothing. So, what are you habits? What are you doing to yourself?”

 

This is a value that I’m sure we can all work on. We can work our butts off to create a real estate empire, but if our diet and exercise habits are poor, we’re reducing the time we’ll have to enjoy the rewards.

 

10 – Commitment

 

Finally, number ten is commitment. Carlos said, “When you say that you’re going to do something, get things done, because there’s no point about you saying something and at the end there’s no commitment.”

 

If you aren’t scaling a business, lack of commitment is one of the five reasons why. Click here for the other four reasons, as well as the five things you should be doing instead.

 

Conclusion

 

The 10 values that Carlos Vaz attributes to his real estate success are:

 

  1. Faith
  2. Excellence
  3. Perseverance
  4. Establish Great Relationships
  5. Effective Communication
  6. Integrity
  7. Love for Family and Country
  8. Knowledge
  9. Health
  10. Commitment

 

Which of these 10 values do you think is the most important for a successful real estate business?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

                       

If you have any comments or questions, leave a comment below.

 

 

 

eliminating competiion in chess match

Eliminate 99% of Your Competition with This Simple Real Estate Investing Strategy

 

How much would your real estate investing success increase if you could eliminate up to 99% of the investors competing for your deals? Daniel Ameduri, who bought his first investment property at the age of 18 years old, accidentally stumbled across such a competition reducing strategy when he was purchasing his personal residence.

 

In our recent conversation, Daniel explained how he leveraged that tactic to grow his investing business. By selecting the correct investment criteria, you can replicate Daniel’s strategy and never have a problem finding a deal again.

 

Step #1 – Identify a Market’s Main Problem

 

The first step for this strategy is to uncover the property type that no one wants to buy. If you know your market well, you should already have an answer to this question. If not, simply ask around. Speak with local investors, wholesalers, or realtors and ask, “what is the property type that nobody else wants to buy? The one that scares away most investors?”

 

In Daniel’s market, and maybe in your market too, the issue that every investor runs away from are foundation problems. He said there’s virtually zero competition for deals with foundation problems because “no one can get a loan. Bam! Right there, you just got rid of all your paint/carpet/blind fix and flippers. They’re gone.” Daniel also said “most people are ignorant of what it takes to fix a foundation. Okay, there you go; you got rid of a ton of cash buyers and a ton of other investors.”

 

Step #2 – Find a Solution

 

Next, you want to determine how you can solve that issue in a cost-efficient manner, which will require investigating and due diligence on your part. For Daniel, he discovered both the problem and solution completely by accident. So, he’s not being boastful or arrogant by claiming that most investors are ignorant of what it takes to address a foundation issue, because initially, he was as well. He said “in Southern California I came across a foundation problem and I ran. In central Texas, I wanted to buy a home for my family to live in, and they said ‘It has a foundation problem.’ Because I didn’t have my investor mindset on, I didn’t run. I became an entrepreneur problem-solver, which that’s what I should have been as an investor. Because I wanted to live in that home, I said ‘Well, I’m going to find out how much it costs’, and to my surprise, the bids were coming in at $3,000, $3,500, and I was like ‘Wow!’ Here I was, thinking this was a $50,000 problem… Because it’s about the logistics – they’re literally digging holes around the property, jacking it up… Typically, if it’s a two-story, it will burst some pipes or break some things, so a lot of times you have to fix the piping as well, which is another $3,000 on let’s say a 2,000-3,000-square foot home. So, I actually originally discovered this whole problem that was solvable with the purchase of my own residence. Then once I knew that, I smelled the blood; I was hungry. I told that very realtor and everyone I could get in contact with – ‘If there’s a foundation problem, from basically all of central Texas to San Antonio, I want to know about it.’”

 

Step #3 – Become the Go-To Person for Those Types of Deals

 

Finally, you want to contact the realtors and wholesalers in your market and ask them to notify you if they come across the type of deal you’re looking for. At first, this will be the specific problem you’ve identified and for which you’ve found a solution. But as your business evolves, you may want to invest in all the deals that investors are running away from, which is what Daniel’s strategy is.

 

When someone asks Daniel what his investment criteria is, he said is response is always “I want what nobody else wants. I want what everybody hates.” That is his standard reply to every realtor, investor, realtor, etc. “I tell them I want to be the guy that buys the things that nobody else wants to buy. I want to get the things that are hated. I don’t care if it’s fire damage or foundation. What are people scared of, what do they hate, what does nobody want, what can no one get a loan for? I’m that guy.”

 

Since you won’t be able to get a loan on these types of deals, you’ll either have to use all cash or utilize the same strategy as Daniel – seller financing. He said, “what I’m doing is I’m approaching that homeowner who cannot sell his house; he is stuck. The only option for him is a cash buyer, that’s what he thinks but what I tell him is ‘What do you ultimately need from this deal?’ That’s where I start the negotiation. Maybe they need $5,000, maybe they need $30,000. If I can be agreeable to that, the rest is easy, because all I have to do is an assumable transaction; I take over the loan and I tell them ‘Look, I need 18 months to fix and flip this house or refinance it. I can get the foundation people almost immediately, I can have the foundation repaired within six weeks, and then I just need to finish the rest of the property.’”

 

“I still have an assumable loan, so I’ve never even applied for a mortgage at this point. I’m simply making the payment of the previous owner, but I am legally on the deed; I am the owner, I just don’t have the mortgage in my name. I continue making those payments, and that distressed seller – he’s long gone. And I then sell the property, and hopefully – and usually it works, in this case; and I say actually always it works so far – I’m able to sell the property in under six months… Paying off that loan, so that guy is happy, and I get to make the cash. I never have to go through the nightmare of an application of getting a mortgage, I never had … to write a $200,000 check to buy the property cash… I usually got into the property for less than $25,000, and probably put another $25,000 to fix it up.”

 

Keep in mind that this is not a no money down strategy. But it also doesn’t require hundreds of thousands of dollars either. Daniel said, “most of the owner-financing deals I have done, you need some cash. You’re going to need anywhere from $5,000 to about $30,000.”

 

Conclusion

 

Daniel Ameduri follows a three-step investment strategy that eliminates up to 99% of the competitors vying for the same deals.

 

The first step is to identify the main issue in a market. That is, the problem that scares away 99% of investors.

 

Next, research the solution, and the cost, to the issue.

 

Finally, notify the wholesalers and realtors in the market of your criteria and become the go-to person for those types of properties.

 

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

How to Perform Due Diligence on an Apartment Building

The due diligence process for an apartment building is much more involved and complicated in comparison to that of a single-family residence or smaller multifamily building. For the latter, you will likely only require an inspection report and an appraisal report in order to close. If you are experienced, you’ll perform your own financial audit, comparing the leases and rent rolls with the historical financials.

 

When you scale up to hundreds of units, the increase in potential risk points is such that you’ll need additional reports before deciding whether or not to move forward with the deal. In fact, for the apartment due diligence process, you’ll want to obtain and analyze the results of these 10 reports:

 

  1. Financial Audit Report
  2. Internal Property Condition Assessment
  3. Market Condition Report
  4. Lease Audit
  5. Unit Walk Report
  6. Site Survey
  7. Property Condition Assessment
  8. Environmental Site Assessment
  9. Appraisal
  10. Green Report

 

1 – Financial Audit Report

 

The financial audit report is the detailed results of an inspection conducted by a commercial real estate consulting company. They will analyze the asset’s operating history and provide a breakdown of the individual components of the operating income and expenses.

 

When you underwrote the deal, you likely used the income and expense figures provided in the pro-forma, and then made assumptions for what those figures would be after you took over the property. The results of this report will confirm the actual income and expenses, as well as allow you to make adjustments to your assumptions if necessary.

 

2 – Internal Property Condition (PCA) Assessment

 

The internal property condition assessment is an inspection report that provides you with the overall condition of the property. The assessment is conducted by a licensed contractor of your choosing.

 

This assessment will differ depending on the contractor. However, you will most likely be provided with a list and images of problem areas observed by the contractors, recommendations for repairs, opinions on costs to address deferred maintenance, and whether or not further inspections are required.

 

These results will help you confirm or make adjustments to your repair and rehab assumptions and screen out deals that have maintenance issues outside your investment criteria.

 

3 – Market Condition Report

 

The market survey and condition report is a comprehensive comparison analysis of the sub-market. The subject property is analyzed and compared using multiple variables, including rents, unit type, occupancy, unit size, new construction, historical statistics, amenities offered, and more.

 

This report is created by your property management company, so the thoroughness of the report will depend on who you select.

 

The results of this report can be used to confirm your underwriting assumptions including for occupancy and rental rates.

 

4 – Lease Audit

 

The lease audit is a systematic examination of the leases, including the stated income and expense figures, billing methodology and lease language. Typically, this audit will be conducted by your property management company.

 

The purpose of this audit is to verify that charges billed are accurate an in compliance with the lease terms. The most important piece of information I receive from this audit is to understand the difference between economic and physical vacancy.

 

5 – Unit Walk Report

 

A question my clients ask a lot is “when I am performing due diligence, do I need to walk every single unit?” The answer is a resounding yes! And that is the purpose of the unit walk report. It is a detailed inspection of every single unit, assessing the condition and characteristics of the entire unit.

 

This report is also prepared by the property management company. However, if you so desire, you can print out a spreadsheet and perform the inspection yourself.

 

6 – Site Survey

 

A site survey shows the boundaries of the property, indicating the lot size. It also includes a written description of the property. The report resembles a map.

 

There are a lot of third party services that can conduct a site survey. A quick Google search of “site survey + (city name) will do the trick.

 

7 – Property Condition Assessment

 

The property condition assessment is the same as the internal property condition assessment, except this one is created by a third party selected by the lender. So, you’ll have two PCAs from two different contractors, which should cover all your bases.

 

8 – Environmental Site Survey

 

The environmental site survey is an assessment that identifies potential or existing environmental contamination liabilities. This report is required and is conducted by a third-party provider selected by the lender.

 

The analysis typically addresses both the underlying land and the physical improvements on the property.

 

9 – Appraisal

 

The appraisal is a report that determines the value of the property based on market capitalization rate and net operating income. This report will also be created by a third-party provider selected by the lender. Hopefully, the appraisal value comes back equal to or, even better, exceeding the contract price.

 

10 – Green Report

 

The green report is an energy audit that evaluated an apartment for potential energy and water conservation opportunities and calculates the estimated cost savings that would result from addressing these identified opportunities.

 

The audit is performed by an energy efficiency provider. Once completed, you are sent a report with the results and recommended next steps.

 

Conclusion

 

The 10 reports needed when performing due diligence on an apartment buildings are:

 

  1. Financial Audit Report
  2. Internal Property Condition Assessment
  3. Market Condition Report
  4. Lease Audit
  5. Unit Walk Report
  6. Site Survey
  7. Property Condition Assessment
  8. Environmental Site Assessment
  9. Appraisal
  10. Green Report

 

Failing to do so can, and most likely will, result in unexpected and unplanned for expenses later on down the road.

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

burnt out light bulb

How to Start Up a Business w/ Pittsburgh Steelers Legend Franco Harris

 

According to Bloomberg, 8 out of 10 entrepreneurs who start business fail within the first 18 months. Or, for every 5 business ideas you attempt implement, one will hit and four will fail.

 

How can you increase your odds of success? Well, I great place to start is to learn about how entrepreneurs who’ve been successful in starting up a business were able to do so.

 

Franco Harris, NFL Hall of Fame Pittsburgh Steelers running back, has two booming businesses in completely unrelated fields – the food and silver industries. In our recent conversation, he offered tips, based on his experience, on how to successful startup a business from scratch.

 

Q: After 13 successful years in the NFL, how did you smoothly transition into a new career field?

 

A: When football was over, I said to myself, “Franco, you need to get busy.” Upon retirement, one thing you definitely don’t want to do is stay idle. Even if that meant I’d go work in a fast food restaurant, I had to do something.

 

I decided to start a food distribution company, and I called it Franco’s All Natural. I wanted to serve all natural food products. And I dove in feet first. I loaded and unloaded trucks, delivered, and partook in all the day-to-day operations. Eventually, we rebranded the company to Super Foods, and it has been beyond my wildest dreams where we’ve taken that.

 

Q: Are you actively involved in all the businesses you’ve started?

 

A: Yes. I prefer building businesses from the ground up, so learning the lowest level operations of the business is advantageous, and I believe a requirement, to scaling a business. That philosophy really helped me grow Super Foods.

 

This is also the advice I provide to NFL players when they’re transitioning out of the league. I say, “Don’t buy your way to the top. Learn the business. Learn every aspect of the business.” As I said before, that really helped me scale Super Foods. I delivered the products and worked in the warehouse, so I knew every aspect of the business and how it feels to perform the multitude of duties. I know how it feels to unload the tractor trailer. I know how it feels to drive an hour to deliver something or drive three hours for a business appointment.

 

Q: Since you have such a hands-on approach to your businesses, in order to make the most out of your time, how do you determine which business ideas to pursue and which to push aside?

 

A: The first thing I look at is if the idea is unique enough and if there is space for it. For example, when I started Franco’s All Natural, all natural foods were not the norm yet, but it is obvious today that there was space to grow.

 

I also co-founded SilverSport, which incorporates the odor killing properties of silver into clothing and paints. That is another area that was kind of new and not saturated, but in demand. Everyone wants a product that eliminates their body odor, right?

 

So, I’ve been successful by looking at unique things, things that are different, and things that have potential.

 

Q: What is your specific as the co-founder of SilverSport?

 

A: I focus on the company’s long-term strategy. I try to build the culture to align with what the company stands for, which is to provide the best odor-free clothing and paint lines in the world. I strategize to determine what the company needs to focus on to accomplish that mission, and make sure we have all those pieces in place.

 

I love this creative part of the business, doing new things, and exploring new ideas about how we can be different and the best. When you talk sports, that’s one of the things that you always work on. You want to be the best player on the team, right? I was fortunate enough in sports to experience that, and I leverage the experience to continually improve my businesses.

 

Q: Based on your business experience, what is your best advice ever?

 

A: I think you’re lucky enough if you’re able to do what your passion is, what you love to do, and really jump into it. But, a lot of the time, we hesitate. So, my advice is if you have something that you love to do, jump in. It doesn’t matter where you start, but if you do the right things and you put the time and effort into it, you can really make great things happen, and at the same time, do something that you really love to do.

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

meetup

To Source Real Estate Deals And Generate More Wealth, Start A Monthly Meetup

Originally featured on Forbes.com here

 

Having interviewed over a thousand business and real estate entrepreneurs on my podcast, one of the most valuable pieces of advice I’ve gotten is how to start an in-person meetup group. From a business development standpoint, the educational benefits, relationships formed and the potential for direct monetization have been instrumental to the growth of both the investors who attend and a business’s growth. In fact, it’s been so successful for my business that I require my clients to start their own in-person meetups within their local market.

 

In general, the advent of the internet has given us the capability to connect with like-minded strangers more easily than ever before. And while forums, blogs and social media allow you to join any number of virtual communities, other platforms promote the formation of in-person communities. One such outgrowth I take advantage of is meetup websites.

 

No matter how mainstream or obscure your interests might be, there’s a meetup group for you. Meetup.com, one of the more popular meetup sites, boasts a membership of 32.3 million people participating in over 288,000 meetup groups across 182 countries.

 

Interested in joining a community of psychic vampires? There’s a group for you. Want to relive a cherished childhood freeze tag experience? Don’t worry. There’s a group for you, too.

 

Of course, as a real estate entrepreneur, I’m not as interested in meeting vampires or playing freeze tag as I am in leveraging popular internet advancements to scale my business. Since online-generated meetup groups is a relatively new concept, and monetized meetups even more so, many people don’t know how to get started.

 

And starting a meetup can be nerve-racking — especially if you’re an introvert. This anxiety will be the No. 1 enemy keeping you from actually scheduling your first event. That’s why I advise you avoid spending an inordinate amount of time planning and structuring the perfect meetup event. Instead, simply focus on starting it.

 

A successful meetup group can be pretty informal. One investor I interviewed, Anson Young, has been hosting a meetup for over three years with very little structure. Once a month, Anson and about 70 other investors meet at a local beer hall. For three hours, they just drink beer and talk real estate. There’s no agenda or scheduled speaker. It’s just good old-fashioned networking, a time for investors to chat, solve any problems they’re facing, team up on real estate projects, and most importantly, learn from each other’s mistakes and successes. Even so, in just three years, Anson’s made six figures directly from partnerships and relationships formed at the meetup. That’s a return of nearly $1,000 per hour spent simply drinking beer and networking.

 

Starting a meetup group like Anson’s at a local bar is an easy and informal option, but maybe you’re a little more conscientious and orderly, like me. I created a meetup that’s much more structured than Anson’s, which is broken into four parts:

 

  1. Presentation: Each meeting begins with a short presentation from an active real estate professional or attendee.
  2. Share opportunities: Attendees have the opportunity to share deals with the group — maybe they’re trying to sell a deal, find a partner, or have questions on a deal under contract.
  3. Business updates: Each person provides a 90-second update on the latest in their business.
  4. Open floor: I allot the remaining time, about an hour, for networking, closing deals, sharing information and forming business partnerships.

 

Overall, the meeting lasts two hours.

 

Both Anson and I run our meetup groups on a monthly basis. Our primary objectives are to educate and build relationships — efforts that indirectly result in more deals, more business partnerships and more money in the long run. But if you want an even more direct avenue to financial gains from a meetup, create a rockstar-level meetup like real estate entrepreneur Taylor Peugh, and turn the group into a deal-generating machine.

 

Taylor hosts a meetup — not once a month, or even once a week — but four times a week. Three of the meetups are dinners and the other is a lunch. About 30 to 40 unique investors attend each meetup, which means Taylor networks with 100 to 150 real estate entrepreneurs every week. The result? Every rental property, wholesale, and the majority of the fix-and-flip projects he negotiates stem directly from someone he met at his meetup. For Taylor, a meetup group isn’t just a space to educate and build relationships; it’s the main source of his investment gains.

 

Want to replicate Taylor’s success?

 

Here’s the agenda for his meetups:

 

  1. Check-in: At check-in, attendees must answer: “What are you doing right now that will move you forward in the next 30 days?”
  2. Recognize wins: Each person describes what they accomplished personally, or in their business, that week.
  3. Needs and wants: Attendees have the opportunity to ask for anything they need. For example, “I need a plumber,” or “Does anyone know a good CPA?”
  4. Property pitches: This is where Taylor makes his money; anyone who has an active deal can present it to the group to see if anyone has an interest in buying, partnering, or funding it.
  5. Open floor: The end of the dinner/lunch is an open Q&A session where attendees can ask any questions they want.

 

Hosting a meetup is one of the best ways to create valuable relationships, learn about real estate from those active in the field, and find deals and create partnerships that generate wealth in other the short and long-term. I’ve provided three meetup examples above, ranging from monthly, informal beer hall gatherings to powerhouse groups that meet four times a week, but in reality, the sky’s the limit. There are an infinite number of ways you can structure your meetup group.

 

But don’t forget the most important step: Get over your fear or procrastination and host your first event!

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

 

 

urban apartment syndication

How to Successfully Overcome an Identity Crisis w/ NFL Running Back Terrell Fletcher

 

Imagine living your entire life performing at the highest level, losing nearly everything, and then discovering your true purpose on this Earth?

 

That’s exactly what happened to Terrell Fletcher, NFL running back turned Senior Pastor, motivator, and best-selling author.

 

In my interview with Terrell, he shared his journey from losing his NFL superstar identity after retirement to finding the true meaning of life.

 

Read on for lessons on how to bounce back from crises of identity and unlock your life’s mission.

 

 

What were you doing during the three-year transition period between retirement and becoming a Senior Pastor?

 

Soul searching.

 

Football is such a time-consuming activity that you don’t have a chance to find your true self. You inherit a stock identity – an NFL player. Upon retirement, you lose that identity and are left with the unpleasant feeling of emptiness.

 

So, I spent that period not looking for a new job, but searching for a new identity. I finally had time to explore the parts of myself that my football identity had suppressed.

 

As you began the search for your true identity, what did you gravitate towards?

 

People.

 

I rediscovered the meaning that came through altruism. What non-professional athletes don’t understand is that the world centers around the team and you. Then, there’s your secondary world that includes your “handlers” – your agent, financial advisors, friends, and family. And you are the center of that world too. Without even realizing it, you become selfish.

 

Did you work during this transitional period, and did those jobs impact your soul-searching process?

 

I went into the sportscaster role, but my heart wasn’t connected to it. I also went the coaching route, but my heart wasn’t connected to that either. There wasn’t a feeling of purpose, even though I was still deemed a success in the eyes of others. That’s when I realized that people will root for you at the level of their expectation of you. If their expectation of you is lower than the level of expectation to which you hold yourself, then you feel insignificant. People will applaud you for average, so I learned that you can’t go off of what everybody else thinks.

 

How do you determine what brings you a feeling purpose and significance?

 

You have to find that thing in your heart and chase it. That’s where you find real satisfaction.

 

I always had a love for real estate, public speaking, and inspiring people. So, after failing to find purpose in sportscasting and coaching, I tried to hone those skills, hoping one or two of them would shake out.

 

But I knew that before I could find true purpose, I needed to performed deep introspection. That required addressing existential questions, like ‘Who am I? What do I have to offer this world. What core tenants of life am I going to operate in?’

 

What were the takeaways of this introspection process?

 

A life’s mission. My purpose is to motivate, educate, inspire, and entertain every person I come across. No matter what business venture I pursued, that mission would be a part of my job.

 

You mentioned the need to disregard other’s expectations of you. How did you shed these expectations to start living your new mission?

 

At first, I was giving into those expectations. I was following the path I thought I was supposed to follow. And it was a very predictable path – underdog athlete reaches his dreams, and now he becomes a sports announcer or a coach.

 

But through my introspection, I determined I didn’t want to be predictable. I didn’t want to be normal. Nothing about normal inspired me. I knew my core competencies lend to more than what people were expecting of me. I could have done it, and I probably would have attained some level of success. But I learned along the journey that I didn’t just want success. I wanted significance. I wanted meaning. And to do so, what I did needed to count towards somebody else’s life and not just my own.

 

How did this need to be altruistic and giving manifest in your life?

 

I began to understand that my pursuits had to be more than a money grab or a fame grab. So, I needed to find the underlying purpose for why I wanted all of those things. To discover the root of why I wanted to build wealth, why I wanted to be a household name, and why I wanted my face on TV. Once I deconstructed those, my “why” became clear and I found my true identity.

 

Through real estate, entertainment, faith, and inspiration, I fulfill my “why” and feel a sense of significance while giving back to the world.

 

Based on your journey, what is your Best Ever advice to real estate investors and entrepreneurs for finding and completing their life’s mission?

 

Always stay the course. Often times, we spend too much time focusing on our end goal and not enough time preparing for what’s going to show up between now and the end. Barriers, enemies to our success, whether they’re external or internal, are guaranteed to show up on the journey. But don’t give into them. Fight them. Do battle with them. Get victory over them. Because those barriers are not there to stop you; they’re designed to make you stronger.

 

How do we overcome these barriers to success?

 

You must realize that as long as you’re on the right path and have a goal in mind, every barrier that arises is meant to make you stronger, wiser, and more compassionate.

 

The thing that seems disastrous is actually going to be for your benefit in the long run. I wish someone would have told me that the troubles of my life were actually going to be what helped make me the man I am today. I would not have run from so many things. I would have embraced the journey, understood that barriers were a part of the process, got victory over them and kept on moving.

 

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

 

basketball player silhoutte

How Former UK Great Tony Delk Reached the Highest Levels of Success in Multiple Fields

 

Through hard work and surrounding yourself with the right people, anything is possible. Those are the two factors that were main drivers of success for Tony Delk, whose resume boosts a NCAA national championship, 10 years in the NBA, and a multitude of entrepreneurial endeavors.

 

In my interview with Tony, he shared the life lessons he learned from legendary coach Rick Pitino and how that help him not only become a basketball star, but also prepared him for creating a star life after the NBA.

 

If you want to learn the lessons that helped Tony achieve uber-success in multiple differing fields, read on.

 

You played college basketball at the University of Kentucky, and then went on to have 10 successful years in the NBA. Out of all your coaches, which one had the biggest impact on your career?

 

Coach Pitino while I was at UK. He taught me the game – the mental aspect and the physical aspect. But most importantly, he prepared me for life after basketball. In fact, as a senior, Coach Pitino set me up with a really good business manager who’s been with me since 1996.

 

What’s an important lesson from Coach Pitino?

 

The most important thing that he taught me was to not let money define who you are, and to always stay humble. Because of that advice, once I began making a lot of money, it didn’t change who I was as an individual.

 

The money that comes in, in tandem with the fame from being on TV, results in an extreme pressure to change and let it go to your head, but my foundation in which Coach Pitino helped to create kept me grounded and humble.

 

What did this foundation consist of?

 

Mostly, it was surrounding myself with a good circle of friends, which was something else Coach Pitino provided. His circle of friends became our circle of friends. That’s one of the things I enjoyed most about him. He didn’t allow us to go out and meet new friends that that could take us away from being who we were, or give us money or some other thing we thought we wanted.

 

What characteristics should we as entrepreneurs look for when determining whether or not to accept someone into our circle of friends?

 

If someone is in my circle of friends, it’s because they’re an asset and not a liability. Liabilities are the people that when you go out, they never get the check. They’re always mooching. They want free clothes, free gear, and never pay for gas. In other words, they like everything if it comes for free.

 

An asset is a friend that I know is willing to get out and work, and it’s someone I don’t need to take care of as if they were my kids. Assets are the friends that rarely ask you for anything, but when they do, you know they’re either going to give it back or are in a desperate situation.

 

Also, it’s important that they are truthful, offer constructive criticism and feedback, and hold you accountable.

 

Does this asset/liability concept also reflect your overall business philosophy?

 

Absolutely. Coach Pitino used to say “when something is given, it can be taken away. But when it’s earned, it’s yours.” I’ve always taken that dictum with me wherever I’ve gone, and it’s the motto I pass on when offering advice to others, especially when I speak to kids. I always tell them – listen, the most important thing is hard work. You have to put so many hours in, and when you put those hours in, it’s earned, not given to you. So, it’s important to not only surround yourself with assets, but to also be an asset yourself.

 

Tactically, how do you apply this concept when screening investment opportunities or partnerships?

 

Well, initially, I didn’t. When I was in my 20s, if someone brought me an exciting business opportunity, I would jump on it without conducting much research. Or if it was a friend, I would invest to just help them out.

 

For example, in 1996, I gave my brother $15,000 for a business idea. I knew that it wasn’t going to pan out, but I made the investment because he was my brother. He had mentored me growing up, so it was sort of a payment of gratitude. However, the business idea flopped and I never got that money back. So, I also learned a valuable lesson – don’t invest with family or friends.

 

How did your approach to business opportunities evolve as you got older?

 

For my early investments, a common thread was that the only money invested in the deal was my own. So, now there needs to be an alignment of interests financially.

 

I also conduct a lot more research, specifically on the other people involved in the deal. I want to know if they’ve ever gone bankrupt. And if they have pursued other business endeavors, and if so, if they were successful. And to have an understanding of their business careers and where they are to this day.

 

And then of course, I study the business itself. But not just the financials. I want to get to know the employees, and the family and friends of the owners. You want to have that financial alignment of interest, but you also want to know if they are family-oriented and treat their friends and employees properly. If they don’t take care of their employees, they won’t take care of your clients.

 

Based on your successful NBA and business career, what is your Best Ever Advice for real estate investors and entrepreneurs?

 

When you’re investing in a deal or in a business, have equity. That way, you will personally benefit from any financial gains, but you are also creating generational wealth for your children and grandchildren.

 

Also, I would advise to only pursue opportunities that you love. If you love it, you’re going to be all in and want to see the project grow.

 

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

 

cash in hand

5 Steps to Raise over $30,000,000 for Apartment Syndications


How do you raise private capital from high net individuals to invest in large multifamily deals? Well, that question assumes that 1) you have high net worth individuals in your network and 2) you know how to syndicate large multifamily deals. If you are like most entrepreneurs, neither of those assumptions are true. So, the real question is, how do I create a network of high net worth individuals, and how do I learn how to syndicate large multifamily deals?

 

Dave Zook, who has closed on over 2,800 units since 2010, has raised well over $30 million for apartment syndication deals. But, at one point he was like you. He didn’t have the connections, nor did he know how to invest in apartments. So, how did he get to where he is today, and how can you replicate his success?

 

In our recent conversation, he condensed his journey into a five-step process to raising millions of dollars from private money investors.

 

Related: How Do I Know If I’m Ready to Become an Apartment Syndicator?

 

Step #1 – Build a Reputation

 

Before even entertaining the idea of raising money for deals, Dave was already investing in multifamily utilizing his own capital. Also, he was running a sales and marketing company. Due to these successes, he was known by others in his local market to be a savvy entrepreneur who could effectively manage a business. “Having a good reputation in your local market is a great start,” Dave said. “We’re well-known in the community for the business we’ve done there.”

 

A reputation of previous business success, even if it’s not in apartment investing, is a requirement prior to raising money. No one will entrust you with their hard-earned money without having the confidence that you can navigate the syndication niche.

 

Related: How a Wannabe or Experienced Investor Can Obtain a FREE or PAID Real Estate Education

 

Step #2 – Tell Your Story

 

After building a business reputation, you want to locate the high net worth individuals in your current network and tell them your story. And if you are thinking to yourself, “Joe, I don’t have any high net worth individuals in my network,” then you need to continue working on that reputation. When you are performing at a high level, in either real estate or business, you will cross paths with these potential private money investors.  For example, prior to becoming a syndicator, I was a VP at a New York City advertising firm. When I decided to raise private money, people whom I created relationships with in that industry were some of my first investors, and they still invest to this day. They had seen my success in business (the advertising industry) and in real estate (I had purchased multiple SFRs and taught classes on how to invest in SFRs).

 

Similarly, Dave said, “what really helped [me] was I was able to show them what I was doing. I started in this business investing in multifamily on my own for myself. I had a tax problem. I needed some tax shelter. We got creative on that side, so I was able to approach some of the people that I knew that had some investable income, and I just told them my story.”

 

So, after building your reputation, use it as a selling point to the high net worth individuals you met along the way.

 

Related: Four Tips to Successfully Sell Yourself in Real Estate Investing

 

Step #3 – Get Investor Commitments

 

Once you’ve built your reputation and begin telling your story high net worth individuals, get them to commit to investing in a deal. For example, Dave’s first investors came from the members of a local bank’s board in which he was invited to join. He said, “I was invited to sit on the board of a local startup bank… I was listening to conversation that went something like this – These guys were talking back and forth, and I knew most of these guys around the table, about a dozen guys. They were talking about investing in this bank and wanting to know if it was a good idea, a wise investment. I heard conversations like, ‘Well, you may not see a return for 5-7 years, but it’s better than putting our money in a CD.’ I was just blown away. I was amazed at the conversation. I got to looking at what I was doing in the multifamily space and got thinking, ‘Man, how can I add value to these guys?’ It was about the time I had bought a couple hundred units on my own. I was sort of coming to the point where I was running out of cash. I had to slow down. Then I talked to another friend of mine who was on the board as well. I ran the idea by him about syndicating and teaming up with these guys. He thought it was a great idea. For the next deal, they come along.”

 

Due to his business reputation, he was invited onto the board. Due to his previous real estate experience and successes, he had a compelling story to tell. With this combination, he was able to raise private money for his first syndication deal. “I needed $850K to get the deal done,” Dave said, “and I went to see some of these individuals. Some guys that I knew were able. It was about getting around the right people and about having a good relationship in the community, and being able to go out there and talk to people that knew and trusted me.”

 

Related: A 5-Step Process for Raising BIG Capital for Multifamily Syndications

 

Step #4 – Increase Investor Network Through Referrals

 

Once you gain your first investors and complete a deal or two, as long as those deals were a success, your current investors will refer you to their other high net worth friends. From there, it’s a snowball effect.

 

Dave said, “If I would pinpoint and go back to each one of those [investors], a lot of the guys were from referrals. People that invested with me and then said ‘Hey, I’ve got a friend,’ and they’d give me a third-party endorsement, and we ended up doing a deal together. One thing led to the next, and the next thing you know they’re a really faithful investor.”

 

Related: Three Ways to Cultivate Word-of-Mouth Referrals

 

Step #5 – Retain Current and Referral Investors

 

Finally, once you receive a new investor, either your first investors or through referrals, retain them by continuing to syndicate successful deals. As long as you consistently provide your investors with a solid return, you will not only continue to receive more referrals, but those current and referral investors will come back deal after deal. For an example, Dave said, “We [recently] closed a 373-unit building. We’ve raised $3.5 million. About 85% of those investors had invested with me on other deals. So, they were current investors and just coming back for another round.”

 

Related: 16 Lessons from Over $175,000,000 in Multifamily Syndications

 

Conclusion

 

For those aspiring entrepreneurs who want to become multifamily syndicators, starting from scratch, the 5-step process is to:

 

  • Build a business or real estate reputation in your target market
  • Convey your reputation to high net worth individuals in your network through storytelling
  • Get investors to commit to your next deal
  • Increase your number of private money investors through referrals
  • Retain your investors by consistently providing a solid return on investment

 

Related: 6 Creative Ways to Break into Multifamily Syndication

 

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

 

man with a weapon

6 Ways to Spot a Scam Artist Lender

 

As you start growing your real estate business, you will likely get to the point where you will need to find more money to fund your deals. Even if you started with a lot of money, leveraging OPM (other people’s money) decreases your risk and offers the chance of an infinite return. So, regardless of your financial starting position or your real estate niche, everyone should have the capability and understanding of how to raise capital.

 

When most investors reach the point where they need to find more money, they get nervous. They think accessing capital will be difficult. However, with a few quick Google searches, you’ll find a flood of people who need to deploy their capital quickly.

 

That’s great, right? Well, not exactly.

 

Ross Hamilton, who is the CEO of Connected Investors, an aggregator of crowdfunding portals with 250,000 investors, said “we work closely with all of the real hard and private money lenders around this great country, and the number one complaint and the biggest competitor of lenders is not other lenders. It’s scammers.”

 

So, with a plethora of scam artist lenders, how do we distinguish between the real and the fake? In our recent conversation, Ross explained how to screen lenders by looking for the six red flags of a scam artist lender.

 

Related: How to Qualify for a Commercial Real Estate Loan

 

What is a scam artist lender?

 

Before outlining the six red flags, let’s define a scam artist lender. Ross said that a scam artist lender is “going to be people who are actually trying to steal your money, and other people who are just completely and totally wasting your time.” So, a scam artist is the Zimbabwe King that emails you asking for your personal information so they can send you millions of dollars, a newbie lender that doesn’t know what they’re doing, and everything in-between.

 

When screening a new lender, what are the red flags to look out for?

 

#1 – Do they want you to wire the down payment?

 

“If a lender ever asks you to wire them your down payment money, run,” Ross said. Typically, down payment transfers are handled by your attorney, which the lender should know. Therefore, if they ask you to personally wire them money, that is a huge red flag.

 

#2 – Do they ask for your social security number or other personal information?

 

Ross said, “Giving away your social security number or any of that information before you’ve vetted a lender” should be avoided and should raise your alarm. This includes bank account information as well. Provide this information and risk having your bank account emptied or your identity stolen, both of which Ross has experienced. If these are the first things they ask for, consider working with another lender.

 

#3 – Do they have a business email address?

 

“Using a Gmail [email] address [is a] red flag. This person’s not really in business,” Ross said. This is a quick red flag to spot. If the lender doesn’t have a business email address, that’s a sign that you’re potentially dealing with a scam artist.

 

#4 – How well is their English?

 

Ross said another red flag is if “their English isn’t very proper. You can hear the accent come across in the e-mail correspondence.” However, that doesn’t mean that foreigners are the only scam artists. “The people who will waste your time are inside the U.S., the people who will steal your money are typically outside the U.S., because it’s tough to track those people down.”

 

If improper English is the only red flag, then you are likely in the clear. But if there are other red flags as well, like a Gmail email address and they are asking for your social security number, they may be a scam artist.

 

#5 – Do they have a website?

 

“Make sure they have a website. A lot of these lenders have very bad, fake websites (they’re easy to see through) or they just don’t even have a website,” Ross said. This is an obvious red flag that is applicable to any potential business partner. If someone doesn’t have a website in this day and age, something fishy is going on.

 

#6 – Do they have examples of past deals?

 

If the lender passes the first five red flags, the last test is to ask for referrals.

 

Ross said, “A big thing you want to do is you want to vet the lender and you want to say ‘Hey, can you give me some examples of recent deals that you’ve funded?’” If they are the type of scam artist that wants to steal your money, you probably won’t hear back. If it is the incompetent scam artist type, they will either disappear, or they will back pedal, both of which will be obvious to spot.

 

Related: Pay Attention to These Five Loan Components to Maximize Your Apartment Returns

 

Conclusion

 

There are a lot of lenders and private money investors looking for deals to fund. However, a portion of them are scam artists.

 

In order to screen lenders, Ross Hamilton tells us to look for these 6 red flags:

 

  • Do they want you to wire the down payment?
  • Do they ask for your social security number or other personal information?
  • Do they have a business email address?
  • How well is their English?
  • Do they have a website?
  • Do they have examples of past deals?

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.