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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Steps to Stop Trading Your Time For Money with Kris Benson

Steps to Stop Trading Your Time For Money with Kris Benson

Kris Benson is like many other investors who are getting their feet wet with residential properties. He dreamed of generating enough passive income from a small empire of residential properties to pay the bills. However, on his journey toward making this dream a reality, he discovered a more efficient and effective way to make far more money through real estate investments.

Today, Kris Benson is the CIO for Reliant Investments, which is part of Reliant Real Estate Management. However, his incredible story began many years ago when he was a sales professional for a payroll processing company, ADP.

 

Growing Up on the Fast Track

Kris Benson did not intend to settle down with a wife and kids early in life. An unexpected pregnancy in his early 20s may not have been in the plans, but this was a pivotal moment in his life. This blessing in disguise actually caused Benson to put his nose to the grindstone very early on, and this ultimately took him on a path toward passive investing. In fact, if he has any regrets, it is that he did not start investing in passive income streams even earlier.

He initially worked for ADP, and he later transitioned to a sales job at Intuitive Surgical. Benson worked long hours and had the same thought that so many other people have. He wanted to stop trading his valuable time for money. The solution that he came up with was to build a solid stream of passive income. While Benson could have started a business, he understood that he was not creative enough to walk along that path. Investing in rental properties was the clear option.

 

Amassing a Small Empire of Duplexes

Benson’s initial investment goal was to slowly build a solid portfolio of two-unit residential properties. He figured that if he had 25 buildings that were producing $200 per unit per month, he and his wife could live a comfortable life without the need for a 9-to-5 job. After he had 22 units across 11 properties, however, he realized this plan was not going to work for him. Even with a great management team in place, he did not want to deal with the stressful hassles associated with residential tenants. He also did not want to endure the stress of purchasing many additional duplexes.

He and his wife decided to divest. They ultimately sold all but one of the buildings. The property that they continue to own is one that Benson’s brother currently lives in. At this point, Benson had capital available to invest, and he was looking for a more effective way to generate passive income.

 

Co-Developing an Apartment Complex

Benson made the move that many others make when they gain more experience and have more investment capital. He decided to invest in an apartment complex. While he does not recall where he heard the advice, he attributes this move to the idea that big deals and small deals require the same amount of effort and time. The difference is that you make less money on small deals. Essentially, Benson believed that the return on an apartment complex would be more aligned with his output.

He teamed up with a partner who he knew from his childhood. While his partner was a construction expert, Benson was the capital investor. The pair built a large apartment complex in four phases. Initially, the project required Benson to put out a $200,000 investment. However, a shortfall in planning required him to front another $270,000 after the first phase was complete. When only a quarter of the property was constructed, he was already committed for almost a half-million dollars. However, he says he never thought about not following through with the other three phases. They made up some of the initial phase’s overage on future phases, and Benson recouped the majority of his capital later through refinances.

 

Transitioning to Storage Investments

Finding additional multifamily investment opportunities was a challenge for Benson. Through his research, he decided to pursue self-storage properties. Specifically, the National Association of REIT Data indicated that self-storage properties had a 17% annual return for the 23-year period between 1994 and 2017. This is compared to a 13% annual return for apartment complexes during that same time period.

Kris Benson used a storage industry publication issued by MiniCo to research the top self-storage operators in the country. MiniCo’s publication listed the top 100 operators, and he personally reached out to the top 30 operators on the list to find investment opportunities. This was how he connected with Reliant Investments. Specifically, he met with Todd Allen, who is one of Reliant’s principal partners. Todd was responsible for finding investors, but he preferred to manage operations. With Benson’s strong background in sales, he was the perfect individual to join the team and head up the equity committee.

He proactively structured a deal with them that allowed him to earn equity in the properties for those he assembled investors for. This ultimately transitioned into an extensive amount of passive income for Benson and his wife. On top of that, Benson also joined the company officially as its CIO.

 

Reflecting on the Past

As he reflects on the past, Benson attributes his success to several pivotal points. While he was stressed by his duplexes, he does not regret starting his journey with them. Getting started is often one of the most difficult parts of real estate investments and investing in his duplexes got the wheels moving in the right direction. He also states that his most successful investment to date is the apartment complex. If he were to give advice to a new investor, that advice would be to educate yourself as much as possible. However, you also need to jump in at some point and be prepared to learn more along the way.

 

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Meet Best Ever Conference Attendee Suzy Sevier

Meet Best Ever Conference Attendee Suzy Sevier

Active and passive investors alike can agree — building relationships is imperative when it comes to real estate success. However, since the beginning of the pandemic, essential networking opportunities have had to be adapted to take place mainly on screens. After the virtual Best Ever Conference in 2021, attendees are even more excited than ever to be back in person in Denver, Colorado for the upcoming 2022 event.

Like in previous years, the Best Ever Conference 2022 will provide attendees with the opportunity to network with other top commercial real estate professionals and create lasting relationships proven to build wealth and evolve success. One of those professionals in attendance will be Suzy Sevier, co-founder of Adventurous Real Estate Investors.

 

Meet Suzy Sevier

We recently sat down for a quick Q&A with Suzy to learn more about her prior virtual BEC experience and her expectations for 2022.

Suzy has been involved in commercial real estate since August 2020, and she’s already accumulated an impressive portfolio. She is the owner and asset manager of 188 units totaling $12 million AUM.

Through Adventurous Real Estate Investors, Suzy and her husband and co-founder, Michael, work to create a positive impact through real estate investing. They specialize in “Return on Impact,” and they share in this journey by offering their partners investment opportunities and mentoring others.

Suzy has several reasons she will be attending the BEC 2022. “I have been told many great things about this conference by a diverse set of individuals, so I knew that this was a conference worth attending!” she said. “I loved the virtual conference in 2021, so afterward it was a no-brainer to purchase the ticket for next year.”

She has high expectations for the upcoming event. “The biggest impact I am looking to achieve for my business is more exposure,” she shared. “I love chatting with like-minded real estate investors, so this will be a great opportunity to meet more people.”

When asked who she looks forward to meeting in person, Suzy responded, “Everyone, since it will be my first in-person conference!” In addition to meeting like-minded investors, she is also excited to explore Colorado while snowboarding before and after the event.

 

Make Your Own Connections

Want to meet Suzy and other like-minded attendees to connect with? You can learn more about the Best Ever Conference and purchase your ticket today at besteverconference.com.

 

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Big Goals in the Big Apple With Melissa Jameson

Big Goals in the Big Apple With Melissa Jameson

With big goals for her professional development and real estate portfolio, Melissa Jameson shares how nurturing the growth in others has helped her thrive in both.

 

On the Move

After growing up in Connecticut, Melissa Jameson decided it was time for a total change of scenery. She moved to California to earn an undergraduate degree in political science from the University of San Diego before crossing the continent again to land in Washington, D.C., where she would work on Capitol Hill while also obtaining her master’s degree from George Washington University.

While in Washington, D.C., Melissa earned a job as an advisor to the Department of Justice, where she worked closely with the FBI and DEA on money laundering investigations. She continued to excel in a constantly evolving field, providing investigative support and specialized knowledge to support active federal criminal cases and help the government “follow the money.” That is, until 2014 when an opportunity presented itself to join PricewaterhouseCoopers’ Financial Crimes practice in New York City— somewhere she had always dreamed of living.

 

Becoming a Real Estate Investor

With her new job away from Washington, D.C., she could now focus on other opportunities. A family property was Melissa’s first entry into real estate and where she started developing a genuine interest in the potential of real estate investments for wealth generation.

“I had always been interested in real estate and then ended up with this family property that I decided to renovate and rent out. And as I started to do that, I realized there’s definitely more money to be made in real estate, and I got my feet wet,” Melissa said. “I realized lots of people were making a lot of money in real estate. I can be doing something here, too, even though I’m obviously working a full-time job. I started getting an interest in buying other properties to rent out, so I started actively investing in Atlanta. I also started passively investing, partnering with operators investing in high-growth areas in the U.S.”

 

Keys to Success

As Melissa has continued to grow her real estate portfolio, she realized that many skills fluidly transfer between the corporate world and the world of a real estate investor.

“Having good mentors is really important, and personally, I’m still trying to develop those mentoring relationships in the real estate industry. I have those mentors more on the corporate side, just because I’ve been in the industry for so long,” Melissa shared. “The network and mentors, in particular, can be so helpful because you can bounce ideas off of them and potentially avoid making the same mistakes.”

Learning from the past is another foundational element that drives Melissa’s investment strategy. In her formative years, she didn’t have financial role models in her life. Healthy money management wasn’t practiced or discussed.

Taking the Lead

Today, she is looking ahead and lives her life in a way that positions herself for a secure financial future, focusing on building a portfolio of diverse financial investments, and taking calculated risks.

“If other people can do this, other people are making money off of it; I had that confidence in myself that I can, too,” Melissa said. “I’m not perfect. I’m still learning and making some mistakes along the way, but it’s just that I have that confidence in myself that I can really learn, that I can make the connection and that I can be successful in this industry.”

With confidence comes support, and whether it is in the professional realm or with a team of fellow real estate investors, giving support is a fundamental element of every successful team. For Melissa, it’s essential to how she’s grown and managed her own team to ensure their continuous success.

“I love leading people. I’m really passionate about it because I like to see people grow and develop, and I love mentoring, building relationships, and building that trust,” Melissa reflected. “At the end of the day, we all want to succeed and we all have the same objective, so I want to make my team feel like I really support them and that I’ll do whatever I can to really help them in whatever ways they need.”

 

 

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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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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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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The Path to Profit: From Airbnb to Commercial Real Estate Enterprise With Rock Thomas

The Path to Profit: From Airbnb to Real Estate Enterprise With Rock Thomas

If you’re an aspiring property investor but are not ready to buy, you might think you should wait. With the right strategy, however, you can start investing now. We spoke with Montreal-based investor Arvin “Rock” Thomas, who shared his investment wisdom about an opportunity waiting in plain sight.

 

About Rock Thomas

Rock Thomas has built a real estate enterprise that earns over one billion dollars yearly. He has steadily grown the business despite economic and personal challenges. As a neuro-linguistic programming (NLP) practitioner and champion of motivational thought, Rock models a remarkable level of self-discipline.

 

Start in real estate without purchasing property.

Rock stumbled into a lucrative answer to this conundrum when renting out his house while traveling. To his surprise, people paid up to $1,000 per night to stay in his residence located in a ski area. He soon realized Airbnb was a path to profiting from real estate you don’t own.

Unlike multifamily or apartment investing, a short-term rental venture doesn’t require a steep initial investment. The key is to find a residential property in a desirable location. Then, you lease the property from a willing owner and manage the rental as a business.

Your upfront costs include the lease and furnishing the unit. Expect ongoing expenses for utilities and maintenance. Unless you can manage it yourself, you’ll want to budget for cleaning and repair experts.

If Airbnb is potentially so lucrative, why isn’t everyone doing it? Rock stresses the importance of treating it as a business and employing strategy and humility.

To succeed, you want to mind these steps:

  • Find owners willing to let you sublease.
  • Do your homework on the market.
  • Partner with more experienced investors.
  • Master your mind.

 

Get owners on board.

How do you convince a property owner to let you lease the unit for your short-term rental business? Rock notes you should expect to knock on many doors and refine your pitch as you go. Your primary selling point is that the arrangement benefits owners.

As the lessee, you’ll keep the unit in top condition and curate all occupants. You’ll handle normal wear and tear, turnover, and minor repairs without disturbing the landlord. The landlord gains a stress-free experience with guaranteed rent and pristine property.

To successfully woo owners, focus on extracting lessons learned from each encounter. What went well, and what fell flat? You’ll improve your transactions by objectively evaluating them and committing to improving.

 

Do your homework.

Rock emphasizes that success means doing your homework on properties and having a team and system in place. As with any property, location is critical. Units close to public transportation, colleges, and hospitals will attract renters. Unless you have trusted local partners, start near your home so you can manage the rental in person.

You’ll also want to consider the timing. Long weekends are the most popular, and you may struggle to fill the middle of the week. However, urban properties close to employment and tourist spots can draw steady customers.

 

Know your data.

To know what you’re taking on financially, you need to run the numbers. Rock and his team analyze opportunities using a sophisticated system not available to most people. The system helps set daily prices based on fluctuating demand. If you’re considering a property, the software can provide projection data to help you decide.

What if you’re crunching your own data? Rock recommends checking similar listings neighboring your property’s location. Enter different date ranges and other variables to evaluate price and demand. You may be tempted to price low to get a renter, but you could leave hundreds or even thousands on the table by not educating yourself first.

 

Partner with experience.

Rock learned this pricing lesson firsthand, along with the importance of mentorship, when beginning investing. He rented his house for $300 per night to an eager renter and passed on the investing course his friend was teaching. The actual nightly value was $600 to $1,000, so Rock left far more money on the table than the cost of the course.

Rock’s takeaway? Invest in learning from experts, and you’ll make fewer mistakes and escalate your game.

If you’re not handy with maintenance and repair, you’ll want a dependable maintenance expert on call. Handling minor repairs promptly is essential to an excellent tenant experience and fast unit turnover.

Consider how you’ll address common issues such as renters locking themselves out in the middle of the night. For example, remote-controlled keyless entry lets you unlock the front door or garage from wherever you are. In addition, make sure your renters can quickly reach you at any time for home emergencies.

 

Mind your headspace.

As a successful business owner dedicated to personal development, Rock has some candid words of wisdom for the rest of us. Growing up on a farm taught him resourcefulness, a fierce work ethic, and the value of a morning routine.

He notes that many people expend far more energy wishing for different circumstances than doing anything about them. So instead of having gratitude for what the universe has provided, people send the message that its bounty isn’t good enough. As a result, they miss opportunities and live joylessly.

If you aren’t doing so already, stick with a beneficial morning routine to propel the day’s success. For example, Rock starts his day with pushups to remind himself that his mind controls his body.

The bottom line is that to improve your professional performance, first control your mind. As a new investor, you want to start with good data and self-management basics. This way, you’ll prime your short-term rental venture for long-term success.

 

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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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A woman holds a silver smartphone, speaking into it using voice technology.

The Advantages of Voice Technology in the Multifamily Industry

Not only has the next generation arrived — they have arrived with a loud bang. Businesses have been forced to listen to their voices and needs like never before. Over generations, different aspects of our social lives have been affected by new innovations and have been incorporated as daily necessities. Electricity, machines, automobiles, etc., played a part in revolutionizing society and the way business is conducted. Today, it is voice technology’s turn.

How the voice technology revolution is changing business

No longer do you have to physically input commands into a device. Now almost everything can be voice-activated. Using a simple command, you can switch on your TV, lights, fans, or air conditioner, and the limit is almost endless. How did this voice revolution come about? Other than the obvious reason that it makes life simpler, the subtext lies in the much wider availability of smart devices.

No manufacturer would be stupid enough to market a smart device without voice command capability. Even the employees would not buy such a product. Alexa, Siri, etc., have become ubiquitous at homes and workplaces, so much so that we take them and their capabilities for granted. More than 70% of owners of smart devices say that they use voice commands routinely to activate or deactivate their voice-powered devices.

By incorporating voice technology into all available digital assets, voice searches will become easy and routine. Even though today traditional text search is still popular, it is slowly giving way to voice search as a means to find information on the internet. About half the routine searches conducted on the internet are voice commands, and it is an even larger figure when searching for local businesses. This underscores the importance of voice search features, not only for businesses but also for multifamily units.

 

Some advantages of voice technology in the multifamily industry

The multifamily industry has been quick to realize the advantages of incorporating voice technology into the development of multifamily units. This technology can be leveraged as a selling point since it adds more facilities and other convenient features to be offered to investors and/or renters. The multifamily industry will be positively impacted in many ways on a day-to-day level as well as in the long term.

 

  • Voice technology can be integrated to make marketing the lease easier.
  • Renters’ FAQs can be handled by chatbots, especially during after-office hours.
  • Installing chatbots and using natural language processing will help reduce labor costs while ensuring queries get answered.
  • Apartment residents will benefit from voice-tech-activated smart appliances such as thermostats, lighting, etc.
  • When this technology is incorporated, even mundane things like heating up dinner become simple and convenient.
  • The on-site property manager can utilize voice tech to ensure prompt rent payment, stay on top of maintenance issues in real-time, and more.

 

Incorporating voice technology into your multifamily properties

 

Speak the users’ language.

Developers of multifamily units have been strategizing the needs of the end-user. Voice commands during internet searches tend to be longer than text searches. End-users generally build up a rapport with their smart devices and talk to them like a family member or friend. When introducing voice tech, it is better to incorporate various forms of speech that tend to reflect the type of interaction between friends. It will be informal commands to a large degree and the incorporated voice technology should be able to accept this in stride.

 

Create a more inclusive environment.

Voice tech, being inclusive in nature, will make for an easier and more accessible leasing process. It helps those with impaired vision and motor skills, which is an important advantage. Due to its usefulness, voice tech has become routine and a necessity for most consumers. Such technology, incorporated within the multifamily unit, contributes greatly to ease of living.

 

Optimize your website for voice search technology.

Voice searches in multifamily units also tend to be almost totally local. To ensure the search throws up relevant material, the community details should be accurately and consistently displayed on your website. Since such local searches tend to be reflected in social media platforms, ensure your pages are in total sync with such platforms. Update your profile with relevant and important details, which will ensure that search engines give prominence to your listing. It will score a big plus with consumers.

 

Voice tech is here to stay, and multifamily developers have a very valuable tool in their hands to positively impact their bottom line.

 

 

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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a hand is inserted into a row of dominoes, protecting them from continuing to fall

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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Is Commercial Real Estate a Good Hedge Against Inflation?

It is commonly talked about that real estate offers a good hedge against inflation. Typically, the value of real estate will align with, if not slightly edge out, inflation rates. But what are the actual drivers, specifically in commercial real estate, that make this true? And are these drivers equivalent among the specific types of real estate: multifamily, retail, industrial, and hospitality?

To better understand the true nature of any inflation hedge, we need to look to where the returns of real estate are generated:

  • Income/cash flow
  • Sale value/cap rate

The sale value will have a direct correlation to the net operating income, but outside forces — meaning market cap rates — will have a direct impact as well.

 

Income/Cash Flow

Inflation will typically have an upward pressure on rents. More rent means more income. More income means higher sale value. Therefore, commercial real estate is a good hedge against inflation. But if you unpack that between asset types, can an operator truly realize higher rents? Most office, retail, and industrial leases are five years or longer, and oftentimes have predefined renewal rates for even longer terms. When you get into anchor tenants, it is not uncommon to have 20-year leases. These types of leases do provide surety of income, particularly from credit tenants, but in a high inflationary environment, the owner cannot adjust rents mid-lease term, so, therefore, they cannot realize the upward pressure on rents. Leases on vacant units can reflect current market conditions, but this could have a minimal impact on NOI, depending on the size of the unit.

Now, when compared to multifamily and hotel assets, these have much shorter leases. The typical residential lease is 12 months, and a hotel “lease” is often one day to a week. Due to the shorter length of the lease, the apartment or hotel owner has more frequent opportunities to adjust their rental rates, allowing these assets to better realize higher rents due to inflation.

Regardless of asset type and the ability to capture current income, commercial real estate carries the inherent value of future cash flow. So, a property in an area with historical trends of strong rent growth will still sell for more than comparable assets in areas with lower rent growth expectations.

 

Sale Value/Cap Rate

The sale value of commercial real estate is calculated as net operating income (NOI) divided by a capitalization rate, or cap rate. The cap rate, which is represented as a percent, can create very large swings in value. For example, if an asset generates $5 million of NOI and the market cap rate is 10%, that creates a $50 million value. If the market cap rate drops to 8%, the value is $62.5 million. Many core assets, particularly in the favorable asset classes of multifamily and industrial, trade in the 3%–5% range. The same $5 million NOI property trading at a 4% cap rate is valued at $125 million. Drop the cap rate to 3.8% — so, only a 0.2% change in cap rate — and you have a property worth $131.6 million, or $6.6 million more than at a 4% cap rate.

So how does inflation affect cap rates, and ultimately sale values? Historically, cap rates will move with interest rates. As interest rates go up to stave off inflation, the cost of capital for borrowers goes up, and therefore the returns needed from their investments need to increase as well. And an increased cap rate lowers the overall value.

The balance here is that oftentimes, interest rate increases are a reaction to inflation, not a leading indicator. Therefore, there is the ability for rents to rise, and for NOI to rise at a fast rate, to counterbalance the rise in cap rates.

 

The Wildcard Factor

While income and cap rates are fairly easy to measure, demand is not. Historically, investor sentiment moves towards hard assets in markets showing high inflation. This increase in demand helps keep values high for those hard assets: real estate, gold, oil, and even collectibles.

So, while capital market effects can often imply a decreased value, the natural demand that comes from inflation helps increase the demand and often balances out rises to cap rate.

 

Overall, real estate — specifically commercial real estate — has proven to be a strong investment option. In good economies and bad, real estate continues to show its resilience through its ability to create current cash flow and retain long-term values.

 

About the Author:

Evan is the Investor Relations Manager for Ashcroft Capital. As such, he spends his days working with investors to better understand their investment goals and backgrounds. With over 13 years in real estate, he has seen all sides of real estate from acquisitions to capital raising on the equity and debt side, to operations, and actively invests himself. Please feel free to connect with Evan here.

 

 

 

 

 

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8 Post-COVID Pandemic Commercial Real Estate Trends

In Marcus and Millichap’s recent Coronavirus Special Report, they analyzed the performance of the major commercial real estate asset classes during the pandemic in order to predict future, post-pandemic investment trends.

I recommend checking out the full report here, because there are many graphs with up-to-date cap rates, asking rent, and vacancy trends for industrial, multifamily, office, and retail commercial real estate.

Here are my top eight takeaways from the report:

 

1. Improved economic outlook

The US GDP is set to grow between 5% (low-end forecast) and ~9% (high-end forecast) in 2021. Even if the low-end forecast comes to fruition, it will be the greatest single-year GDP increase since at least 2001. This is supported in part by savings deposits and money market funds increasing by an estimated $4.3 trillion since February 2020. This built-up demand will result in increased retail spending, helping the economy grow.

 

2. Cap rates expected to continue to compress

With the exception of senior housing and office where cap rates are expected to remain the same, cap rates are expected to continue to decrease across all other commercial real estate asset classes. The asset classes with the greatest anticipated decreases in cap rates are self-storage and hospitality.

 

3. Commercial real estate yields still greater than other alternative low-risk investment vehicles

The spread between the average commercial real estate cap rate and the 10-year Treasury rate is 460 bps (compared to 590 bps in 2011 and 390 bps in 2016).

 

4. Strong demand for industrial space

Temporary store closures resulted in more people engaging in e-commerce business. As a result, there were a near-record number of deliveries over a 12-month period ending in March, while national industrial vacancy only rose 10 bps and the average asking rent grew by 4.6%.

 

5. Target secondary and tertiary markets for multifamily

Across primary markets in the last four quarters, vacancy increased by 80 bps and average effective rent declined by 3.4%. However, in secondary and tertiary markets, vacancy decreased by 10 bps and average effective rent grew 2.2% over the same span.

 

6. Single-tenant retail space preferred over multi-tenant retail space

Demand remains strong for single-tenant office space that at least maintained performance during the pandemic, like discount stores, drugstores, and quick-service drive-thru restaurants. However, some multi-tenant spaces, like grocery-anchored shopping centers in growing submarkets, are in demand.

 

7. Continued uncertainty in office space, but suburban preferred over urban office space

Due to the uncertainty of people returning to in-person working, cap rates for office have remained largely unchanged. However, medical offices are in demand, which is reflected by minor compression of cap rates. Additionally, suburban office space performed better than urban office space. During a 12-month period ending in March 2021, vacancy rates for suburban offices rose approximately two-thirds as much as compared to urban offices, while asking rents fell by 6.1% for urban office space compared to 0.2% for suburban office space.

 

8. Private buyers responsible for the majority of purchases during the pandemic

Private buyers accounted for 55% of the total dollars invested during the 12-month period ending in March of 2021, which is 300 bps higher than the pre-pandemic volume. This is typical during economic recessions, but the trend is expected to continue for the near future, especially for purchases in the $1 million to $10 million price range.

 

Download Marcus and Millichap’s full report here.

 

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10 Tips for Your First Apartment Syndication Deal

Getting into multifamily syndication can be one of the most lucrative areas of commercial real estate, but it can also be quite intimidating. You’re not only responsible for your own money and success, but you also have other investors entrusting you with their finances.

We recently spoke with Mo Bloorian, a 25-year-old investor who has acquired over 100 units in just two years. Mo’s best-ever advice is to just get started. Don’t worry about your age or experience level — if you want to get into syndication, you’ll make it happen. Read on for more of Mo’s best tips for doing your first apartment syndication deal.

 

1. Don’t Wait — Just Get Started

Mo can be an inspiration to everyone. Many of us feel that we’re too young and too unfamiliar with the real estate business to get started. We may make excuses that we’ll invest when we’re a little more secure in our careers and when we’ve taken the time to learn more.

Mo did the opposite. He jumped in and he’s been learning as he goes. He started as a real estate agent and then used some of his equity to buy a duplex. From there, he was hooked, and he’s been taking risks ever since. Mo’s bold attitude has helped him get successful quickly.

 

2. Sometimes You Have to Look Outside Your City…

If you live in an area where multifamily syndication is difficult to turn a profit, you may need to look outside your city. Some cities and regions are just naturally better for multifamily properties. If you, like Mo, live in an area like New York City, it may be too expensive for you to invest.

Instead, Mo started looking in upstate New York. He found the properties to be much more affordable and he did really well on turning a profit. Just start widening your search circle until you find an area that will be profitable.

 

3. …But Stay Within Driving Distance

While some apartment syndicators will work with commercial real estate from all over the country, Mo prefers to stay within driving distance from where he lives. His properties are all only a few hours’ drive for him.

He suggests keeping your properties relatively close, especially if you’re working closely with management or if you’re involved with value-add properties. For active investing, you need to be able to visit the property in person. When there’s an issue, sometimes the best way to handle it is to take care of it yourself. You can have a more hands-on approach if it’s somewhere you can reach in a few hours.

 

4. Look for Hidden Gems

While some properties are an obvious win, there are some that are hidden gems. These properties often seem like they’re in such disrepair that they’d be too much trouble to renovate. However, don’t just overlook a property without giving it a chance.

You may be surprised that some properties that look awful may just need some simple repairs and some changes in management to give you a significant value-add.

 

5. Network and Cultivate Strong Friendships

One of Mo’s biggest accomplishments comes from networking with other young professionals who are passionate about investing. He made it a point to connect with others and learn as much as he could from them. As a result, he was tipped off about some of his best deals.

Investing is difficult to do completely alone. If you are willing to work with others, you’ll often be considered when they have new deals come up. You may even find out about prospects before others if you’re friends with the right people.

 

6. Work With People Whose Skills Complement Your Own

While it’s great to have friends who share your interests, you also want people who can complement you when it comes to active investing. Mo and his partner each handle different parts of their business and each play to their own skills.

You’re not going to be great at every aspect of being an active investor. Instead of trying to do it all, surround yourself with people who excel at the areas where you don’t. You’ll have a much greater chance of success. Focus on what you do best and find talented people to handle the rest.

 

7. Management Skills Are Important

There will be times when the people you’ve hired to manage, maintain, or renovate properties aren’t quite meeting your expectations. If you want your investment to be worth it, you’ll have to step in and manage the situation.

 

8. You Don’t Have to Break the Bank to See a Return on Value-Add Properties

Many investors think that value-add properties involve spending tens of thousands of dollars in order to increase their profit on a property. However, Mo feels that in many situations, you’ll only need to sink a few thousand into each unit to get a really good return.

Focus on the areas that’ll make a big difference, like the kitchen and baths. If you can improve these areas, you can definitely increase the rent.

 

9. Consider Using Local Banks

When you’re just getting started, you may not have a lot of equity. It can be difficult to get larger banks to lend you money. Instead, you can work with local banks. Local banks are much more willing to take risks on a new investor.

 

10. Build Trust With Your Investors

When you’re working in apartment syndication, it’s imperative that your investors trust you. You can gain trust with a proven track record. You can also be upfront about everything. Your investors will appreciate your honesty and will be more likely to work with you in the future.

 

Final Thoughts

As an active investor, getting your first syndication deal can be challenging, but you can be successful. Remember to find the right people and play to your skills. Above all else, follow Mo’s top advice: jump in as soon as possible and start making money.

 

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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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Top 9 Takeaways from CBRE U.S. Lending Figures Report

Top 9 Takeaways from CBRE’s Latest Lending Figures Report

Each quarter, the commercial real estate institution CBRE releases its U.S. Lending Figures report, which analyzes mortgage debt in commercial real estate.

Here are my top 9 takeaways from CBRE’s Q1 2021 lending report:

 

1. Lending momentum is down YOY.

The CBRE lending momentum index tracks loans originated or brokered by CBRE capital markets based on a 100 baseline from 2005. The Q1 ending lending momentum was down 6% YOY. However, it is up by 16.7% compared to December 2020 and achieved an all-time high in January 2021.

 

2. Most non-agency loans were originated by banks and alternative lenders.

39.2% were originated by banks (up YOY), 30.6% by alternative lenders (credit companies, debt funds, pension funds — up slightly YOY), 19.2% by life companies (down YOY), and 11% by CMBS lenders (down YOY).

 

3. Treasury yield rate increased.

The Q1 ending 10-year treasury rate is 66 bps higher compared to Q4 2020.

 

4. Rising equity prices, lower volatility, and smaller corporate bond rates.

The S&P 500 closed at a new high of 4232.6 in early May, which is a 14.4% YOY increase. Volatility (measured by the VIX index) has decreased YOY and since Q4 2020. The BBB corporate index spread was down 14 bps between the end of April 2021 and the end of December 2020 (130 bps to 116 bps), which peaked at 488 bps in March 2020.

 

5. Commercial mortgage loan spread to U.S. Treasury tightened.

Overall spread for commercial loans was down 31 bps from Q4 2020 to Q1 2021 (275 bps to 244 bps) but is up 23 bps YOY. The spread on multifamily loans is up 7 bps in Q1 2021 and up 24 YOY.

 

6. Mortgage rate distribution shifted higher.

Nearly 70% of mortgages had a coupon rate above 3% in Q1 2021 compared to 59% in Q4 2020.

 

7. Underwriting assumption changes.

DSCR fell slightly (1.57 Q4 to 1.52 Q1). The amortization rate (a measure of the average percentage of the original loan balance that pays down over the loan term) increased (18.6% Q4 to 26.8% Q1). Percentage of full-term interest-only loans decreased (34.3% in Q4 to 17.4% in Q1). Interest rates increased (3.08% Q4 to 3.34% Q1). Debt yield decreased (8.89% in Q4 to 8.75% Q1). Cap rates were largely unchanged.

 

8. Loan-to-values were largely unchanged.

Commercial loan LTVs were up 1% from Q4 and 10 bps lower YOY, indicating that leverage has recovered to pre-pandemic levels.

 

9. Mortgage volume is up.

Agency volume was $35.5 billion in Q1 2021, up from $24.2 billion in Q1 2020. CBRE’s agency pricing index (reflects the average agency fixed-mortgage rates for closed permanent loans with a seven-to-10-year term) increased by 46 bps in Q1 2021 to 3.18%, which is down 55 bps YOY.

 

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5 Reasons Why You Should NOT Become a Commercial Real Estate Syndicator

5 Reasons You Should NOT Become a Syndicator

Becoming a commercial real estate syndicator is a great way to help you and others achieve their financial goals. However, commercial real estate syndications are not for everyone. In this blog post, I will outline some of the reasons why you might decide to forgo becoming a commercial real estate syndicator and pursue a different active real estate investing strategy.

 

What is commercial real estate syndication?

A commercial real estate syndicator raises money from passive investors to acquire and manage a commercial real estate investment. The syndicator (sometimes referred to as the operator, sponsor, and general partner) actively finds, manages, and sells the asset, and the passive investors fund a portion of the project costs. The profits from the commercial real estate investment are split between the active and passive investors.

 

5 Reasons You Should NOT Become a Syndicator

1. You have anxiety over managing and/or losing other people’s money.

Once you enter the realm of commercial real estate syndications, you are managing other people’s money. There are other investment strategies that involve other people’s money. However, for syndications, the other people who invest their capital are entirely passive (i.e., limited partners). They are entrusting you and your team to preserve and grow their capital.

Like all investments, there are no guarantees in commercial real estate syndications. It is unlikely that a passive investor will lose their money, as long as they adequately vet the syndicator, market, and deal. However, it is possible. Therefore, if the thought of managing and potentially losing your passive investors’ money gives you crippling anxiety, commercial real estate syndications may not be for you.

 

2. You have no real estate experience.

There are two main requirements to becoming a commercial real estate syndicator. The first is that you must have real estate experience (more on the second requirement in the next section). You don’t need to have a track record investing in the specific asset type you plan on syndicating or in commercial real estate. However, you must have success investing in some sort of real estate.

You will have a difficult time getting someone to trust you with their capital if you have zero real estate experience or haven’t invested your own capital. Even if you’ve only purchased a handful of single-family rentals, you can leverage that experience to raise capital. If you’ve never done a deal before, or haven’t worked in real estate in some form, you may not be ready for commercial real estate syndications.

 

3. You have no business experience.

In addition to real estate experience, you should also have business experience before you become a commercial real estate syndicator. By business experience, I mean starting your own company (hint: it could be a real estate company) or being promoted within a large corporation.

As I will detail below, a commercial real estate syndicator is running a business. Therefore, they must have adequate business experience. If you haven’t started your own business or haven’t been promoted within a large corporation, you may not be ready to become a commercial real estate syndicator.

 

4. You want to work part-time in real estate.

There are many real estate investment strategies, like buying single-family rentals or small multifamily, wholesaling, or fix-and-flipping, that can be done part-time (although there are people who do these strategies full-time). However, most commercial real estate syndicators are doing it as their full-time job.

Managing other people’s money, a multimillion-dollar commercial real estate portfolio, and a team requires a lot of attention. If you don’t have the time or don’t want to work full-time hours on your business, commercial real estate syndications may not be for you.

 

5. You don’t want to be liable if something bad happens.

A commercial real estate syndicator, as a general partner, can be personally liable in certain situations. For example, if they secure recourse debt and default on the loan, secure non-recourse debt, trigger a carve-out and default on the loan, or if they are sued by a resident, vendor, etc.

Lawsuits and loan defaults are not the norms, but they are possible. Therefore, if you don’t want to be liable if something bad happens at your property, commercial real estate syndications may not be for you.

 

5 Reasons You Should NOT Become a Syndicator

The five reasons above should not be interpreted as black and white. I am sure there are commercial real estate syndicators who are anxious about managing other people’s money or who got started without real estate and/or business experience.

However, if any of these five reasons apply to you, do some reflecting on your goals and preferences before pursuing a career as a commercial real estate syndicator.

 

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Four Ways to Increase Cash Flow of Your Commercial Real Estate Investment

Anyone involved in commercial real estate is hoping to maximize the return on their investment. When trying to increase their potential returns, they often focus on the value of the properties they’re investing in. While buying properties with an upside (i.e., natural appreciation) is certainly important, it’s vital not to overlook another way your investments can bring returns: cash flow. When your properties are providing a monthly income, you’re receiving a regular reward for having made the investment.

 

Why Cash Flow Is So Important

A steady cash flow is essential in many cases because it supplies the investor with a regular income. This is especially important for investors who are just starting out and don’t have a lot of wealth to fall back on.

Take the example of a young couple who were hoping to parlay their real estate expertise into a profitable enterprise. In the early years of their venture, they needed to prioritize investments that could bring immediate cash flow. This is the only way they were going to get by.

A steady income can also help increase the value of the property itself. While the cash flow is undeniably useful to the investor, it is even more important as a way of increasing equity. Not only is the increase in equity likely to exceed the value of the income, but it will also remain untaxed as long as it remains unrealized.

While unrealized equity might not feel as good as cold hard cash in your pocket, it will still be part of your total wealth. Eventually, the equity you gain through your income will become big enough that you can use it for further investments, which will in turn provide other income streams. This means the modest cash flow you started out with will allow you to create an income-equity-investment cycle that should prove highly profitable down the road.

In order to maximize the return on an investment, you want the cash flow to be as high as possible. There are many ways to boost the income from a property, all of which depend on adding value to the property itself. A sound value-add investment strategy will improve the property in ways that directly increase cash flow. Here are four ways you can create additional value for a property.

 

Find Off-Market Deals

Before you can successfully add value to a property, you need to find properties that present opportunities for improvement. One of the best ways to do this is by working off the market. While you might find some great options listed on the MLS, LoopNet, or from a commercial real estate broker, you should never limit yourself to what is officially for sale. Some of the best commercial real estate opportunities will only show their faces if you go actively looking for them.

Finding off-market opportunities is a lot of work, which is why not all investors take the time to do it. Worthwhile discoveries only come after months of marketing efforts, like cold calling and direct mail campaigns. Eventually, however, all that work will pay off, and you’ll find yourself with a property that could undergo serious improvements. Once you’ve increased the property’s value, you’ll see the cash flow steadily improve.

 

Get Creative In Negotiations

Sometimes, you can increase the value of a property before closing. The way to do this is by artfully negotiating with the seller. With the right negotiation tactics, you can add conditions to the purchase that will increase your cash flow down the line.

Imagine, for example, that you are hoping to buy a mobile home park that is not making efficient use of its space. You could insist that the sellers build additional units as a condition for the purchase. If the current owners are truly interested in a sale, they might be willing to negotiate a deal. You can buy the property once the additional units have been completed, and then you’ll have the ability to house more tenants on the property. This, in turn, will increase the property’s cash flow.

Creativity in negotiations will also make it easier to land promising off-market deals. Try to stay as flexible as possible when dealing with intransigent sellers. By making multiple offers, each of which contains different financing options, you make it more likely you’ll secure a deal. Once you’ve got the deal in place, you can start making plans to add value and increase revenue streams.

 

Improve Property Management

A well-managed property will always outperform a similar investment that’s not properly run. As an investor, you should seek out properties that aren’t living up to their potential. Once you’ve secured the purchase, you’ll be able to implement your own management style that should bring a greater steam of income.

Not all investors know how to make wise decisions regarding their properties. Many indulge in cost-cutting measures that ultimately detract from a property’s profitability. As the new owner, you’ll have the ability to run the business as you see fit. By looking for potential improvements, running a series of cost-benefit analyses, and implementing meaningful changes, you can increase the cash flow that a property produces.

 

Invest in Infrastructure

Infrastructure is one area where better management can make a major difference. Improving a property’s physical components will increase demand among potential tenants. This, in turn, will allow you to fill more units and increase monthly rents. When you have more tenants, each of whom is paying more than before, your property will produce a much more significant income.

Take the example of a self-storage facility in Texas. In an effort to save money, the original owners used massive fans on the third level instead of installing a typical climate control system. As a result, one-third of the facility was unbearably hot during the summer months. Unsurprisingly, this made it difficult to rent the units in this part of the building. Upon buying the property, new owners ripped out the fans and installed regular air conditioning, and the demand for the units increased dramatically. By spending big on significant improvements, the buyers were able to make the property much more valuable while increasing the monthly cash flow. Soon enough, the infrastructure improvements had paid for themselves.

 

Conclusion: Value And Cash Flow Go Hand-in-Hand

Any investor wants their commercial properties to accrue value and bring in cash. Luckily, these two goals are far from mutually exclusive. In fact, they supplement each other, allowing you to pursue them both simultaneously. By developing and implementing a value-add investment strategy, you’ll increase the cash flow from tenants. Over the years, you’ll earn a significant income from your property, increase the associated equity, and grow your overall wealth. What more could an investor ask for?

 

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Forging an Entrepreneurial Mindset

Succeeding in business is about a lot more than simply coming up with a good idea and putting it into action. To really succeed, an entrepreneur must develop the attitudes and mental habits that will allow their business to flourish. Whether you’re getting started in commercial real estate investing or scaling your existing company, you need to work on yourself to create a winning mindset.

 

The Importance of Developing the Right Mindset

From raising money to building a team, there are many aspects of running a commercial real estate business that require mental fortitude. You simply can’t win in today’s competitive market without embodying the attitudes that are conducive to success. A closed-minded or arrogant entrepreneur will always lose out to a humble and open-minded competitor.

 

How to Build an Entrepreneurial Mindset

A positive mindset isn’t something you should expect to have innately. It’s not that some entrepreneurs are blessed with the right attitudes while others are doomed to failure. You can proactively cultivate a better mindset by learning about the types of attitudes that prove beneficial.

By examining your own mental habits and seeking to improve them, you can become better at management, investor relations, or any other area of business. Here are five possible areas for improvement.

 

Don’t See Transactions as Inherently Confrontational

Whether you’re trying to buy or sell a commercial real estate deal, you need to keep in mind that business transactions are not, by definition, confrontational. Remembering that the other party is not your adversary will help you build trust. It will also remove any sense of anxiety you might otherwise feel.

If you approach every interaction as a confrontation, you’ll create tension where it doesn’t need to exist. Some salespeople imagine that they’re on one side while the potential buyer is on the other. This makes them think they have to trick or beat the other person in order to come out on top.

Alternatively, a salesperson could recognize that they’re simply helping another human being solve a problem. Instead of being on different teams in direct competition, they imagine themselves and the buyers as teammates working together towards a common goal. You can apply this same mindset to all negotiations and discussions involving your business.

 

Strive for Outcome Independence

It’s important to remember that most business ventures have a probability of success rather than a certainty of a positive outcome. Your job as an entrepreneur is to determine whether a particular initiative is likely to work. From there, whether the move actually pays off won’t have an effect on the soundness of your decision. You made your choice according to the potential risk/reward ratio, not because you knew the endeavor would prove successful.

This attitude can be termed outcome independence. A smart entrepreneur should realize that the outcome of a move doesn’t have to define the move itself. Even if a commercial real estate deal or negotiation ends in failure, you can learn from the episode without considering it a mistake.

Take, for example, a commercial real estate investor cold calling property owners. This is an attempt with zero risk and a very high reward. The worst thing the people could do is say “no,” or one of the owners could be willing to sell their property. Even if the investor gets nothing but negative responses over the course of an afternoon, they shouldn’t view the effort as a failure. This represents an outcome-independent mindset.

 

Always Learn From Your Mistakes

Whenever a business project fails, you owe it to yourself to learn from the experience. This is what allows you to grow as an entrepreneur and a person. Any failure left unexamined is an opportunity that goes wasted.

The potential lessons within a project are a major part of the project’s value. Whatever the result of the endeavor, you’ll still have a chance to learn from the experience. One way to think of this dynamic is in terms of 50/50 goals. With every goal you set, only 50% of the success is based on whether or not you actually achieved what you were hoping for. The other 50% comes from the ability to draw some lessons from the experience.

Consider the example of a failed negotiation. Even if you didn’t finalize the deal you were expecting, the endeavor will still be 50% successful if you come out of it smarter and stronger. Not only will developing this mindset make you better at self-improvement, but it will also help you stay motivated. With 50/50 goals, total failure is practically impossible.

 

Fail as Early and Quickly as Possible

Failure is inevitable in business. Some ideas aren’t as good as you thought they were, and some ventures simply don’t work out. While you shouldn’t let failure get you down, you should do everything you can to mitigate the damage. One way to do that is by making your failures as short-lived as possible.

Imagine, for example, that you are running a company that has just launched a new product. As demand exceeds expectations, you press your supplier for more units, unsure of whether they will be able to keep up. If you stick with the supplier even as they barely manage to fulfill your orders, you’re setting yourself for eventual failure when demand finally outstrips the suppliers’ capacities. Instead of delaying the inevitable, consider asking the supplier to provide a massive amount of units right away. When they say they can’t fulfill the order, you’ll have identified the point of failure early enough to change course.

Drawing failure out will only compound the damage. Learning from failure is important, but that doesn’t mean you want your failures to become year-long courses. Learn the lessons as quickly as possible, then abandon the failure before the costs rack up.

 

Don’t Try To Master Everything

While all entrepreneurs would like to be amazing at everything and micromanage every aspect of their companies, such an ambition simply isn’t feasible. The best managers know how to delegate tasks in order to maximize efficiency at every level of a company.

If there are certain tasks that you’re simply not very good at, don’t hesitate to hire someone else to do the job. There’s a reason that division of labor is a fundamental component of contemporary society. Nobody’s perfect at everything, and only vanity would keep you from making use of others’ expertise.

It can also be worth it to outsource tasks that you’re actually quite good at in the interest of freeing up your time. As a manager, you should be focused on strategy and upper-level operations. You are the company’s architect, which means pounding nails and sawing wood isn’t the best use of your time no matter how great a carpenter you may be. If you can outsource a daily task to someone who can do 70% as good of a job as you, it is still worth it. You’ll make up for the loss in efficiency by giving yourself time to work on bigger ideas.

 

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