Best Ever Apartment Investing Blog Posts

If you are reading this, you are probably interested in making some smart, life-changing decisions in the real estate industry. Without question, apartment investing can be a great path to take. Multifamily properties are often easier to finance than others, for one; additionally, you can grow your portfolio quickly, and property managers can take a lot of stress off your plate. Whether you have never invested a penny in real estate before, have been in the industry for decades, or fall somewhere in-between, I believe I have the tools, knowledge, and experience you need to make the most money—and, in turn, get the most out of your time. A great way to start would be to check out my multifamily and apartment investing blog posts, which can provide you with a foundation of knowledge and answer a lot of questions you may have. Want to learn how to add value to apartment communities, how to figure out if you should be getting into passive or active apartment investing, or how to spot commonly overlooked expenses? Maybe you’d like to know how to effectively evaluate a multifamily deal and save thousands of dollars on your taxes. All of this, and other tips regarding apartment investing, can be found below. If you like what you read, I encourage you to also read the rest of my blog posts, of which there are hundreds, and to check out both volumes of my book, Best Real Estate Investing Advice Ever.
4 Investing Growth Strategies from a Real Estate Marketing Expert

4 Investing Growth Strategies from a Real Estate Marketing Expert

The familiar saying, “knowledge is power” is absolutely true when it comes to real estate marketing and investing. Lael Sturm gives us a perfect example.

Lael owes much of his professional success to his wealth of knowledge: how he gathers it and how he uses it.

Based in San Francisco, Lael is a real estate marketing professional as well as an investor. Over the past 25 years, he’s worked with companies of all sizes, including Microsoft, MTV, and Nokia.

LPSS Digital Marketing, the company Lael founded, helps real estate investors and other professionals grow their businesses.

Here are a few key lessons that Lael’s fascinating career can teach us all.

 

1. Learn Something New Every Day

In his work, Lael has always had to learn new things. During the mid-1990s, as an MBA student at Columbia, he began teaching himself all about a new technological and cultural phenomenon: the internet.

Soon, other Columbia students came to Lael for digital investing advice. Thus, he decided to become an online strategy consultant. Today, he helps businesses maximize their social media strategies, internet advertising, and digital content.

Given the rapid pace of technological change, Lael has had to constantly master new tools and methods. To that end, he’s developed a learning philosophy to stay ahead of the competitive curve. That is, Lael keeps two facts in mind: There’s always more to learn, and he doesn’t know everything. Consequently, he soaks up lessons from everyone he encounters: coworkers, bloggers, authors, podcasters, and so on.

If you keep seeking out new knowledge, it’s astounding how much you can learn. And some of that information should lead to business growth.

 

2. Learn from Customers

It’s worth noting one special group of people here: customers. So many businesspeople fail to obtain new knowledge from their clients. But customers are often founts of useful information.

Many entrepreneurs believe it’s their job to provide clients with all the answers. And to them, it’s a one-way street. They may also think it looks bad to ask customers business questions. They never want to appear ill-informed.

In truth, it’s healthy to ask customers questions to see how they view different issues. Many clients will then provide valuable ideas and pointers.

Similarly, it’s more than acceptable to tell clients you don’t know the answer to one of their questions. Just let them know that you will find out the answer. In such a case, a customer would probably trust you more. After all, no one knows all the answers, and honest people admit when they’re stumped.

By researching customers’ questions — and by discussing various business topics with them — you won’t just increase your general knowledge. You’ll increase your knowledge of specific topics that are important to investors and clients. As a result, your business will be better prepared to meet its needs going forward.

 

3. Thought Leadership Matters

Here’s another reason why knowledge is important: You’ll probably want to establish yourself as a thought leader.

A thought leader is someone who continually shares useful information and strategies. If you’re one of these influential people, it’s easier to attract investors.

To become a thought leader, you could routinely make high-quality content for an online channel. For instance, you could create podcasts, YouTube videos, or Medium blogs. Indeed, many leading internet platforms let you post content for free. If you keep showing your depth of knowledge, providing value to your followers, and finding creative ways to speak in your own voice, you could gain a loyal audience.

Providing value, by the way, doesn’t mean repeating platitudes or common industry knowledge. Instead, offer unique insights, actionable tips, personal stories, and precise business growth ideas. On top of that, never advertise your business within your thought leadership content. People will trust your messages less if they seem like commercials.

In all of this, pay particular attention to Instagram. Some businesspeople might see Instagram as unserious. In truth, it’s an outstanding platform for engagement, and its algorithm is sophisticated and powerful. You may have great success using this network to promote your thought leadership.

However, maybe you’d find it hard to keep producing beautiful Instagram images. Perhaps you’d feel more comfortable posting text. In that case, LinkedIn is probably the right network to focus on. It’s ideal for the written word, and LinkedIn also makes it easy to connect with the right people.

On the other hand, you don’t have to worry much about a website. These days, pouring time, effort, and money into a full website is unnecessary, maybe even wasteful. You may just need a landing page. And you might not need a business site at all, just your social media accounts.

 

4. Buy and Hold

In addition to his sharp advice about thought leadership and knowledge growth, Lael Sturm has many valuable business tips to share.

One helpful suggestion involves buying and holding real estate. Lael uses his San Francisco home as a case in point. After investing in it, he turned down many offers to sell it at a high price. As a result, this property has appreciated considerably.

With appreciation, you can build up equity. Thus, although it’s often tempting to sell residential and commercial real estate, try to hang onto your properties for as long as you can.

Lael’s buy-and-hold strategy is a terrific example of turning acquired knowledge into profitable action. It confirms the principle that’s guided his entire real estate marketing career: The more he knows, the better he can serve his clients.

 

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Building in the Big Leagues with Brian Noel

Building in the Big Leagues with Brian Noel

Serial investor Brian Noel reflects on why— and how —he made the switch from single-family investments and a corporate career in sales to become a general partner on his own multifamily property.

During 40 years in sales, Brian Noel escalated his role into management positions. At one point, he was managing more than 4,000 people globally, spending much of his time bouncing between airports, and from one hotel to the next. But from day one, Brian had an interest in real estate as an investment strategy.

Real estate investment started for Brian as it does for many investors: in the form of single-family homes. On the hunt for appreciation, the timing of the market in the ’80s and ’90s wasn’t right, so Brian liquidated all his properties and invested in the stock market. After riding the highest of highs, then ultimately crashing into the lows by losing everything in 2000, it was back to the drawing board to find alternative investments to generate additional wealth.

“In 2005, as I’d moved throughout my career to different companies, I wound up with about a half-dozen different IRAs and was trying to figure out how I could consolidate those and seek alternatives beyond just the stock market to invest in,” Brian shared. “I discovered there was something called a self-directed IRA. So I put all of the retirement money I had into a self-directed IRA account and then used that to buy a rental property.”

Brian eventually sold the property and used the equity to purchase eight townhouses and condos.

“Instead of looking for appreciation, I was looking for cash flow… [so that I could] then use the extra cash to pay the mortgage down as fast as possible. Then in 2019, I kept looking at how much money I was paying every month in HOA fees and decided it might be better if I got rid of all these properties and went more into building,” he said.

Today, Brian is a general partner on his own 280-unit Class C multifamily apartment building in Houston, Texas. While his investment journey brought him to this point, it was his experience with the teams of people along the way that made it fulfilling and drove his excitement to continue investing this way.

“There are seven of us on the team. And it’s been an interesting journey to go through this because everybody has different experience levels in multifamily investing. There are a couple of people who are very experienced; they’ve been [general partners] on five, six, seven deals and have gone full cycle on a few deals,” Brian said. “Then there are other people, like myself, who are still what I would consider sort of a new general partner.”

As Brian has experienced growth in both professional and investing aspects of his life, he now finds joy in helping others get started and find their way on their investing journeys.

“I’ve had the chance to build teams, and then I’ve been an individual salesperson going out to focus on my own deals as well,” Brian reflected. “So at one point or another, I’ve kind of done it all, but for me, at this stage of life, it’s fun to be a part of a team and give back and help other people.”

Equally as crucial to building a team is being a productive part of one. Having the opportunity to have been a leader at prominent companies throughout his career as well as being a part of an investment decision-maker group, Brian firmly believes that communication and transparency are non-negotiables that must come with any individual into a team setting.

“When you’re taking other people’s money, you have to be incredibly conscientious about the fact that they’re trusting you with their hard-earned dollars. And, for me personally, I’m more worried about other people’s money than my own,” Brian said. “I also think you’ve got to communicate. And honestly, if you step back and think about it, there’s always something you can say, right? So just staying visible and staying in front of your investors, I think, is very important.”

Brian’s essential enjoyment and passion for real estate are at the foundation of all his investments that allow him to continue building his income.

“You do have to be willing to roll up your sleeves and get your hands dirty. You’ve got to enjoy it and you’ve got to be passionate,” Brian noted. “If you don’t want to do that and you don’t enjoy it, and you’re not passionate about it, then you shouldn’t do it.”

 

About the Author:

Leslie Chunta is a marketing consultant with nearly 15 years of experience in creating dynamic marketing programs and building brands for startups to enterprise organizations. She has worked agency- and client-side with high-growth companies that include Silicon Valley Bank, JPMorgan Chase, SailPoint, EMC, Spanning Cloud Apps, Ashcroft Capital, Netspend, and Universal Studios. www.thelabcollective.com

 

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The Complete Guide to Saving Money While Investing

The Complete Guide to Saving Money While Investing

For most people, it’s important to keep saving money, even while you’re investing. After all, while your investments are a way for you to plan for your future and build your portfolio, you never know when you might need an emergency fund, or some savings tucked away.

When you’re trying to balance your income between expenses, savings, and investments, however, things can start to get difficult. That’s why it’s important to know some critical savings tips that will help you stay on top of your finances, even while you’re pursuing investment opportunities. Here’s what you need to know.

Start by paying yourself.

With every paycheck or direct deposit, it’s easy to start racking up the costs. While this may vary depending on your spending habits and monthly expenses, it’s often easy to push your saving money to the back of the priorities list. After all, when you’re done paying for groceries, utilities, and mortgage expenses, you still want enough money left over, right? But, in most cases, hitting a firm savings goal means finding the right balance. That’s why it’s important to pay yourself first.

Every time you get a paycheck, take a portion of that and immediately place it in your savings account or emergency fund. Otherwise, it’s harder to keep your monthly savings consistent if you leave all your money in your checking account. When you really want to hit a savings goal, the best way is to prioritize savings as much as you can.

Depending on your financial situation, it’s often a good idea to set up automatic bank account transfers. This is an easy way to consistently set aside a small amount of extra cash on each payday.

Plan for unexpected expenses.

Planning for an unplanned expense seems a bit oxymoronic. However, while you might not be able to plan for a specific dollar amount, you can save a general sum of money to give yourself a bit of a safety net in the event of any unplanned expenses, job loss, or financial hardship.

Often, when someone’s facing a financial crisis, the temptation is to forgo ongoing investments in favor of immediate funds. However, with an emergency fund, you don’t necessarily have to compromise your long-term financial stability to pay for medical bills, home repairs, and unexpected emergencies.

Many financial experts agree that your rainy-day fund should account for roughly three to six months of expenses. While you can certainly add extra money or less money, having an emergency fund is a great option to supplement retirement funds, savings, and investment accounts. Again, if you don’t want to spend a lot of time creating a separate account for your emergency fund, automatic transfers might be a good option for your needs. Since a string of unexpected events can impact your financial health, your saving money in an emergency account is a great way to protect yourself in the long run while you continue to build wealth.

Consider a side hustle.

At this point, the side hustle is officially a United States institution. Whether you’re working on getting your credit score to a good place or you’re using a financial planner to help you choose a high-yield savings account, a side hustle or part-time job can go a long way toward helping you meet your financial goals. Plus, as more U.S. industries continue to lift in-person restrictions and encourage business, this is one of the easiest ways to take the next step in your financial journey.

You can take whatever amount of money you earn from your side hustle, passive income opportunity, or part-time job and put it toward your retirement savings, high-yield savings, or another investment or financial product.

If a part-time job isn’t your style, you may want to consider selling things you no longer need. The first step is to look through your belongings, decide what’s worth selling, and list it online. For a simple way to sell clothing and accessories, you can consider popular resale sites. For furniture, decor, and other possessions, you might want to consider local resale groups.

Try to pay off your debts aggressively.

If you have credit card debt, a loan at your financial institution, or any other high-interest debt, it can make it that much harder to build an emergency savings fund and continue investing in your future. It can also limit how much money you put into your online banks and accounts. If you find that your existing debts eat into your general savings goals, you might want to consider prioritizing loan and credit card payments. In some cases, you may want to work with a financial advisor to review your credit report and see what debt you should prioritize. This can help you eliminate high-interest debt, which frees up more resources to dedicate to your investments.

Understand your investment costs.

Every mutual fund, CD, and broker service has its own costs that you need to understand. Whether you’re talking about a retirement savings account or your supplemental investments, it’s a good idea to weigh the costs against your returns; this can help you make better decisions that benefit your overall financial well-being.

For instance, say you’re on a workplace retirement savings plan. If your employer-based plan is too expensive, you may want to consider contributing to the match and then seeking external investment opportunities. As long as you stick within your general investment plan, this can improve your financial fitness.

Are you ready to master saving money while investing?

At Goodegg, we have experience working with investors at all skill levels, and we always think it’s best when you take the time to set and review your financial goals truly. So, whether you need to reconsider your subscriptions and gym membership or you need to diversify your investments to better align with your long-term plans, prioritizing your savings growth and overall financial health is a smart choice. With the right investment decisions, you have the potential to hit your financial milestones that much faster.

If you’re looking for the right partnership, you should consider joining the Goodegg Investor’s Club. With our industry expertise, we give you insight into savings tips, investment strategies, and growth tools that can help you succeed.

 

About the Author:

Annie Dickerson and her partner Julie Lam are founders of Goodegg Investments — an award-winning real estate private equity firm — and creators of the Real Estate Accelerator Mentorship Program. They are authors of the book Investing For Good and hosts of the popular Life & Money Show podcast: https://goodegginvestments.com/

 

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Tips for Success After a Bad First Deal with Jamie Gruber

Tips for Success After a Bad First Deal with Jamie Gruber

In the early 2000s, Jamie Gruber was like many other new real estate investments. At the time, zero-down financing was easy to find, and few people were putting up red flags about a possible market crash. Gruber jumped at the chance to enter the market with an 80% loan followed up by a 20% second lien. While some people who purchased property only a few years before the recession hit in full force were unscathed, Gruber was one of the many people who were burned. Nonetheless, he gained valuable insight from his first deal. He recently joined us to share what he has learned.

 

Jumping In at the Wrong Time

When Gruber purchased his first single-family home in 2005, housing prices in New York were rising quickly, and Gruber was eager to get his feet wet. Because he did not make a down payment, he had minimal equity in the property when the housing market crashed three short years later. At the same time, housing prices in New York plummeted. Gruber’s employer relocated him to Boston, and he was not in a position to either sell the home or to live in it. Essentially, he was forced to ride out the market as a landlord. Thankfully, the rental rate was sufficient to cover the property’s expenses.

 

Developing a Larger Perspective

While some people who have had a poor investing experience may be averse to making future investments, Jamie Gruber had a different perspective. Despite being saddled with this property for several years at a very inopportune time, he and his wife decided to buy a fix-and-flip home in Boston. They turned a reasonable profit on it, and this encouraged Gruber to look at other real estate investments. Their next two properties were two-unit multifamily rentals in New York, and they were successful investments despite being located in another state.

Through these experiences, Gruber regained a sense of comfort and even excitement about the lucrative potential of the market. Gruber saw the potential for investing in multi-unit properties. However, he was not keen on slowly building a portfolio of two-unit properties. The path to giving up his W-2 job could be traveled more quickly if he made larger commercial real estate investments.

 

Finding the Right Deal

Gruber learned his lesson from his first deal. After he decided to lean into commercial real estate, he spent time educating himself before he started looking for a property. Then, he waited for the right deal to come along. The property that he ultimately invested in had incredible upside potential with rates that had not been raised in years. Its elderly owners were eager to sell, and they had perhaps not run it as well as they could have over the last several years. Gruber and his partner purchased the 16-unit apartment complex near Ann Arbor for $750,000 with a 7% cap rate.

This particular property had more upside potential than Gruber initially realized. In addition to being able to raise rents after taking ownership, he was able to collect revenue from pet rents, storage fees, the laundry facility, and more. At the same time, Gruber was able to slash many operating expenses that had gotten out of hand. Nonetheless, this property also had an expensive learning curve.

Gruber had the insight not to raise rents on established tenants sharply. He had a rent escalation plan that would slowly get the units up to market rents without potentially creating a vacancy issue unnecessarily. However, the repair costs that Gruber estimated upfront were significantly below the actual cost. In addition, some of the materials that they thought could be salvaged ultimately had to be scrapped, and labor was much higher than he anticipated. Gruber ultimately put approximately $5,000 per unit into the upgrading and updating costs, and this was more than he was prepared for.

 

Creating His Own Opportunities

Before Gruber found this great investment opportunity, he struggled to get real estate agents to give him and his partner the full attention that they needed. They decided to take matters into their own hands and make something happen. To create a great network of investor contacts and industry professionals, the pair established a multifamily meetup group and a Facebook group. This is how they stumbled upon their 16-unit project, and it is also how they met the other pair of investors who are working with them on their new apartment deal.

This new project is a 22-unit project located in Cleveland. While Gruber will be a remote or hands-off investor, one of the partners will be on-site and responsible for the day-to-day operations. This is one of the reasons why Gruber feels comfortable taking this project on as his second multifamily investment property. Notably, this 22-unit property may also come with a learning curve as the seller has not provided them with solid records.

In hindsight, Gruber says that his best advice for new investors is to network. This is how he found his most recent investment opportunities as well as his partners. Without networking, Gruber would not be in the position that he is in today.

 

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5 Bad Habits That Are Costing You Money When Investing

5 Bad Habits That Are Costing You Money When Investing

If you want to know how to save money, it’s also important that you understand how not to save money. While you can follow top investing tips, read blogs, and listen to industry-leading podcasts, it won’t help you hit your investment and savings goals if your bad habits are costing you money.

The difficult part is that, oftentimes, we don’t even know when we have these bad habits, let alone how we can break them. Whether you follow the stock market, invest in real estate, buy mutual funds, or you’re trying to build a more robust savings account, bad habits can harm your finances in the long run.

Whether you struggle with financial temptation or rely on credit cards a little too much, here are a few bad financial habits that can cost you money when you’re investing.

1. You spend more than you earn.

It’s a poorly kept secret that credit cards and credit lines often lead to vicious cycles. It often goes like this: You start by spending a bit too much of your paycheck. Then, to navigate ongoing expenses and costs, you have to rely on your credit card. Unfortunately, this traps you into high-interest-rate debt. This can derail savings goals, eat up your paychecks, and cost you a lot of money over the years. So, if you’re ready to start investing, the best way to hit your financial goals is to stop spending more than you earn.

Often, this means you need to sit down and review your spending habits and how those align with your long-term goals. Start by looking at your spending over the last year and how much money you have in your bank account. In some cases, a great way to hit your savings goals and continue investing is to cut down on unnecessary expenses. These include retailer subscriptions (such as Amazon Prime or your gym membership), credit card debt, and discretionary spending. You can also set a tighter budget for your groceries, use more coupons, and look for discounts. It’s a great option that often equates to “free money” in a sense.

For some people, however, this may even mean that you need to earn more money. If you don’t have enough money to tackle your credit card debt, invest in a retirement plan, and consider index funds or individual stocks, you need to find ways to earn money. A simple way is to invest in a part-time job or a side hustle. This will impact the amount of money you make in the short term and help you grow your portfolio in the long term.

2. You’re not prepared for emergencies.

If you don’t have an emergency fund, it’s a good idea to set one up. Even if you have automatic savings and a robust retirement plan, there are plenty of ways that unexpected expenses can derail your savings account, short-term goals, and financial success. At a minimum, many financial advisors and experts recommend saving a few months’ worth of expenses to navigate job loss, medical bills, or other emergency expenses. Then, if you have to replace your water heater or pay unplanned utility expenses, you’ll be prepared.

While you don’t need to contribute to this account at regular intervals, you should always review it at regular intervals, determine when it needs more or less money, and take note of your account averages.

3. You’re missing out on tax breaks.

If you’re not using the right financial products for your taxable income, it might be time to hire a financial planner and review your past performance regularly. Often, your tax refund is the easiest way to find additional money each year. With an experienced financial advisor, you can find tax break opportunities and get a good deal on your tax return each year. This helps preserve your hard work during each fiscal year and helps you reap the rewards in the near future.

The government even offers tax-advantaged accounts that are great for someone looking to build a diversified portfolio. They offer IRA (individual retirement account) and 401(k) options. It’s a good idea to review your current retirement savings and taxable brokerage account to ensure that it’s helping you build wealth. If not, it won’t require a lot of time to correct, though this should be your top priority.

4. You tap into your retirement accounts too early.

The bottom line is that a little bit of greed now can cause you a lot of grief in the next year. A sound piece of financial advice: Don’t pull from your retirement savings accounts unless you absolutely have to. You shouldn’t treat a retirement account like a payday advance opportunity. Even if you’re using that money to purchase financial products or look into the real estate marketplace or stock market investing, you’ll still face higher interest rate penalties. You also miss out on those financial growth opportunities.

The first thing you need to keep in mind about these accounts is that you should leave your money invested at all costs. Unless you have no other options for securing funds, this route carries too much volatility, and it can take you a long time to rebuild. If you’re facing true financial hardship over the course of a year, you may want to reach out to a professional in the financial world to discuss early withdrawal options.

5. You’re impatient with diversification.

An easy way to cost yourself money while investing is to get impatient. While nobody has a great time watching a low-cost index fund or a Roth IRA underperform, you need to focus on the essentials and your portfolio’s overall goals. The downside is that it’s understandably difficult to stay the course, but you must do your due diligence and avoid tinkering with your portfolio in a reactionary way.

Next Steps

If you’re ready to learn more about how to manage your finances while you’re investing, the first step is to join the Goodegg Investor’s Club. With helpful insights on anything involving U.S. investing, from equity to ETFs, the Goodegg team can help you ditch your bad financial habits and invest in financial products that can help you hit your goals.

 

 

About the Author:

Annie Dickerson and her partner Julie Lam are founders of Goodegg Investments — an award-winning real estate private equity firm — and creators of the Real Estate Accelerator Mentorship Program. They are authors of the book Investing For Good and hosts of the popular Life & Money Show podcast: https://goodegginvestments.com/

 

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5 Colorado Travel Tips for the 2022 Best Ever Conference

5 Colorado Travel Tips for the 2022 Best Ever Conference

Who’s ready for some après ski? Best Ever Conference attendees often use the conference as an opportunity to vacation in Colorado either before or after the conference. It’s truly the perfect winter adventure to get your team together before or after the BEC, or even for inviting your family and friends to join. Let’s face it, this past year has caused us to pause many of our vacation plans, and we’re all eager to get back out and create some exciting experiences. With that in mind, we’ve put together our top Colorado travel tips to help you make the most of your stay.

 

1. Pack your gear.

If you are planning on venturing outside of Denver, don’t forget to pack your snowboard, skiing, or sledding gear. Some of the most popular ski resort towns in the world are located in Colorado such as Aspen, Breckenridge, Keystone, Telluride, and Vail. These ski towns offer incredible resorts located close to town, as well as shopping, restaurants, and other winter activities.

 

2. Book early.

It’s certainly not too early to book your ticket and travel plans for the upcoming BEC. You won’t want to catch a case of travel FOMO by skipping out on your opportunity to secure your spot and travel accommodations. Hotels and vacation rentals start booking in the summer for the upcoming winter season, and since this year is the year of travel, many vacationers are securing their winter lodging already — especially the ski-in/ski-out homes.

 

3. Remember your lift tickets!

In addition to booking your stay, it is highly recommended to book your lift tickets in advance as their prices are expected to increase throughout the year. Those who purchase lift tickets early always receive the best discounts, and they avoid the risk of waiting until the resorts sell out.

 

4. Explore Denver.

Interested in staying local in Denver? There’s plenty to experience in the Mile High City. Did you know Denver brews more beer than any other city? Denver’s downtown area offers a wide variety of brewpubs, eclectic restaurants, and world-class galleries and museums. Another popular location to explore is the artsy hotspot neighborhood River North Art District (RiNo).

 

5. Snag an exclusive resort discount.

The BEC is offering limited exclusive discounted rates at the Gaylord Rockies Resort for attendees. The Gaylord is extremely convenient for travel as it is just minutes from Denver International Airport. The rustic resort is the perfect retreat for a winter vacation — indulge in tranquility at the resort spa, indoor and outdoor water complex, and lazy river, and soak in the picture-perfect views of the nearby Rocky Mountains.

 

There is so much to look forward to this winter at the BEC, and with these Colorado travel tips in your back pocket, you’re sure to have an incredible time both in and outside of the conference. Secure your spot today by visiting besteverconference.com.

 

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Growing Overseas with Jennifer Bourdeau

Growing Overseas with Jennifer Bourdeau

For some professionals, the opportunity to relocate for a career is an exciting next step on their path to success. However, when Jennifer Bourdeau chose not to relocate for her career in the hotel industry, it led to an even more fulfilling adventure. She had always wanted to obtain an MBA degree, and with a reluctance to move for her job, she decided that the time to earn it was now.

 

Education Abroad

Accelerating her timeline, Jennifer Bourdeau started evaluating MBA programs, not only across the United States but across the globe. She enjoyed travel and realized that she might as well create an experience as she furthered her education. Jennifer landed on a year-long intensive MBA program located in Nice, France. Eleven years later, she remains based in the South of France where she is building her career and future.

“I decided to stay. I thought, ‘Okay. Let me give it a go. I will stay in France and try to find a job,’” Jennifer reflected. “I ultimately found a great job working in the travel industry, but in technology for travel.”

 

Financial Clarity

Jennifer Bourdeau was focused on building her professional acumen and career in France as a business consultant in product marketing, working with teams all across the globe. Throughout this period of growth, she sat down to examine her finances, which she was convinced weren’t enough.

“I took a look at my finances, and I realized that I had financial clarity. I thought, ‘Wow! I’m in a good position.’ Before that, I had always had this scarcity mindset. I didn’t have enough money. I needed to keep saving it,” Jennifer said. “I realized that I’m pretty comfortable right now and I can take some risks. And this aggressive saving that I had been doing had given me some options. One of the options was to say, ‘You know what? I’m going to take a break from the corporate world and try out something new.’”

 

Becoming a Full-Time Investor

At the end of June, Jennifer Bourdeau will be transitioning out of her corporate role and into a role that is solely focused on generating wealth and allowing her to make the most of her time: a full-time real estate investor.

Real estate was something that Jennifer dabbled in before leaving the United States. In 2007, she purchased a home that had significant equity in it. To ensure that she could continue owning it, unbeknownst to Jennifer, she started house hacking to pay the mortgage. Since then, her passion for real estate has only grown.

“When I moved to France, I became a passive landlord. I just rented the whole property with a property manager. I’ve done two new-build villas. We’ve also rented them seasonally. So that created quite a bit of income and a bit of work as well on our side to manage those rentals,” Jennifer shared. “I like active investing because it’s a direct reward and a direct reflection of my efforts. So every penny that is made, it’s because I did something well. Every penny that’s lost is because I did something wrong.”

 

Building a Team

Last year, Jennifer Bourdeau continued to diversify her real estate portfolio by investing in multifamily syndications. As she started in this new arena of investment, she realized that she needed to surround herself with individuals and operators who would help fill in the gaps in her real estate savvy.

“When I discovered passive investing, I had no team. I was so clueless. So I just consumed as much content as I could. I spent a really good amount of time upfront educating myself and learning who the players were in this space,” Jennifer said. “And from there, I started to create a little network. I discovered some investor groups. That is my team— these other investors.”

 

A Better Path to Success

Jennifer’s investor network is now more than one thousand people strong, with several hundred actively engaged in providing insight and best practices along the way.

“Now, my aim is more about creating wealth without creating a job. It’s been valuable to have insights and expertise and learning through sophisticated, experienced investors,” Jennifer reflected. “I just became disillusioned with this boomer’s dream where you go to college, you get a job, you buy a house, you get married, you stay dedicated to a company for so long, and then you retire at 65. I just realized there was a different way, a different path to get where I want.”

 

 

About the Author:

Leslie Chunta is a marketing consultant with nearly 15 years of experience in creating dynamic marketing programs and building brands for startups to enterprise organizations. She has worked agency- and client-side with high-growth companies that include Silicon Valley Bank, JPMorgan Chase, SailPoint, EMC, Spanning Cloud Apps, Ashcroft Capital, Netspend, and Universal Studios. www.thelabcollective.com

 

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Multifamily and Commercial Real Estate Insurance Advice for Investors

Multifamily and Commercial Real Estate Insurance Advice for Investors

Commercial real estate can be incredibly lucrative, but it also has inherent risks. Many of these risks can be mitigated with the right real estate insurance coverage. Jake Stacy specializes in this specific niche, and he works for an established, successful firm located in Seattle, Washington. More than that, he personally invests in commercial and multifamily properties. With this in mind, he offers real estate insurance advice to commercial property investors that is rooted in personal and professional experience alike. We met with Stacy to share his insight with others who may benefit from it.

 

Factors That Affect a Commercial Property’s Premium

Historically, the process that an apartment or commercial real estate owner or manager endured when shopping for new coverage has been time-consuming and stressful. For each quote requested, the individual had to provide between five to 10 pages of concrete data on the property. This covered everything from the age and square footage of the building to the construction type, the number of units, the average market rental rate for comparable units, and more. In addition to these factors, property location plays a major role in the premium. For example, the property’s location will impact what types of inclement weather and environmental factors it is subject to. The crime rate in the area also drives the premium.

Over the last several years, Jake Stacy’s firm has seen double- and triple-digit growth year over year because of its streamlined way to provide quotes. Specifically, it draws on various databases to access digital data. Then, it does not wait for new clients to reach out. Instead, the firm actively mines data to look for communities that would meet its criteria. It provides potential clients with a faster, easier way to set up more affordable coverage.

 

The Impact of Age on Insurability

Older properties are increasingly difficult to insure, according to Stacy. Specifically, he states that a property that was built prior to 1990 or 1980 may have limited options for carriers interested in insuring it. At the same time, the rates offered by the interested carriers may be much higher than the rates for a comparable yet newer property. This holds true even if the property is in great condition and has no significant claims in its history.

However, there are mitigating factors that providers look at. For example, if the property’s wiring has been updated from aluminum to copper and if it has a newer roof on it, it may be much more affordable to insure. Because these are factors that impact exposure to risk as well as the cost to insure the property, investors should pay attention to them when selecting a new investment property.

Another mitigating factor that may be considered is the age of other properties in an investor’s portfolio. Assuming that the investor’s other properties are insured by the same carrier, that carrier could make an exception with regards to the older property if all other properties are newer. This exception can be related to insurability as well as rate.

 

The Effect of Geographic Location

While the property’s location will specifically be used to research the crime rate for coverage purposes, the location’s environmental risks and weather conditions are also taken into consideration. For example, in California, the risk of wildfire damage can result in increased rates compared to a property in Michigan. The risk of wind, hail, and tornado damage in Texas can result in a higher real estate insurance premium than a comparable property in Washington may have. Properties along the Atlantic and Gulf of Mexico coasts are subject to hurricane damage and flooding. While all properties may be subject to some level of environmental risk, properties in some locations may be more likely to experience costlier damage. In fact, you could pay double the premium in some areas in Texas than you would pay to insure a comparable property in Seattle.

To offset these risks, providers look at specific factors. For example, in New England and in the Midwest where deep freezes are common, one of the biggest risks is related to water damage from ruptured pipes. Because of this, coverage may be more affordable and easier to obtain if the property’s plumbing system has been updated.

 

The Importance of Replacement Cost

When you insure a commercial or multifamily property, the policy will have a per-unit or per-square-foot replacement cost. Essentially, this is how much the carrier will pay out in the event of severe damage or a total loss. In some cases, building costs are increasing rapidly, and policies may not be aligned with the most current costs. With this in mind, the property owner may only receive a payout that covers a fraction of the cost to replace the property. This creates an unnecessary financial liability for the property owner through investing activities.

 

The Affordability of Deductibles

Investors have some wiggle room with regards to their deductible. By increasing the deductible, they can enjoy a lower premium. This equates to improved cash flow on a monthly basis. However, a higher deductible may be more challenging for some investors to pay in the event that they need to file a claim. Keep in mind that some situations may require the investor to pay the deductible at the drop of a hat on multiple properties. The investor should establish a deductible strategy across his or her full portfolio that is manageable and that optimizes profitability without creating unnecessary risk.

 

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Learn From These 6 Investing Mistakes

Learn From These 6 Investing Mistakes

While real estate investing can be incredibly lucrative, these investments come with the risk of moderate or even significant financial loss. Often, investing mistakes are tough lessons that come with a high price tag, but you don’t necessarily have to learn those lessons through your own experiences.

United Property Group Founder Dan Gorman has been investing in real estate for more than 22 years, and he has purchased more than $50 million in commercial real estate. Currently, he owns apartments, office space, and a few restaurants. While Gorman has enjoyed incredible success as an investor, he has also lost an extensive amount of money through mistakes with multifamily and commercial real estate. What can you learn from Dan Gorman?

 

1. Trusting Others With Skin in the Game

When Gorman reflects on some of his biggest financial losses and investing mistakes, he attributes them to not understanding the deals fully and relying on the advice of others. For example, many years ago, he was under contract to purchase a 120-unit apartment complex. The deal was complicated with financing involving bonds, low-income tax credits, and other unique sources of capital. Gorman admits that he did not understand the deal fully. He relied on the advice of others who told him it would be a profitable deal, but those individuals all stood to profit from the transaction. Gorman believes that they were advising him with their own agendas in mind.

Before closing, Gorman rightfully got cold feet. He tried to back out even though he stood to lose a large chunk of money at that stage in the transaction, but his attorney advised him that he could be sued for not following through. Ultimately, Gorman went through with the deal, and he lost a substantial amount of money for many years on end until he sold the property recently.

 

2. Failing to Understand the Transaction

Gorman recalls specifically asking his real estate attorney about one key aspect of the transaction, and his attorney could not explain that component of the transaction to him. In hindsight, Gorman realized that if an attorney who works with real estate transactions on a daily basis could not understand the structure, this should have been a red flag.

He warns others never to get involved with land contracts, lease options, bond financing, and other situations that are over their head. Take the time to understand all aspects of the transaction fully before committing to it.

 

3. Relying on Projections

This particular project was a rehabilitation project that involved putting $2.5 million into the property. The rents were below market value with a two-bedroom unit at the time renting for $650. The projection used by underwriting was $750 per month for these units. Gorman’s attorney advised him that the underwriting projections were too aggressive and that they may not be realistic.

Initially, Gorman saw dollar signs and ignored his attorney’s advice. However, he realized as the closing date approached that his attorney may have been right. This realization came too late because Gorman already had $250,000 of hard money invested in the deal. He has learned to use conservative, realistic projections that are based on actual market data.

 

4. Failing to Understand Contract Terminology

Ultimately, the 2008 real estate crisis led Gorman to go into default on the apartment complex. While he was not behind on payments, the lender backed out of the financing. The only option he realistically had was to file for bankruptcy. However, even though the multifamily property was owned in a protected entity, the bankruptcy triggered defaults in other investments that Gorman owned. Essentially, this one bad deal triggered the collapse of his investment portfolio.

 

5. Not Understanding the Tax Implications

In addition to dealing with the ramifications of bankruptcy and losing money on this 120-unit multifamily complex transaction, Dan Gorman was hit with a huge tax bill when he ultimately sold the property 15 years later. While he sold the property for exactly what he paid for it, he realized a net profit of $1.5 million. This was a surprise to him, and he states that he still does not fully understand how the calculation was made. Because of this net profit, however, he is now struggling to find a way to mitigate his tax liability with only a few months left in the tax year.

 

6. Overlooking Building Permits

This is not the only project that has provided Gorman with major life lessons. One of the more recent lessons that he has learned is tied to an office building that he rehabbed. He met with the building inspector and an official from the fire department to discuss his plans for the project, and they both told him to move forward with it. Through a miscommunication, Gorman believed that a permit was not required to do the work. Now, he is backtracking in an attempt to pull together all of the documents related to the permit. Unfortunately, this opened up a can of worms related to maximum occupancy, usage, and more. The project seemed fairly straightforward initially, but it has become overly complicated because he is dealing with the permit application process midstream.

 

Through his investing mistakes, Dan Gorman believes that residential real estate is easier to invest in than commercial real estate, but both require diligence. He is happy to discuss his investing mistakes with others in the hope that they may learn from them. At the same time, he acknowledges that he still has lessons to learn. Nonetheless, the mistakes that he has made have made him a more conservative, cautious investor.

 

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The Top 3 Trending Multifamily Amenities Right Now

The Top 3 Trending Multifamily Amenities Right Now

In the multifamily industry, change is constant. Over time, the industry has weathered many a storm, thanks mainly to being on top of the curve in innovation. This tendency has seen a relatively stable sector, even though the industry has faced its fair share of highs and lows. Whatever the economic impact on this sector, it has consistently delivered in customer satisfaction, promoted local businesses, and implemented newer technology and amenities to improve customer experience.

The new generation of renters is tech-savvy and demands the best amenities that provide comfort and enjoyment in multifamily units.

The pandemic has accelerated apartment searches due to the economic downturn. Though the searches have matched the levels that were seen before the pandemic, customer expectations have changed and property managers have to enhance their offered amenities if they expect to convert leads to leasing. 

During the pandemic, precautions have had to be put in place for the common good. Common areas have to be sanitized on a regular basis and on-site staff on duty has to be provided protective gear such as hand sanitizer, protective masks, and, if the situation warrants, PPE kits. In these circumstances, which amenities and services can be provided while keeping operating costs within budget? Learn which amenities are quickly gaining popularity below.

 

Catering to the Work-From-Home Renters

Over the years, many multifamily units have provided co-working spaces to the work-from-home labor force. However, due to the pandemic, more and more people are working from home, so having a co-working space will be a definite attraction to prospective clients looking to lease apartments. Offering improved and updated amenities in co-working spaces will be of prime importance to residents since it has been predicted, even after the pandemic, that this may be the new norm.

Since health and safety have been prime concerns, workspaces should have properly distanced workstations and seamless Wi-Fi connectivity with sufficient charging outlets to prevent crowding. An added attraction like a coffee bar, pool table, etc., can also provide an enhanced ambiance.

 

Attractive Outdoor Spaces

Scientific researchers determined during the pandemic that outdoor, open-air settings were safer than crowded indoor settings. Most people prefer being outdoors to being cooped up indoors anyway, and all the time we’ve spent indoors during the pandemic has reportedly increased anxiety levels.

Providing amenities for physical fitness, tables, and chairs in a well-laid-out garden setting or a play area for children can act as a mood enhancer. Many residents of multifamily units are drawn to amenity-loaded outdoor spaces.

Offering a spacious balcony and patio in residential units is another well-thought strategy for multifamily developers. Additional popular amenities that can be provided include dog walk areas and open-air lounges. All these amenities add to a pleasant living experience, which will attract many prospective residents.

 

Remote Technology

Technology is also a clear front-runner in helping people overcome the effects of the pandemic. Cloud computing and social media apps, for example, are optimizing businesses like never before. This evolution of technology and its incorporation into daily life has allowed a semblance of normality. It has allowed us to connect with family and friends and order food and groceries, plus a host of almost limitless items. Even getting medical advice remotely from a qualified doctor is possible. Multifamily units must offer such amenities, or they will lose prospective clients.

The upheaval caused by this pandemic has affected almost everyone, including the multifamily housing industry; however, challenges can be mitigated by making subtle changes in the current business model. The multifamily unit should offer as many useful amenities as possible in order to become a hot, sought-after living space in the city. Investing in extra amenities may cost money, but in the long term, it is money well spent.

 

 

About the Author:

Veena Jetti is the founding partner of Vive Funds, a unique commercial real estate firm that specializes in curating conservative opportunities for investors.

 

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The First Timer’s Guide to the Best Ever Conference

The First Timer’s Guide to the Best Ever Conference

With a name like “Best Ever,” it’s easy to get excited, and maybe even a little intimidated, about attending your first Best Ever Conference. You might be wondering what makes it the best ever, and how you can get the most out of this conference. And we want to help!

That’s why we’ve developed our First Timer’s Guide for your first Best Ever Conference to ease your mind and help you get the most value out of your time.

 

How the Best Ever Conference Is Designed

The Best Ever Conference, known throughout the commercial real estate industry as the BEC2022, is designed specifically for commercial real estate professionals to focus on relationships and education that will directly impact growth for both you and your portfolio.

 

Our Speakers

Our speaker selection process isn’t about who we know, it’s about what YOU want to know!

Our team listens to and actively engages with commercial real estate investors like you all year round to ensure we stay at the forefront of the commercial real estate investing industry, choosing speakers with expertise and topics that you want to learn about most.

Past speakers have included industry giants such as:

And more importantly, past topics have included:

  • How to Scale Your Syndication Business
  • Lessons in Becoming a Better Leader
  • How to Build a Powerhouse Investing Team, and
  • Multiplying Your Real Estate Portfolio

 

Here are some tips for getting the most out of your time at the BEC2022:

 

Before the Conference

In the weeks leading up to the conference, take some time to create a game plan for your experience. Consider who you want to meet, which services and vendors you might be interested in learning more about, and what topics and insight will be most valuable to you and your goals.

 

Set Your Speaker Session Lineup

First, we encourage you to check out the BEC2022 speaker lineup on our website at besteverconference.com. We will update the conference website regularly as new speakers are confirmed.

Research each of the BEC2022 speakers before the conference. Get to know who they are, what they bring to your table, and the type of information that will be presented. Consider how this information can help you grow your business and portfolio.

It is also a good idea to make note of any questions that come up during your research that you would like to ask the presenters.

Now, break the different speaker sessions into three categories to set your custom speaker session schedule:

  • Must attend
  • Would like to attend
  • Don’t need to attend

 

Shortlist Your Exhibitor Interests

Another good way to make the most of your time at your first Best Ever Conference is to take a look at the exhibitors that will be present. Which exhibitors do you want to learn more about?

Next, go ahead and make a shortlist of the exhibitors you’re most interested in and keep this in your back pocket to make the most of your downtime between sessions at the conference.

 

At the Conference

Balance Your Time

As with most conferences, the top three things you’ll do at the BEC are learn from speakers, network with speakers and other attendees, and browse the exhibitor booths. To get the most out of the Best Ever Conference, you’ll want to strike a balance for the way you spend your time.

Set your speaker schedule into your calendar with locations and reminders so you’re never late to your “must attend” speaker sessions.

During your “don’t need to attend” sessions, try to make your rounds to the exhibitors based on your preparations. Spread these visits out to allow for plenty of time to take care of your basic needs and stay comfortable, fresh, and energized throughout the conference.

And last but certainly not least, plan to spend the rest of your time networking with speakers and other conference attendees.

Most likely, you’ll have questions for the “must attend” speakers — either prepared questions from your pre-conference recon or questions that came up during the presentation. Here is an insider tip: Don’t try to talk to the speaker immediately after their presentation. That’s when everyone is going to want to talk to them and you’ll spend a lot of time waiting in line or look like a weirdo running up to them to get to the front of the line. Instead, talk to them between sessions, at private events, and in the additional group events and parties that will take place at night.

All Work and No Play — Not Us!

Lastly, we’re excited to announce that the BEC2022 will be held at the Gaylord Rockies Resort in Denver, Colorado.

Many BEC attendees use the conference as an opportunity to vacation in Colorado either before or after the conference — skiing and snowboarding are the most popular activities. If this is the case for you, don’t forget to pack your snowboard, skiing, or sledding gear!

 

After the Conference

The value from the BEC doesn’t stop at the end of the conference, it only continues. The relationships you will develop and the knowledge that you take away can be implemented immediately and last a lifetime.

If you haven’t already, check out www.besteverconference.com to learn more about the Best Ever Conference and reserve your ticket today. Check back often for updates, and we’ll see you at the Best Ever Conference in February 2022!

 

 

 

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Managing Up With Jonathan Ghaly

Managing Up With Jonathan Ghaly

As he looked back on his real estate career, Jonathan Ghaly realized that he first worked for a syndicator before he started doing deals with one. In the mid-2000s, Jonathan got hired as a property manager for a 100-unit apartment building. On his first day, he was handed a keychain full of keys and a cell phone that rang non-stop.

Around 2007, the syndicator started to take risky gambles, unbeknownst to the tenants. He began to take on additional investors while subsequently not paying down the mortgage. With the economic crash, the syndicator turned all of the properties into foreclosure, leaving Jonathan to find his next steps.

 

Early Success

“I learned a lot. He introduced me to ‘Rich Dad, Poor Dad,’ and the cash flow game. I saw his mistakes, of course,” Jonathan recalled. “During the crash, I had my real estate license already, and no one was hiring. So I just said, ‘Well, I might as well try to sell real estate.’”

Jonathan’s real estate career started to flourish. He started with two deals his first year and steadily grew upwards. In 2013, he transitioned from only selling properties to buying properties of his own.

“I partnered with a friend because I was just too scared to pull the trigger in the beginning, and we bought eight units together,” Jonathan said. “I bought him out a few years later, and then I just kept buying more.”

 

Coffee Talks

Today, Jonathan’s portfolio consists of 15 rental properties and an assisted living facility, in addition to his investment in multifamily syndications. Reflecting on the community of people who helped elevate him to this place, he said it all started with one friend and a morning coffee session.

“I felt the need to call a friend of mine who I had helped buy his first couple of properties. He was a teacher and he quit to be a fix-and-flipper. I said, ‘I would love to just talk about this stuff — what we’re doing and what to invest in and what not to invest in — with you. Would you have any interest in meeting on Thursday mornings and having coffee at my house?’” Jonathan shared. “He said, ‘Perfect. My kids go to school right near there. I’ll drop them off and come over.’ This beautiful friendship came out of that, and we put everything on the table as far as investment stuff.”

Jonathan’s inner circle of like-minded investors continued to grow larger, with others interested in their open and honest discussion of real estate and real life.

“These investor-mentor meetings or inner circle meetings are amazing, even if it’s once a month. After my experience with it, I would highly recommend it to any investor because you never know what good can come out of it,” Jonathan said.

 

Shifting the Game Plan

Even with a trustworthy network, Jonathan Ghaly believes that the work is never done with self-education and believing in your own intuition on a deal.

“Experience is a big word in the industry. But even with that, a lot of people can have experience but still go through a protocol. So, are you like a machine just going through protocol without common sense? Or do you really understand real estate where you can get creative, and you can see through these blind spots? Because it’s all about shifting the game plan. Keep educating yourself in real estate, and don’t get distracted,” Jonathan shared. “I can get really distracted, but when I do all this research about these other things, I come back and realize it doesn’t beat the real estate return.”

 

The Importance of Trust

Reflecting on his journey to date, Jonathan Ghaly believes that the fundamental element of any successful real estate partnership is similar to that of marriage: trust. While some things are learned the hard way, it’s essential to surround yourself with a team that complements your strengths and can compensate for your weaknesses.

“Find a partner you can trust with your life because it is a marriage. I find myself constantly partnering with people who are exactly like me,” Jonathan said. “We should build our teams up so that the strengths and weaknesses, and skills and non-skills, are really evening out and covering everything across the board.”

 

 

About the Author:

Leslie Chunta is a marketing consultant with nearly 15 years of experience in creating dynamic marketing programs and building brands for startups to enterprise organizations. She has worked agency- and client-side with high-growth companies that include Silicon Valley Bank, JPMorgan Chase, SailPoint, EMC, Spanning Cloud Apps, Ashcroft Capital, Netspend, and Universal Studios. www.thelabcollective.com

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4 Tips to Raise More Money From Passive Investors

4 Tips to Raise More Money From Passive Investors

Have you ever found yourself asking: How could I raise more money from passive investors for real estate investing? If so, you’re definitely not alone. It’s one of the industry’s most common questions.

To help you out, here are four proven strategies for earning more funds from passive investors. If you can incorporate all four of these techniques into your work, your syndicate should keep thriving.

 

1. Launch a Thought Leadership Platform

Your network, also known as a sphere of influence, is one of your most valuable assets. Grow it, and you’ll almost certainly grow your business. You’ll have more leads and more opportunities, and more people will be eager to invest with you.

A thought leadership platform is the best tool for growing your network. Examples of effective platforms include blogs, podcasts, and video channels. Real-life events can work, too. Interview formats are often ideal for these platforms. You can invite experts to share their knowledge, and you’ll attract many of their fans when you talk with them.

Flourishing thought leadership platforms share two qualities. First, they’re consistent; new content gets released at regular intervals.

They also focus on unique topics. They’re not bland, generic, or overly broad. For a marketable topic, try to incorporate an intriguing aspect of your life. For instance, if you are or ever were a schoolteacher, you might focus on how educators can invest on the side and how they can teach real estate lessons in the classroom.

Remember that a thought leadership platform is a long-term proposition. It will almost certainly take time — maybe a year or longer — to see impressive results. A good place to start, though, is with people you already know.

That group could include friends, family members, coworkers, neighbors, classmates, and the people you see at church or the gym. And those individuals might recommend your platform to people they know. Some of these people may even be willing to invest in your syndication projects.

In addition, make sure you’re posting your content on large and popular distribution channels like Facebook, LinkedIn, YouTube, and Bigger Pockets. Such channels make it easier for web searchers to discover you.

 

2. Ask Positive Questions

The words we use impact the way we think and vice versa. Thus, if we often use negative phrasing, we tend to think negatively. And negative thinking limits our options, sometimes on a subconscious level.

Maybe you’ve asked yourself and others questions like these:

• Why aren’t I more successful?
• Why can’t I ever find good leads?
• Why do my syndication attempts always fail?

Because these queries focus on negative concepts, they reinforce in your mind a certain idea: that you won’t ever succeed.

Therefore, if you’re talking with an expert or just doing your own research, it’s much more productive to pose positive questions. Ask about proactive steps you can take, questions like the following:

• What’s the first thing I should do to raise capital for a particular deal?
• Where can I go in my community to find outstanding leads?
• Who in my sphere of influence could help me attract new investors?

When you put forth such questions, you get solid information that you can use right away.

More than that, these questions put you in the frame of mind for business success. Instead of making you feel defeated, they can empower and energize you. They remind you that you are in charge of your destiny and that you have the resources to improve your situation at any time.

 

3. Make Your Own Opportunities

Once you’re asking good questions, you’re ready to create great opportunities. Never sit back and wait for passive investors and deals to come to you. Go out and find them.

If you’re in need of funds, for example, go to as many conferences, meetup groups, Bigger Pockets forums, and other networking events as you can. Contact leading industry bloggers and other online influencers as well. Over time, your network should grow considerably, and your investment income should do likewise.

In the same way, deals are waiting for you. Of course, you can employ old-school methods such as cold calls and direct mail. And, once again, it pays to be an enthusiastic networker. Reach out and build relationships with as many local property owners as possible. You’ll get inside intelligence that way, and those people just might call you first when they’re ready to sell.

 

4. Find Complementary Partners

A business partner can be extremely helpful. When you join forces with someone, your sphere of influence will immediately double. You can accomplish twice as much in a given week or month. You can motivate one another to ever-greater heights. And, if you choose the right person, your weaknesses will no longer hold you back at all.

That’s because the ideal business partner is someone who’s good at what you’re not so good at. As a result, the two of you can both focus on your strengths, leading to a more formidable operation overall. For example, if you’re a whiz at underwriting but not so hot at marketing, seek someone who’s a genius at the latter.

Naturally, finding such a person requires introspection. You have to honestly and objectively assess your past performance to figure out what you do well and less well. Also, never feel bad about any weaknesses. Everyone has professional weaknesses, and being able to recognize them is, well, a strength.

Finally, all of these methods have something in common. They’re not one-offs. Instead, they’re behaviors for the long haul. They’re techniques that can win over passive investors year after year. In that way, investing in success really is a way of life.

 

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Real Estate Lessons From the Ralph Lauren Story

Real Estate Lessons From the Ralph Lauren Story

I have a unique topic to share with you. You might be wondering from the title, what does Ralph Lauren have to do with real estate? Is he a real estate investor? Did he write a real estate book? Not exactly.

I’ve been reading a lot of biographies lately. Greenlights by Matthew McConaughey, Can’t Hurt Me by David Goggins, and most recently the story of Ralph Lauren: Genuine, Authentic by Michael Gross. The reason I wrote this blog is to highlight a few parallels between Ralph Lauren’s story (the story of building his fashion brand) and investing in real estate. My hope is that you find these lessons impactful and inspirational.

Before we begin, let me ask you a question: When you think about long-term investing, what comes to mind? For me, I think of building something generational. Some people use the term generational wealth.

Said another way, what does money mean to you? If you had a billion dollars in your bank account tomorrow, what does it mean? What would you convert the money into? Would you travel more? Spend more time with family? Be more charitable? Buy exotic cars and houses? Everybody is different — but what would you do?

These are big questions, so we will come back to them at the end of the blog. For now, let’s explore some of the takeaways from Ralph Lauren’s story and relate them to real estate.

 

Leverage Other People’s Expertise to Build a Team

Ralph Lauren is a master at building teams. Did you know Ralph Lauren never went to design school? He didn’t go to college to be a fabric or clothing designer. He doesn’t even do his own sketches for design concepts. What’s the lesson?

Ralph leverages a team of experts who work at their own highest and best capacity to run his company and create designs. Ralph has a gift for finding inspiration and he’s a visionary; in other words, he has the “eye” for design. I’m not underplaying his talent; I am highlighting that he’s built a team and he focuses on his own highest and best potential. He outsources the majority of the other tasks to free up his time.

You and I can do the same in real estate. Take investing in apartment syndication for example. If you are not the expert in all areas of real estate or do not wish to do all the work, you can simply partner with teams who are experts in underwriting, finding off-market deals, property management, construction, and technical analysis. You might consider this investment model so you can focus on your highest and best potential. That’s the lesson; real estate and business are team sports. What role do you want to play in the team? You have a choice.

 

Think Alternatively

Ralph Lauren went against the grain in terms of the fashion industry. In the 1960s, he took a look at what everyone else was doing and he chose to go in a different direction. This same concept can be applied to investing. Most people are investing based on their parents’ advice, mainstream marketing, billboards, and TV advertisements. These outlets mostly suggest that you follow the herd and turn your money over to Wall Street. In other words, put your money in a 401(k) or IRA, and buy annuities, stocks, bonds, and mutual funds. There’s nothing inherently wrong with these investments. As many of you know, I used to work for a very large, well-known brokerage firm to learn this type of investing and stack it up against real estate. You may find, as I did, that there are sometimes superior investment vehicles in the alternative sector.

To think “alternatively” in terms of investing is to think private real estate, private businesses, precious metals, oil and gas master limited partnerships, and so on — typically, investments that are not publicly traded. There are thousands of investment options outside the world of Wall Street.

Ralph Lauren never set out to be a “grand designer.” He didn’t say to himself at an early age, “I’m going to launch a mega clothing line one day.” In fact, he refers to himself and his company as “anti-fashion.” Going against the grain, thinking alternatively, and finding your own way can often be the best approach. As poet Robert Frost might add, “I took the [road] less traveled by, and that has made all the difference.”

 

Start Simple, Then Build From Your Foundation — the Key Is to Start

Ralph Lauren started with a simple idea. He was observing men’s fashion in the 1960s. At the time (generally speaking), everybody was conforming to a standard gray or black suit and black or neutral colored tie. Most everyone shopped at the big box retailers, and there wasn’t much of a “designer’s touch” in men’s fashion.

Ralph started his business by creating a men’s necktie. In the 1960s, men’s ties were typically two-and-a-half inches wide. Skinny ties — think about the TV show Mad Men. Ralph decided to mix things up and he created a four-inch-wide necktie, nearly twice as wide as the industry standard. He also added vibrant colors, patterns, and designs to top it off. Bloomingdale’s (a major NYC retailer) took a gamble and partnered with Ralph Lauren and, lo and behold, the neckties sold. Then customers started realizing, “If I have this necktie that’s vibrant and colorful, I need a new dress shirt that goes with it.” So, Ralph started making men’s dress shirts. Then his customers had a new shirt and new tie — why, they needed a new suit to go with them, right? He expanded into the suit business. And so it began.

As we know, Ralph Lauren today has expanded into women’s clothing, home décor, perfumes and colognes, activewear, watches, and the list goes on. It has become a mega-company, but it has taken decades to get there. The lesson is to take action; start with a single step forward.

How does one begin investing in real estate? Some prefer to start with buying shares of a publicly traded REIT (Real Estate Investment Trust) for as little as $10 per share. I use that number for example purposes, of course — each REIT will be priced differently. Some may be $10 a share, $20 per share, $100 per share; it depends on the company. The point is, it doesn’t take millions of dollars to get started. In fact, this is what my nephews are doing to start their passive income journey, and they’re starting in their teenage years, which is incredible… if they keep it going.

You could invest in single-family homes. This might require $25,000 to $50,000 in the form of a down payment. You could house hack (rent spare bedrooms), flip it, turn it into a vacation rental, or purchase a buy-and-hold rental. You could also invest in real estate syndications as I do. You may have to come up with $50,000 to $100,000 to invest in a private placement offering; however, the passive benefits may be worth it. The bottom line is that everybody is different. Everybody has a different risk tolerance. Do what makes sense to you, start with what you’re comfortable with, evaluate your risk tolerance, and leverage licensed advisors if you need help making a decision or strategizing.

The takeaway is that building a business or investing in real estate is not an overnight success. It can take decades to get where you want to be. The key is to start your foundation, then build from your foundation.

 

Setbacks Are Part of Life — Be a Realist

This next lesson is not as pleasant, but it is necessary to discuss. Setbacks are part of life. There was a point in the 1970s when Ralph Lauren almost lost the business and nearly went bankrupt. It came at a point of rapid expansion. You would think from the outside looking in, that the company was doing great, but the inventory, overhead, and payroll began to exceed the cash flow of the business.

Hopefully, if you and I are investing in cash-flowing real estate, we’re not taking on such risk. At least not that of a venture capitalist running a startup company. There will always be hurdles and setbacks with investing, in business, and in life. There’s always a recession around the corner and not every deal you invest in is going to be a home run. In fact, you might lose money in some deals. That is why diversification is so important. Just be a realist. In other words, you and I can’t bank on consistent 10–15 percent returns for the next 50 years; it doesn’t work that way. Since we know there will be setbacks, let’s plan for them. As Warren Buffett’s business partner Charlie Munger says, “Prepare for the worst, hope for the best.” He refers to himself as a “cheerful pessimist.” Excellent billionaire advice.

 

Design Your Own Path and Live It

The final lesson that I want to share with you is to design your own path and live it. This is one of the most inspirational takeaways from Ralph Lauren’s story. What did he actually do? Ralph Lauren created a lifestyle image for his brand, similar to that of a Hollywood film. He designed an imaginary lifestyle of romance, freedom, abundance, optimism, and a vision of the American Dream, and he sold that vision to his customers. The most inspiring part came after decades of creating this fantasy lifestyle. Ralph began living that lifestyle in real life.

If you have ever seen Ralph Lauren, he wears his own brand, he lives in the houses you see in the photoshoots, and he drives the collector cars you see in the ads. Genuine and authentic. That is the beauty of it all, and also why I’m so passionate about teaching you and others about the benefits of investing for passive income. The purpose is not about money, it is about designing the life that you want to live.

At the beginning of this blog, we explored what money means to you. What would you do if you had time freedom? In other words, if you freed up your time by generating more passive income each month compared to your monthly expenses. I encourage you to get started on your passive income journey if you haven’t already. Get started with designing your life. A life on your terms.

Thank you for tuning in and reading this blog. I don’t blog much anymore, but when I do, it comes from inspiration, passion, and the desire to help you achieve your goals. I hope you found these takeaways and lessons inspirational, impactful and valuable. Until next time…

 

 

To Your Success,

Travis Watts

 

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Commercial Real Estate Tips for Investors Ready to Retire From Their Full-Time Jobs

Commercial Real Estate Tips for Investors Ready to Retire From Their Full-Time Jobs

Many people who invest in commercial real estate do so in hopes that they’ll be able to quit their full-time job. While your day job may fund your initial investments, the promise of a passive income is enticing. Anna Kelley is a real estate investor who made this dream happen. She is also a wife, mother, and author. Wearing all those hats means that her time is limited. She has perfected the art of achieving her retirement goals through real estate investing.

That’s not to say that investing in commercial real estate is easy. You have to put in the work, which involves planning and executing your moves intelligently. Her story uncovers some excellent tips for a commercial real estate investor who wants to transition away from their full-time job.

Start Small

Thinking big is a great idea. But starting small can help you get experience so that you can work out the kinks without bottoming out.

One of the best ways to begin the investment strategy that will take you to retirement is to buy property that you can live in. This would need to be a multi-use or multifamily building. If you can cover your mortgage with the rental fees for the areas that you don’t live in, you’ll save thousands of dollars a year. Then you can put the money that you’re saving on your mortgage into new investments.

Network

Talk to people in the areas where you’d like to buy property. You might find unlisted opportunities. You’ll make sellers aware that you’re in the market. You never know when an opening for a lucrative deal will arise. As you make more acquaintances, word of mouth will help you find new prospects.

Negotiate Better

Negotiating doesn’t mean low-balling people or making senseless offers. It involves poring over numbers, knowing your budget, and understanding what adds value.

Some factors to consider include:
• Rental history
• Current tenants
• Environmental concerns
• Reasons that the owner is selling
• What the competition is doing

One way to test the waters is to discuss a lower offer with the broker. If the owner is willing to drop the price, you know that they have wiggle room. Be patient and see if the listing price drops over time. Then, make your lower offer. It’s more likely to be accepted.

Researching the factors above and knowing the market will help you make knowledgeable points. If you present a clear case for the property’s value, you’re more likely to be taken seriously.

Don’t Chase Cash Flow in the Wrong Market

The research that you undertake to make negotiations will help you make effective decisions. If a property doesn’t have great cash flow now, consider what it would take to improve it. You can’t always add value if the market isn’t favorable.

Also, remember that no one cares about your cash flow more than you. You may think that you can wash your hands of a less-than-perfect deal by hiring a management company to fill the space, collect rent, and reduce expenses. But you’ll likely spend more time and money than it’s worth to keep things profitable.

Consider Syndication

You don’t have to do it alone. Owning a larger property can deliver a larger passive income. But you can’t benefit from that if you can’t afford it.

Syndication allows you to merge resources, skills, and capital. As a syndicator, you can put in time and effort instead of capital. Your investors will provide you with the majority of the funds to launch the investment. You may receive an acquisition fee and a portion of the return when you sell. If you don’t use a third-party management company, you can ask for a property management fee.

Add Value

Most people think about adding value by enhancing the property physically. But flipping a property isn’t just about the upfit. You can achieve a similar result by looking at the operations.

Can you reduce expenses? Can you raise rents? Can you fill vacancies? You can often add value to a commercial property just by managing it more efficiently.

Don’t Underestimate Rehab Costs

It’s important to estimate repair expenses when calculating your budget and negotiating a purchase price. Structural issues aren’t always obvious, though. Some buildings are prone to problems that crop up down the road even if they’re not evident at the time of the sale.

This is where networking and research come in. Work with inspectors, realtors, and contractors who are familiar with the area. They’ll give you a good idea of what to look for now and what to expect in the future. You’ll be able to factor in the expenses associated with those rehab costs to come up with an appropriate offer.

Maintain a Strong Vision

Although commercial real estate can provide you with passive income, you can’t sleep through the process. It takes a great deal of work, determination, and perseverance to achieve your retirement goals. When obstacles arise, your vision will help you press on.

Your vision should include your business plan, which combines a structure for your business operations. It will include your goals and the framework that you’ll use to achieve them. But your vision should also take into account the reasons that you’re putting in the effort. Knowing your “why” will help you endure when the “what” becomes challenging.

A vision doesn’t have to be set in stone. As you progress, you’ll learn more. You may adjust your vision as necessary as you enhance your cash flow, develop more equity, and build capital.

If you plan to retire on your commercial property investments, you should focus on consistent cash flow, low vacancy risk, and optimal leasing contracts. You may not be able to retire today, but creating a solid vision that’s based on research and market analysis can help you execute your business plan and quit your full-time job.

 

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How to Provide Value to a Partnership Without Capital

How to Provide Value to a Partnership Without Capital

How does one bring value to a partnership? I was asked this question last week while speaking with a young man who is interested in real estate investing. His conundrum is that he only has a small amount of capital. Thus, he wanted to know how he could provide value to a partnership that would provide him an equity stake in a deal. Unsurprisingly, this exact question is bandied about among new investors and old. Not all partnerships are on equal footing from day one. Within this blog post, I hope to provide some insight into how to provide value, earn equity, and become a partner when there is no money to invest on your end.

 

Bird-Dogging the Deal

The first and most popular way to obtain an equity stake in a deal is to be the one to find the deal. This means that if you are the hopeful investor with no money, your value is in finding the property, seller, or bringing people together. So how does one find the deal or bird-dog? Answering that is not as simple as it sounds. The short answer is that there is a lot of time spent scouring neighborhoods, property listings, tax records, looking over tax dockets at the courthouse, going to those properties, talking with the owners or agents, and becoming familiar with every aspect of the property. Once a property is identified, what is the deal?

Any investor that will bring money to the table will want to know the numbers. The non-money investor needs to have all the numbers crunched and know that deal backward and forwards. Know the value add and how this deal can be a good buy. Is it simply return on investment or is it an appreciation play? What is the value of the deal? Know the goal of the deal. Simply buying a property is not enough; it is important to know how the deal will bring value to the partnership.

Once you have found the property, be it commercial or residential, you then have to be able to show the money investors how they are going to see returns on their investment. There are numerous apps, programs, and websites that can help you prepare a pro forma on the property. Investors want to see numbers. Numbers control the deal. Know your numbers.

 

Finding the Right Partners Once You Have the Deal

Once you have a deal put together, how do you find the right partner? It is simple to say “networking” and shrug, but that is not a genuine answer. Websites like Best Ever Commerical Real Estate, meet-up groups, and talking with your banker, real estate agent, lawyer, accountant, or insurance agent are good places to start. Those points of contact need to be cultivated to grow relationships. Organic relationships will generate more leads than you can possibly imagine. That said, there are plenty of money investors out there that are looking for deals. If you look enough, they will be everywhere. Investors are always on the lookout for new deals.

Once you have found a potential partner, it is paramount that you and they start the vetting process. You need to learn as much as you can about your partner. That does not mean their blood type and mother’s maiden name, it means that you need to make sure that your soon-to-be partner has the capital, has experience in investing, and is willing to be transparent with you — after all, this is a marriage of sorts.

 

Structuring Your Equity Stake

What does all your effort calculate up to in the deal? Is it 5%, 10%, 15%, 20%, or more of the deal? Is there an equity earn-out? Meaning, does your equity in the deal increase once the money investors have recouped their down payment? The answer to this question is that you need to have this number in your head when you create the deal. You need to understand and realistically value your efforts in putting this deal together. In the context of syndication, this is the role of the general partners. The GPs bird-dog the deals and it is the limited partners (the money investors) that bring the cash to the table. However, not every deal is a syndication. Most deals are simply buying a building, house, or multifamily property, but the concepts are the same.

Spend the time with your potential partner in outlining your partnership agreement. It is time well spent. Speak with a lawyer who handles partnerships, LLCs, and does real estate work. Do not cheap out on getting the right advice — these boxed agreements online will do you more harm than good. Get a tailored partnership agreement. Ask questions and understand the agreement as well as you understand your deal. Learn about the new ideas of the lawyer or your partner. Structuring your deal is as much an art as is putting the deal together. Find the right structure for you.

 

Good luck out there!

 

About the Author:

Brian T. Boyd, JD, LLM, www.BoydLegal.co

 

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Boost Your Investment Growth in 2022 With the Best Ever Conference

Boost Your Investment Growth in 2022 With the Best Ever Conference

It’s official — the Best Ever Conference is going to be back in person and better than ever in 2022 in Denver, Colorado.

Attendees will have the opportunity to take full advantage of engaging keynotes, workshops, and networking with top real estate investors and innovators, all while forming long-lasting relationships with other high-quality attendees.

Investors eager to boost their growth in 2022 will want to mark their calendars for this game-changing event.

We asked Hunter Thompson, Managing Principal of Asym Capital, to share his thoughts on the Best Ever Conference. “There’s a part of me that wants to try to say, ‘It isn’t REALLY the best ever!’ but, you know what — it actually is,” he said. “When it comes to the caliber of the speakers, the networking opportunities, and the overall energy of the event, it just might be the ‘Best Ever!’”

Hunter added, “If I’m going to take the time out of my schedule to travel to a conference, it needs to be a five-star experience. Best Ever never fails to deliver on that requirement, which is why I attend every year.”

Purchasing a ticket today will allow attendees access to monthly virtual group discussions known as Mini Masterminds, which have already started. These Mini Masterminds provide the opportunity to immediately begin connecting with other attendees and continuously build relationships prior to meeting in person at the conference.

The BEC three-day agenda is going to be packed with next-level value and opportunities for growth. Not one day will be the same.

Want to elevate the experience? There is a limited amount of VIP tickets available. These tickets include everything in General Admission, plus additional exclusive opportunities to meet conference speakers, attend private social events, and more.

To purchase your ticket today, visit besteverconference.com.

 

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Stop Using Projected Returns & Focus on This Instead

Stop Using Projected Returns & Focus on This Instead

There is a dirty secret that every passive investor should know about real estate syndications. And today, I’m going to share the truth.

Syndicators are wrong on projected returns 99.99% of the time.

It’s a guess at best. An educated, informed, well-intentioned… guess.

So stop using projected returns to make investing decisions.

You see, there are WAY too many factors impacting returns for us to provide an accurate projection. From rent growth to cap rates, there are numerous projections, and each assumption has an impact on returns. It’s hard enough to forecast next year’s projections, let alone the next five to 10 years! This is why you shouldn’t rely on projected returns to make investing decisions.

So instead of focusing on projected returns, focus on the fundamentals of the investment. In particular, there are four key areas to determine if an opportunity is actually a good investment.

 

The Four Keys for Passive Investing

 

The Market

When looking at markets, many people tend to focus on population growth. It’s an easy narrative. As more people move to an area, apartment demand increases, ultimately driving up rents. But in the words of ESPN’s Lee Corso, “Not so fast, my friend.”

Population is an important metric, but it is not the ONLY metric when looking at markets. You want to monitor employment growth and industry diversification as well. Other key metrics include rent growth and absorption rates. But these are just precursors to what you really want to know. Can you expect demand (and rents) to be higher in the future?

Population growth sheds some light at the macro level, but you’ll want to determine why demand will increase for the property you are targeting, opposed to somewhere else in the metro area. When selecting a submarket, pay attention to key drivers like proximity to interstates, nightlife, employment centers, and desirable schools.

 

The Operator

The person controlling the key aspects of the deal is one of the most critical things to consider when investing. You want an operator or sponsor who has the knowledge, capability, character, and consideration to effectively lead the deal. It helps to find someone who has a risk tolerance that aligns with your own, a clear vision for their projects, and a proven ability to get results.

You will depend on this person for their market knowledge and investment leadership so be sure it is someone you know, like, and trust.

 

The Asset

The tangible, physical property is certainly critical when investing. Older properties inherently require more maintenance. Lower-income properties typically encounter more wear and tear. Newer properties have fewer maintenance issues but often provide less cash flow. The age, condition, and upkeep of the building could mean the difference between a cash cow and a lemon in need of a little squeeze and some sugar.

The question is, do you prefer milk or lemonade?

It’s important to note that commercial acquisitions are actually business acquisitions. You are not just buying a physical structure, you’re buying a company. Because of this, you need to scrutinize the current performance and determine the upside potential.

 

The Business Plan

Speaking of potential, the business plan is the final area to explore when reviewing an investment opportunity. This plan should be well-constructed and deeply vetted, with a clear vision for execution. However, it should not be the only path to success. Even the best-laid plans can be forced to change, so it’s critical to work with an operator that has the ability, humility, and foresight to acknowledge that a change is needed and pivot accordingly.

Strong returns are driven by strong operators with a savvy business plan for a quality asset, in a good market. Not from OMs, spreadsheets, and pro formas. Stop focusing on projected returns and ensure you are investing with quality people and properties. When you do this, you are more likely to realize the returns you seek and mitigate some of the downside risks.

 

 

About the Author:

John Casmon has helped families invest passively in over $90 million worth of apartments. He is also the host of the #1 rated multifamily podcast, Target Market Insights: Multifamily + Marketing. Prior to multifamily, John was a marketing executive overseeing campaigns for Buick, Nike, Coors Light, and Mtn Dew: casmoncapital.com

 

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Are You Asking the Right Questions When It Comes to Private Investments?

Are You Asking the Right Questions When It Comes to Your Private Investments?

I am not much for sizzle, glamour, or sensational TV. However, now and again my teenage daughter will put something in front of me that grabs my attention. Have you seen the Nightbirde ditty from America’s Got Talent on YouTube? You should take a moment; it is touching. When competing as a singer on AGT, artist Jane is asked about her life. Her answers are jarring and painful. What follows is amazing.

This grabbed my attention because, without the panelists’ questions of the artist, the performance would have been sensational. But within the context of Jane’s life circumstances, her performance was beautifully profound. My point? The right questions allowed the audience to experience the strength of an undaunted human spirit mired in the most challenging tragedies of human life.

 

Asking the Right Questions

Hitting closer to home, you too must ask the right questions related to your private investments (think self-storage, multifamily, and industrial). The art of finding the right question is critical as you determine value and find facts and truth.

As you approach investment opportunities, you face a significant risk because your assumptions about how the investment will function might not be accurate. Oftentimes in life, the subject matter is awfully complex. How are we to know the right answer when we see it if our assumptions are flawed?

I will return to this point at the end of this article, but let me stress this again: If the assumptions we make about how the asset will function are invalid, we face a meaningful risk in the world of private investments.

 

Unpacking the World of Private Investments

My dear wife Melissa works at a biotech company. When she talks to her colleagues, I do not have a clue what they are talking about other than they are trying to make drugs that cure cancer. Recently at a post-COVID gathering with friends, I started talking about prohibited transactions in IRAs. Melissa gently pulled me out of the weeds, reminding me that a subject matter that is common ground is a better place to spend time socially.

Thank goodness I married up and can rely on her to be my guardrail in life. She was spot on and is better at reading social cues than I am. I was off in the weeds on a topic nuanced with smart-sounding 20-dollar words, enjoying myself as I put on a clinic of technical precision and accuracy. Everybody else was thinking, What a dork.”

I mention this because many areas of life are specialized. And not just a little. The world of private investments can be one of these areas. Let’s focus on a topic that is often confusing to investors and packed with 20-dollar words. Just as Melissa’s world of oncology is a maze of SOPs, tangled multinational partnerships, and real people who are dealing with cancer, the world of private investments also needs to be understood, evaluated, and unpacked.

 

The “Safe” Investments That Led to the Great Recession

Back in the ’80s and ’90s at banks and brokerage firms, investors frequently purchase mortgage-backed bonds. These bonds were called Ginnie Mae, Freddie Mac, and Fannie Mae bonds. These bonds are still around today, but the shine partially faded due to the Great Recession.

Remember 13 years ago (2008–2010) when we first heard about TARP (Troubled Asset Relief Program) from Hank Paulson? He was our Secretary of the Treasury at the time, as well as the former Goldman Sachs Chairman and CEO.

Back then the mortgages were packaged and sold as presumably safe investments. What we discovered in the great recession was that these packaged, mortgage-backed securities were not actually the high-quality collection of mortgages they were presumed to be. Frankly, they contained poisonous high-risk mortgages that subsequently defaulted. Think Countrywide Financial, civil fraud, and Angelo Mozilo. Creepy stuff.

Remember that home mortgages are assets that are bought and sold by various banks, institutions, and entities as their marketability provides the liquidity needed by the underwriter. The underwriting entity can package a tranche of home loans and sell them into the market and go back to new borrowers to underwrite additional loans, then rinse and repeat.

 

Chasing Cash Flow

Investors viewed these packaged loan portfolios as reasonable and safe assets for investment. Investors would frequently purchase GNMA bonds (often referred to as Ginnie Mae) with the anticipation of using the cash flow provided by the asset to service lifestyle needs.

Where it gets tricky for investors is when a mortgage in the tranche is refinanced. Think about it — when a mortgage is refinanced, the lender is repaid their principal as a new lender now carries the note. In the context of a GNMA bond, the investor receives a portion of their original principal back as the borrower is no longer paying interest since the debt has been paid.

To the investor, the sum of the monthly cash flow is higher than the bond’s anticipated yield due to mortgages in the tranche being refinanced. But because the principal was mixed in with the interest payment on the bond, the investor did not care. They just knew they liked the cash flow, and the cash flow was relatively high. Until that is, they realized the remaining principal was less than what was originally invested.

That was when it got tricky. If you expected to receive a payoff of $50,000 at the maturity of the bond, which equaled what you invested, you would be disappointed when you received something less.

 

Your Capital Account

Some private investment syndicators apply a similar approach when accounting for the invested principal. Here is some terminology to be watchful of. Not that the following is wrong, it is just a distinct way of handling things:

“Any capital that is returned on the aggregate is considered a return of capital.”

What this means is that your capital account will be diminished during the life of the investment. That is not to say that your ownership is diminished — just your capital account. So, if you invest $50,000 in a deal with the assumption that you will participate pro rata in the gains at the end of the deal, plus receive your original principal back, you will be disappointed.

In the above scenario, you will most definitely participate in the gains on the investment as your ownership does not change based on the balance of your capital account. It is just that, because your principal is being returned to you during the life of the investment, you will not have a singular event where you receive the original amount invested being returned to you.

Additionally, your preferred return, if contingent on the balance of your capital account, will cash flow less to you each month/quarter based on the decreasing balance of your capital account. This may be significant. Admittedly, cash will build more quickly in an investment where the burden of preferred payments declines. Your ownership remains the same, so you eventually get the bucks. Only you can determine which you prefer.

 

Thinking Beyond the IRR

Remember that the Internal Rate of Return (IRR) calculation of your investment is only one method for measuring performance. Strong IRR numbers can be impacted by providing a return of principal early on. I feel the truest measure of performance of an investment is the equity multiple within the context of the number of years for the life of the investment. In other words, an equity multiple of 2 within 5 years tells me almost everything I want to know. An IRR of 18 only tells me part of what I want to know.

 

Final Thoughts

Now, please re-read the second paragraph of this article. My advice? Before you talk with an investor relations representative about a private investment, compile a list of your assumptions, and during your conversation, ask the representative to validate or contradict those assumptions.

Investors make their best decisions when they are well informed. Talk to your friends and ask for their advice. Spread your investments out in position sizes of 2% to at most 10% of your net worth, and diversify by year of maturity, type of asset, and geographic location of the investment.

 

All my best as you manage the tension between risk and return!

 

 

About the Author:

Ted Greene is part of the Investor Relations team at Spartan Investment Group. Spartan syndicates self-storage assets for investment. Ted has 24 years of experience in the financial services industry as an investment advisor and Chief Compliance Officer. Ted can be found on LinkedIn at www.linkedin.com/in/ted-greene-dontbeafraid or ted@spartan-investors.com.

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What Do Limited Partners Do for a Living?

What Do Limited Partners Do for a Living?

Those who qualify to invest in apartment syndications as limited partners are required to have a certain amount of money (net worth and liquidity) and investing experience.

But who are these people?

A common misconception is that only a “special” sort of person can passively invest in real estate. A savvy Wall Street broker, a billionaire tech giant, a hedge fund manager, and other such wealthy professionals. While these people absolutely do passively invest in real estate, thinking they are the only ones who invest cannot be further from the truth. In fact, as you will see if you keep reading, the most common passive investor is (probably) who you least expect. In fact, if I had to bet, I’d say that someone you know already passively invests in real estate.

Following are the types of people who most commonly passively invest in apartment syndication.

 

W2 employees

Arguably the most common passive apartment investor works a full-time W2 job. These are individuals who’ve reached a point in their careers where they have a high enough salary or made enough investment into stocks, IRA, 401(k), or other investments to meet the SEC’s accredited investor status.

I have met passive investors who work W2 jobs in nearly every industry. Examples include:

  • Physicians
  • Dentists
  • Technology sales
  • Engineers
  • Oil and gas executives (often engineers who’ve transitioned into management roles)
  • Commercial pilots
  • Fortune 500 executives
  • Attorneys
  • Professional athletes
  • Authors
  • Composers
  • Actuaries

People with high-paying W2 jobs decide to passively invest in apartment syndications because they work long hours and enjoy what they do, but they also want to beat the returns they are receiving on their other investments, like IRAs, 401(k)s, and the stock market.

 

Small business owners

These are self-employed individuals who’ve scaled a business to the point where the revenue generated or value of the company allows them to meet the SEC’s accredited investor requirements.

Examples of companies owned by small business owners who passively invest in apartment syndications include:

  • Landscaping companies
  • Architectural signage and lighting companies
  • Construction companies
  • Restaurants
  • Franchises
  • Health machinery companies
  • Grilling accessories companies
  • Office water cooler companies
  • Exposition companies
  • Technology companies
  • Voiceover actors
  • Golf cart supply companies

And the list goes on, because being self-employed, small business owners are heavily taxed. Therefore, they are attracted to passively investing in apartment syndications because they can get tax benefits. Also, they are busy running a small business that they are passionate about. They don’t have the time or the desire to go out and actively invest in real estate.

 

Retirees

People who retire from a W2 job or who sell their small business also passively invest in apartment syndications. They have a lump sum of cash that they want to put to work while enjoying their retirement.

 

Professional full-time passive investors

These are individuals or groups who — using their own money, other people’s money, or both — operate a business that exclusively passively invests. They either exclusively passively invest with one or multiple GPs or they invest in a wide range of passive investment opportunities (apartment syndications, REITs, stocks, start-up businesses, etc.).

Examples of full-time passive investors include individuals who accumulated a high net worth and quit their W2 jobs to passively invest full-time or institutional investment firms like private equity companies or family offices.

A professional, full-time passive investor will choose to invest in apartment syndications because they can achieve higher and less risky returns compared to other passive investment opportunities and/or diversify their portfolio.

 

The GPs

It is common (and ideal) for the GPs to invest in their own deals. GPs will choose to invest in their own deals to create an alignment of interest with the LPs and to convey their confidence in the deal.

 

Real estate professionals

Individuals who invest in other types of real estate will passively invest in apartment syndications that generate enough income or have a large enough net worth from the active real estate business to meet the SEC accredited investor requirements.

Examples of real estate professionals who passively invest in apartment syndications include:

  • Fix-and-flippers
  • Buy-and-hold landlords
  • Short-term rentals
  • Developers
  • Commercial real estate investors (self-storage, mobile home parks, retail, medical, office, industrial, etc.)
  • Real estate agents
  • Commercial brokers
  • Mortgage brokers and lenders
  • Property management companies
  • GPs on other apartment syndications

 

If this type of individual is an active real estate investor, they will choose to passively invest in apartment syndications to diversify their investments, since they are usually focused on one asset class. For the non-real estate investors and real estate investors alike, since they work in the real estate industry full-time, they can qualify for the “Real Estate Professional” tax status. This allows them to use passive losses to offset the income generated from their active business.

Most likely, this person would choose to invest in apartment syndications to diversify their investments because they are usually exclusively investing in single-family homes or smaller multifamily properties. Additionally, the IRS has a designation called “Real Estate Professional” where passive losses can be used to offset non-passive income.

 

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5 Best Tips for Investor Relations

Over the years, I have had the privilege of serving in investor relations with a number of firms. Starting out, I worked for a brokerage firm that had trillions of dollars in assets under management. I later made a 180-degree turn to a startup real estate syndication firm where I built an investor relations platform and served as Director of Investor Solutions. Currently, I serve as Director of Investor Relations at Ashcroft Capital, a group I have grown with and have been investing with for years.

I have never written a blog or article on the topic of investor relations. My primary focus has been on helping others learn how to invest and create wealth for themselves. Today, I felt compelled to share five tips for investor relations that can help you. Whether you are involved in investor relations yourself, or if you’re hiring for an investor relations role, or even if you’re simply an investor looking to partner with a firm, these five tips will help you create better conversations and awareness. Let’s get right to the point:

 

1. Discuss the Good AND the Bad.

Everyone loves to talk about the positives, best-case scenarios, and strong past performance. The truth is, it can create skepticism among some investors if you fail to mention the risks or the downside scenarios as well. You create more trust and transparency if you do not gloss over the negatives, but instead, proactively put them out in the open.

 

2. Be Visible.

It may not be a great idea to start raising capital or promoting your deals without a network, community, or online presence. Make sure to create content on social media outlets, be a guest on podcasts or host your own, and build a thought leadership platform.

Some firms and/or general partners have thousands of followers on one outlet and post there frequently (on Facebook, for example) but they are missing thousands of potential investors who prefer using LinkedIn or YouTube instead. It is better to post a small amount of content on multiple social media outlets than to go heavy on one outlet. The key is to be visible in as many places as possible when someone Googles your name or firm.

 

3. Professionalism.

Newer syndication groups have reached out over the years and asked me to take a look at their website, slide deck, or deal overview from the perspective of a Limited Partner investor. I always circle back to professionalism. For anything you post or distribute, it is critical to remove typos, glitches, or anything that might suggest your team is unprofessional or simply doesn’t care.

Also, what you say and how you say it is really important, so be aware of your messaging. When I join investor Zoom calls or podcasts (for example) I always wear a clean pressed button-up shirt and/or a sports jacket. It may seem unnecessary while working from home, but impressions go a long way. Always be professional.

 

4. Know Your Target Audience.

Funny story… I gave a speech years ago when I was first trying to network with more accredited investors. I had an investor/realtor friend of mine in Orlando who was wanting to start a local meetup for real estate investors. I decided I would partner with him on one of the first meetups.

I marketed the event, created a PowerPoint, rehearsed my speech, got all dressed up, traveled to the event, and gave it everything I had. When I finished the presentation, the audience applauded, and I remember thinking, “I killed it!” Only one problem: It turned out that nobody in the audience was an accredited investor. Lesson = Know who your target audience is, where they hang out, what they do, and get out in front of the right crowd to avoid wasting time and energy.

 

5. Respond Quickly.

Oftentimes it is not about whether YOU are ready to pitch your deal, it is when YOUR CUSTOMER is ready to invest. If one of your investors decides out of the blue that they are ready to deploy $100K today, and they email, text, or call, you better be ready to help them out ASAP. You can lose an investment simply by not responding quickly enough.

On a personal note, a couple of months ago I was looking to make an investment with an operator. I emailed three quick and easy questions after reading their project overview and never heard back. I placed that capital with another operator a couple of weeks later. We work in a very competitive space — something to keep in mind. Responding is also a form of professionalism.

 

In conclusion, I will leave you with a bonus tip…

 

Be Adaptable.

Things change rapidly in today’s world. New conferences, new social media outlets, COVID — you must be adaptable and open to experimenting to see what works. When one door closes, pivot and look for another. If one strategy stops working, be adaptable. One of my mentors told me years ago: “Double down on what works.”

 

 

To Your Success,

Travis Watts

 

 

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How to Save Your Commercial Real Estate Company From Catastrophe

Real estate is a wonderful way to make lasting relationships, create wealth, and provide society with something it needs in the form of housing.

These are things people say when things are going well, and everyone is making money. However, what happens when things go bad? I am not talking about the kind of small “b” bad. I am talking about the big “B” bad. The kind of bad where you and your partner(s) are saber-rattling and lawyers are being called, big litigation budgets are in the offing, and you can see this very profitable business venture nose diving over things that should have been dealt with on the front end of this venture.

 

The Agreement

I cannot count the number of times I have met with a client who has been sued by a partner or is ready to sue their partner. From a partner refusing to allow access to the books and records, to one partner taking too much money, to cutting off a partner’s distributions, these are the issues that a little pain on the front end with a lawyer would have obviated.

How so? By writing a partnership agreement or operating agreement detailing who will do what, when. The best place to start drafting your problem-solving document is at the end of that document. What does this mean? This means that you draft a partnership agreement or operating agreement by breaking up the company first. It is best to agree on how to close the company and split the assets and profits when you and your partner(s) are getting along and everything is rainbows and butterflies with a pot of gold at the end of that rainbow.

Dissolution agreements or clauses help you construct the front end of the document. It is here that you can find out who is going to put some skin in the game. At the beginning of a venture, it is easier to have everyone agree that they will only get out their pro-rata share of what they put into the company. Thus, when the venture buys that apartment building, everyone knows: 1) how much equity everyone has, 2) how much each person paid for their equity, and 3) how much each person will get back if this venture ends.

 

Discuss the Details

Far too often good friends, business colleagues, and/or family decide it would be a good idea to be business partners and fail to approach business as the transactional matter it is. Not only will this naivete lead to hurt feelings and irreparably damaged relationships, but it will also lead you to the courthouse steps.

A partnership or other business venture that has not had the foresight to discuss the hard issues about its inner workings will ultimately find itself strangled to death by lawyers and the legal system. Notwithstanding the legal fees each party will pay their attorneys, the Judge has the ability to order a receiver to take over the business, wind up its affairs, and sell the assets. This means that your largest investment could go on the market against your wishes, sold for less than you and your partners think the business is worth, and you will only get what you can prove your equity is or was.

 

Understand Your Dynamic

In the context of syndication, it is important to know and understand these issues very well, either as a general partner or a limited partner. What do the documents say? What do those clauses mean? How much do you get if things go sideways?

Typically, a syndication deal is very well papered with documents, and you should be able to know how you get from A to Z. If you do not know your exit strategy or how you get your equity/money out, then you have some homework to do.

Syndication is successful because of the general partners who put the deal together. But those deals cannot work without limited partners who fund the projects. GPs and LPs need to understand their dynamic in a syndication relationship. Take the time to sit down with a pen and go over your partnership agreement. Know what you can expect in good times and bad.

 

 

About the Author:

Brian T. Boyd, JD, LLM, www.BoydLegal.co

 

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How to Succeed as a Real Estate Investor While Working Full-Time

When you work in a high-earning job, you may wonder what the best use of your money is. You likely want to take measures to secure your and your family’s future and find ways to become less reliant on your day job.

We spoke with Peter Kim, who’s something of a triple threat, about how he manages working full-time, investing in real estate, and running a blog. He shared his best-ever tips with our audience to help them get started in the industry.

If you want to learn more about putting your money to work, balancing work and family life, and carving out space online, read on for some of Peter’s top advice.

 

How to Get Started in Real Estate Investing Even When You’re Busy

If you’re working a full-time, high-paying job, you’re likely busy for many hours each day. Throw in a family, especially one with small children, and you may feel like you have nothing left to give when it comes to starting a side business.

Peter’s advice is to prioritize. You obviously have to spend time on your primary job and family, but what do you do with the rest of your time? If you truly want to succeed in real estate, you may have to sacrifice your free time, especially in the early days.

Kim would often stay up for hours after his kids went to bed, sacrificing his free time and his sleep, to get his business off the ground. He worked his way into the industry and eventually his late nights paid off.

 

Transitioning From Being a Passive Investor to an Active Investor

Peter started with passive investing for a few reasons. First, he felt that he didn’t know commercial real estate well enough to do a lot of it on his own. He started with crowdfunding and syndication initially because it was less risky and was a good way for him to learn the ins and outs of commercial investing.

As someone with a high-earning job, it can be challenging to change your mindset to other types of earning. You’re used to actively putting in the hours at your job in exchange for money, but with real estate, you often do a lot of research and work upfront, but then you have to be patient while you wait to see results.

As he grew in confidence, he got into active investing. He started with a single-family home and then worked his way up to multifamily commercial properties. He does well as an active investor, but he didn’t stop passive investing either.

Peter’s strategy is to diversify his business. That way, if one of his investments isn’t doing as well, he has others to fall back on. Passive investing is also a good way to earn money without having to continually put in long hours. If you go through a busy time at your day job, you’ll still be earning through your passive investments.

 

What to Look for in a Syndicator

Peter puts a lot of emphasis on finding the right syndicator, especially when you’re just getting into commercial investing. Since the syndicator will be making decisions on your behalf and those decisions will affect your finances, you want to make sure you have someone who knows what they’re doing.

When vetting a syndicate, you want to first find candidates who’ve been in the game for a while and have some experience with the type of investments you want to do. Look into their track record. You want someone who is successful. Some failures are okay too; a lot of it comes down to how they navigate difficult situations.

The next thing to look for in a syndicator is who else has invested with them. If there’s someone you know and respect who also invests with that syndicator, then that’s a good indication that they’re good at their job. Finally, you want to meet with any potential syndicators. Even if they have a good reputation, you want to make sure that the two of you get along and that they understand your needs and concerns.

 

Don’t Wait — Just Jump in and Learn as You Go

When people decide to get into commercial investing (or any new business venture), they often spend a lot of time researching, going back and forth between passive or active investing, and basically just waiting around until they feel comfortable spending money.

The problem is, you’re never going to feel 100% confident about an investment, and if you wait around until you do, you’ll never invest. Peter’s advice is to do a little research, then dive in. You’ll be taking some risks, but you can learn as you go.

 

Blogging and Real Estate Investment

Peter started blogging as a way to give his friends advice about getting into commercial properties. He didn’t expect his blog to blow up the way it did, but once he saw the opportunity, he seized it. He discovered that his blog was another way to make money, and he’s used it to grow his income.

Although it takes up more of his time, Peter makes sure he’s consistent with his blog and posts often to keep his readers coming back. If you’re interested in starting a blog, you don’t have to be an expert. Peter said that when he started, he was by no means an expert on investment — he was just a few steps ahead of his readers, and thus able to offer advice.

 

Final Thoughts

If you’re in a high-earning field, you can make your money work for you so that you don’t always have to rely on your income from your job. It can be time-consuming, but if you’re willing to put in the work and sacrifice some of your free time, it can definitely pay off.

 

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5 Things to Expect After Investing in First Real Estate Syndication

5 Things to Expect After Investing in Your First Real Estate Syndication

You’ve selected a commercial real estate sponsor and invested in your first deal. Once the due diligence is completed and the deal is closed, what comes next?

Here are some insights into what a passive investor can expect after investing in their first deal.

 

1. Deal Updates

Nearly every syndicator will approach investor communication differently, but most will send some sort of deal update via email. The ideal frequency is every month, but some sponsors elect to send deal updates on a quarterly basis.

The first email will notify you of the closing. Ideally, the email is sent the day of closing and includes a FAQ-style guide that answers common questions, like:

  • When, how, and how much you are paid (first-time and ongoing)
  • Contact info of the point person
  • When you will receive deal updates, and what the updates will entail

Each syndicator’s deal update communication will also be different. Typically, important operational metrics are included, like occupancy rates, preleased occupancy rates, and collections rates. If these metrics are nowhere they are supposed to be (which depends on the investment strategy), then an explanation of the problem and the proposed solution should be communicated.

For value-add opportunities, updates on the number of renovated units and rent demand will be included. The important thing here is how the actual rent premiums compare to the projected rental premiums. If actuals are below projections, an explanation of the problem and the proposed solution should be communicated.

Other information a sponsor may include in a deal update email includes capital expenditure updates, market updates, and resident updates. They may also include details on other investment opportunities available.

 

2. Financial Reports

Another best practice for real estate syndicators is to provide actual financials on the investment. The most common financial report is a profit and loss statement, which breaks down all income and expense line items. This will promote transparency and allow you to see exactly how the investment generates money and where the money is going.

Quarterly financial reports are the most common frequency. However, more and more syndicators are using investor portals to manage their passive investors. If you are investing with such a syndicator, you may be able to access financial reports more frequently.

 

3. Distributions

At some point after closing, you will begin to receive distributions. The amount and frequency of the distributions will vary based on the syndicator and the investment strategy. For example, core or value-add investments may pay out distributions immediately while opportunistic and distressed investments may not pay out distributions for a few years. However, you should know the amount and frequency of distributions prior to closing, and the syndicator should adhere to those terms. If the amount or frequency of distributions does not align with what was originally communicated, the syndicator should provide an explanation in the deal update.

Eventually, once the investment is sold, you will receive your original investment plus any profits, when applicable.

 

4. Schedule K-1

The Schedule K-1 is the report the sponsor sends to you each year for your tax returns. Once a year, you should receive your personalized Schedule K-1 tax report. Oftentimes, sponsors will communicate the timing of the K-1 in the FAQ portion of the original closing email.

 

5. Educational Content

Many real estate syndicators create educational content for their passive investors. This could be in the form of an exclusive newsletter or webinar, a specific section on their website, an eBook, blogs, podcasts, and/or YouTube videos they post to their website, etc. The purpose of this content is to help you learn more about what you are investing in.

 

5 Things to Expect After Investing in Your First Real Estate Syndication

After you have invested in your first real estate syndication, expect to receive deal update emails and financial reports from the syndicator. Based on the timing outlined in the PPM, you will also begin to receive distributions.

Once a year, you will receive a Schedule K-1 report for your tax returns.

If you want to be proactive and learn more about what you are investing in, the syndicator may offer additional educational resources, either by sending out a newsletter or posting information to their website.

Bottom line: you can be as active or as passive as you want. You can do nothing except check your bank account each month, or you can read every deal update email and financial report. My advice is to be active in what you enjoy and passive in what you don’t enjoy.

 

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Small multifamily property

Pros and Cons of Investing in Smaller Multifamily Properties

When it comes to residential and commercial investing, smaller deals often mean big business. Take, for instance, the talented active investor Tyler Sheff. Tyler seeks out residential properties with five to 50 units. Those investments have led to an extensive and highly profitable portfolio.

Tyler Sheff has been a real estate professional for more than 16 years. He’s based in Tampa.

In addition to his active investing, Tyler serves as a real estate broker and syndicator. He also runs a real estate education company called The Cash Flow Guys, and he hosts an informative podcast.

Why, though, does Tyler focus on complexes with 50 units or fewer? One reason is his natural conservatism as an investor. He’s careful and thoughtful with his money.

Moreover, Tyler has found that smaller multifamily properties represent a lucrative niche. Some investors are just starting out or have limited funds, and those people tend to avoid multifamily homes. Meanwhile, other real estate investors prefer buying larger properties. Thus, Tyler faces limited competition.

 

Challenges Tyler Faces

As with any type of residential or commercial investing, smaller multifamily properties involve a few tricky aspects.

First, before making a purchase, Tyler tries to figure out all the ongoing costs associated with the property. That way, he can ensure that the deal will be profitable.

For example, he always calculates that property management fees will cost 15 to 18 percent of the total annual income. In truth, they tend to cost only 10 to 13 percent. But, by inflating management fees in his initial computations, he gets a little leeway — and he often gets a little bonus money at the end of the year.

Another difficult task is finding a good property manager or management company. Some deals come with an effective property manager already in place. However, in many instances, Tyler must hire his own. And, in the past, he’s lost revenue due to poor or inattentive management.

Also, it’s easier to find larger residential properties than those with five to 50 units. Therefore, it takes longer to grow a real estate portfolio with the latter type.

Plus, when you’re investing in bigger real estate assets, you usually buy residential or commercial properties from large companies, hedge funds, or professional brokers. Those organizations and individuals sell assets all the time, and their selling processes are usually quick and efficient. And, because they rarely feel personal attachments to properties, their transactions are dispassionate and formal.

By contrast, when smaller residential and commercial properties come on the market, the sellers are often people who’ve owned them a long time. To a certain extent, pride and nostalgia could interfere with their business judgment. For that reason, negotiations can take longer, and they can be less orderly.

 

Park Your Assumptions

A benefit to buying smaller multifamily properties is that, if you have negotiating ability and people skills, you can often develop relationships with sellers. Consequently, it’s easier for you and a seller to arrive at a price that’s fair to both of you.

On the other hand, people at a large company or a hedge fund might not even bother negotiating.

Tyler says that a key to his negotiating is to never make assumptions, especially when asking questions. In most cases, when people ask questions, they already have an answer in mind. After all, making predictions and assumptions is human nature.

For example, maybe there’s a property you really want to buy, but you believe the asking price is too high. Many investors in that situation would pass on the property and look for another one, assuming that an agreement would be impossible.

However, if you meet with the seller and explain your situation fully and respectfully, a deal could very well be obtainable. Start by telling this person how much you’d love to own the property, how much funding you have, and how much profit you’d need to make from this deal over time.

You could also assure the seller that all your offers will be made in good faith. If you suggest a price that she or he feels is too low, that person shouldn’t feel insulted or angry. Instead, it could be a springboard for more dialogue.

 

Build a Rapport

You might show concern for the other person’s needs. What would make this deal worthwhile for the seller? Does this person want money for a certain purchase or for retirement? Is it emotionally difficult to sell this property? What special memories does she or he have of the place? By making the seller feel valued, you’ll earn trust and goodwill.

All throughout such a conversation, you’re never making assumptions. You’re always hearing the other person out, considering the responses, and evaluating them in an honest way. And you’re empowering the seller to make positive contributions to the conversation instead of just arguing back and forth.

For sure, it takes courage to be open and candid. However, by doing so, you can overcome serious disagreements more easily.

Later on, you might even visit the seller a few times to have coffee or go on a walk. You don’t need to talk business then. You could just socialize and try to form a bond.

In any event, such conversations are much less effective over the phone. If you can’t be physically in the same room as the seller, you could at least talk on a video call. Your face conveys all kinds of subtle emotions and visual cues, and another person can sense your sincerity by seeing you speak.

 

Learn from the Experience

With any kind of active investing, patience is helpful. With a smaller residential property in particular, a seller might reject your price at first, collect other offers, and then realize that yours was actually the best one. And, if a seller gets several offers that are about the same, that person might sell to you simply because you have a rapport.

As with anything else, practice and experimentation will make you a better negotiator, and failure can be a healthy part of the process. Just know that, if you enter such a discussion free of animosity and with a caring attitude, you’ve already taken a major step toward achieving your goal.

Of course, smaller multifamily homes aren’t right for every active investor; you might be interested in other residential or commercial properties. But, if you have a flair for building relationships, you may soon enjoy the kind of investing success that Tyler Sheff has enjoyed for quite a few years.

 

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How to Generate Passive Income

How to Generate $120,000 in Passive Income Working One Hour per Week

Who doesn’t want to work less and make more money? We recently talked with Anton Ivanov, who spends just one hour each week managing his investment properties and makes $10,000 a month in passive income.

But Anton’s business wasn’t built overnight. Below, we’ll share his tips for passive investing in commercial properties.

 

Don’t Be Afraid to Start Small

Everyone gets into real estate investment wanting to make the big bucks, but it’s rarely possible to generate a huge income in the beginning unless you’re fortunate enough to have a lot of start-up capital.

Instead, think about starting small. Start with just one property and then invest in another once the first is doing well. Keep putting money back into investing and eventually you may see exponential growth.

 

House Hacking Can Be a Great Way to Get Started

One of the best ways to generate passive income with little money is through house hacking. House hacking involves buying a rental property and living in one of the units while renting out the others.

You’ll often be able to cover your housing costs and have more money left over to focus on growing your investments.

 

Start with Turnkey Properties

If you listen to any investment advice, you’ll often hear talk of value-add multifamily properties and how much money there is to be made there. However, you may want to start with turn-key properties, especially if you’re just getting started and have little to invest.

Turnkey properties allow you to start renting and generating an income quickly after purchase. Once you’ve made some money, then you can turn to value-add properties.

 

Move On to Value-Add Properties When You Have More Experience

Once you have experience working with multifamily properties and know an area well, it’s time to move on to value-add multifamily properties. You’ll have a good understanding of how the market works and which commercial properties will yield good results. You can significantly increase your income with these types of properties, but you’ll need some money going in.

 

Find the Right Properties

It kind of goes without saying that the properties you choose can make or break you. However, there are a few things you need to consider to help you find the right properties.

Obviously, you want to choose properties in an area where the rent is high enough for you to make a comfortable profit. You’ll also want to look in markets where the economy is doing well, and employment is up. These areas are likely to have lots of people looking to rent.

Try to find properties that are also in areas where the real estate is appreciating. If you decide to sell, you can get even more money, and if the property didn’t make as much as you’d hoped, at least you can make something off the sale.

 

Consider Looking Out of State

If your location isn’t a great place for real estate or rental properties, you may need to look out of state. Start researching to find cities that are medium-sized and going through a growth spurt. If you’re lucky, you can get in at just the right time.

You’ll want to stick to your criteria. Find a place where the rent is high or going up and where property values are on the rise.

 

Scope Out the Area

Once you’ve settled on an area, it’s a good idea to visit, especially when you’re not familiar with the neighborhoods. Things often look one way online and can look quite different in person.

Spend time riding around the neighborhoods and talking to locals. You’ll be able to get a sense of where the best areas are. You can also check out potential properties in person.

 

Network with Other Investors

One of the best moves you can make is to network with other investors, particularly those who are involved in the same type of investing as you and are located in the area where you’re looking to make a purchase.

It’s important to meet with investors in the property area because they’ll be able to give you some good advice about the areas and types of properties that do well. You may see other investors as competition, but you can be much more successful as allies.

 

Find Great Property Managers

To be more hands-off with your properties, it’s essential that you hire great property managers. These are the people who will be acting in your stead, so you want to make sure you get the right people.

You’ll want to start by meeting with different property managers to see who will be a good fit for what you want. It’s not enough to go on another’s word about a manager because what works for them may not work for you.

Once you’ve found a property manager, take the time to train them. Be clear about what you expect and make sure you both agree on everything before you hire them.

 

Hire a Great Team

Beyond property managers, you’ll also need others to help you. Meet with all contractors and anyone else who’ll work on your property. Make sure everyone is on board with your expectations. You’ll save yourself a lot of headaches if you’re clear up front.

 

Research and Take All the Variables into Account

You need to do your underwriting before making the final decision on a property. Do plenty of research and don’t just get your information from one source. You should check online records and reviews and talk to people with experience in the area. If you only go to one source for research, you run the risk of overestimating the potential of a property.

Don’t just look at cash flow and the real estate market when it comes to a property. There are other variables to consider, such as the cost of any renovations and maintenance. What’s the vacancy like? Make sure the profit’s worth it after all of the variables have been considered.

 

Build a Business That Can Run Without You

The key to passive investing is to build a business that can run without you. If you’ve trained your team well, they’ll know exactly what you’d want them to do in every situation. They’ll rarely need to contact you.

After spending some time getting everything established, you can cut down your work time to an hour or less per week. You’ll simply have to check in and manage a few things to keep it running smoothly.

Another secret to building a hands-off business is buying property out of town. You’ll be forced to train a team to put in charge of everything and you won’t be around to deal with every problem that arises. You’ll be forced to be more hands-off.

 

Final Thoughts

If you’re angling for a passive income, commercial investing is a great space to start. There’s always money in real estate and you can get a cash flow almost immediately if you choose the right properties. The keys are to start small, do your due diligence, and build a team you can trust.

 

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9 Secrets to Multifamily Asset Management

9 Secrets to Multifamily Asset Management

Have you been thinking about getting into the multifamily asset management space? You may have done a lot of research about the process, but you’ll need more than that if you want to be successful.

We spoke with Ashley Wilson, who runs a successful multifamily syndication business, to get some insider secrets to investing in multifamily properties.

 

Why Get into Multifamily Asset Management?

Multifamily properties are a great place to get your feet wet. These properties often already have some income, so you’re not tying up your money for a long period of time. In some situations, you can make some simple modifications and restructure some management issues to maximize your profit.

If you don’t have a lot of investment capital, it makes financial sense to buy one property with several units instead of buying several properties. It’s often cheaper to do your renovations on units in the same place than in multiple areas. There’s much less risk involved with multifamily spaces.

 

Secret #1: Choose Value-Add Properties

One of the biggest trends in the commercial investing space is to choose value-add properties. You can often find properties that already have a steady cash flow, make improvements to add value, and then either increase your income or flip the property.

There are many types of value-add properties to consider. Some properties will have obvious fixes, but you should carefully consider each property you come across. Some may have value-adds that aren’t as obvious, such as a change in marketing, that can make a huge difference and greatly increase your profit.

 

Secret #2: Always Be Available

If you’re going to be an active investor, you’re never really off the job. Things come up all the time, and time is money. If you’re not willing to put in the hours and deal with issues as they come up, then you may want to look into another type of commercial investing.

 

Secret #3: There’s No One-Size-Fits-All Solution for Every Property

Each property is different and has its own unique set of problems. While it would be nice to completely streamline the renovation, active investing involves evaluating each property in isolation and coming up with an individualized solution so that you can maximize your profits.

Some are properties that are in physical disrepair. These may need structural or cosmetic modification to make them safe and more appealing to buyers and renters. Some properties have been damaged in natural disasters and were left vacant when the owners couldn’t afford to have them repaired. Other properties are simply behind on maintenance and just need some minor repairs and updates.

Other properties have issues that aren’t so obvious. Some have issues within management that prevent the property from bringing in as much profit as it should. An active investor can hire and train new management and turn the property around.

Finally, some properties need to be pivoted. An investor can add amenities and restructure the marketing to target a different demographic.

 

Secret #4: Partner With a Contractor

One of the biggest secrets to successful active investing is to partner with a contractor or make sure someone on your time has a background or extensive knowledge in contracting. Many investors hire a contractor to renovate their commercial properties, which can lead to spending more money.

Independent contractors are out to serve their own business, not yours. Their bottom line is making money for their company, and it doesn’t matter to them if they save you money. When you partner with a contractor, they have a vested interest in being as cost-effective as possible.

If you don’t partner with a contractor, having someone with contracting knowledge on your team is the next best thing. They can meet with contractors and evaluate bids to make sure you’re choosing the most cost-effective repairs and methods.

 

Secret #5: Sometimes Paying More Saves More

Everyone goes into multifamily syndication with two goals: spend as little as possible and make as much as possible. However, many investors don’t realize that sometimes spending as little as possible costs more money in the long run.

When you’re involved in a renovation, you sometimes will have the option between spending less and waiting longer for the job to get done and spending more and getting a job done quickly. When you’re considering whether to spend less or more, always consider time as a factor. If waiting for a project to get finished will cost you in other places, it’s best to pay more and get things finished quickly.

 

Secret #6: Get to Know Everyone You Work With

When you’re investing, you can work with a wide range of people and your team may change from one project to another. It can be difficult to get to know everyone, but it’s worth the time and effort.

The better you know your team (and the better they know you), the better you can work together. If your team knows you well, they can often save time by making decisions and doing things the way you’d want them to.

 

Secret #7: Don’t Let People Take Advantage of You

When you’re working in commercial properties, there will always be people who try to take advantage of you, especially if you’re new to the game. Contractors and others you hire will assume you know very little and try to take advantage of that.

They may try to cut corners or may try to charge you more for a project. Subcontractors will often make a small problem seem like a much larger one to charge you more. When you’re new to multifamily syndication, the best thing you can do is get knowledgeable, experienc