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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5 Colorado Travel Tips for the 2022 Best Ever Conference

5 Colorado Travel Tips for the 2022 Best Ever Conference

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

 

1. Pack your gear.

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

 

2. Book early.

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

 

3. Remember your lift tickets!

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

 

4. Explore Denver.

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

 

5. Snag an exclusive resort discount.

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

 

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

 

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Growing Overseas with Jennifer Bourdeau

Growing Overseas with Jennifer Bourdeau

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

 

Education Abroad

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

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

 

Financial Clarity

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

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

 

Becoming a Full-Time Investor

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

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

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

 

Building a Team

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

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

 

A Better Path to Success

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

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

 

 

About the Author:

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

 

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Multifamily and Commercial Real Estate Insurance Advice for Investors

Multifamily and Commercial Real Estate Insurance Advice for Investors

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

 

Factors That Affect a Commercial Property’s Premium

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

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

 

The Impact of Age on Insurability

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

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

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

 

The Effect of Geographic Location

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

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

 

The Importance of Replacement Cost

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

 

The Affordability of Deductibles

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

 

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Learn From These 6 Investing Mistakes

Learn From These 6 Investing Mistakes

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

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

 

1. Trusting Others With Skin in the Game

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

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

 

2. Failing to Understand the Transaction

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

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

 

3. Relying on Projections

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

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

 

4. Failing to Understand Contract Terminology

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

 

5. Not Understanding the Tax Implications

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

 

6. Overlooking Building Permits

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

 

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

 

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The Top 3 Trending Multifamily Amenities Right Now

The Top 3 Trending Multifamily Amenities Right Now

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

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

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

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

 

Catering to the Work-From-Home Renters

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

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

 

Attractive Outdoor Spaces

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

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

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

 

Remote Technology

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

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

 

 

About the Author:

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

 

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The First Timer’s Guide to the Best Ever Conference

The First Timer’s Guide to the Best Ever Conference

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

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

 

How the Best Ever Conference Is Designed

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

 

Our Speakers

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

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

Past speakers have included industry giants such as:

And more importantly, past topics have included:

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

 

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

 

Before the Conference

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

 

Set Your Speaker Session Lineup

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

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

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

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

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

 

Shortlist Your Exhibitor Interests

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

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

 

At the Conference

Balance Your Time

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

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

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

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

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

All Work and No Play — Not Us!

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

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

 

After the Conference

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

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

 

 

 

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Steps to Stop Trading Your Time For Money with Kris Benson

Steps to Stop Trading Your Time For Money with Kris Benson

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

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

 

Growing Up on the Fast Track

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

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

 

Amassing a Small Empire of Duplexes

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

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

 

Co-Developing an Apartment Complex

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

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

 

Transitioning to Storage Investments

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

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

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

 

Reflecting on the Past

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

 

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Meet Best Ever Conference Attendee Suzy Sevier

Meet Best Ever Conference Attendee Suzy Sevier

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

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

 

Meet Suzy Sevier

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

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

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

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

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

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

 

Make Your Own Connections

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

 

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Big Goals in the Big Apple With Melissa Jameson

Big Goals in the Big Apple With Melissa Jameson

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

 

On the Move

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

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

 

Becoming a Real Estate Investor

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

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

 

Keys to Success

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

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

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

Taking the Lead

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

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

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

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

 

 

About the Author:

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

 

 

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

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

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

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

Start Small

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

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

Network

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

Negotiate Better

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

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

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

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

Don’t Chase Cash Flow in the Wrong Market

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

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

Consider Syndication

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

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

Add Value

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

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

Don’t Underestimate Rehab Costs

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

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

Maintain a Strong Vision

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

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

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

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

 

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