How a Low-Cost Virtual Assistant Can Help You Scale Your Business

How a Virtual Assistant Can Help You Scale Your Business

Running a commercial real estate business is a lot of work. You’ve got to investigate opportunities, market your brand, and close deals, all while doing the day-to-day tasks necessary to keep things running smoothly. With such a jam-packed schedule, it’s hard to find the time to actually scale your business. Sometimes, the limited number of hours in a day is the biggest impediment to growth.

If you’re struggling to scale your commercial real estate business, it might be worth considering a radical solution: hiring a virtual assistant. The world is full of intelligent, hard-working individuals who can help you manage your business. The right virtual assistant can take care of all sorts of daily tasks, from tracking down leads to managing your social media accounts. As a result, you’ll have the time you need to expand your operation.

 

The Main Question: How to Do More With Less?

Time is a finite resource. There are only so many hours you can devote to work each week, and you need to decide how you can best take advantage of the time you’ve got. No commercial real estate agent has enough time to do everything they’d like. There are always leads that go unpursued and opportunities that remain unexploited. All the same, your goal should be to do as much as possible with the time you have. Hiring a virtual assistant is one of the best ways to maximize output.

 

The Many Tasks a Virtual Assistant Can Handle

Versatility is a big part of what makes virtual assistants so valuable. If you find an assistant with a high level of intelligence and competence, you can count on them to complete a wide range of tasks. If you grant an assistant access to your social media accounts, you can often rely on them to post regular content.

Assistants are also great for drawing up brochures, creating useful apps, and managing larger projects that require outside contractors. A trusted virtual assistant can become a sort of field manager, taking charge of all the activities that you’re too busy to oversee.

 

Get Your Time Back

When you’re in charge of a large real estate operation, you spend an inordinate amount of time working on details. From updating social media accounts to sorting documents, a lot of your job revolves around administrative clutter. When you hire a virtual assistant to do all this work for you, you’ll have more time to focus on growing your business.

 

Sign More Deals

Every minute you spend on mindless administrative tasks is a minute you could have spent pursuing lucrative deals. With the administrative work successfully outsourced, you’ll have more time to work directly on proposals. This increased focus will lead to more deals.

 

Increase Your Profits

You should be able to pay for your virtual assistant with just a single successful deal that wouldn’t have gone through without them. Every additional deal will represent an increase in profits that’s directly related to your assistant.

 

Scale Your Business

With more deals comes greater revenue. You can use this additional revenue to invest in growing your business. With a trusted assistant helping you on the administrative end, you should have a much easier time scaling your operation. Suddenly, you’ll find yourself with limitless growth opportunities.

 

Bringing in a Virtual Assistant

Hiring an assistant is actually quite straightforward. Vetting is easy enough to do online, and you can even go through an outsourcing company to simplify the process. After just a few simple steps, you should have your new assistant on board.

 

The Vetting Process

As you can imagine, not all virtual assistants bring the same competence and drive to the job. Before hiring an assistant, you should make sure you’ve found someone you’ll feel comfortable working with.

A bit of time and effort during the vetting process will pay off in the form of a hardworking, reliable assistant. Give a potential hire some test projects to see how they handle vague instructions and complicated tasks. If they do a good job, you’ll know you’ve found someone who can help you grow your business.

 

Going Through an Outsourcing Company

You don’t have to go out and look for a virtual assistant all on your own. There are all sorts of outsourcing companies that can help you find reliable workers. Outsource Access even specializes in the commercial real estate business. By going through an established company, you’ll streamline the entire process.

 

Conclusion: Scale Your Business With a Reliable Virtual Assistant

Don’t let a lack of time hold your business back. Return on investment is the first criterion by which you should judge a potential change, and hiring a virtual assistant almost always pays off. By hiring an assistant at a reasonable price, you can set yourself up for years of growth. If you’re an ambitious business owner, the time to act is now.

 

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What to Do When Your Lender Backs Out at the Last Minute

What to Do When Your Lender Backs Out at the Last Minute

Pulling off a commercial real estate deal is often a challenging feat. When you’re dealing with multifamily units or a large commercial space, the deal is bound to involve multiple moving parts. Sometimes, everything seems to be in order until the very last minute when the bottom drops out.

The best real estate investors manage to stay calm in these stressful situations. With the right strategy, you might still be able to salvage a deal. The key is to accept the sudden collapse, identify possible solutions, and work diligently to bring a new deal into place.

 

The Situation: A Lender Suddenly Backs Out

Imagine you’ve got a massive commercial real estate deal on the cusp of going through. Suddenly, the financial institution that had promised you a loan decides to pull the plug.

There are all sorts of reasons a bank could make such a last-minute decision. A new leader could have come in and changed the institution’s operating procedures, or maybe someone suddenly got cold feet. Whatever the reason, you now find yourself in a precarious situation. You’ll need to secure financing from another source, and you’ll need to do it before the seller pulls out of the deal.

 

The Potential Consequences

Losing your financing at the last minute can have truly disastrous consequences. In the first place, you could lose your ability to close the deal. The deadline could pass, the seller could refuse an extension, and you could find yourself without the property you’d been hoping to purchase.

What’s even more devastating is that everything invested in the project, including time and financial resources, will have gone down the drain for nothing. Needless to say, this is an awful situation to find yourself in. To avoid this worst-case scenario, you should do whatever it takes to salvage the deal.

 

How to Handle the Situation

Losing your financing is certainly devastating, but it doesn’t have to be a fatal blow. With an industrious work ethic and a can-do attitude, you can still find a way to rescue the deal. What matters here is working quickly and communicating with everybody involved in the case. You’ll need the seller to be on your side, and you should work closely with a trustworthy broker. If you take the steps outlined below, you can find another bank to close the deal.

 

Talk With the Seller

When a deal falls through just before a scheduled closing, the seller is bound to become a little bit spooked. They trusted you as a reliable buyer, and now they have a reason to doubt your ability to close the deal. If you want them to come back to the table and hammer out a new solution, you’ll need to convince them that you’re still worth trusting.

Contact the seller immediately to reaffirm your commitment to buying the property. Then, explain exactly how you’ll go about securing the financing you need. Give them a timetable, and express confidence in the ultimate completion of the deal. As long as the seller gives you the benefit of the doubt, you’ll still have a chance to pull the deal through.

 

Negotiate for an Extension

If the terms of the deal are about to expire, you’ll need the seller to agree to an extension. Some savvy owners might demand an increase in the sales price in exchange for giving you extra time. Don’t agree to the first price mentioned, but negotiate a deal that works for everyone. You might have to bluff and threaten to walk away to secure a fair price.

 

Work With a Reliable Mortgage Broker

The mortgage broker will play an essential role in finding a new lender to finance the deal. You should work closely with the broker during this process. Find someone you can trust, and let them in on your negotiations with the seller. Remember that your interests align with those of the broker. If you work together closely, you’ll have a better chance of eventually closing the deal.

 

Find a New Source for the Loan

The ultimate goal is to work with the broker and find another financial institution that’s willing to finance the deal. As you search for the right bank, it’s important to be fearless and proactive. Don’t hesitate to inquire with local banks that might not seem like the perfect fit. Time is of the essence in a situation like this, and any potential lender is worth a shot. With perseverance and hustle, you should manage to find a bank that’s willing to offer the loan.

 

General Tips for Closing Commercial Real Estate Deals

While the steps described above are great for getting you out of a pickle, it’s better to avoid such challenging situations altogether. With the right approach to commercial real estate deals, you should be able to avoid most last-minute crises. Whether you’re dealing with multifamily units or commercial spaces, here are some general tips to keep in mind.

 

Prioritize Communication With the Lender

You’re less likely to be blindsided by a bank or financial institution if you’re in constant contact with them in the lead-up to the closing. When talking with a representative from the bank, you should notice any signs of doubt or hesitation. If you forecast a potential pullout from the deal before it happens, you’ll have a chance to prepare and consider other options.

 

Build Strong Relationships With Mortgage Brokers

A mortgage broker is often your strongest ally when negotiating over multifamily units. By building strong relationships with brokers, you’ll give yourself a greater chance of securing complicated deals and avoiding sudden collapses. Smart investors use the same brokers throughout their careers, taking advantage of the improved results that such a tight working relationship can bring.

 

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12 Most Downloaded Best Ever Podcast Episodes of 2021

12 Most Downloaded ‘Best Ever’ Podcast Episodes of 2021

Congratulations! We’ve (almost) made it through another year, and for Best Ever listeners, it’s been a year packed with daily no-fluff advice to guide their investing journeys.

We highlighted the top 12 episodes our listeners couldn’t get enough of in 2021 to inspire you as you prepare to kick off the new year. Whether you missed them the first time around or listened on repeat, these 12 episodes are sure to help set you up for success in 2022.

 

12. Attaining Your Passive Income Goal

John Soforic
Guest: John Soforic
Guest Bio:
John is a full-time property manager and author with 25 years of real estate experience. At the time of this interview, he had attained a net passive income of $20,000 per month, a portfolio consisting of 110 doors freely owned, and had flipped 75 properties while working full-time.
Best Ever Quote: “
Let’s really talk about turning off that TV. Let’s talk about all the frivolous things that we can do. I had to do that. I stopped reading books that I liked, magazines that I liked, I stopped watching TV that I liked — you sacrifice.”
Listen to the full episode.

 

11. 80 Units in 1.5 Years

Blake Selby

Guest: Blake Selby
Guest Bio:
When Blake Selby started his real estate journey as an investor, he tried a little bit of everything before eventually morphing into a private lender. But not before scaling to 80 units within 1.5 years, then turning that into 100 units free and clear.
Best Ever Quote:
“Selectively choose who you listen to. Make sure people you’re listening to actually have done what they’re saying and aren’t making the majority of their money on education. Make sure they’re making the majority of their money on deals.”
Listen to the full episode.

 

10. Learning the Secrets of the Rich

Chris Naugle

Guest: Chris Naugle
Guest Bio:
Chris is the co-founder and CEO of FlipOut Academy, The Money School, and Money Mentor. Based in Buffalo, NY, he has 16 years of real estate investing experience with a portfolio consisting of more than 500 real estate deals including flips, wholesales, and rentals.
Best Ever Quote:
“It’s going to feel like everything around you is collapsing, falling apart, but you know what that feeling is? That is the feeling where you need to rise up, be the leader that you were meant to be — be the light in the dark for all those that follow you.” 
Listen to the full episode.

 

9. Cash Flow or Equity Gains: Which Strategy Is Best? | Actively Passive Investing Show

Actively Passive Show

Hosts: Travis Watts & Theo Hicks
What You’ll Learn: The difference between investing in cash flow vs. equity gain, and the pros and cons of each. 
Best Ever Quote: “Sometimes early on, if you’re young or you just absolutely don’t have capital, it’s going to be frugality. It’s going to be your budget. It’s going to be your choices of how you spend money that’s going to have the greatest impact.” —Travis Watts
Listen to the full episode.

 

8. Current State of the Multifamily Market | Actively Passive Investing Show

Actively Passive Show 2

Host: Travis Watts
What You’ll Learn:
The five metrics you should pay attention to when looking at new deals, whether or not it’s a good time to invest, and the migration trends that have been beginning to appear since the pandemic.
Best Ever Quote:
“Forty percent of U.S. dollars — all the U.S. currency — was printed in the last 12 months. So what do you think that means for real estate?”
Listen to the full episode.

 

7. Finding Your Next Cash Flow Monster

Adam Craig

Guest: Adam Craig
Guest Bio:
After starting a profitable online retail business right out of college, Adam Craig decided to get started in real estate investing with single-family homes. He has now been actively involved in real estate investing for nine years, including acquisition, rehab, leasing, and selling.
Best Ever Quote:
“Take the action. Just like my office building — I was scared, I had all the same fears. And then after you do it, you keep waiting for some kind of shoe to fall or some kind of hiccup, and then when it doesn’t come, you realize, ‘Wow, much easier than I thought.’ Just like everything else in life.”
Listen to the full episode.

 

6. Becoming Your Own Bank #SkillsetSunday

Chris Naugle 2

Guest: Chris Naugle
Guest Bio:
Chris is the co-founder and CEO of FlipOut Academy, The Money School, and Money Mentor. Based in Buffalo, NY, he has 16 years of real estate investing experience with a portfolio consisting of more than 500 real estate deals including flips, wholesales, and rentals.
Best Ever Quote:
“What they were talking about was something so different than anything I’d ever heard about in all my training, all my high-level years doing the advisory thing. I remember thinking to myself, ‘If I don’t know this, what else do I not know? What do the wealthy know that I don’t?’”
Listen to the full episode.

 

5. Managing Property Managers: 101

Yosef Lee

Guest: Yosef Lee
Guest Bio:
From working multiple part-time jobs to becoming a full-time civil litigation lawyer, this father of three quickly learned to manage his time when he became a multifamily investor during nights and weekends. Yosef joined a multifamily mentorship group in early 2020, and by the end of the year, his first 44-unit deal was closed.
Best Ever Quote:
“Forming a team is very important. Partnership is very important. But to do so, you’ve got to know what kind of value you can bring in. So you’ve got to reflect on yourself first, and then find out what value you can add. Then you’ve got to find the partners who can complement your skill set.”
Listen to the full episode.

 

4. Building Financial Independence | Actively Passive Investing Show

Actively Passive Show 4

Host: Travis Watts
What You’ll Learn:
How host Travis Watts got started in real estate with house hacking, the pivotal moment that kickstarted his financial freedom, and the four key steps he took to get there. 
Best Ever Quote:
“What are my goals, short-term and long-term? What is the best investment strategy that can help get me there? That was a fundamental shift in my thinking.”
Listen to the full episode.

 

3. The 15 Best Ways to Generate Passive Income | Actively Passive Investing Show

Actively Passive Show 3

Hosts: Travis Watts & Theo Hicks
What You’ll Learn:
Insights about investment opportunities, private placement investing, the concept of being a passive investor, and the effective ways to generate passive income.
Best Ever Quote:
“Really, anyone who I ever talked to that talks about getting into investing in real estate, this is really one of the best ways. It’s a really low down payment,  you’re managing a property that — you’re there, so you don’t have to travel around everywhere. And once you leave, you can rent it out and have a really high cash-on-cash return.” —Theo Hicks
Listen to the full episode.

 

2. 3 Essential Tips for Selecting Investment Markets | Best of Best Ever

Best of Best Ever

Guests: Marco Santarelli, Brent Maxwell, and Adiel Gorel
Guest Bios:
Marco, based in Orange County, CA, is the founder of Norada Real Estate Investments. Brent is a real estate investor with a passion for restoring Detroit, MI, and Adiel is the CEO of ICG, a real estate investment firm based in San Francisco, CA.
Best Ever Quote:
“You want to see job stability in a diverse economy. If you don’t see that, that may be a market that you should avoid. Because let’s face it, there are so many other markets that you can choose from, and the United States is such a large market geographically speaking, that it’s really made up of over 400 metropolitan statistical areas and probably over 600 if you include micro markets.” —Marco Santarelli 
Listen to the full episode.

 

1. $15,000 a Month Passive Income

Rachel Richards

Guest: Rachel Richards
Guest Bio:
Rachel is a former financial advisor, and now a real estate investor with a portfolio of 40 doors. At 27 years of age, she quit her job and retired with $15,000 a month in passive income.
Best Ever Quote:
“You have to be able to recognize the point at which you’ve learned enough and it is time to take action. Because you’re never going to feel 100% prepared. It’s always going to be scary to take that first step.”
Listen to the full episode.

 

Thank you for an incredible year, Best Ever listeners — here’s to even more expert insights, education, and prosperity in 2022.

Did your favorite episode make the cut? Leave a comment below and let us know!

 

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How to Effectively Network at Multifamily Meetups & Conferences

How to Effectively Network at Multifamily Meetups & Conferences

Apartment syndication is a process with many aspects to address and learning how to go through each step of the process in detail is extremely helpful. What if you had a manual containing this valuable information for anyone interested in how to increase their effectiveness and network during conferences and multifamily meetups? The value added to any investor is instantly made clear.

 

Multifamily Network Skills for Real Estate Investors

There are different approaches that can be used to break into the industry of apartment syndication. Getting a mentor or investor is a huge hurdle, so this needs to be addressed directly. The goal is to build relationships that create opportunities, add value, and lead to developing partnerships over time.

Start with the prospect of improving your positioning within any situation. Going to a conference requires a strategy. Even if you have the right attitude and outlook going into the conference room, you still need to get yourself in a position to earn the trust of the potential partner or investor. This can require practice, so you have to be prepared to do this again and again.

The issue of how and where to find investors, file legal documents, and complete other forms of paperwork are compounded by the need to properly raise funds. In addition, the structure of the partnership with the investor is important. Communication style also has an impact.

 

Preparing to Meet Investors

Prepare to meet investors, podcasters, or others who are doing things that you hope to be doing in the future. The mindset should reflect your preparations. Ask yourself how you can add value to each and every interaction. The perception of adding value goes a long way in building your first impression in the eyes of others.

Be aware that getting an investor isn’t the only goal. It’s also important to build up a kind of infrastructure of solutions, so you can be in a position to refer people to others who can help them to meet their most pressing needs. This strategy is more effective than the direct approach because you build value during each interaction and generate a reputation in circles connected to the investors.

 

Investor Network and Meetups

High-quality referrals can get you noticed: This is the strategy, in a nutshell.

Instead of angling for direct attention as you network, as so many do at these conferences, seek to connect the target person with someone else who has the skill set or network that they need. Providing value in this way does require a long-term outlook, but that’s exactly why it’s so advantageous. If you’re capable of playing the long game, this is a winning hand to play.

This strategy shows the potential investor your ability to perceive the problem and design an effective solution. Target a specific person with the skill set necessary to solve a particular real estate issue. If the issue requires a specific type of knowledge, outsource the work to someone who has a solid background in this area.

This approach is simple, effective, and requires little extra time. Think about how it can be applied at real estate conferences, meetups, or in casual settings in general. First, don’t think about setting an arbitrary goal like the number of business cards you can get passed out to people. Quantitative goals often eat up time that can be better spent in crafting valuable relationships.

Building one relationship each day might be a feasible goal for a conference that lasts several days. However, the focus should remain on quality instead of quantity. Get past the surface of the conversation and create value in any way that you can think of at the time. At the very least, communicate your understanding of the issues your clients are facing inside their business.

 

Getting Started in Apartment Syndication

Apartment syndication is often pursued after an initial period of activity. During this time, the potential partner might have done fix-and-flip deals before transitioning into multifamily units. Once they reach this stage, they might become interested in apartment syndication, but they often lack the ability to raise the necessary capital to close the deals.

Just imagine meeting someone at a conference at this stage of the process and being able to instantly produce a manual that comprehensively outlines the apartment syndication process from start to finish. Now, that makes quite an impression!

The idea is the same: Add value to the person’s life in an immediate way that addresses their major pain points.

 

Building and Maintaining Relationships

If this isn’t possible, the next best thing is to schedule a follow-up meeting or connect them with someone else who can help. Make sure to get enough information to conduct these activities while maintaining your presence in the mind of your new contact. This could be a small piece of relevant personal information, for example. Use it to remind them of how you helped them to solve a problem.

Finally, don’t be dissuaded if you meet someone at a conference who is new to making these deals. The person might control considerable resources or have a net worth that they’re interested in using as leverage. They came to the conference seeking information, so be the person to provide them with relevant answers.

 

Summary

Use this strategy to network with everyone you meet. Don’t reserve it just for people who you think are likely prospects; this can blind you to the presence of a real gem in the room. Find out how you can add value to the lives of the people you meet. Let it lead to the opportunities you seek. This can help you to find a new partner, investor, or even a friend. You never know what the results will be until you go through the process of actually doing it.

 

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How to Build Your Own Residential Assisted Living Portfolio

How to Build Your Own Residential Assisted Living Portfolio

Some people start their commercial real estate portfolios with apartment buildings, strip malls, and similar structures. Loe Hornbuckle, a Texas-based entrepreneur, has seen great success by creating top residential assisted living properties. His advice in the real estate investing world can help others follow in his footsteps and gain success.

 

Early Beginnings

Hornbuckle was born in Shreveport, Louisiana. His background was in sales and marketing. In fact, his first real job had nothing to do with commercial real estate. Loe ran a car dealership and accrued solid income. However, he wanted more control of his time. He began working with MC companies in the apartment syndication field. By accident, he stumbled into assisted living care properties.

Hornbuckle’s father required hospice care during his final years. As others in the same situation can attest, this experience is stressful. His father was neglected, which weighed heavily on him. At this time, he was running apartment properties. Although he enjoyed the work, he never felt that it was having a positive impact on his community. Following the passing of his father, Hornbuckle got word about investing in residential assisted living, or RAL. He immediately took interest and felt a sense of purpose. He knew that he could give other families a better experience than he and his father had.

 

First Opportunities

Hornbuckle’s first opportunity in this niche was to take over an existing RAL home. It had three residents, so it was quite small. He was not sure that he could do it. He did everything possible to provide residents with top care. After receiving positive feedback from clients, he gained the confidence to keep moving forward.

 

Learning the Business

Although Loe feels that experience is key to learning any business, he also took a class from Gene Guarino. He taught Hornbuckle how to turn single-family homes into eldercare facilities. In August 2015, Hornbuckle dove in and never looked back.

In the beginning, it was tough for Loe to break into the commercial real estate sector. He couldn’t find employment in the apartment world. Nobody understood why he would take such a drastic pay cut to become an apartment manager over his lucrative car sales background. Luckily, he gained a job from a company that had taken some of his investments. He literally “worked his way down the ladder.” However, it was vital for him to learn the mechanics of property management and ownership. He claims that people get too reliant on third parties. He feels that it is fine to take help, but you must understand the business first.

 

Different Types of Business Plans

Loe reveals four different types of business plans that involve this type of investment property. To begin, it is possible to participate in residential conversion. He was familiar with this idea. In 2015, he purchased a home outside of Preston Hollow, which is the neighborhood that used to house George Bush. It was converted from a regular dwelling into a residential assisted living property.

Another plan involves a change of ownership, which is when a person takes over an existing care facility. It provides an opportunity to gain an established business and to improve on it. If things are running smoothly from the beginning, there is very little hassle.

Also, it is possible to obtain a facility that has a license but no residents. Sometimes, it becomes difficult to obtain permits and licenses to run this type of facility. When there is already one in place, it becomes easier to build a successful business without outside interference.

Finally, ground-up development is an option. It is the most time-consuming and expensive way to go. However, it may not always be possible to find a piece of property that is already established. On the positive side, it allows a developer to customize every aspect of the facility.

He urges people to proceed cautiously. If you are interested in this type of investing, make sure that you work with knowledgeable individuals. He explains that one of his biggest mistakes was purchasing a property with a faulty fire system. Ignorance cost him a lot of time and money.

 

Building a Solid Portfolio

Managing a residential assisted living property is a 24/7 business. To be successful, it is essential to be fully committed and focused. According to Hornbuckle, it is vital to build a business with a number of different units. You must have various facilities to make it worthwhile. To gain success, you should look at the number of beds in each facility and understand how many people are needed for staffing. It is more cost-effective to handle a large facility than one with only a few beds.

 

How Much Money to Build a Portfolio?

Loe explains that the amount needed for managing a multi-house portfolio varies depending on the area. In Dallas, each house costs approximately $1 million. Also, many cities and states limit the number of people per setting. If you are forced to start small, it is essential to offer a premium product. The fixed costs and highest expense of running this type of facility is staffing. Labor drives price. Hornbuckle explains that you must be willing to dedicate 30%–40% of the cost to labor. This ensures an efficient staff-to-patient ratio.

To gain success, it is crucial to stand out. Besides offering premium services, you should dedicate the facility to a specific segment. For example, a facility may be dedicated to serving clients with dementia or Parkinson’s disease.

 

Funding

It is not possible to begin real estate investing without adequate funding. Purchasing and managing an assisted living facility is quite costly. When pursuing a house conversion, it is necessary to acquire a traditional mortgage and to raise private money as well. This route is quite equity-intensive. On the other hand, an existing business is easier to finance through a bank or SBA loans.

 

Mitigating Risks

Hornbuckle explains that the construction side of RAL investing is challenging. Remodeling a facility is difficult. However, he surrounds himself with good people and has developer partners. Also, he works with his architect to develop successful models. He recommends others do the same.

 

Looking to the Future

Currently, Loe Hornbuckle is CEO and founder of The Sage Oak, which is a memory care community with five locations throughout Dallas and over 40 beds. Also, he has two great development deals in the works with 300 beds. He is committed to providing the best outcomes for society’s most vulnerable people and encourages others to do the same. Understanding the risks and rewards will help you to make the best choices and enjoy the best outcomes.

 

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From Commercial Real Estate Investor to Mentor

From Commercial Real Estate Investor to Mentor

Peter Conti’s story is proof the American dream is alive and well. In 1990, Peter was an auto mechanic. He liked the job, but it didn’t allow the lifestyle he envisioned for himself. Thus, he decided to start investing in real estate.

That decision paid off in a big way. In the intervening years, Peter has invested in all different types of properties all across the U.S. They include apartments, single-family homes, and shopping centers.

Today, Peter is primarily a commercial real estate investor, and he’s based in Annapolis. He also founded an informational company called Real Estate 101, through which he and his team mentor industry newcomers.

Here are a few of the strategies that have propelled Peter into the real estate stratosphere.

 

1. Don’t Let the Math Overwhelm You

Peter notes that many real estate investors get bogged down by formulas. When they find a deal, they overanalyze it. They apply the cap rate formula, a series of net operating income conversions, and so forth. As a result, no deal looks good to them, and they end up going a year or two without investing in anything.

Peter takes a more commonsense approach to investments. He typically visits sellers and asks them why they’re selling, especially if a property is still making money. Then he carefully studies their responses.

In particular, Peter examines social cues like tones of voice. That way, he can see if buyers seem to be hiding something. Indeed, from such a discussion, he gets a sense of a property’s upside and potential pitfalls.

In some cases, an emergency or tragedy compels someone to sell a profitable property. Peter has met sellers who were facing bankruptcy, contending with severe medical issues, and grieving for lost loved ones. In those situations, Peter provided some solace; his investments helped people to move forward with their lives.

Peter also seeks out “lazy landlords.” They own successful properties — so successful they’re financially set for life. And they don’t want to keep renovating, overseeing maintenance, and doing all the other work of being an apartment owner. Thus, they’re willing to sell their profitable properties.

Whatever the motives for selling may be, once Peter becomes interested in a deal, he negotiates with the owner carefully. The end goal is always the same: terms that are attractive to the seller and to him.

 

2. Attract Quality Leads

For a commercial real estate investor, relationships aren’t just important in making deals. They’ll also help you find those deals in the first place. Local and national real estate experts can provide valuable leads. A couple of them might even mentor you over time.

However, to get the best tips and leads, you must build relationships. It takes time and effort.

Introduce yourself to industry insiders. Tell them what you’re looking for in properties and what you’re avoiding. Also, provide clear feedback whenever someone sends you a lead.

Peter uses this example: Imagine you’re a commercial real estate investor, and you’re looking for a multifamily residence that’s half full and requires renovations. Once you buy it and upgrade it, you can raise rents and add tenants.

Next, imagine someone sends you a lead about a multifamily property that’s fully leased and fully renovated. Instead of ignoring that lead, contact the person who sent it. Thank that individual, and politely reiterate that you’re looking for more upside potential. That pro can then be on the lookout for such deals.

 

3. Play It Safe

You might think that someone who’s thrived in real estate for decades would be a bold and aggressive risk-taker. But most of the time, Peter is conservative. He’s careful with his investments and eager to minimize any downside.

For one thing, Peter finances his deals creatively. At the outset, he invests little of his own money or his investors’ money. Instead, he might keep the previous financing structure in place. Or he may locate a new investor, someone who’s willing to accept a year or two of financial risk.

Another financing option is a master lease. In essence, with this arrangement, you lease the apartment complex at first, paying a certain amount to the owner each month. You also agree to take care of the management duties and promise to buy the property at some point. And, with a master lease, there are penalties if the seller defaults or if the buyer refuses later on to purchase the property.

With such strategies, Peter has the freedom to walk away from a deal while suffering minimal financial losses.

Peter has another way of being cautious: He rarely if ever buys a property unless someone has owned it for 15 years or longer. After all, if a person has held onto it for that length of time, it’s almost certainly capable of generating reliable profits. And it’s less likely to come with major problems.

 

A Professional with a Personal Touch

If there’s one big takeaway here, it’s that it helps to sit down with a real estate owner and talk when you’d like to buy a property. When it comes to a deal, an honest and respectful back-and-forth usually leads to the best outcome. The two of you could explain what you want and need from the deal. Then you could spend time working out all the details.

By contrast, if you just give someone a sales pitch and reach an agreement quickly, it’s more likely to fall apart. A fast negotiation can make an owner suspicious. Over the next few days, this person might wonder: Why did the buyer accept the deal so fast? Were the terms unfavorable to me? Those doubts could make the owner withdraw from the deal in order to seek other offers.

There’s one more rule Peter Conti always follows: Whether he’s buying real estate or starting to mentor an industry newbie, he does so with eagerness and passion. Of course, given his profound love for his profession, there’s probably no other way he could do it.

 

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Choosing the Type of Real Estate You Want to Invest In

Choosing the Type of Real Estate You Want to Invest In

Congratulations! You are choosing to think about investing in real estate. I am glad you got to this point in planning for your future. Real estate is a great place to grow wealth by making your money work for you. In fact, if done correctly, you can amass great wealth. This is not meant to replace your own homework and research, rather it is meant to give you a jumping-off point.

I talk with people weekly about real estate. I invest personally and I advise people about their investments. You see, I am a lawyer, and while I am not your lawyer, people come and see me about the matters below on a regular basis. I hope you find some good nuggets in here and they help to launch you into a great success.

 

Choosing What Kind of Real Estate You Want to Invest In

The first step to investing in real estate is figuring out that you want to. Good job! You know you want to invest in real estate. That part is now behind you. But, how do you do it? My intention is not to point you in any direction, rather it is to give you information about how YOU can decide what direction YOU want to go.

In this short outline, I want to introduce you to commercial and residential real estate — they are similar but very different. For the purposes of this blog post, I want to focus on residential real estate and the kinds of rentals, how you rent those out, and what other ways to invest in real estate exist for you.

 

Commercial

Commercial real estate is basically anything that is not residential, meaning you are not living in it. While you may think you live at work, you actually do not. Commercial real estate is anything that is held for business or commercial purposes. A good example would be the fast-food restaurant down the road. That building and the land on which it sits is commercial space.

There are many types of commercial properties out there. There are retail spaces, office spaces, mixed-use (office and residential), mixed-use (retail and office), industrial, storage, hotels, and on and on. Each type of property is unique in and of itself with different classes for office (A–C), and air-conditioned or not for storage.

Commercial real estate has different tax treatments for depreciation and 1031 exchanges or like-kind exchanges. It is important for you to understand that things work differently in commercial real estate than they do in residential real estate. While this is a primer for the new residential real estate investor, just know this area can be complex and very competitive.

 

Residential

Residential real estate is often where most new investors find themselves when they start investing in real estate. Whether someone inherits a house from a relative; outgrows their current house, buys another one, and decides to keep the old one to rent out; or they have found themselves in a situation where the opportunity was just right; most new investors find themselves involved in residential real estate.

There are myriad types of residential real estate out there. Anything that people live in can be rented out. Just think about that for a minute with apartments, mobile homes, houses, duplexes, triplexes, quadplexes, condominiums, fifth wheels, and on and on.

 

STRs

Short-term rentals (STRs) have been made famous by companies like Vrbo and Airbnb. These companies have amassed fortunes by allowing the average person like you and me to rent out our homes or other properties to the general public. There are other platforms out there that provide the same service, but for ease of reference, these are the ones that have found their way into the public lexicon.

STRs provide better returns than most long-term rentals (LTRs) because of the unique price points they are able to charge per night of stay. This unique animal has become a popular alternative to hotels with price points ranging from very inexpensive to quite costly depending on the level of finishes, location, rooms, and amenities available to the guests.

Many STRs have drawn the ire of city councils and homeowner associations (HOAs). The reasoning for such conflict ranges from unruly guests using properties as bachelor and bachelorette party pads to the properties not being designed for typical residential uses with small closets and little cabinet space in the kitchen. These issues act as double-edged swords to the investors that build properties specifically for STR usage. However, depending on the capital investment and the return on that investment, many STR investors find this area of the residential investment market very lucrative.

Below are some of the types of properties that STR owners rent out on a regular basis and locations for you to look into for your own research.

  1. Cabins — Gatlinburg, Tennessee; Big Sky, Montana
  2. Apartments — New York City, New York; Chicago, Illinois
  3. Condos — Destin, Florida; Scottsdale, Arizona
  4. Houses — Nashville, Tennessee; Lake Tahoe, Nevada

 

LTRs

LTRs are a slower and steadier way to make money over time. Compared to STRs, LTRs make a lesser amount of money each month as tenants pay their rent. That being the case, there is usually less wear and tear on the property and market fluctuations do not correlate to larger losses in revenue, e.g., COVID-19. Further, LTRs normally do not have a conflict with city councils and HOAs.

Below are the two types of LTRs that real estate investors discuss most frequently:

  1. SFRs — Single-family rentals, which are stand-alone structures that usually house one family unit.
  2. MFRs — Multifamily rentals, which are usually duplexes, triplexes, quadplexes, apartment buildings, and mobile home parks.

 

Fix-and-Flip

Fix-and-flip investing is when a property is purchased, usually for a discount of the market rate. That discount provides the investor the opportunity to “add value,” a term the real estate investor comes to know well. Adding value to a property increases the market value of the property and allows the investor to increase the profit made on the sale of the property.

There are several television shows that focus on fix-and-flip investors. Typically, the investor will purchase a run-down property, and over the course of 30 minutes to an hour, they will deconstruct the property and sell it to a new owner for a tidy profit. This type of investing can be very profitable if done properly.

Bear in mind that if you do this type of investing, controlling your costs is imperative. Remember, unless you are going to do all the work yourself — a daunting task for even the most experienced investor — you will have to pay contractors and sub-contractors to perform services such as electrical, plumbing, drywall, roof repair, pest control, etc.

 

BRRRR

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. This house hacking idea is brilliant in its simplicity. Not something recommended for the first-time real estate investor, this is a good way to achieve quicker financial gains over a shorter period of time.

For example, say Pat buys a property for $70,000 in an area where comparable homes are selling for $130,000. The rents in this area are $1,300 per month. Pat’s house could earn him the same rent if he made some improvements to the property.

Pat buys the house for $70,000.

Pat puts $30,000 down on the house.

Pat has closing costs of $3,500.

Pat takes a mortgage for 15 years at 4.5%.

The monthly payment is $332.

Pat makes the following improvements for $30,000:

  • New appliances in the kitchen (refrigerator, oven, dishwasher, and microwave) for $6,000.
  • Replace first-floor carpet with luxury vinyl planking (LVP) for $7,000.
  • Update 2.5 bathrooms with paint, new lighting, two new fiberglass shower/tubs, and LVP flooring for $12,000.
  • Landscaping for $2,500.
  • Paint the exterior of the house for $2,500.

With these improvements, Pat has invested $100,000 in this property. It is now ready to show to potential tenants for a rental rate of $1,300 per month. Once this property is rented for $1,300 per month and can show approximately six months of rental history, Pat goes to his bank and refinances the property.

Through the refinance process, the bank appraises the house at $130,000. Pat takes a mortgage for 70% of the loan to value (LTV) of the property and is provided a 15-year mortgage at 4.5% with closing costs of $3,500 for a monthly payment of $791.

He is provided a check at closing for $91,000. This represents Pat’s original $30,000 down payment back, $30,000 in improvements, and $31,000 in equity handed back to Pat. Pat made $31,000 back and the tenant who is paying $1,300 a month is paying Pat’s mortgage of $791. Pat is grossing $509 each month from this property. This example does not account for depreciation, appreciation, property taxes, and insurance.

Through some searching and identifying the property, Pat was able to find a good property to invest in and turn the property into a cash-flowing rental while getting his money back and making some money along the way. This type of investing requires diligence on the part of the investor that is not required of those investors who buy turnkey properties that are rent-ready when purchased.

 

Good luck out there!

 

About the Author:

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

 

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The Future of Self-Storage

The Future of Self-Storage

Yardi recently published an interesting article titled “National Self Storage Report” that captures the pulse of the self-storage industry. What I find interesting about the study is that a core tenant of the storage industry is truly still intact.

 

Who Uses Self-Storage?

Storage units are utilized by two types of consumers. First, business owners. Second, everyday people who are dealing with routine and customary life events.

What’s a life event? A new career in a new town. Closing your store’s retail footprint due to COVID and putting equipment and inventory into storage. Upsizing or downsizing your home. A marriage, or a separation. The loss of a loved one, or the excitement of adding a little one to your family. These life events just happen, and they can’t be stopped. Similar to changing the motor oil in your car, now and again we just have to deal with a life event.

 

Rates on the Rise

The part of this that really grabs me is that Yardi states that rent rates for a typical 10×10 were up in the trailing 12 months between 10% and 12% for non-climate and climate-controlled units. Now, candidly, the report was generalizing. Yardi does not identify by class (A vs. C), nor does the report identify properties by state.

For purposes of this brief article and in general terms — storage owners and investors did really well during the second half of 2020 and the first half of 2021, during which time the economy was being hammered by COVID. You’re doing something right if you can maintain the same cost structure but raise your top-line revenue number simply because the market will bear it.

And to overkill it with the yellow highlighter here, in the second half of 2020 the economy was simply not doing well. Storage is often discussed as being a recession-resistant asset class. At least it is until it isn’t. Let’s not kid ourselves — nothing is bomb-proof.

 

How Long Will This Last?

So where does this take us next as investors? Will it be a flame-out? Or will the space be durable, sustainable, and continue its macro trend?

The increase in the value of an asset like a self-storage facility is determined by the following formula: Increase in Net Operating Income (NOI) / Cap Rate (cap rate at exit) for the asset. Because of the institutions’ appetite for portfolios of assets, some portfolios of assets are being liquidated in the high 3 or low 4 cap ranges. That’s bananas!

But will that end anytime soon? I think very likely not. Remember, when interest rates peaked in 1982, the P/E on the Dow was less than 7. And that peak in interest rates was a Fed Funds rate of 18%. Ouch! The asset size of the 401(k), 403(b), and 457(b) marketplace is gargantuan, and those plan administrators can now for the FIRST time buy portfolios of strong stabilized and cash-flowing real estate assets. From here it seems plausible that both bond values and stock values have a solid chance at a decline.

 

Looking Ahead

My best guess is that ERISA plan allocations (think Department of Labor and retirement plan funds) will continue to come out of both the stock and the bond market and move into tangible real estate assets for decades. Remember, those plans had for the most part a 0% allocation to direct ownership of commercial real estate until August of 2020. I think we are just starting the move.

If the stock market lost 40% in the .com bust and more than 50% in the great recession, when comparing standard deviations of a stock portfolio compared to the standard deviation of a syndicated real estate portfolio, you tell me which is more volatile and which may have a higher compound average annual return.

To really drive the above point home, take a look at the stock chart of FRI, an S&P REIT Index Fund from February to March of 2021. That’s a bloodbath. From my perspective, that was due to the inflation scare we had this spring. Soon after, we first heard the newly invented term “transitory inflation,” and the yield curve has since reversed its move. What happens when it moves again, without reversing?

 

The Future of Self-Storage

Back to the question regarding the trend in self-storage. We just identified that one of the largest pockets of investable assets, corporate retirement plans, is now able to move into the CRE market, and their current allocation is near 0%. We also identified that life events drive occupancy at self-storage locations to increase, which in turn drives lease rates higher.

Does it seem plausible that the industry may become overbuilt? Sure. An equally reasonable assessment would be that not all regions will experience the same saturation growth and that investors can drill down using Marcus & Millichap’s Research (available for free), which focuses on the industry by region. Interested in the Texas market for self-storage? Read M&M’s work first, and then examine the due diligence work of your favorite sponsor.

Nobody ever said investing in private securities was as easy as holding cash in an FDIC-insured bank account. You can and should go find those pockets of strength and growth and make modest investments, varied by region, duration, and year of maturity.

 

Final Thoughts

If you have more than your age with a percent sign behind it of your net worth allocated to the stock market, take note. That may be much more risk than you realize. Former Merrill Lynch research strategist Bob Farrell is a legend on Wall Street. I encourage you to read his 10 Rules for Investing. The implications of rule #4 are profound, and while stock prices are still high, make sure your stock allocation is where you need it to be. Please be careful as you wade in the waters of risk and return.

 

About the Author:

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

 

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Is the Multifamily Market Softening?

How Software Can Improve Your Real Estate Investing Efficiency

Like many successful sales professionals, Matt Whitermore’s career has developed to meet various needs that he has identified over the years. While he was in college, he worked as a real estate agent connecting renters with property managers and landlords. Today, he is an experienced real estate investor with a wealth of hands-on commercial real estate experience. More than that, he is a consultant for Investor Management Services, a firm that specializes in selling software solutions to syndicators and investment firms.

Through his connections in college with landlords and property managers, he was able to shift gears from being a leasing agent to focusing on selling investment properties. After gaining extensive experience in this space, he jumped into the analytics side of the business to learn the ropes from a different angle. In addition to making the transition from sales to analytics to technology as a means of rounding out his knowledge, Matt Whitermore wanted the flexibility to become a seasoned investor as well. Today, he is looking at investing in a multifamily property in Albany with his fiancee.

The majority of Matt’s professional attention is focused on selling Investor Management Services’ solutions. The solutions offer a variety of resources that ultimately promote investor efficiency. The cost ranges between $1,000 to $5,000 per month depending on the features. These features include everything from an investor portal to a CRM. Subscribers can do everything from accessing K-1s to monitoring their portfolio’s performance.

The solution stands apart from other products on the market with its back-office automation features. For example, it enables different investors in a syndication to monitor their distributions in real time. These calculations are made automatically, so the solution enhances efficiency and ensures accuracy. This unique aspect of the software has been developed based on the review of thousands of operating agreements. Because of this, it is a robust tool that is practical in most syndication structures. It is fully functioning today.

Matt Whitermore describes the main objection that potential customers have with the Investor Management Services solution as cost. Often, this objection is with newer investors who are focused on running a lean ship. However, Matt has noticed that the prevalence of this objection has decreased in recent years as investment managers have been eager to leverage technology.

Matt has been involved with Investor Management Services for approximately 18 months. Since he joined the company, he has seen the solution evolve considerably. For example, some early clients provided feedback on the overall layout of the solution. Investor Management Services took that feedback to heart to make thoughtful updates. Today, it has more than 500 clients, and the solution has a great feedback system. This enables the developer to progressively improve the solution and to add features that its clients ask for.

Most recently, Investor Management Services has focused on evolving the program to meet the more complex needs of funds and larger investment firms. For example, some institutional clients often have a layer of syndicated equity that is not present with other clients. In some cases, investment groups also have an option for investors to exit their position. These are only a few of the situations that add to the complexity of needs that Investor Management Services’ larger clients may have.

While the solution is relevant to large commercial real estate groups, it is equally beneficial to small or one-person operations. Matt Whitermore states that many of the one-person entities that he works with initially are using email and Excel as their primary technologies. With this in mind, the main objection that Matt faces relates to the need for a more advanced product. Because the software solution is scalable from the smallest investor to institutional investors, it is a solution that can grow with a client’s unique needs.

For a smaller client, one person often wears many hats in the operation. The solution promotes investing efficiency by migrating asset management, distributions, and other factors to a single platform. This saves time and energy. More than that, it becomes increasingly important as that small investor grows his or her portfolio.

For both one-man shops and smaller syndications, the solution has a range of other beneficial tools. The ability to portray a professional, established image is essential when these entities are trying to gain investor interest and achieve other goals. The solution enables the easy production of professional investor statements and other documents that have the entity’s logo on them.

When Matt Whitermore talks about the progression of his career, he discusses how important his previous experience with investment sales and analytics has been to his current role. He understands customers’ needs and expectations. At the same time, he understands what his solution offers and how it can help clients achieve their goals. This enables him to bridge the gap and to truly help his clients find a solution that offers true benefits to them.

While many industries have wholeheartedly embraced technology, real estate has been a hold-out in this area. However, Matt states that true investing efficiency is rooted in identifying opportunities that technology offers. This extends far beyond what Excel can do. For example, the Investor Management Services solution has automated functions that are crucial for a waterfall structure and other purposes. These functions are simply not feasible through Excel and they offer true value to investors. Regardless of the size of the commercial real estate investor’s portfolio, there may be ample room to leverage technology more robustly.

 

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Why There is a Big Uptick in Deals in 2021

Why There Is a Big Uptick in Deals in 2021

This year, we have sold two properties, acquired one property, have another two properties under contract to sell, and we are under contract to buy another property. That’s six multifamily transactions in 2021.

We had zero transactions in 2020.

We’re not the only ones seeing a big uptick in transactions in 2021. There was $53 billion worth of apartment transactions in Q2 2021, the highest transaction volume for Q2 in recent history. In fact, it was the highest between Q1–Q3 for the last 15 years.

So why have we seen a big uptick in deals in 2021? For starters, many sat on the sidelines in 2020 building up eagerness in would-be buyers. These investors recognized the signs of an unstable economy and decided to wait until things settled down. In addition, inflation has spiked, and the growing concerns are forcing investors to act now as their cash holdings lose buying power.

Investors want to park their money in cash-flowing, appreciating assets that can weather an economic downturn and fight inflation. Multifamily has fared better than most asset classes during COVID and other recessions and is a proven inflation fighter, so it’s understandable that investors expect it to perform well going forward. This increased demand has pushed cap rates even lower, making it a great time to be a seller to cash out on current valuations.

However, this creates challenges for buyers who now face increased competition and higher prices for apartment buildings. This increased competition is across the board, but it’s especially competitive for older, value-add properties. The valuations have increased to the point that these older properties trade at just a small discount to newer, better-quality apartments. It’s like a used 2015 Cadillac selling for $50,000 when a brand-new 2021 Cadillac can be bought for $55,000. For the extra $5K, why not just trade up to the newer model?

Some may suggest that you wait for demand to dip and prices to fall. However, you could be waiting a long time. There are investors who have been saying the market was overheated as far back as 2016. Those investors have already missed out on a full cycle and the wealth that could have been used to fund future endeavors. And while the market can certainly swing, investors who utilize sound fundamentals have already protected their downside. This includes sticking to cash-flowing properties in growing areas, where appreciation can be forced using conservative leverage.

So, what are we looking for in a deal in this market?

For starters, we want to protect our downside. The labor shortage and supply chain issues have decreased our interest in heavy value-add opportunities. Instead, we are focusing on properties where we can drive value through operations, not just renovations. We’re paying attention to the price of newer properties, as well as the traditional value-add apartments. As with the Cadillac example, where it makes sense, we will opt for the newer model.

As sellers, we’re exiting properties where we’ve executed the bulk of our business plan or feel the additional upside potential is minimal. Many of these properties still have a value-add opportunity for the next buyer if they continue what we started. It allows us to exit early, exceed investor expectations, and seek out the next opportunity to create value.

If you are looking to buy in this market, you will need to adjust your expectations. It is unlikely that you will uncover the elusive dream deal at a steep discount as most apartment owners are not in a distressed situation. You will want to understand the key terms for an owner beyond just the purchase price. There may be other factors that can weigh in your favor such as time to close, earnest money, non-refundable deposits, and contingencies.

Transactions happen when both parties are willing to work together to solve each other’s problems. We’re now seeing both sides willing to negotiate and deals getting done at a record pace. Creative buyers are making offers that give owners what they need in a deal while helping the buyer make the returns they seek. While we don’t know exactly what the future holds, we do know 2021 is seeing record levels of transactions as investors adjust their portfolios. Like others, we are both buyers and sellers in this market.

 

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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From No Real Estate Knowledge to Over $40 Million AUM

From No Real Estate Knowledge to Over $40 Million AUM

Michelle Bosch has been a full-time real estate investor since 2002, and she is a co-founder and Chief Financial Officer at Orbit Investments. Over the years, she has purchased more than 4,000 properties, and the company currently holds more than $40 million in assets under management (AUM). However, she came from humble beginnings.

She immigrated to the United States from Honduras, and her husband is also an immigrant. Michelle spent her first several years in the United States attending business school and working in a professional position. She quickly realized that she wanted a different life experience and turned to real estate. She and her husband had no prior real estate knowledge, so they started investing in land rather than in homes as most other investors do. This quickly led them to own and manage a live auction company that hosted quarterly land sales.

Those profits were used to purchase single-family homes starting in 2009. They purchased homes priced between $30,000 and $50,000, and they rented them out for up to $1,100 per month. They grew their portfolio and branched out to multifamily properties in 2016. To date, they have been involved in three syndicated multifamily deals. However, they continue to work on land deals as their bread and butter.

Specifically, they reach out to landowners who may not be interested in holding their property any longer. Because of technology like Google Earth and others, they no longer need to walk properties. Instead, they focus on identifying properties and lining up buyers for them through their auction platform. The couple has assembled a great team of skilled individuals who share core values and goals.

Because of their current real estate knowledge, Michelle Bosch and her husband focus on three primary types of land. These are infill lots in cities, land in the path of growth, and recreational land in desirable locations. After they identify an area they want to focus on, they buy a list of people who own vacant land. Over the years, they have fine-tuned a prospectus letter. They now just send that same letter out to property owners each time they identify a promising market. Typically, they can get two to three good deals off of a 100-piece mailer. Michelle noted that they only send out 100 letters at a time because they cannot handle more volume. However, she did note that they could handle more volume if they preferred to not provide personalized service and develop a relationship with each buyer and seller.

They also have refined a script for gathering details and gauging interest once a landowner reaches out to them. More than that, they have developed proprietary software to help them screen their calls and to ensure that each caller gets prompt, personalized service. Some of the questions they ask upfront relate to the owner of record, easements, access, utilities, and more. These questions ensure that they are talking to the person who has power over the deal, and they enable Michelle and her husband to quickly gauge value.

When the couple started out, they were relatively new immigrants and had thick accents. They were concerned that their accents would discourage people from working with them. However, Michelle says that was never actually the case. Instead, people loved to talk about their land. Often, the land was inherited or was purchased by an out-of-state buyer who ultimately changed his or her plans for using it.

They have two different purchase processes for the land they find. One process is to pay cash for the land themselves before trying to find a buyer. The other option is to do a double close if they have already identified a buyer. Michelle Bosch and her husband use a variety of platforms to identify buyers. For example, they list land for sale through platforms like LandWatch, Craigslist, Facebook Marketplace, and Zillow.

They utilize a software program linked to Zillow and Trulia to review comps quickly. This enables them to estimate value more accurately without having to walk the land or spend hours conducting research. For infill lots that do not have a lot of comparables available, they often look at the developed value of the land nearby and subtract construction costs. They make an offer that is approximately 20% or less of the land’s researched, present-day value. While some people may be offended by such a low offer, others quickly act on it.

Michelle Bosch and her husband have spent the last few decades building up their real estate knowledge, and they have learned a few things along the way that they are happy to share with others. She wholeheartedly believes that the road to prosperity is rooted in simplicity. You do not need to create a complex deal structure in order to profit from it. She also places emphasis on building a solid team. These are individuals who believe in your goals and who are able to fully support you because of that shared vision.

When Michelle reflects on the past, she said she would look at larger and more valuable pieces of land from the beginning. These enable them to turn a “one-time cash” profit by flipping the land. Otherwise, they can lease it out to get “temporary cash” from monthly payments. When they pull together profits and park the cash in a long-term investment, such as through multifamily syndications, they create passive income. In hindsight, she believes that focusing her goals on building that strategy earlier in life would have made a significant difference in their current situation and opportunities.

 

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The Quest for the Holy Grail of Real Estate Investing

The Quest for the Holy Grail of Real Estate Investing

In the investment space, the term “holy grail” is thrown around quite a bit, implying there exists one perfect investment opportunity that can help you achieve your financial goals. However, while there are certainly many good investment opportunities out there, the term “holy grail” can be a bit misleading — the investment opportunity that is best for one person might not be what is best for another.

So, if you have a little bit of capital saved and are looking to enter the competitive real estate investment space, you might be wondering where, exactly, you should begin. When all else is equal, here are a few of the characteristics we find to be desirable in an investment:

 

High Rate of Return

Naturally, the return — or the amount of money you earn on your principle — is why you choose to invest in the first place. Return is how the market rewards us for taking risks. At a bare minimum, you need your investment to keep pace with inflation, which lately has hovered around 2% to 3% per year. In most cases, you want your return to be much higher. In real estate, 8% to 10% is a commonly cited goal, with some risk-tolerant investors seeking returns that are even higher.

 

Minimal Effort

Once you make an investment, you’re probably not going to want much additional work. A passive investment, as the term implies, is one in which the post-investment effort from the investor is minimal. There is a huge difference in the amount of effort required to simply put money in a REIT and trying to actually buy and sell specific properties.

 

Low Risk

In a speculative market, like real estate, there is always a risk that you might end up losing money. Your willingness to tolerate risk will likely depend on many factors, including your current life situation, the amount of money you have, and your personality type. Before making any investment, whether in real estate or not, ask yourself, “How much could I potentially stand to lose and what are the (reasonable) odds of me losing it?”

 

Defining the Holy Grail

Keeping these factors in mind, it seems the best way to define the holy grail of real estate investing is as an investment that offers high expected returns, minimal effort, and minimal exposure to risk. Usually, risk and return are positively correlated (i.e., more risk means more reward), so finding this exact holy grail can be relatively difficult. However, there are still plenty of instances — particularly in the dynamic real estate market — where there is a bit of a mismatch and returns significantly outweigh the risk.

In many cases, you will need to make quick decisions. But with the need to be decisive, there is also a need to be prudent and make sure the investment you choose is compatible with your investment profile.

 

Minimizing the Likelihood of Loss

Oftentimes, the expected return you’ll receive on an investment is much more speculative than the expected risk. The final return you’ll receive can depend on many factors beyond your ability to control, such as how the geographic market matures, how long a property remains on the market, whether tenants are able to fill a property, and even local legislation.

With expected risk, on the other hand, there are a few things we can typically look for that help signal a low-risk real estate investment:

 

Collateral

The collateral is what will be taken in the event of non-payment. This is the key differentiator between real estate and many traditional investment vehicles. When you invest in real estate, you are investing in tangible, real property, rather than an idea. In real estate, the property itself is usually the collateral, which offers some additional downside protection.

 

Management Team

When making a real estate investment, it is important to work with a competent, transparent, and disciplined management team. These will be the individuals who help direct the project once it is actually in motion, allowing you to put in minimal effort. With better and more experienced management on your side, you’ll be much more likely to have your principal investment protected should any problems emerge.

 

Cautious Underwriting

Depending on the type of investment, cautious underwriting can present itself in many forms such as conservative market assumptions and rent growth, which we could dive into for days. However, for the purpose of this article, we’ll discuss one very important item: leverage. Leverage is a term used to describe how much capital you can access for how much capital you are putting down. If the value of the project is significantly greater than the down payment, this represents a high loan-to-value ratio (LTV), which is considered risky. It might be possible to access a $1M loan for only $50,000 down, but this LTV of 95% is incredibly high, and such a loan should only be entered into upon careful consideration. For commercial projects, stick to investments with an LTV of about 75% or lower.

 

Diversification

Diversification is the surest way for investors to limit the overall risk of their current portfolio. In real estate, there are multiple ways to diversify. The most obvious way is to invest across many different types of property including multifamily, residential, senior living, industrial, self-storage, mobile home parks, triple net single-tenant retail, raw land, and others. Furthermore, you can also diversify by geographic location. Purchasing property in different markets across the country, along with purchasing property in different areas (urban, suburban, rural, etc.) can help protect you from the future unknown.

 

Finding the Holy Grail

Now that you know what to look for — and more importantly, what to avoid — you might be ready to make a significant real estate investment. As suggested, there are several ways to enter the private realm.

A real estate syndication, for example, is an organized group of real estate investors, led by a specific investor in such group (aka a sponsor). The sponsor will be responsible for running the fund and making key decisions, along with communicating with potential investors. Rather than saving to buy a rental property on your own, you can invest in a group that purchases several properties, helping you reduce your exposure to risk and your need to be hands-on.

When comparing funds, there are many things you’ll need to think about. The payout timetable and the types of investments being made by the fund should both be carefully considered. Most importantly, you will want to make sure that the return you are receiving appropriately matches the risk you are being asked to take.

There might not be such a thing as a perfect investment, but with some basic principles in mind, you can move closer to finding the type of investment that’s right for you. In that sense, the holy grail just might be within reach after all.

 

About the Author:

Seth Bradley is a real estate entrepreneur and an expert at creating passive income while still working as a highly paid professional. He’s closed billions of dollars in real estate transactions as a real estate attorney, investor, and broker. He’s the managing partner of Law Capital Partners, a private equity firm focused on multifamily and opportunistic acquisitions.

 

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How to Find a Commercial Real Estate Investment Property

How to Find a Commercial Real Estate Investment Property

We’ve said before that if your money sits in a savings account, you’re losing money. While a savings account is a low-risk way to enhance your cash flow, it doesn’t provide the same opportunities as real estate. Plus, your savings account isn’t quite the equivalent of a retirement plan. That’s why so many individuals consider commercial investment properties.

Finding the right investment property is critical to your success, especially if you’re trying to learn how to make money in real estate. After all, before you can build a real estate investment portfolio, you need to find good investments and make sound financial decisions to empower your investing journey, improve your cash flow, and build equity.

Particularly if this is your first time pursuing a real estate investing opportunity, finding a property can feel overwhelming. Learning about stock market options, down payment terms, asset classes, commercial real estate, and tenants’ rights takes time, energy, and resources. That’s why it’s crucial that you have the right long-term resources, and you know where to look. So, if you’re wondering how to make money in real estate and find your first investment property, here’s what you need to know.

 

Choose a property type.

When looking for commercial property, you’ll want to consider the primary types of property available to real estate investors. These include multifamily housing units, office buildings, industrial spaces, retail real estate projects, and hospitality real estate. During this time, you should do your due diligence to learn more about asset classes, diversification, and key property concepts that could impact your investment strategy.

As you’re deciding between your property types, it’s essential that you consider the purchase price, lease, potential return, utility expenses, and current market volatility. By taking a closer look at each property type, you can leverage your knowledge to negotiate the set price with the seller. Of course, all of this can impact your cash flow after you’re done working with the seller, so you must find the property type that works for your individual investment strategy.

In recent years, many individual investors have chosen to take the time to explore different asset classes, wholesale options, foreclosures, and crowdfunding brands to find the right asset types. If necessary, you might want to discuss a good choice to meet with a financial advisor, accredited investor, or financial management company. Investing services can also help you find the right applications, crowdfunding platforms, individual stocks, and money market accounts that align with the type of property that attracts you as an investor.

 

Ask for commercial real estate referrals.

When you’re looking for real estate, sometimes the best way is to ask. Whether you’re asking buyers, landlords, tenants, or Airbnb hosts, a simple question is fairly effective out of all the different ways you can go about finding a piece of real estate. Compared to other types of investments, word of mouth can be the best way for a real estate beginner to find their first property.

If you’re going to ask for a few real estate referrals, you should narrow down the type of real estate property you require. Specify between residential property, commercial property, single-family homes, and other real estate property types. Whether it’s a vacation rental or you’re going to rent out your own home for a higher return in the short term so you can invest in a commercial property, you’ll find the best investment by clearly defining your preferred property types.

It’s also effective to take the time to weigh interest rates, leases, mortgage payments, and property taxes when you’re meeting with a real estate broker or agent. That way, you’ll be more prepared to have an open and frank conversation about initial investment amounts, stock options, and bank products that can help facilitate your commercial investment goals.

 

Consider passive investing tools.

If a more traditional form of investing seems too involved, your best bet might be to work with the great companies that connect real estate investors with passive investing tools and real estate syndications. This is a common way for many beginner investors to address high-demand commercial investing situations. With this kind of investing, you don’t have to manage homeowners, long-term tenants, travelers, or your own property.

Instead, many investors generate a healthy average return by putting enough money into real estate syndications and group investments. These passive investing tools can help investors generate a lot of cash without the hassle of being a landlord. In addition, passive investing partnerships make it easier for busy investors to take advantage of commercial investments in various ways. These include equity, appreciation, cash flow, and various tax benefits.

Real estate syndication offers similar options as crowdfunding for commercial properties like self-storage facilities and mobile home parks. These syndications are less involved than trying to manage stock options and sell shares, plus you have the peace of mind knowing a seasoned fund manager or specialist is helping you improve your cash return.

 

Work with a real estate agent.

When looking for real estate or commercial space, it’s often most intuitive to go directly to someone in the industry. Thanks to real estate advertisers, you’re probably already aware of local real estate agents and businesses. Working with a real estate professional, broker, or agency can help you vet risky investments, find the right properties, and refine your investment strategy. Whether you’re purchasing an office building, an apartment complex, a short-term rental building, or a second home, the right real estate agent can save you time, effort, and no small amount of money.

Many agents can help you find the best investments, from commercial real estate to residential real estate and other types of properties. A real estate agent makes it easier to negotiate with sellers, vet great investment opportunities, flip properties, and generate equity.

However, before you trust anyone with your investment strategy, you also have to vet your agent. Otherwise, you run a higher risk of making a bad investment or negatively impacting your rate of return. To keep your strategy in a good place and make the best investment decisions, work with a real estate agent with previous investment property experience. Sometimes, it’s a good idea to work with individual companies or real estate developers to help you make a safe investment with little money down. While these may not be high-return investments, sometimes starting small is a good thing. After all, managing a renter in a condo is a lot different than maintaining malls, trailer parks, or commercial buildings.

 

Contact a real estate investment trust (REIT).

For many buyers, investors, and prospective landlords, a great way to start working with real estate is with REITs. REITs are U.S. companies that own or finance income-generating real estate. Like many types of investments, REITs trade on major stock market exchanges and offer several key benefits to prospective real estate investors, property managers, and rental property owners.

REITs enable investors to put a given amount of money into different mutual funds, ETFs, and individual company stocks. As a result, these stockholders can generate positive cash flow and even make a lot of money without having to play their local real estate market, invest in renovations, or manage a rental property.

For beginners trying to navigate real estate property and passive income essentials, REITs regularly deliver solid returns. One downside new investors should consider, however, is that many REITs have weak growth potential. While a real estate investment trust is a welcome addition to most investment portfolio setups, they don’t always facilitate real estate growth or appreciation. Beginners who want growth alongside their dividends should consider private REIT options and weigh their risk tolerance when deciding.

 

Use real estate websites.

When looking for commercial opportunities to generate rental income, most beginner investors turn to real estate websites. It’s a good choice if you’re running up against market scarcity or you’re trying to view trends over a specific time or period of time. Websites offer a low-risk way to start finding properties, connecting with tenants or homeowners, and contacting realtors for commercial property newbies.

If you’re going to use a website to find real estate assets across the United States, you’ll want to look for platforms that can steer beginner investors to the best investment opportunities available. It would help if you also considered sites that allow you to refine your criteria beyond the basics, like how much money you’re able to spend. These tools can empower your long-term investing strategy when you’re looking for physical real estate and commercial deals. For property investors looking for a big return on their commercial opportunities, these refinements can mean the difference between steady income and sporadic additional income.

 

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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From the Corporate World to Mobile Home Parks

From the Corporate World to Mobile Home Parks

Who knew that working in the world of mobile home parks could be so lucrative? We recently spoke with Ryan Narus, who has grown his mobile home park investment business to over 500 mobile home pads. Ryan started out as a car salesman and then moved to the corporate banking world before making the leap to becoming an investor.

Read on to see what you can learn from Ryan about networking, going above and beyond, and betting big on yourself.

 

Success Looks Different Now Than It Did in the Past

Like many of us, Ryan was told to go to college, get a job in the corporate world, and then move up the ladder to success. But Ryan quickly realized that that strategy is no longer viable.

What worked for our parents doesn’t work today. If you want a job that offers financial freedom, you have to make it for yourself. There are ways to earn money and scale a business, but you have to take the initiative. You can’t depend on another company to get you where you want to be.

Even if you work your way up to the top, there’s only so far you can go if you don’t own the business. Your best chance of success is to start your own business.

 

Don’t Let “No” Stop You

Ryan heard the word “no” a lot when he was first starting out. He even had 40 banks reject his financing application. Where many may have given up, he kept going.

If you want to get into real estate investing, you have to go in knowing that it’s not going to take off the minute you start. There will be obstacles and pitfalls along the way. The reason so many people fail is that they gave up too soon.

You have to have a mindset that you won’t give up, no matter what. Once you make it beyond the others who quit too soon, you’ll be primed for success.

 

Find People You Can Help — and Who Can Help You

Everyone has something to offer. If you can find people whose talents complement your own, you can accomplish so much more together. Ryan’s business partner specializes in underwriting. He linked up with a broker who needed help. The broker then helped him by giving him early access to deals coming on the market.

 

Network, Network, Network

No matter what phase of the real estate investing process you’re in, it’s all about who you know. Ryan credits a lot of his success to networking with as many people as possible. His goal is to get people on the phone.

Ryan finds people anywhere he can. He’s willing to talk to just about anybody, not just his best prospects. He networks in person and through social media platforms like Facebook and LinkedIn.

He also suggests networking with people who are both slightly ahead of you in the game and slightly behind you. He often has people who are a little further along who’ll offer him a property off-market because they’re getting ready to take their business to the next level and don’t want to deal with the hassle of putting it up for sale.

He also likes to pay it forward. If he’s offered a property that doesn’t work for him, he’ll often recommend someone he’s networked with.

 

Choose an Avenue That Matches Your Skill Sets

There are many types of real estate you can choose to focus on. While each can be lucrative in its own way, it’s more about your approach. Dig deep and figure out what skills you have. Even if you think those skills may have nothing to do with investing. You’d be surprised how a skill can transfer from one area to another.

Ryan chose to work with mobile home parks because he had spent a few years working as a car salesman. It was an emotionally grueling job that required him to continually put himself in front of people who may not want to talk to him. He used these skills to make it in mobile home parks because he deals with many of the same types of situations.

 

Be the Person Who Takes a Different Approach

The investment market is hot right now. Everyone is looking to buy, and sellers have their pick of buyers. Ryan said that one of his secrets to success was always offering a little something different than what everyone else was offering.

While others are being formulaic in their approach with people who own trailer parks, he recommends tailoring the pitch to each individual. He and his business partner take the time to get to know them and will do whatever it takes to close the deal, even if it means going to the person’s house. Tenacity can be incredibly powerful.

 

Don’t Be Afraid to Bet Big on Yourself

Many get into the investment game but only go halfway. They keep their day job while doing investments on the side. While they may have a few minor successes, they often bemoan that they could have so much more success if they just had a little more time.

Ryan knows many people like this. His advice is to not be afraid to go all in. It’s difficult to build a full business if you aren’t willing to bet big on yourself. That often means quitting your day job and giving up some security for a while.

Going all-in can be terrifying, but according to Ryan, you should imagine how you’ll feel when you’re old. Will you be glad you stayed at your job where you were never able to build something for yourself, or will you wish you’d taken the leap and bet big on yourself?

Obviously, you shouldn’t walk out of your job today, especially if you have a family to support. But start making an exit plan. Put up money so that you can try your venture for at least a year. If things don’t work out, you can always find another job. If things do work out, you’ll never regret your decision.

 

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Investing in and Managing More Than $2 Billion in Real Estate with Alexander Radosevic

Investing in and Managing More Than $2 Billion in Real Estate with Alexander Radosevic

Alexander Radosevic currently owns and manages more than $2 billion in commercial real estate, but he was not born into money. In fact, he started working at his family’s retail store when he was eight years old, and he has had his nose to the grindstone since that time. This Beverly Hills-based property investor spoke with Joe Fairless about some of his experiences and his strong desire to give back to others who aspire to rise up as successful investors.

Long before Alexander Radosevic launched his investing business, Canon Business Properties, he worked in commercial finance at Lehman Brothers. Some of the many property types that his business manages and owns today are hotels, retail, industrial, and residential real estate. The company is also active in construction, construction management, and debt financing. One of the reasons he made the transition from a financing executive to an active entrepreneur and investor is because his current side of the business is far more lucrative.

While Alexander was propelled into commercial real estate through market conditions, a passion for earning, and motivation from those who were already active in the industry, he had to find the right property to invest in. He identified 2.5 acres of land in Laughlin, Nevada before the area was the mecca that it is today. Upon selling the property, he turned a profit. That profit was seed money for his future real estate investments.

One of his first major projects was the rehabilitation of an abandoned, fire-damaged bakery in South Central Los Angeles. This 40,000-square-foot commercial building had been damaged in the 1994 riots, so Radosevic saw both risk and reward as he ventured into it. He could only obtain 40% loan-to-value financing, so he had to come up with 60% upfront. He ultimately cleaned up the building, converted it into a nine-unit warehousing and manufacturing property, and turned a great profit.

When Alexander Radosevic reflects on what has helped him grow his business from a fledgling startup to its current level of success, he quickly cites due diligence. Specifically, he focuses his research on his personal investments and for his clients on financing, management, marketplaces, and cash flow. These are researched in relation to what he or his clients want to achieve through the deal. Digging deeper into marketplaces or locations, he focuses on retail properties in Los Angeles and Beverly Hills. For industrial properties, he has a wider scope and looks at properties in major cities close to airports. While Radosevic focuses on a variety of commercial property types, his investing activities in industrial properties have consistently been among his most lucrative over the last 15 years.

As a recent example, Radosevic identified a great opportunity in the construction of small boutique hotels. After an extensive search, their client found the perfect piece of land on the coast of California. It was originally zoned for a different use, and it took them several years to get their rezoning request approved. This process was in combination with challenges related to the Coastal Commissions regulations and interests.

Radosevic states that many people may have thrown in the towel at some point in the lengthy process, but persistence is key in these situations. His client specifically benefited from his team’s experience in hotel development and operation. With this in mind, Radosevic believes that professional expertise in niche areas is sometimes critical for getting deals done.

The project is still in the works as they are trying to get approval for 131 hotel rooms, and they are currently only approved for 101 rooms. He anticipates that the project will take another four years before the details are finalized and construction is complete.

Alexander Radosevic has worked on many projects that have yielded a tremendous profit in far less time. In fact, one of his earlier projects was 32 acres in San Diego. He intended to carve the land into small acreage estates and create a 16-home residential community. When he asked a client to help him develop the land, however, the client advised him to create the parcels, lay utilities, install streets, and sell the individual parcels. Ultimately, he was able to turn a $130,000 profit on each parcel he sold without spending the time and effort to build on them because of the advice he received.

When Radosevic looks at real estate investing on a larger scale, he talks about buying and holding land longer than what other people may hold it for. He says there is often a rush to sell a property and trade up, but there may be a multifold profit if you hang onto that property for a little longer.

When he looks for land investment opportunities, he specifically looks at the top five U.S. markets for living and working. These are areas with true growth and where financing is usually readily available. More than that, the properties are in demand, so they are usually relatively easy to sell when he is ready to do so. However, when he looks at other property types, he has other criteria as well. Industrial properties, for example, are most ideal in areas close to airports and in areas that have tax benefits.

Alexander Radosevic attributes his success to hard work, his focus on due diligence, and plenty of luck. He built his multibillion-dollar business from the ground up, and he has a passion for helping other aspiring investors establish their roots as well. Specifically, he strives to offer one-on-one guidance to those who work for him or to those he comes in contact with in various capacities on details.

Going forward, Radosevic will continue to apply the principles that he has developed to his efforts, such as a focus on due diligence and market research, as he continues growing his commercial real estate business and helping others.

 

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3 Questions to Ask Before Investing

3 Questions to Ask Before Investing 

Is this a good deal?

This is one of the questions every investor is trying to answer when evaluating real estate. There are calculators and rules of thumb to help people answer this question. However, the answer for one investor may be completely different for another. Many investors like to use key metrics like IRR, cash on cash, or equity multiple to determine if a deal is good, but we’ve already talked about why you need to stop using return projections for these decisions.

Let’s illustrate this with a quick example. Say you are evaluating an opportunity to invest in a multifamily property that was built in 2010 in a growing market. It is 94% occupied and has projected returns of 15% IRR, 8% annual cash on cash, and a 1.9 equity multiple.

Is this property a good deal?

Before you answer, understand that the question should be: Is the property a good deal for me?

Just because others think an investment is a good deal doesn’t mean it’s a good deal for you. Whether you make decisions based on a formula or your gut, you need to answer key questions first. Once you answer these, you will be able to decide if a deal is good for you.

 

1. Why am I investing?

Yes, I know you’re investing to make money, but you need to dig deeper if you want to be able to evaluate opportunities. What are you trying to solve? Are you looking to live off of monthly cash flow? Or is your primary goal to build long-term wealth? Maybe you just want extra income to pay for vacations, tuition, and other expenses.

If you want passive income, you may be disappointed with an investment that requires you to be actively involved, no matter what returns you are getting. Too many investors get into real estate for financial freedom and wind up with a second job instead. The clearer you are on the problem you want to solve, the easier it will be to find good deals.

 

2. What’s the business plan?

Once you are clear on your goals, determine the business plan for the properties you want to explore. Are you looking to buy and hold rentals? Are you looking for value-add properties? Or are you looking for a flip or distressed property to rehabilitate?

Each strategy has its pros and cons and should align with your investing goals. The business plan to carry out this strategy is critical to each deal. This is what separates a good deal from a bad deal. Good deals have a clear business plan and proof of concept for execution.

Let’s use our example property here. If the business plan is to perform cosmetic upgrades when residents move out, we can keep occupancy high, while bumping rents on the unit turns. We may be confident because three comp properties have similar finishes and amenities and are achieving the projected rents.

 

3. What could derail the business plan?

The last of these questions requires understanding the risk involved in the business plan. You need to understand what can derail the plan, how these risks can be mitigated, and your comfort level with the risk. If you’re doing a buy-and-hold investment, the biggest risk may be incurring a major repair. The best way to mitigate this is to have proper insurance and cash reserves set aside.

Going back to our example property, what if we’re not able to get the rent increases we hoped for? First, the ability to achieve these rents should have been confirmed in the business plan, but if something was missed or changes, you want to make sure you have a Plan B or other ways to mitigate the risk. You may decide to focus on the most important upgrades and only perform those instead.

Identifying the risk in the business plan allows you to proactively address it, making it easier to sleep at night. There isn’t a metric or formula that can calculate the importance of peace of mind. Maybe we should call it the new IRR for Inner Rest and Relaxation. When deciding if a deal is good for you, this IRR may actually be the most important metric.

 

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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Keys to Achieve Passive Income Through Real Estate Investing

Keys to Achieve Passive Income Through Real Estate Investing

Earning a passive income through commercial real estate isn’t just about flipping houses. Ryan Enk is a real estate investor and author who is passionate about helping people develop a customized strategy that allows them to create a passive income in unique ways. His sports arenas and RV rental fleet have helped him achieve financial freedom. But he started out as a dad of five boys with a dream to be more available to his family. His real estate investing tips can help others who might think that they don’t have the money or resources for this type of enterprise.

 

What Would You Do if Money Didn’t Matter?

Many successful real estate investors started their journey with a significant amount of income. Enk did not. He was selling copiers, feeling overworked and underappreciated. He wanted more time to be with his family, and he wanted to give back to the community.

So he asked himself, “What would I do if money didn’t matter?” After some introspection, he realized that he wanted to help people. If money wasn’t a factor, he would open up a sports arena, play music, or mentor others. When his wife agreed, Enk realized that he needed to pursue his passions.

Even though his bank account was sparsely filled, Enk didn’t let his lack of financial resources stop him. He knew that someone would have the money to support his big dreams, and he began his search.

 

The Importance of Mentorship

Enk’s first deal involved building a sports arena. Because this was something that he had never done before, he knew that it would be a hard sell to investors. That’s why his first step was to hire a consultant.

A consultant serves as part of your team. It also gives you a chance to prove that you’re working with someone who has experience. When you hire the right mentor, you don’t have to worry so much about selling yourself. You’re selling your team.

Hiring a consultant isn’t always cheap, though. Enk took out a second mortgage to pay his mentor. He also offered the consultant equity in the project. This allowed him to present his mentor as his business associate, which gave him clout when pitching to investors.

Hiring someone with experience in the business will help you create a solid business plan. However, even the perfect business plan may not convince investors if you don’t have the experience to run that type of business. Therefore, you should either have someone on your team with the know-how that your investors are looking for or build up your resume.

In Enk’s case, he developed a strategy for bringing daytime business to the sports arena. He launched a soccer program for youths while he was seeking investors. Initially, he rented space from gyms and churches to support the program. Eventually, he would run it in the arena. This plan not only served to demonstrate that the arena could bring in business during the day, but it also showed that he was able to launch and run a profitable business.

 

Own the Real Estate, Not Just the Business

The key to Enk’s success was that he realized the benefits of owning the real estate for the sports arena. At first, he sought investors for the business. But he didn’t own the property.

When Enk made a deal to purchase the arena from the landlord, he saw how high his returns could be. The landlord earned $300,000 by selling the property. Once Enk owned it, he was bringing in returns of 20 to 30 percent.

 

Rolling Real Estate

Eventually, Enk owned several single-family and multifamily properties, earning a passive income on those. But his wife wanted to purchase an RV, which would be a liability. Enk decided that he could transform it into an asset with plenty of cash flow by renting it to others.

When that pulled in $32,000 in profits in the first year, Enk realized that he could help others capitalize on this type of passive investing. He created a company that managed RV rentals, earning income from other people’s RVs without having to invest in purchasing more vehicles.

 

Keys to Passive Investing With Real Estate

Enk has learned a great deal from his endeavors. He shares his wealth of knowledge because he believes that commercial real estate investing is a lucrative way to earn a passive income. These keys have become part of his overall strategy.

 

Invest in Today Instead of Speculating About Tomorrow

Speculating happens when you purchase a property that will eventually bring in an income. This happens when you flip a house, improving it to raise its value before you sell.

But investing involves putting your money into something that is already working. When you start out, look for properties that are already doing well, such as a multifamily apartment home with regular tenants. That way, you can begin earning immediately, and you’ll be up against less risk than a speculative deal.

 

Project Your Losses

Most businesses struggle in the first few years. It can take three to five years to begin pulling in profits. Many startups fail because they neglect to factor in these losses. Moreover, investors could become antsy if they expected to rake in the money but aren’t seeing it come through.

Planning for these losses is important. You may need more capital than you expect to cover the overhead and your income for the first few years. With the right balance of capital, you can keep moving forward. Plus, your investors won’t be disappointed when they know that your plan accounts for these losses and a strategy for overcoming them.

 

Take Advantage of Trends

The RV rental business worked well because it capitalized on a popular trend. Private property rentals through sites like Airbnb were giving owners a chance to capitalize on their unused space. The same could be done for RVs.

Not every investment is going to be a long-term one. However, if you can take advantage of the current market, manage the business well, and sell when the time is right, you can earn a decent profit while you sleep.

 

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4 Tips To Scale Your Business From Single-Family Homes to Apartment Communities

4 Tips to Scale Your Business from Single-Family Homes to Apartment Communities

Yusef Alexander is a Los Angeles-based real estate investor who has been in that field since the 1990s. Although he started off with Los Angeles rentals, he later focused on apartment communities located in Georgia and elsewhere in the South. As he did so, he transitioned from spending his time on commercial real estate and single-family homes to focusing on those aforementioned multifamily apartment communities. As a result, he is a solid person to listen to in order to learn how to scale your business in a similar manner.

One property that he got involved with in early 2019 is a 172-unit multifamily building in an upper-middle-class part of Atlanta, which ended up having a purchase price of $8 million. He then planned to engage in light-rehab and high-end rehabs, costing $3 million in total and ultimately selling it for nearly three times that.

 

Consider Various Costs

Of course, also be sure to consider all of the costs that will go into rehabbing these units. These include the costs of hiring workers and paying for what needs to be installed as well as any costs connected with consulting with a design firm to determine just how these rehabbed units should look when all is said and done. And take into account that the design costs could be significant if you will be making major renovations to the apartment community property as a whole, such as installing a pool, building a gym, and so on.

An additional aspect to consider is that some of the units that are being rehabbed are going to need to be de-leased — i.e., empty — during those times and won’t be bringing income in.

Another recommendation to consider if you are looking to scale your business from commercial real estate or a different type of real estate to apartment communities is to fully research similar properties in the area. For example, if you discover that a similar real estate venture is offering spaces to rent for a similar price that you are, go through the process of applying for a place there, see what they are offering for that price point and consider why.

 

Determine Value

Also take into account that if you are going to join in on a purchase with one or more others, you should ensure that the split is as fair as possible. In Alexander’s case, three owners were reduced to two. As a result, he and the other person agreed to have a third party (a broker) determine the price (the worth) of this particular asset (the apartment community). They also had a desktop appraisal from a financial group that is trained to do appraisals on properties such as these do the same and compared the figures.

If the two numbers are not in close agreement, you will want to either go with whichever one is trusted more, go with the average of the two, or, if simply getting the deal done is of utmost importance, go with the higher one. In Alexander’s case, they decided to go with the higher appraisal, which was from the broker.

 

Diversify

To scale your business, it is also worth considering combining being an active investor with being a passive one. For example, Alexander is an active investor in that 172-unit place while he is a passive investor in a 355-unit apartment community, also in Georgia, that he became a minority partner of a few years prior. In total, he’s active with two communities — both in Georgia — and passive in five others.

However, note that these investing focuses require different skill sets. For example, knowing as many details as possible about the other partners in a passive investing opportunity is of utmost importance, as you will not have as much control over the situation after the money has been invested.

 

Remain Diligent and Disciplined

For those new to investing in apartment communities, one of the first pieces of advice that Alexander would give is to surround themselves with people who are already knowledgeable in this field and soak up that knowledge.

And, as they progress through the years, continue to remain diligent and disciplined. Also make sure to keep long-term focuses in mind, including ways to exit these opportunities later. When you get into a project, determine how you expect the entire process to go from beginning to end, throughout any renovations and other aspects of owning it, until it has been sold.

Also, make sure that you take into strong consideration just how important location really is as it relates to real estate.

One of the mistakes that Alexander made early in his real estate career was buying a residential property next to a gas station. Of course, making that type of purchase does not necessarily make something a bad deal, but in this case, it did. Unexpected issues related to the gas station, such as the smell that emanated from there, various people constantly loitering, the significant and annoying lights that it had up and on at night, all contributed to lower the property’s value.

Conversely, you may also be able to secure a place with an enviable location that hasn’t made that aspect of its listing obvious to other investors, getting a nice deal on it as a result.

 

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Has Cash Flow Been Dethroned?

Has Cash Flow Been Dethroned?

Cash flow is king.

Well, it used to be king. Now, it might be a lord or duke, but I’m not sure investors see it as king anymore.

In the stock world, share prices for many firms are no longer based on actual profits; instead, they are based on speculation of the earnings the company could produce. Tesla is a great example of a company that is valued based on its profit potential instead of its actual earnings. As of June 30, Tesla was valued at $668 billion with a net income of $1.14 billion for the quarter. For comparison, General Motors was valued at $88.75 billion with a net income of $2.8 billion for the same timeframe. Yes, despite delivering close to 2.5 times more profit, GM is valued 7.5 times less than Tesla.

In real estate, this speculative investing isn’t as dramatic, but investors are drifting away from fundamentals with their eyes on the future possibilities. Many investors have accepted lower cap rates for the opportunity to buy a property where they can create value and deliver future returns. This means that they are willing to pay a premium and receive a lower return if they feel the upside is strong. This approach has gotten so popular in recent years that some investors are only focused on appreciation and dismiss cash flow altogether.

In their minds, cash flow has been dethroned. Appreciation is the new king.

Appreciation is simply the increase of the value of an asset over time. It can be organic, rise with inflation, or be stimulated by new developments and increased demand. However, instead of waiting for values to increase organically, investors look to force appreciation through strategic improvements and efficient operations. The ability to force appreciation is one of the reasons real estate is so attractive to investors. However, appreciation alone comes with great risks. It does not factor in the fundamentals of the investment in the same way Tesla’s value doesn’t factor in the actual profitability of the company. More importantly, it’s based on future assumptions that can easily change.

Market conditions play a major role in appreciation and anything from new developments, policy changes, renter preferences, and yes, global pandemics can impact the appreciation potential for a property. While we invest with appreciation in mind, these factors make it unreliable to serve as the primary reason to invest. It also leaves investors exposed in case of a down market. I know many coastal investors who are losing money on their properties but assume the values will appreciate over time. This is a dangerous and speculative approach.

Savvy investors know appreciation is a complement to cash flow, not a replacement. Together, you get risk mitigation and upside potential. And while they work well as a team, many investors are still going to prefer one of the components when making decisions. Determining which one you should focus on more is a personal decision. However, the fundamentals of evaluating opportunities and the value that can be created need to revert to the cash flow that can be created.

Markets change, preferences change, but the desire to earn a profit will never change. At some point, Tesla will be treated like every other company, judged on its actual performance, not what it could be someday. Apartment investing and commercial real estate are the same way. When reviewing investments, be sure the cash flow is sufficient for your investing goals, and don’t speculate on the appreciation. It’s important, but cash flow is still king (even if it has to share governing powers).

 

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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Meet Best Ever Conference Co-founder Ben Lapidus

Meet Best Ever Conference Co-founder Ben Lapidus

We sat down with Ben Lapidus, co-founder and host of the Best Ever Conference, to find out what he’s looking forward to most at BEC2022.

First, a little about Ben: He is the Chief Financial Officer for Spartan Investment Group LLC, where he has applied his finance and business development skills to construct a portfolio of over $300M assets under management from scratch, build the corporate finance backbone for the organization, and organize over $100M of debt capital from the firm.

In addition to completing over 50 real estate transactions at and prior to Spartan, Ben is the managing partner of Indigo Ownerships LLC. Before Spartan, Ben founded and sold a multimillion-dollar study abroad company and worked with several start-ups through IPO or acquisition. He graduated from Rutgers University with dual degrees in finance and economics, where he founded the Rutgers Entrepreneurial Society.

We asked Ben some questions about what to expect at this year’s conference — here’s what he had to say:

 

What are you most excited about for the BEC2022?

“What I’m most excited about is the opportunity that has presented itself in the operating environment for commercial real estate investors. Since this conference began in 2016, we’ve been talking about a market correction from which syndicators can execute a scaling strategy. For all of its destruction, the silver lining of the global health crisis is that it has accelerated or formed new trends that will allow for new creative investing and operating strategies.

“To take advantage of this for BEC2022, we are marrying all of our learnings from the past five years and compounding them with new partnerships. We are incorporating the components of virtual programming that worked in 2021, the networking that worked in 2020, the location that worked in 2019, and the late-night networking that worked in 2018. We have our biggest production budget yet to make sure it’s high quality, peak energy, and massive impact.”

 

Tell us about the experience. What can attendees expect?

“From the moment you register, you’re going to feel like you’re coming home. This is not a conference for beginner investors or tire kickers. Ninety-six percent of our attendees have transacted or invested in one or more commercial real estate deals in the last six months. There is no other conference with this kind of concentration of high-quality networking, and those who have attended before know that, so they treat every new handshake as an opportunity to make a new friend or partner. It’s an incredibly inviting atmosphere.

“When you first enter the main stage, you’ll be drinking from a fire hose. We like to start off the conference with back-to-back economic updates from those with access to massive datasets who are fantastic presenters. We’ll keep you well-fed and intellectually stimulated throughout the day so that you have the energy to carry the relationship-building into the evening where the real connections are made.

“You won’t find yourself avoiding the gaze of our sponsor tables as we’ve filtered them in advance and they’re likely to be highly relevant to your business or investing needs. Two years ago, we had a deal funded by a lender two business days after the connection was made at the Best Ever Conference.

“Finally, this will all take place at the newly built Gaylord Rockies in the peak winter season, which means you’ll have access to indoor water parks and some of the best skiing in the world.”

 

In your opinion, what are the top three reasons to attend the Best Ever Conference?

“Learn. Network. Invest. People come to the conference attracted to the speakers and subjects presented on stage, and this year will be the best yet. Our lineup is next level and with such a volatile year, there are endless subject matters to touch on to support the professional investor navigating the year ahead.

“But the true value that our audience walks away with is the networking, which ultimately leads to a new investment of dollars, time, or energy. Countless companies have been formed out of Best Ever connections, and hundreds of millions of dollars in capital have been placed in our community’s deals.

“And of course, we can’t forget the partying. If you are active in the syndication space, you’ve likely corresponded with dozens of folks who you’ve never met in person; the Best Ever Conference is the place to finally connect in person over a beer — or three.”

 

Any other exciting tips or best practices for attendees?

“Don’t set out to peddle an investment offering at the Best Ever Conference. There are dedicated spaces where that’s appropriate, and you can reach out to the Best Ever team if you’d like to take advantage of that. Rather, set out to make a few deep, high-quality relationships without an endpoint in mind.

“The deeper you can make a single relationship, the further it will carry your business or portfolio to success. Take the blinders off your periphery and identify how adding value to someone else’s life could creatively compound an outcome in yours. The more you learn about someone under a non-transactional premise, the deeper the reward will ultimately be.”

 

How will this year be better than ever?

“This year, we are leaning into the mantra, ‘collaboration beats competition,’ and partnering with several other communities outside of Best Ever to create an audience composition that will surely be the ‘best ever.’

“In partnering with investment groups, we are increasing the amount of available capital searching for real estate syndications. By partnering with other sponsor-facing organizations, we are increasing the exposure of high-quality commercial real estate sponsors to the passive investor community.

“Our audience might show up for the marquee content, but they leave pointing to the networking opportunities as the most valuable component of the experience. By investing in getting the right people in the room, we know more deals will get done, more capital will be placed, and more lifelong partnerships will form.”

 

How can attendees plan to make the most out of the Best Ever Conference?

“Set an intention — one relationship or one nugget of wisdom that you’d like to walk away from the conference with.”

To learn more or purchase your BEC2022 ticket, visit us at besteverconference.com.

 

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How to Find Great Commercial Real Estate Deals Outside of Your Market

How to Find Great Commercial Real Estate Deals Outside of Your Market

Where real estate investments are concerned, many investors regularly discuss the elusive off-market deals. By finding commercial real estate deals outside your market, you’re much more likely to face decreased competition, negotiate more effectively, and secure your desired property. So naturally, this can positively increase cash flow, so off-market real estate is a great way to retool your investment strategy.

However, before you start playing the real estate market or setting aside capital for real estate investing, it’s essential to understand how investment properties work and find deals on the correct property type. Whether it’s a rental property, an office building, or another piece of commercial real estate, here’s how to find the best off-market deals.

 

Turn to a real estate agent.

While it’s easy to think real estate agents focus on their buyers, many realtors also maintain seller lists. That way, if market conditions are favorable, a realtor can prod potential sellers into listing their real estate. In some cases, real estate representatives will provide cold calls to property managers, tenants, and landlords to discuss selling real estate. While it’s not always possible to convert someone into a real estate seller, especially if you’re a new investor looking to acquire your first property, a real estate agent can help facilitate long-term real estate investment strategies. This can help you find the ideal rental property or investment property in the United States.

 

Rely on traditional real estate direct mail.

Many successful real estate investors in the United States depend on direct mailing opportunities to acquire property. Pros enjoy these strategies because they typically don’t require much money and can help you develop long-term real estate property strategies. Especially for a new real estate investor, direct mail can lead to higher returns. Mailers can even be a long-term investment as they’re comparatively easy to update, intuitive for beginners, and don’t require a broker.

If you’re interested in a direct mail campaign, the next step is to determine your audience so you can craft a targeted campaign. Then, once you’ve developed an effective mailing list, you can send out mail to single-family homes and properties that you’d like to acquire. No matter the type of real estate, from residential real estate to commercial properties, direct mail can help connect you to adequate buying opportunities in the long run.

 

Contractors regularly network with real estate professionals.

Contractors can help you find unlisted real estate and different property types. This is a good idea for individual investors, and you can even consider limited partnership opportunities to help you hit your investing goals. The only downside is that this requires you to have existing network connections, especially if you want to make an excellent investment. For example, a contractor may be working with real estate developers to fix up a commercial property to sell. If you’re looking for real estate investment opportunities and you have an established relationship, a contractor may be willing to share this information with you.

Successful investors use all different ways to achieve their financial goals, own property and supplement their regular income. Since contractors can help with many types of real estate investing, working with a pro is a great way to bolster your developing real estate investment strategy. It’s also the first step many beginners make when they’re applying real estate investment tips.

 

Network with fellow investors.

Whether you’re looking to spot a great opportunity for homeownership, or you want to debate market analysis and exit strategies, it’s essential to work with fellow investors and limited liability companies. Whether you’re working with a single investor or a firm, you can gain insight into their strategy, real estate tactics, and willingness to sell. Buying and selling within an investor network is a form of “house hacking” that can pay high dividends.

The best part is that this is an intelligent way to get the most out of your property value. You know that fellow investors and flippers understand the importance of an investment property or renovation opportunity and won’t offer as much hassle as other sellers. You can use this strategy for a long time when you’re trying to connect to property owners, find commercial property to generate passive income, or even list your own home. The next step is to leverage your existing network to find listing opportunities and off-market single-family buildings, condos, or commercial units.

 

Wholesalers can help you find off-market deals.

When you want to grow your taxable income, add to your net worth, or develop rental income, you can turn to wholesalers to find potential off-market opportunities. Many wholesalers are using clever tactics to put income properties under contract across the United States. A wholesaler can find smart deals from malls to rental additions, flip the right to purchase, and turn it over to the buyer for a commission fee. While this is an adequate rental income or commercial property strategy, a few cons range from property depreciation to bottom-line impacts.

Wholesalers also regularly sell products that need additional work. To avoid dipping into your emergency fund, it’s essential to determine how much work a wholesaler off-market listing requires. You can find an appropriate lender and interest rate to cover costs when you know how many repairs and renovations a property needs. You can also determine whether or not a property rehab deal is a right fit for your investment portfolio.

 

Auctions often feature hidden gems.

Auctions are one of the best ways to find off-market properties with lower property taxes. There are probably already regular housing auctions in or near your zip code, which makes it much easier to connect to local commercial real estate deals. Much like if you’re working with a wholesaler, you can expect most auction properties to require a certain amount of rehab. Depending on the auction’s location, you can buy an off-market property by paying back taxes or past-due utilities taxes.

When you know how to find the right off-market deals, it’s that much easier to diversify your real estate portfolio, invest in properties that pay regular dividends, and collect the monthly rent of your commercial properties.

 

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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The New Rules of Real Estate Investing

The New Rules of Real Estate Investing

Like most endeavors, real estate investing comes easier to those who are willing to change with the times. Whether you’re dealing in commercial real estate or multifamily homes, it’s important to utilize the best new strategies in the game. Adopting tactics from decades ago will deny you the opportunity to maximize profits. If you really want to make the most of your career as a real estate investor, you’ll have to take the newest rules to heart.

 

Going Door to Door

Knocking on doors to speak with people in person might seem like a tactic from the past, but it’s still the most effective way to reach out to potential sellers. While the basic concept remains the same, there are definitely modern insights to consider when deciding how to frame these difficult conversations. Tweaking your strategy to align with contemporary expectations will bring significantly improved results.

 

Persistence is Everything

Knocking on doors is always going to be a low-percentage play. Even the best communicator in the world is turned down more often than not. This means you’ll have to get used to overcoming near-constant rejection. Try to focus on the big picture, always remembering that a single success will offset all the minor failures. Keep your head up and knock on as many doors as you can.

 

Start a Genuine Dialogue

While it’s important to cast your net as widely as possible by knocking on lots of doors, it’s also vital that you adjust your strategy to maximize your success rate. The best way to get potential sellers on your side is by starting a genuine, heartfelt conversation. Invite them to share their concerns and avoid taking an authoritative stance.

 

Be Relatable

You need people to trust you, and that will only happen if they think you’re on their side. This means you need to be warm, friendly, and relatable. Take on the tone of a neighborly advisor rather than that of a pushy salesperson. You might not be able to become their best friend during a five-minute conversation, but you can certainly project kindness, empathy, and goodwill.

 

Maintaining a Positive Attitude

A career in real estate investing is rarely straightforward and never boring. When you’re working with a volatile market and capricious individuals, sudden changes in fortune are inevitable. To maintain success in such a chaotic field, you’ll have to maintain a certain strength of character. Just a few adjustments to your attitude should be enough to preserve the equanimity you’ll need.

 

Don’t Dwell on Negative Circumstances

In the world of real estate investing, there are always some factors that exist outside of your control. Take, for example, the market crash of 2007–2008. Investors of that period had no power over the market’s sudden collapse. Even during the worst of the crisis, there were still commercial real estate deals to be made and multifamily homes to be rented. The investors who were best able to cope with the hardships of the recession were those who chose to ignore the circumstances altogether. Complaining will never get you anywhere, while optimism and perseverance can help you overcome even the most formidable obstacles.

 

Learn to Accept Unavoidable Challenges

When a sudden hardship like a market downturn destabilizes your plans, try to see it as a challenge that could pay off in the long run. You can’t change the circumstances, but you can work around them. You’ll likely become a more talented, versatile investor in the process.

 

Familiarizing Yourself With Unconventional Methods

As with any financial activity, new methodologies and techniques are constantly developing in the world of real estate investing. If you’re unaware of these novel practices, you might find yourself at a competitive disadvantage relative to other investors. If, on the other hand, you master these new techniques, you can use them to your benefit. Knowledge is always among a real estate investor’s most valuable assets.

 

Rent-to-Own Real Estate

While this method has been around for many years, it’s especially important to master in today’s real estate market. Many people aspire to homeownership but don’t have the finances for immediate purchase. Negotiating a rent-to-own deal is a great way to invite would-be buyers into the process while finding sellers a long-term plan for meeting their objectives. In real estate, matching buyers to sellers is often the name of the game. Rent-to-own deals provide another way to do that.

 

Owner-Financed Deals

Owner financing is another great way to bring buyers into the fold. When prospective homeowners don’t have the financial means to take on a mortgage, the seller can finance the sale instead. By offering interest rates higher than a typical mortgage and including a balloon payment in the negotiation, the seller creates a worthwhile deal. The buyer, meanwhile, gains the homeownership they otherwise wouldn’t have been able to afford. This creative tactic effectively pairs eager buyers with determined sellers.

 

Securing Larger Down Payments

Whenever you’re selling properties or working with someone who is, it’s in your interest to secure the largest possible down payment. Many buyers are reluctant to put too much money down at the beginning, but there are plenty of clever ways to raise the initial figure. Clever investors can structure down payments in accordance with a buyer’s specific circumstances. Some buyers, because of their work schedule, might be able to contribute more to a down payment during a certain part of the year. Others might receive a significant refund during tax season that they could then put towards a payment. Taking these factors into account can help land you a higher down payment. Make a point of talking with buyers to see what works for them, and don’t be afraid to get creative. When it comes to securing higher payments, a little flexibility goes a long way.

 

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Top 7 Lessons Learned from The Book on Negotiating Real Estate

Top 7 Lessons Learned from ‘The Book on Negotiating Real Estate’

Negotiating sometimes gets a bad reputation for haggling, but true negotiators know that it’s really just solving differences between multiple parties. Good negotiators are able to focus on terms other than price and great negotiators are able to get the other party to do the same. The Book on Negotiating Real Estate: Expert Strategies for Getting the Best Deals When Buying & Selling Investment Property by Mark Ferguson is a wealth of knowledge for small and large investors alike. Here are my seven takeaways:

 

1. Information

Gather as much information as you can because information is leverage. This may require putting on your detective hat and doing some investigating. It can be as simple as performing a Google search, scouring social media profiles, or looking on the county auditor’s website. When speaking to the other party in person, be sure to listen with intent and build rapport with the other party because people tend to do business with people they like.

 

2. Motivation

Acquire the seller’s motivation and determine if there are motivating factors other than price. In short, you’ll want to learn if there are any pain points as to why the other party is selling, their timeline to sell, the condition of the property, and lastly, price. By asking the right questions, you’ll be able to gauge the seller’s expectations and their willingness to work with you.

 

3. Terms and Contingencies

In a sense, you could make the agreement contingent upon pretty much anything and it’s all deal-dependent. The most common contingencies are the financing and inspection contingencies. With terms, you could get a little more creative. Some general terms include but are not limited to earnest money deposit, seller financing, closing times, and personal property. Before putting together an initial offer, it would be best to make a list of all the terms beyond the price that you’d like to get from the deal and believe the other party would like to get from the deal.

 

4. Delivering the Offer

When delivering your offer, present it in writing because people put more weight on the written word versus something that has been simply discussed. It’s also a good idea to go through the agreement with the other party. Start the discussion with information and ideas that the seller finds agreeable, which allows you to create a positive emotional state leading up to more controversial aspects of the offer. Listen after you present your offer and resist the urge to justify a low price or some term or contingency in the contract.

 

5. Tactics

Plan your negotiating strategy beforehand and tailor the conversation to the other party’s personality because by doing so, you keep them involved and in their comfort zone. Always focus on things that both sides can agree on because by focusing on agreeable issues, the other party will get the feeling that progress is being made. In tough situations, you can always appeal to a higher authority like your partner or your boss, even when they don’t exist. And always remember that no deal is better than a bad deal.

 

6. Concession Strategies

Instead of giving concessions, try trading concessions. Suggesting conditional concessions could also be advantageous. Make sure that you get equal value when you give. And lastly, always ask for a final concession because the other party will learn to stop asking for things once they essentially have what they want or need from the negotiation.

 

7. Defense

Defense is just as important as being aggressive, especially when negotiating against expert negotiators. When you get lowball offers, this is a good time to reject the offer outright to let the other party know you are refusing to engage in a negotiation until they are willing to be reasonable. When your offer is being criticized, the best way to react is to let them know that this deal might not work out. Lastly and most commonly, with threats of competition, the best way to defend is to figure out if the other party is telling the truth and to gather more information in terms of whether they are motivated to work with you and why they haven’t accepted other offers.

Negotiation is a muscle — the more you use it, the stronger it gets!

 

About the Author:

Tanh Truong is a pharmacist by day and an investor by night. A thoroughbred of Cincinnati, he invests locally in high-yielding assets and higher-yielding relationships.

 

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Benefits of Buying the LLC That Owns an Apartment Community

Benefits of Buying the LLC That Owns an Apartment Community

The traditional method for buying an apartment community involves the direct transfer of ownership from the seller to the buyer. In this type of scenario, one or both entities may be an LLC or another entity, and the result is the same. The property will transfer at closing to the buyer listed on the sales contract. At that time, the sales price and the change of ownership are recorded and become a matter of public record. While this is the traditional method of conveying property, it is not the only option. In some cases, it also may not be the best option.

Generally, a tax auditor or assessor will review a property’s taxable value every few years or when a sale is recorded. This means that the property may have been taxed at a lower-than-market value before the sale. After the sale, however, the property’s tax bill may shoot up and be aligned with the sales price.

While the new buyer has likely anticipated this increase when creating projections for future operating expenses, this sharp and immediate increase in tax liability may be avoided through a membership interest transfer. A membership interest transfer essentially is a method where the property’s ownership is transferred from one LLC to another LLC. Because the entire transaction is completed within the confines of the LLC’s structure, the purchase price and the change of ownership are not a matter of public record. Nobody who was not involved in the transaction will know what the sales price was or when the transfer took place.

This type of transfer may be advantageous in a few specific scenarios. One of these is a buy-and-flip situation. After you invest your time, energy, and resources into fixing up a rundown property, you want to sell the property for its current market value. You do not want a buyer to be able to see what you bought the property for, how long you have owned it, and what your profit margin will be. A buyer who is privy to such details may have many questions related to repair costs, the value of the improvements that have been made, and other factors. Through a membership interest transfer, these details are not presented to the buyer. The buyer will then make an offer based on the property’s current condition and relevant comps.

In many areas, commercial real estate values are reassessed every three to four years. The exception is if the property is sold. After a sale, the recorded sales price often becomes the taxed value. This means that the new owner’s tax expense could be significantly higher than the seller’s tax expense. If the new sales price could be kept out of public records, such as by buying the LLC, the new buyer could potentially save money on taxes for the first few years of ownership. Because of how considerable tax liability can be, this could save the buyer a sizable amount of money until the property’s value is reassessed.

Eventually, the property’s value will be reassessed even if the membership interest transfer is used. When a bill of sale is recorded, the sales price usually becomes the new tax value. If no recent sale is recorded when it is time to reassess a property’s value, comps and other supporting data must be researched and analyzed. The burden of defining the new value falls on the tax assessor’s or auditor’s shoulders.

Keep in mind that a membership interest transfer may be legal in all states, but you should consult with an experienced real estate attorney about the process and about structuring it legally. Generally, the buyer will establish a new LLC before closing, and the seller’s established LLC will be listed as the sole member of the new LLC. The deed can be recorded prior to closing to avoid conveyance tax, and this is an additional saving to the buyer.

At closing, the membership interest transfer will be executed. In addition, the bill of sale and other documents related to the transfer of ownership will be executed. Funds related to the sale will transfer at that time as well. Because the property will be owned by the new LLC at closing, the commercial real estate financing process is the same.

Some people are worried that buying the LLC rather than the apartment community would impact their tax basis. However, this concern is unfounded. The seller’s tax basis does not transfer to the new entity. Because of this, buying an LLC would not expose you to additional taxes related to the tax basis.

Investing in commercial real estate can be lucrative, and it may be even more lucrative if you can delay a hike in property taxes for a few years or optimize your return when flipping the property. Whether you intend to use a membership interest transfer as part of a fix-and-flip scenario or to mitigate your property tax liability, you should carefully review your specific scenario with your real estate attorney and with your accountant. Understanding the full implications and benefits of a membership interest transfer when investing in a multifamily community is essential in order to reap the rewards and mitigate risks.

 

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Do Lower-Grade Properties Really Cash Flow Better than Higher-Grade?

Do Lower-Grade Properties Really Cash Flow Better than Higher-Grade?

It is commonly believed that when looking at different investment properties, your Class A properties offer the best appreciation, Class B gives a combination of cash flow and appreciation, and Class C and lower are cash flow plays. But is this perception really true?

First, I want to point out that properties and areas are two different things. A Class A area has lots of in-demand amenities, low crime, and the best schools, but you can have a Class B and C property in that great area. Alternatively, a developer can build a great property with all the amenities tenants want and need, but in a very bad area.

Oftentimes, when I see the underwriting on assets ranging from single-family to large apartment complexes to retail strip centers, I see assumptions that do not seem to take into account the class of property or area. In residential real estate, whether it be a single-family rental or large apartment complex, the numbers projected do not consider real-world risks.

 

CapEx and Age

Let’s start with a single-family rental. I often see properties that were built in the 1960s and ’70s utilizing the same CapEx reserves as a property built in the 2010s. Age is one factor leading to a property’s class. Older properties, even if most items have been upgraded, are far more likely to have real issues that newer houses won’t. There are common items, like the roof, HVAC, and cosmetic upgrades. But less common items are water and sewer supply lines, underground drain lines for downspouts, and retaining walls failing.

I am a huge advocate of building a CapEx budget and reserving on a line-by-line basis for every item in a house: estimated cost divided by remaining useful life. I look at newer houses and older ones with the same process; however, new construction will have a longer useful life, since everything has full life left, which means the monthly reserves will be lower.

As a note, I combine my repairs and maintenance and CapEx budgets together, since the two often constitute very similar items. For tax purposes, repairs and maintenance and CapEx are not the same.

 

Tenant Base

A more market-driven aspect of underwriting that is often overlooked is the tenant base, specifically the length of tenancy and turnover costs. In my experience, the lower the rent in a submarket, the harder the average tenant is on the unit and the more frequently they turn over. This churn comes at a very real cost, as wear and tear repairs come out of the landlord’s pocket. And while larger damages can be withheld from a security deposit, there is a level of damage that often occurs in excess of the deposit but is also not worth the legal expense of pursuing a claim against a tenant that does not have the financial means to pay.

This risk can be mitigated through thorough tenant screening and high standards for applicants, in regard to income, landlord referrals, evictions, and the like. But again, lower-rent areas typically have a higher set of less qualified tenants, potentially meaning more vacancy and screening costs.

 

Considering the Odds

At the end of the day, underwriting is all about playing the odds. The odds of having a tenant damage a property are higher in lower-rent areas vs higher-rent areas. The odds of having a tenant with an eviction are higher in lower-rent areas vs higher-rent areas. This does not guarantee that the landlord in lower-rent areas can’t find great tenants, but the odds are stacked against the lower-income landlord.

When fully assessing items like CapEx, vacancy, and tenant turnover costs, many times these lower-rent areas simply equate to the same cash flow as slightly nicer areas, but with more risk. That risk does create opportunities if all the assessed risks don’t actually come to fruition, but for many that are looking for stable, passive income out of their real estate investments, that stability comes from fully accounting for all risks.

 

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 background. 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 both actively and passively invests himself. Please feel free to connect with Evan here.

 

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5 Bad Habits That Are Costing You Money When Investing

5 Bad Habits That Are Costing You Money When Investing

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

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

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

1. You spend more than you earn.

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

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

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

2. You’re not prepared for emergencies.

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

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

3. You’re missing out on tax breaks.

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

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

4. You tap into your retirement accounts too early.

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

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

5. You’re impatient with diversification.

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

Next Steps

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

 

 

About the Author:

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

 

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