3 Perfect Storms Facing Wealth in America

3 Perfect Storms Facing Wealth in America

In just a few years, the wealthiest generation in history known as the Baby Boomer generation will be between the ages of 60 and 70. These Boomers are set to pass down their assets to their heirs and it will be the largest intergenerational wealth transfer in history. According to Cerulli Associates, “By 2043, an estimated $68 trillion will pass to succeeding generations. Industry experts have dubbed this “The Great Wealth Transfer.” This is the first of three storms. The two remaining are economic and political.

Picture this. You’ve built your wealth for 40 years. You own a large primary home, investment real estate, cryptocurrency, stock, or a business and now are faced with selling and transferring this wealth to your heirs. With such a large amount of wealth set to transfer, high-net-worth individuals, families, and their advisers must be prepared for the changes and responsibilities associated with this wealth transfer.


Are We in the Eye of the Hurricane?

Consider the following proposed policy game-changing statistics regarding capital gains, stepped-up basis, and dividends taxes.

  • The American Families Plan would:
    • Tax long-term capital gains and dividends as ordinary income for taxpayers with taxable income above $1 million.
    • Tax capital gains at death for unrealized gains above $1 million ($2 million for joint filers).
    • Limit 1031 like-kind exchanges by eliminating deferral of gains above $500,000.
    • Tax carried interest as ordinary income.
  • The STEP (Sensible Taxation and Equity Promotion) Act would eliminate the step-up in cost basis. A step-up in basis means that upon death, an asset has its cost basis reset to the date of death.

Considering a storm may be coming to shift us from all-time economic highs in the stock market, real estate market, and cryptocurrency, does it make sense to sell your highly appreciated assets now?

 

When to Sell a Highly Appreciated Asset

According to a blog post by Financial Samurai, “Sometimes, selling is better to simplify life and earn a higher rate of return elsewhere … At the end of the day, your investment property’s main purpose is to generate cash flow in as painless a fashion as possible. Once the pain of owning becomes greater than the joy of earning, it’s time to sell. Continuously work towards that income stream that provides the highest return with the least amount of work … I believe the best holding period for real estate is forever. By not selling, real estate owners ride the unstoppable inflation wave. Further, by holding on, you never have to pay any onerous commissions and long-term capital gains tax. But forever is a long time.”

What if forever is too long for you, however, because you are facing large capital gains tax and the asset you are selling is deferrable using a 1031 exchange?

 

Using a Deferred Sales Trust to Weather a Storm

A Deferred Sales Trust™ (“DST”) offers an elegant way to move wealth into a safe harbor during the three storms facing wealth in America. It unlocks an exit plan for you if you are selling highly appreciated assets of any kind and eliminates the need for a 1031 exchange. Armed with this information and insight, you can position your wealth plan for yourself and your family’s future like never before.

What is a Deferred Sales Trust?

The Deferred Sales Trust has a long track record of success and has withstood scrutiny from both the IRS and FINRA since 1996. It is a tax strategy based on IRC §453, which allows the deferment of capital gains realization on assets sold using the installment method prescribed in IRC §453.

In simple words, if you sell an asset for $10 million using an installment sale contract, and finance the sale, you as the seller may not have received full constructive receipt of the cash. You have become the lender. You do not pay tax on what you have not received if you follow IRC §453 since it allows you to pay tax as you receive payments.

The buyer you lent money to will typically pay an agreed-upon amount of down payment to you upfront —for which you would pay tax — and then pay the rest of the purchase price to you plus interest in installments over a specific period of time. The deferral takes place as you wait to receive payment, which is typically three to five years.

What are the differences between the Deferred Sales Trust and 1031 exchange here? The answer is flexibility and timing. You can learn more about this in a recent interview from the Best Ever Real Estate Investment Advice Show.

Why Use the Deferred Sales Trust?

A Deferred Sales Trust unlocks the sale of any kind of asset and allows you to lower your risk by diversifying your investments and dollar-cost averaging back in the market at any time.

Examples of this include:

  • The sale of a primary residence
  • The sales of active investment real estate (this includes saving failed 1031 exchanges)
  • The sale of a business
  • The sale of cryptocurrency or stock (public or private)
  • The sale of artwork, collectibles, or rare automobiles
  • The sales of carried interest
  • The sale of GP or LP positions in your existing syndications
  • The sale of any kind of asset that is subject to U.S. capital gains tax

Three Questions to Determine if the DST Is a Good Fit for You

1. Do you have highly appreciated assets of any kind you would like to sell, defer the tax, invest the funds into real estate, and diversify the funds into a diverse set of investments, all tax-deferred? By a diverse set of investments, I’m referring to those who own asset types other than real estates such as cryptocurrency, businesses, artwork, collectibles, and public stock, all of which are not 1031 eligible. Yes, all kinds of asset types, not just real estate.

2. What would it mean to you to convert your highly appreciated asset — which may not be producing cash flow of any kind — to cash flow from passive or active real estate?

3. What is the return on equity in your asset?

I believe you are more likely to consider selling when you have a clear plan and solution to your capital gains tax, as well as a clear plan to increase your cash flow and lower/diversify your risk.

Here’s to helping you make the best decision for your family during the three perfect storms facing wealth in America!

 

 

About the Author:

Brett Swarts is considered one of the most well-rounded Capital Gains Tax Deferral Experts and informative speakers in the U.S. He is the Founder of Capital Gains Tax Solutions and host of the Capital Gains Tax Solutions podcast.

 

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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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Boost Your Investment Growth in 2022 With the Best Ever Conference

Boost Your Investment Growth in 2022 With the Best Ever Conference

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

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

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

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

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

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

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

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

To purchase your ticket today, visit besteverconference.com.

 

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Third Straight Month of Record-Breaking Multifamily Rent Growth

According to Apartment List’s most recent national rent data, May marked the third straight month of record-breaking rent growth.

Rent grew by 2.3% in May, the largest increase since Apartment List has recorded data. The previous high was 2.0% in April. Prior to that, the high was 1.4%.

 

1. Rents now exceed pre-pandemic projections.

Prior to the pandemic, Apartment List made projections for rent growth in 2020 and 2021. Due to three straight months of record-breaking rent growth, current rents are now above the level they projected they would have been if the pandemic-related price declines of 2020 had never happened.

 

2. Rents continue to recover in hard-hit COVID markets.

The cities with the largest rent declines during the pandemic have yet to fully recover to pre-pandemic levels. However, most have experienced positive rent growth over the previous four months. This trend continued in May, with rents increasing by 3.8% in San Francisco (down 17% since March 2020), 4.4% in Boston (down 6% since March 2020), 3.7% in Seattle (down 11% since March 2020), 4.1% in New York (down 12% since March 2020), and 1.6% in Washington, D.C. (down 9% since March 2020).

 

3. Rent growth continues to accelerate in mid-sized affordable markets.

The same 10 markets have topped the list for greatest rent growth since the start of the pandemic. For example, in Boise, ID, rents grew by 6.6% in March for an overall increase of 31% since March 2020. The other top markets are Spokane, WA (22% rent growth), Fresno, CA (17% rent growth), Mesa, AZ (16%), and Virginia Beach, VA (16%). However, all of these markets performed well prior to the pandemic. For example, in Mesa, AZ, rents grew by 25.5% from January 2017 to 2020 — the fastest rent growth in the nation over that period of time. Eight of the 10 cities with large rent increases during the pandemic were in the top 20 for rent growth between 2017 and 2020.

 

4. Pandemic rent changes resulted in more affordability.

The markets with the greatest rent decrease during the pandemic were the most expensive markets pre-pandemic. Conversely, the markets with the greatest rent increases during the pandemic were the most affordable markets pre-pandemic. As a result, there has been a convergence of rents in the most expensive and most affordable markets.

 

Check out Apartment List’s full May 2021 rent report here.

 

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8 Post-COVID Pandemic Commercial Real Estate Trends

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

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

Here are my top eight takeaways from the report:

 

1. Improved economic outlook

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

 

2. Cap rates expected to continue to compress

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

 

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

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

 

4. Strong demand for industrial space

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

 

5. Target secondary and tertiary markets for multifamily

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

 

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

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

 

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

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

 

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

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

 

Download Marcus and Millichap’s full report here.

 

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

Top 9 Takeaways from CBRE’s Latest Lending Figures Report

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

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

 

1. Lending momentum is down YOY.

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

 

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

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

 

3. Treasury yield rate increased.

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

 

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

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

 

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

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

 

6. Mortgage rate distribution shifted higher.

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

 

7. Underwriting assumption changes.

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

 

8. Loan-to-values were largely unchanged.

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

 

9. Mortgage volume is up.

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

 

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Capital Markets Figures Report

Top 9 Takeaways from CBRE’s Latest Capital Markets Figures Report

Each quarter, the commercial real estate institution CBRE releases its U.S. Capital Markets Figures report, which analyzes where capital was invested.

So, who’s investing in what? Here are my top 9 takeaways from CBRE’s Q1 2021 capital market report:

 

1. YoY total investment volume is down 27.6%.

The total investment volume was $92.4 billion, which does represent a reduction. However, a strong recovery is expected in the second half of 2021.

 

2. Multifamily and industrial represent over 50% of investment volume.

38.5% of capital was invested in multifamily and 22.2% was invested in industrial.

 

3. Investment volume fell by 38% in the nation’s top 20 markets.

Topping the list were Greater New York (-49.8%), San Francisco Bay area (-46.6%), Greater Washington DC (-49.6%), Seattle (-50.5%), Chicago (-45.1%), and Houston (-56.9%). Markets in the top 20 that were more resilient include Boston (-17.0%), Phoenix (-27.8%) and Raleigh/Durham (-25.6%).

 

4. Some markets experienced a large increase in investment volume of certain asset types.

Office investment increased by 347.6% in Richmond and by 23.5% in Raleigh/Durham. Industrial investment increased by 30.7% in Boston. Multifamily investment increased by 63.7% in Indianapolis, by 17.2% in Jacksonville, and by 13.0% in Charlotte. Hotel investment increased by 161.0% in Modesto, by 90.9% in Hawaii, and by 43.0% in Austin.

 

5. Private investors accounted for over 50% of investment volume.

This represents a 9% increase compared to a year ago. Market share also grew for institutional investors (22.8% in Q1 2020 to 26.3% in Q1 2021) and foreign investors (6.3% in Q1 2020 to 7.6% in Q1 2021). Conversely, REITs experienced a 75% YoY decline in investment volume.

 

6. Industrial and multifamily cap rates continue to fall while office, retail, and hotel cap rates had a negligible increase in Q1.

Multifamily cap rates fell by 21 bps to 5.0% and industrial cap rates fell by 20 bps to 6.03%.

 

7. Returns are below the last cyclical average (2010 to 2019).

The annualized NCREIF total return increased from 1.6% in Q1 2020 to 2.6% in Q1 of 2021 but is still below the average NCREIF for Q1 2010 to Q1 2019 of 10.2%.

 

8. YoY mortgage production increased for all lender types except CMBS and life insurance companies.

Fannie Mae (51.4%), Freddie Mac (40.4%), and HUD (56.6%) experienced large increases.

 

9. Delinquency rates higher for all lender types.

However, all delinquency rates remained low compared to last cycle.

 

Click here to download CBRE’s full report.

 

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Record-Breaking Multifamily Rent Growth in April 2021

According to Apartment List, rents grew by 1.9% nationally in April 2021, which is the greatest month-over-month growth since 2017 (which is when Apartment List began collecting data). Another commercial real estate analytics company, RealPage, said, “effective asking rents for US apartments climbed 1.3% in April, rising at the fastest pace seen during a single month for the past decade or so and likely at the fastest pace ever.”

No matter how you put it, April 2021 was a record-breaking month for multifamily rent growth!

For perspective, rents dropped by 1.2% nationally from March to June 2020 due to the coronavirus pandemic. This decline wasn’t overcome until March 2021, where rents increased by 1.4%, a record at the time. Adding in the 1.9% rent growth in April, the year-over-year rent growth of 2.3% is the second-highest since Apartment List began collecting data in 2017.

In other words, “the recent growth in [Apartment List’s] national rent index has now reversed the disruption experienced in the early stages of the [COVID-19] pandemic.”

Here are some other takeaways I got from the report:

  • Rents in hard-hit markets continue to rebound: For example, rents in San Francisco were down 26.6% from March 2020 to January 2021. Since January, rents have increased by 8.5%, including a 3% increase in April 2021. Other hard-hit markets like Boston (4.3% rent growth in April), Chicago (4% rent growth in April), Seattle (3.6% rent growth in April), New York (2.7% rent growth in April), and Washington DC (1.4% rent growth in April) are experiencing a similar trend.
  • Boise still holds the spot for most rent growth during the pandemic: Rent has grown by 23% between April 2020 and April 2021 in Boise, ID, including a 5.2% rent growth in April 2021. Other top markets include Fresno, CA (13% YoY rent growth), Spokane, WA (13% YoY rent growth), Gilbert, AZ (12% YoY rent growth), and Toledo, OH (12% rent growth).
  • There has been a convergence of rents in pre-pandemic expensive and affordable cities: Essentially, there has been a correlation between pre-pandemic rent levels and rent changes during the COVID pandemic. The higher the pre-pandemic rent, the more it fell. The lower the pre-pandemic rent, the more it rose. Consequently, the expensive markets are more affordable while the more affordable markets have become more expensive.

To review Apartment List’s full April 2021 rent report, click here.

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CDC Moratorium Struck Down, Again!

Good news for landlords and property owners, sort of. In the last few months, at least six courts have struck down the Center for Disease Control’s (“CDC”) moratorium on evictions for constitutional violations. Now, the D.C. District Court has struck down the CDC’s ban on evictions. Citing to the Sixth Circuit Court of Appeals (Tennessee, Kentucky, Ohio, and Michigan) decision that the CDC has exceeded its authority, the D.C. Circuit Court judge, Dabney L. Friedrich, stated “[T]he Department’s interpretation (of its own authority) goes too far” and that “[C]ongress did not express a clear intent to grant the Secretary such sweeping authority.”

In making this ruling against the CDC’s moratorium, the Court has become the seventh court to strike down this moratorium as unconstitutionally broad and an overreach of the CDC’s authority.

So where does that leave the landlords and property owners?

Unfortunately, the Department of Justice has appealed the ruling and it will likely take months before the D.C. Circuit Court of Appeals will rule on it. Thus, the moratorium will remain in place and Judge Friedrich has put her decision on hold until May 12 to give landlords time to file papers opposing a longer delay.

It has become clear, at least through the Federal Courts, that this CDC moratorium on evictions is overly broad and exceeds the CDC’s authority. However, this ruling may not be binding on state court judges. Thus, the quagmire of this eviction moratorium continues to be a difficult issue to navigate. In the meantime, it is prudent to continue to encourage tenants to seek rental assistance through the various programs available to them. Moreover, it is prudent for Landlords and property owners to seek any assistance available to them as well.

 

Author:

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

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WEBINAR: Looking to Note Investing in the Global Health Crisis

TOPIC: Looking to Note Investing in the Global Health Crisis

When a recession hits the commercial real estate market, an under the radar asset class flourishes while the rest flounders. Distressed notes are derivatives of real estate ownership that express a low-risk alternative to real estate, often highly discounted. Join us to hear how experts in the space have been deploying multiple strategies to produce stellar ROI even during the toughest of times.

TIME: Feb 11, 2021 [02:00] PM in Eastern Time (US and Canada)

REGISTER HERE

 

Featured Panel:

Jorge Newbery

Founder & CEO preREO & AHP Servicing

With over 30 years of experience in distressed asset management, community development, and borrower advocacy, Jorge founded preREO with the goal of bringing stability to neighborhoods challenged by the blight of vacant homes. He is driven to empower local small business partners to revitalize and improve their communities while creating investment opportunities for themselves. Throughout his career, Jorge has utilized optimism and resiliency to find opportunity in adversity and he has a proven record of developing innovative solutions that can be mutually beneficial for lenders, borrowers, and communities alike. He founded American Homeowner Preservation, the country’s first crowdfunded distressed mortgage investment platform; AHP Servicing, a nationwide mortgage servicer; and Activist Legal, a law firm facilitating default legal services nationwide. He also authored Burn Zones, sharing lessons learned through his challenges and successes as an entrepreneur.

 

James Maffuccio

Co Founder and Chief Investment Officer Aspen Funds

Mr. Maffuccio is a 30-year real estate veteran and an expert in mortgage notes. He is deeply networked in the secondary mortgage industry and is responsible for acquisitions and underwriting as well as relationships with primary sources and key vendors. During his real estate career, Mr. Maffuccio developed, and/or rehabbed multiple residential projects in Southern California, including infill subdivisions, affordable homes, luxury homes and homesites, multifamily, and planned developments, such as the Gold Nugget Award-winning “Traditions” community in Fillmore. Mr. Maffuccio has personally executed and/or managed every aspect of the development process, including site selection

and acquisition, project conceptualization and design, procurement of entitlements and permits, regulatory compliance, entity structuring and capitalization, construction management, marketing, sales, and investor relations.

 

Kathleen Kramer

Real Estate Broker 1 Oak Advisory, LLC

In her 25+ years as a licensed Real Estate Broker and Mortgage Originator, Kathleen Kramer has closed over 2500 transactions for more than a $1 billion in volume. She ran a successful Real Estate club in Huntington Beach from 2002 to 2006. She and her husband, Michael, have personally invested in a variety of real estate backed investments including single family, multi-family, office, land development, reg D syndications and non-performing notes in several states. Investing in real estate gave Kathleen the financial liberty to take a sabbatical from her Real Estate and Mortgage Brokerage business for the last two years. She spent the time rehabbing her house in Huntington Beach, travelling, homeschooling her daughter, caring for the older generation and planning what is ‘next’.

 

Ben Lapidus

Chief Financial Officer for Spartan Investment Group LLC

Ben Lapidus has has applied his finance and business development skills to construct from scratch a portfolio of over $100M assets under management, build the corporate finance backbone for the organization, and organize over $20M of debt capital from the firm. In addition to completing over 50 real estate transactions at and prior to Spartan, Ben is also the founder and host of the national Best Ever Real Estate Investing Conference and managing partner of Indigo Ownerships LLC.

 

All previous webinars will be featured on demand during Best Ever Conference on February 18-20th. Use WINNERS30 to get 30% off your ticket here.

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COVID Webinar Recap

If you missed it, on Thursday we brought together a panel of experts are focusing on assisted living, retail, and hospitality. From cap rate movement to buyer competition, we discussed how COVID-19 has affected each of these asset classes at the macro level and how our experts have changed their investment criteria or revamped their operations.

 

Dusty Batsell

The best performing retail assets are going to be neighborhood shopping centers, the American fabric of experiential shopping, which is not going away.  Be in the line of development and as close to rooftops as possible.

Surprisingly, Baceline’s retail vacancy never dropped below 80%, in fact they are currently more leased than pre-COVID, which is a data point to suggest that retail was never going to completely go away and COVID was not the death knell it might have seemed to be.

 

Loe Hornbuckle

The assisted living industry has been moving toward smaller properties for a while, but COVID has become a trend accelerant.  A virus has a lower probability of spreading in 16-patient homes than 200-patient homes, coupled with the benefits of a true home feel and more dedicated relationships with staff and skilled nurses.

The challenges the industry has faced include visitation, up to 131 days of no visits allowed, caused excessive patient death due to feelings of abandonment or heartbreak. Despite having no COVID cases in patients, occupancy for Goodhorn Capital has dropped to 70% because potential customers have passed away in mass and no one is moving during a pandemic.

It’s estimated that when all is said and done, 25-35% of all COVID deaths will have happened inside an assisted living facility, not including those who were moved to hospitals before passing away.  This is driving the trend to smaller boutique facilities that limit virus spread.

 

Josh McCallen

Resorts vs Hotels: resorts generate demand for overnight stays in the larger market.  Hotels service the demand for overnight stays. Resort revenue is comprised 45-55% from rooms, the rest from high margin services like weddings, space rentals, F&B.

Because the hospitality space has been decimated, Josh had an opportunity to buy dilapidated opportunities at dirt value and convert them into award-winning resorts. Consequently, his rooms are booked out until the end of 2023!

Meanwhile, hotels are slow to grow for the next 4 years, with one major outlet suggesting occupancy rates will climb from 42% to 52% from 2020 to 2021.

 

Ben Lapidus – Moderator

The punch line for January’s webinar – The Future of Covid-Affected Asset Classes – Investors are bullish about their investment thesis, pleasantly surprised about the performance of their portfolio during COVID, and excited about what a post-COVID world will offer.

The full playback and others are available with ticket purchase to BEC 2021. Use code WINNERS30 for a 30% discount!

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Speaker Preview – Best Ever Conference

We started The Best Ever Conference so that we can keep learning, particularly from others in the field, to stay inspired, and to celebrate our genuine love of REI.

The Best Ever Conference remains more focused than ever on cultivating community, incubating real relationships, and helping individuals actualize their goals. The Virtual 2021 BEC will combine wellness and career innovation in tandem with speakers who are charting new paths in their respective industries. We’re committed to sharing the honesty in career triumphs and slumps, as well as providing attendees with tangible information and action items to take home.

We are excited about our 30+ speakers and wanted to highlight a few:

“There’s been a lot of speculation as to where the housing market is headed in 2021 and beyond. I think the data makes it pretty clear what we can expect, and I’m excited to share it at the Best Ever Conference!”

~ Kathy Fettke
Co-CEO
RealWealth

Kathy Fettke, Co-CEO of RealWealth

Topic: 2021 Housing Forecast with Kathy Fettke

Many real estate investors are wondering how recent changes in leadership will affect our economy and the housing market. Will there be a surge of evictions once the moratoriums are lifted? Will homeowners in forbearance default on their loans? Will rents increase or decrease? While there has been a tremendous amount of uncertainty in the markets, Kathy Fettke thinks the data makes it pretty clear where the housing market is headed.

 

Trevor McGregor, Coach & Business Strategist

Topic: Mindset Mastery for Real Estate Investors – How to Bulletproof Your Mind for Extraordinary Real Estate Success in 2021

There’s an old saying that says, “Success Leaves Clues” and if you’re a Real Estate Investor who is looking to get the Competitive Edge in scaling your business, finding more deals and making more money, you’ll definitely want to watch this presentation.

 

David Toupin, Partner of Obsidian Capital and CEO of Real Estate Lab

Topic: Building A Social Media Content Engine

We all know that social media is a powerful tool that we should all be using in 2021. Many people have because multi-millionaires from social media use alone. It is the future of branding and marketing, and it is here to stay. This presentation will focus on teaching you how to create your brand on social media, how to build a strong following, and eventually how to monetize that following in multiple ways. In order to explode your presence on social media, create a brand, and monetize your following in 2021, you will need to create a content engine.

 

Greg Willett, Chief Economist of Real Page Inc.

Topic: Market-Driven Strategies for Investment and Operations

Apartment sector performances are shifting substantially in some parts of the country, leading investors and operators to re-evaluation priorities and practices. Greg Willett shares some of the key market dynamics that RealPage sees ahead and offers suggestions on how to take advantage of the opportunities those changes will bring.

If you haven’t bought your tickets already, there is no time like the present. Use code BLOG15 for 15% off when you purchase your tickets at www.BEC2021.com. You will also receive an Ambassadors Code in your confirmation email you can share with friends and family and earn $50 back for every ticket purchased using your code. See you there!

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People Are Fleeing Urban Centers for the Suburbs – What This Means for Apartment Investors

One of the main metrics I look at when analyzing a prospective market to invest in is the population growth. 

The thought process behind this is simple: if the population is increasing, the demand for real estate is increasing, and vice versa. 

Of course, there are other relevant factors like the supply side of the equation. However, there are some investors I’ve met who ONLY select markets based on the net migration. If more people are moving out of the market than are moving in, it is automatically disqualified.  

U-Haul is actually a top source for migration data, which they release annually. you can view their migration reports here.

When you understand where people are moving to and moving from, you can adjust your apartment business plan accordingly. If you are in a market with a positive net migration, you are sitting pretty. However, if you are in a market with a negative net migration, there may be trouble on the horizon.

One of the biggest migration trends resulting in part due to the coronavirus pandemic is the urban-to-suburban pipeline

Not only are more people interested in leaving urban markets, but in some states, such as New York, the exodus has already begun.

The Hill, in their article “Americans leave large cities for suburban areas and rural towns”, says that approximately 250,000 residents plan on moving out of New York City while another two million consider moving out of the state altogether. Also, more than 16,000 New Yorkers already moved to suburban Connecticut. 

And this trend isn’t unique to New York. 

“A record 27.4% of Redfin.com users looked to move to another metro area in the second quarter of 2020,” reads a Redfin analysis performed in July 2020

The most popular destinations are Phoenix, Sacramento, Las Vegas, Austin, and Atlanta. Here is a breakdown of the top 10 metros by net inflow of Redfin users and their top origin.

 

The locations with the large outflows were New York City, San Francisco, Los Angeles, Washington DC, and Chicago. Here is a breakdown of the top 10 metros by net inflow of Redfin users and their top origins.

 

Are any of your investment markets on either one of these lists?

There is also an increase in demand for rural markets. For example, according to US News, 57% of realtors who responded to their survey said they’ve seen an increase in interest in rural Montana. The main reasons were because of its low coronavirus infection rate, as well as because they grew up and had family there. The same The Hill article cited above said real estate sales in Montana were 10% higher year-over-year, and that rural Colorado, Oregon, and Maine experienced similar increases in sales.

So why are people leaving the urban centers? 

Another telling article was written in NASDAQ entitled “The Urban-to-Suburban Exodus May Be The Biggest in 50 Years.” This article provided more data on the reasons why New Yorkers were fleeing urban centers. The top 5 reasons were cost of living, crime, looking for a non-urban lifestyle, concern over the spread of the coronavirus and the ability to work from home.

One of the major COVID-related changes that is driving more people out of urban centers is working from home

According to MARKINBLOG, 88% of companies are encouraging or requiring employees to work from home due to COVID and 99% of people prefer to work remotely. Compare this to just 3.4% of the US population working remotely pre-COVID, this has the possibility to massively disrupt real estate, especially the type of real estate that will be demanded.

Since employees aren’t required to go to the office, they are choosing to live in areas that are more affordable, closer to family, and closer to local amenities while still having direct access to a downtown. Hence, they are leaving urban areas for the suburbs. 

However, they are also choosing to head to the suburbs due to the type of homes that are offered. For example, people are looking for more outdoor spaces (whether that is a private yard or nearby greenspaces and parks) and homes with an extra room to convert into a home office. Greenspace is universally nonexistent in a lot of urban areas, and the cost of an extra bedroom in urban areas is also financially unrealistic for many would be buyers and renters. Therefore, if they want to see real green grass and trees, as well as have a home office, the suburbs or rural areas are their only options.

What this means for you?

As a multifamily real estate investor, you need to understand the population and migration trends in your investment market.

If you are heavily invested in major urban centers, it may be time to consider a pivot and diversify into suburban areas.

This is great news for those already invested in suburban areas, as you should benefit from both an increase in rents as well as an increase in value due to falling cap rates.

Newer investors can take advantage of the low barrier of entry since real estate is generally more affordable in suburban and rural markets.

No one knows for certain what the future holds for real estate post-COVID. However, due to other factors leading up to the pandemic (which I outline in my article about why I am confident in multifamily) combined with the migration trend outlined in this article, I believe multifamily real estate in suburban areas will thrive in the years to come.

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The CDC Eviction Moratorium – What You NEED To Know

You may have seen recent headlines referring to an “eviction crisis”: 

The COVID-19 Eviction Crisis: an Estimated 30-40 Million People in America Are at Risk – The Aspen Institute 

 

Experts fear the end of eviction moratoriums could plunge thousands of people into homelessness – CNBC

President Trump signed an eviction moratorium order that effectively bans evictions nationwide through the end of the year. According to the Centers for Disease Control and Prevention (“CDC”), the moratorium order has been issued to provide housing stability and to prevent the further spread of COVID-19. However, it is important to note that rent is NOT cancelled through the end of the year. Let’s dive into how this order effects landlords and owners of real estate…

 

According to the moratorium, there are stipulations in order to receive this “eviction protection.”

Those who are eligible must meet additional criteria before presenting their landlords with a declaration, which will be made available on the CDC website. This criteria includes: 

  1. The resident has sought all available government rental assistance
  2. The resident will earn no more than $99,000 in 2020 (or $198,000, if filing jointly)
  3. The resident can’t pay their rent in full due to a substantial loss of income 
  4. The resident is trying to make timely partial payments, to the extent they can afford to do so
  5. The resident would, if evicted, likely end up homeless or forced to live in a shared living situation

What to do if you (the landlord) receives a CDC Declaration from a tenant?

 

According to Colton Addy from Snell & Wilmer Law, if a landlord receives a CDC Declaration from a tenant, the landlord should respond in writing to the tenant to encourage the tenant to make partial payments of rent (and similar housing-related payments) to the extent the tenant is able, in accordance with the CDC Declaration. Additionally, the landlord’s written correspondence should remind tenants that the rental amounts are not forgiven and will ultimately need to be paid. 

 

Additionally, many tenants may not be aware of the government assistance programs that are available to tenants to help tenants pay their rent during the COVID-19 Pandemic. Landlords should include a list of available resources that tenants can use to pay their rent. The Department of Housing and Urban Development (HUD) has stated that nonprofits that received Emergency Solutions Grants (ESG) or Community Development Block Grant (CDBG) funds under the CARES Act may use these funds to provide temporary rental assistance to tenants. 

 

The following websites provide information on federal assistance that is available:

 

www.hudexchange.info/programsupport

https://www.hud.gov/coronavirus

https://home.treasury.gov/policyissues/cares/state-and-local-governments 

 

Additionally, landlords should include other programs that may be applicable in their jurisdiction. Landlords may also consider filing an eviction proceeding for one of the reasons permitted by the CDC Order, but landlords should use caution in pursuing such actions as eviction proceedings in the current climate are likely to draw additional judicial scrutiny.

 

Penalties:

 

The penalties for individuals who violate the Order are severe, including:

 

 

  • A fine of up to $100,000 and up to one year in jail, if the violation does not result in a death; or
  • A fine of up to $250,000 and up to one year in jail, if the violation results in a death.

 

The penalties for an organization violating the Order are even more severe.

In summary, the moratorium order provides temporary relief to those residential tenants facing eviction who submit the required declaration, through the end of the year.  The order, however, does not absolve a tenant from paying rent or restrict a landlord from applying penalties, interest, or late fees on the tenant’s account for non-payment of rent.  Additionally, the order does not relieve landlords of their debt service obligations if a tenant seeks relief under the order. 

 

Disclaimer: The materials contained in this blog post are for educational and informational purposes only. Nothing in this blog post is to be considered as the rendering of legal advice. Readers are advised to obtain legal advice from their own legal counsel. Additionally, please note that the orders and laws related to the COVID-19 Pandemic are changing on a daily basis and your jurisdiction may have stricter rules related to evictions in place. Please verify the rules currently affecting your property at any given time.

 

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The S.O.S. Approach to Managing an Investment During Coronavirus

As I am sure you are aware, CDC is responding to an outbreak of respiratory disease caused by a novel (new) coronavirus that has first detected in China and which has now been detected in almost 70 locations internationally, including the United States. The virus has been named “SARS-CoV-2” and the disease it causes has been named “coronavirus disease 2019” (abbreviated “COVID-19”).

Consequently, the DOW Jones has dropped by nearly 10,000 points over the past 30 days.

Per the CDC, “the best way to prevent infection is to avoid being exposed to this virus.” Therefore, social distancing has been one of the main methods to combat the virus. As a result, many people are working from home and many others have been laid off or furloughed.

From a business perspective, when a crisis – like the coronavirus, hurricane, fire, earthquake, etc. –  occurs and you have an investment property, you need to have a process for approaching the situation, and even more so when you have passive investors. The procedure I use is the acronym S.O.S, which stands for Safety, Ongoing Communication, and Summary.

 

S – Safety

The first step when a crisis occurs is always and most importantly safety. That is, safety for both the people and the money.

So, you first want to ensure the safety of both your residents and your team members on the ground. We sent all of our residents safety notices outlining the CDC’s guidelines for preventing the spread of the disease, which includes:

  • Wash your hands often with soap and water for at least 20 seconds. If soap and water are not available, use an alcohol based hand sanitizer
  • Avoid touching your eyes, nose, and mouth with unwashed hands
  • Avoid close contact with people who are sick
  • Stay home when you are sick
  • Cover your cough or sneeze with a tissue, then throw the tissue in the trash
  • Clean and disinfect frequently touched objects and surfaces

We also provided URLs to the CDC webpages with more information on the coronavirus:

The money side of the safety equation is still up in the air. It is hard to tell how the coronavirus will impact multifamily real estate. The stock market is going down which means more money should flow into real estate. At the same time, many people are losing jobs, which means they will have difficulty paying rent. We will have to see how rent collections are impacted over the next few months.

One interesting strategy I’ve seen is to allow residents to use their security deposits to pay for rent over the next few months. For example, investor Julie Fagan will allow her residents with a $1000 per month rent payment and a $1000 security deposit to apply $500 to this month’s rent and $500 to next month’s rent, reducing their rents to $500 per month. In exchange, the residents sign a new 12 month lease and sign up for security deposit insurance. I like this strategy because it helps the resident as well as the bottom-line at the property.

Investors will need to start getting creative if the coronavirus does negatively impact multifamily collections.

 

O – Ongoing Communication

Once we have ensured the safety of the people, we sent an initial communication to our passive investors.

The communication we sent to our investors was similar to what we sent to our residents. The major difference is that it also included information on what we are doing to ensure the safety of both the people and the money.

In addition to the relevant CDC information, we mentioned that we are working closely with our property management partners to monitor the operations at the property and that we will have more information for them by the middle of next month. We also mentioned the coronavirus will not impact their distribution for the previous month.

So, we sent one email to let investors know that we are aware of and monitoring the situation and when they can expect another update. It is hard to tell how long the coronavirus pandemic will last, so the plan is to continue to provide monthly updates to our investors about the status of the rent collections at our properties.

Overall, I think it is better to only send emails when there is sustentive information to provide as opposed to hourly or daily updates.

 

S – Summary

Once things return to normal, we will send our investors a final email with a summary of how the coronavirus impacted the operations at our property and distributions, as well as any changes we will have moving forward to make up for lower cash flow and distributions, if applicable.

 

When a crisis occurs, like the coronavirus, the three step procedure is S.O.S. – safety of the people and the money, ongoing communication to provide your investors with status updates, and then providing a summary once things return to normal.

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Tips for Balancing Real Estate Investment Deals with Family During the Holidays

The end of the year and the holiday season can be an exciting time for many reasons. While this is a great opportunity to focus on your real estate investment deals and planning real estate investment strategies for the upcoming year, it is also a time to spend with friends and family. It can be tough finding a balance between work and family any time of year, but this is especially true during the holidays. So what can you do to ensure that your deals don’t fall through as the end of the year approaches? Here are my top 3 tips for balancing business with family during the holidays.

Prioritize What Really Matters

With so many different things going on at the end of the year, the most important thing to do is prioritize your responsibilities. Make of a list of your top 5 to-dos for the end of the year and only focus on those specific things. Whether that means closing your last real estate investment deal, finalizing your new marketing plan, or making sure to spend every Saturday with your family and friends. These are the top things that you want to focus on in order to finish the year strong.

Expert Time Management

Time is the most valuable asset that you have. If you are able to properly manage that, you will be able to better manage a hectic holiday schedule. Having a career in real estate can be incredibly time-consuming if you don’t manage your time effectively.

Break down your day into sections that focus on your top priorities. For example, if you know that you’re most productive in the mornings, block those off to work solely on your real estate investment deals or completing research. You can save responding to emails, calling investors, and any meetings for the afternoon. Having clear sections for your day will make it that much easier during the holidays to plan time away from work and celebrate with family.

Set Actionable Goals

Goal setting is a technique that many of the world’s most successful people use to stay ahead. An actionable goal is something that is specific and clear for you to work towards. Setting actionable goals you can accomplish before year end is a great way to stay ahead this holiday season and ensure that you have a strong start to the next year.

To get the best real estate investment advice ever, visit my blog to learn more about creating wealth and financial freedom through real estate investing.

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Real Estate Investing Lesson From Amazon’s New York HQ2 Cancellation

In a statement released today, Amazon announced that they will not move forward with their original plan to build their HQ2 in Long Island City, Queens in New York.

For more information on the logic behind their decision, click here to read Amazon’s full statement.

This decision is going to cost the region up to 25,000 new high-paying jobs, is a major revenue loss for the city and the state, and is a missed opportunity for New York to further transform itself into the tech capital of the world.

As real estate investors, we closely followed the Amazon HQ2 competition between cities and states. We knew that the city chosen for the HQ2 would benefit in many ways. More high-paying jobs in an area means lower unemployment, higher median income, more migration, increased likelihood of other business moving to and investing in the area, etc. All of these benefits also result in a greater demand for real estate – both rentals and owner-occupied homes.

Once Amazon announced the location (it actually ended up being multiple locations – New York, Northern Virginia, and Nashville), I am certain that many real estate investors began to look in those markets for deals. And some proportion of those investors actually invested in deals based on the expected future benefits to the real estate market once the HQ2 project was completed.

With Amazon’s announcement today that they are backing out of the New York location, the major lesson for real estate investors is don’t invest based on a business announcing its intentions to move to an area.

The first law of my Three Immutable Laws of Real Estate Investing is “don’t buy for appreciation.” Buying for appreciation is like gambling. Sometimes you win, most of the time you lose. A variation of this rule is “don’t buy for new headquarter announcements,” not until they physically move to the market.

Those who “gambled” on New York and underwrote their deals based on the Amazon HQ2 project will ultimately lose money on those deals, while those who “gambled” on Northern Virginia and Nashville may still ultimately end up winning. However, Amazon could have just as easily (and they still might) pulled out of both of those locations. We won’t know until the red ribbon is cut on opening day.

Don’t leave the preservation and growth of your or your investors’ hard earned money up to chance. Follow the Three Immutable Laws of Real Estate. Don’t get sucked into a new market for the sole reason that a major company announced plans to move their headquarters to that location. Wait to see if they actually move and then enter the market. Sure, you will pay more for the same piece of real estate than you would have before or directly after the announcement. But, you are completely eliminating the chances of losing most, if not all, of your money because you speculated on a deal and then the company ultimately reneges on their decision.

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

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Top 9 Cities with the Largest Increase in Renter-Occupied Units

In a recent blog post, I outlined the three economic metrics that will encourage you about the impact a potential market correction will have on the multifamily industry (which you can read here).

 

Essentially, the economy has been extremely strong since the last market correction in 2007-2009 while, at the same time, the overall number of renters and the overall share of renter-occupied units has also increased.

 

In 9 cities, the percentage of renter-occupied units has increased by 30% or more. And in one of those 9 cities, the increase was more than 50%.

 

Those 9 cities are:

 

9 – Glendale, AZ

AZ Sedans

  • 2006 % renter-occupied: 34.6%
  • 2016 % renter occupied: 44.9%
  • 10-year % change: +30.0%

 

8 – Mesa, AZ

desert scenery

Hotpads

  • 2006 % renter-occupied: 31.6%
  • 2016 % renter occupied: 41.2%
  • 10-year % change: +30.1%

 

7 – Virginia Beach, VA

Virginia Beach real estate

Unpakt

  • 2006 % renter-occupied: 28.6%
  • 2016 % renter occupied: 37.4%
  • 10-year % change: +30.9%

 

6 – Fremont, CA

Elegant cityscape

City of Fremont

  • 2006 % renter-occupied: 32.1%
  • 2016 % renter occupied: 42.1%
  • 10-year % change: +31.0%

 

5 – Toledo, OH

International Cash Systems

  • 2006 % renter-occupied: 38.3%
  • 2016 % renter occupied: 50.3%
  • 10-year % change: +31.3%

 

4 – North Las Vegas, NV

North Las Vegas sign

Review Journal

  • 2006 % renter-occupied: 33.4%
  • 2016 % renter occupied: 46.2%
  • 10-year % change: +38.5%

 

3 – St. Petersburg, FL

beach apartments

St. Pete Rising

  • 2006 % renter-occupied: 28.6%
  • 2016 % renter occupied: 39.8%
  • 10-year % change: +39.4%

 

2 – Plano, TX

Plano Texas apartment real estate

Cross Country Moving Companies

  • 2006 % renter-occupied: 24.2%
  • 2016 % renter occupied: 33.8%
  • 10-year % change: +40.0%

 

1 – Gilbert, AZ

Street Scout

  • 2006 % renter-occupied: 19.9%
  • 2016 % renter occupied: 30.6%
  • 10-year % change: +53.4%

 

Source: US Census

 

 

 

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Why I Am Confident Multifamily Will Thrive During and After the Next Economic Correction

In March of 2008, the Dow Jones was at 12,216.40. One year later, the Dow Jones plummeted to 6,626.94. Nine years later, the Dow Jones has skyrocketed – nearly tripling to over 24,000. During that same period, unemployment decreased from nearly 10% to 4% and GDP increased from $15 trillion to $19.39 trillion.

All-in-all, the economy has seen a strong bounce back since the 2008/2009 recession.

With such a strong performance over the past decade, there are fears in the air about a looming correction. And everyone who was investing in 2008/2009 knows firsthand the effects a correction/downturn has on real estate.

The economy is a complex animal that is nearly impossible to predict. However, by studying the impacts of economic corrections on real estate in the past, you can have an idea of how real estate will be impacted by any correction in the future– big or small, in the next few months or the next few years.

One major fact that will encourage you about the impact a potential economic correction will have on the multifamily industry is that renting has increased as the economy has gotten better.

Say what? There are more renters even when the economy has gotten stronger?!

Yep.

One of the most telling statistics is the increase in the number of renters during the past decade. Between 2006 and 2016, the US population grew by 23.7 million. During that time, the number of renters increased by over 23 million and the number of home owners increased by less than 700,000. In relative terms, the overall renter population grew by more than 25% in a decade. In fact, according to Pew Research Center, more U.S. households are renting than at any point in the last 50 years!

Sure, a large portion of this growth occurred immediately following the economic recession (an increase of 1.4%, 3.1% and 4.4% in 2007, 2008, and 2009), which is expected. The economy tanks and people cannot afford nor qualify for a mortgage, so they are forced to rent.

But what is surprising is that the increase in renters didn’t stop. In fact, while the Dow Jones tripled, unemployment was cut in half, and the GDP rose by nearly $5 trillion, the renter population increased nearly every single year (3.4%, 3.3%, 3.1%, 2.0%, 2.0%, 0.9% in 2010 to 2015).

And a lot of this growth has been concentrated in big cities across the US (population greater than 200,000).

That said, the number of overall owners in the US still exceeds the number of renters (63.8% owners to 36.2% renters). However, the gap is closing. Because the number of big cities where more than 50% of the population choses to rent increased from 20% to nearly 50% during that same period. In other words, more and more people are choosing to rent over buying in big cities.

Additionally, renter growth outpaced homeownership in 97 of the 100 largest cities in nearly every year between 2006 and 2016. That means that the number of owners grew at a faster pace than the number of renters in only 3 major cities across the county.

Even more staggering, during a robust economy in 2015 and 2016, rent growth outpaced homeownership in 46 of these major cities!

Okay, more people are renting now, but they plan on buying a home eventually, right?

Well, in a 2017 survey conducted by Freddie Mac, renters were asked a series of questions, including when they expected to move and whether they expected to rent or buy when they move.

Because of the turnaround we saw in the economy, you might think people would move out of their rental and into their own home. But, only 14% of renters expected to move within a year while 37% said they didn’t know and another 9% said they expected to never move. But what was even more shocking was this – only 41% expected to buy, which is the lowest it has ever been.

Another interesting fact is that 55% said they either strongly agree/somewhat agree with the statement “I like where I live and don’t plan to move despite the changes in my rent.” And only 31% said they would move into a different rental property if their rent increased in the next year.

 

Now the question is why did more people decide to rent while the economy was booming?

Well, there are many reasons, including:

All of these reasons will be with us for the immediate future.

The fact that the number of renters increased by over 25% in the decade following the recession, even while the economy dramatically improved, gives me confidence in the prediction that when the next correction occurs, the same percentage of people or more will rent. And when the economy begins to improve again, the same percentage of people or more will rent. Which means that the multifamily investment strategy will continue to thrive now and in the foreseeable future, regardless of which correction takes place.

That said, you want to always make sure you are adhering to my Three Immutable Laws of Real Estate Investing to maximize your real estate portfolio during any part of the market cycle.

 

Take the first steps towards passive investing.

Are you an accredited investor who is interested in passively investing in an apartment community?

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5 Proven Ways to Attract Passive Apartment Investors

I was recently a speaker at Dan Handford’s virtual multifamily summit. The topic of my talk was how to attract passive apartment investors. More specifically, I provided 5 proven ways to attract passive investors based on my experience raising capital for over $470,000,000 worth of apartment communities, interviewing over 1,000 passive investors, and writing the best-selling book on apartment syndications – Best Ever Apartment Syndication Book.

The main thing I’ve discovered through my money raising experience is that passive investors don’t chose to invest with apartment syndicators who offer the best returns, who invest in the most favorable market, or who implement the greatest investment strategy. These are all reasons why someone choses to invest, but not the primary reason. Primarily, passive investors will invest only with someone they trust – both personally and as a business person.

And it must be both. I trust Jim Halpert from The Office as a person, but I would never invest in Jim’s apartment syndication because I don’t trust him as business/real estate person.

The best way to gain a passive investor’s trust is through time (to gain their trust personally) and expertise (to gain their trust as a business person). So, a more apt title to this blog post is “5 proven ways to build trust with passive apartment investors,” and here are those 5 ways:

 

1 – Thought Leadership Platform

A thought leadership platform is an interview-based blog, YouTube channel, or podcast on which you publish valuable content for free on a consistent basis.

You gain both types of trust with a thought leadership platform.

With a thought leadership platform, you are reaching hundreds of potential investors every day. This provides you with a head start in gaining people’s personal trust, because when you eventually hop on an introductory call with them, they’ve already heard you speak for hours. At the same time, since you’re interviewing other real estate experts and offering your own expertise on the apartment syndication process, you’ll become recognized as an apartment expert, which covers the “business person” type of trust.

My overall thought leadership platform and online presence (via podcast, YouTube newsletters, Facebook, and Forbes) has attracted a large portion of my passive investors.

 

2 – BiggerPockets

There are 1.2M members on BiggerPockets and only 6,702 (~ 0.5%) have received the “addict” award. To receive the addict award, you must visit the BiggerPockets website every single day for a month.

When I was first launching my apartment syndication business, I made it a habit to visit and engage on BiggerPockets every day, which is why I am one of the 0.5% who’ve received the “addict” award. And these efforts have paid off greatly, because another large portion of my passive investors have come from BiggerPockets.

To get the most out of BiggerPockets, you need to be engaged in the forums and member blogs and add value on a consistent basis. Set up apartment syndication and passive/accredited investor keyword alerts so you are immediately notified when those keywords were used in the forums.

Answer questions in the forums. Reply to direct messages quickly. Provide referrals to other investors in your market. Republish thought leadership platform content to the forums and member blogs.

In doing so, just like the thought leadership platform, you will build a personal connection with people you haven’t met in person, as well as become recognized as an apartment syndication expert, especially if you make it on the Top Contributors list on the multifamily or private lending forum.

 

3 – Create a Local Meetup

Creating a local meetup group in your market is very similar to a thought leadership platform. The major difference is that the meetup group is an in-person event. You will form personal connections with the followers of your thought leadership platform, but you can form deeper personal connections faster at an in-person meetup.

By being the host of the meetup, you will instantly gain the trust and respect of the attendees, and even more so after you host the meetup month-after-month and it continues to add value to their investing businesses.

Start small with a monthly meetup group in your target market. Then, slowly scale over time. Capture content provided at the meetup (via speakers or conversations you’ve had/overheard) and share it on social media, ideally on a Facebook community you’ve made for the group. On that same Facebook community, have attendees post their monthly goals. Also, use that community to create Facebook ads that target passive investors within a certain radius of the event.

Once you’ve successfully scaled your meetup group, the next step is to create a yearly, in-person conference, where you’ll gain even more respect and trust from potential passive investors – both those who attend and those who simply hear about how great your conference was.

 

4 – Transparent and Quick Communication

Who do you trust more? A colleague who is constantly shows up to work late, takes 2 to 3 days to reply to emails and texts, never answers their phone, and brings up problems without solutions? Or a colleague who shows up 15 minutes early, replies to emails within a few hours, always answers the phone, and is a problem identifier and problem solver?

It should be a no brainer. We trust people who are punctual, transparent, and quick communicators. And that also holds true for apartment syndications.

One of the voicemails I have saved on my phone is from a passive investor who was thanking me for my communication skills. He appreciated our monthly recap emails and the fact that we sent accurate distributions and accurate K-1s on-time. And I’ve received countless more phone calls, emails, and texts from investors saying the same thing, so what we are doing is clearly appreciated. Here is a list of what we do to ensure that we are effectively communicating with our investors:

  • Send detailed, transparent monthly recap emails with images for all deals
  • Send profit and loss statements and rent rolls on a quarterly basis
  • Provide information on new business and economic developments in the surrounding market
  • Send accurate monthly distributions on-time
  • Reply to emails, texts, and voicemails within 24 hours at most
  • Provide investors with cell phone number
  • Record new investment offering calls to send to investors who couldn’t attend
  • Send accurate K-1 tax statements on-time

 

5 – Volunteering

Volunteer at a nonprofit organization that aligns with your values, interests, and beliefs. The primary reason is to give back. But while you are giving back, a secondary objective is to get on the board.

A board member at a nonprofit organization is likely affluent with a high net-worth and has a circle of influence consisting of other high net-worth individuals. So, find a nonprofit organization, volunteer for a few months, and work your way onto the board. Once there, focus on building genuine personal relationships with your fellow board members outside of volunteering (which covers the personal trust). Then, organically bring up passive investment opportunities and see where the conversations lead.

Let me reiterate: the primary objective is to give back. Do not show up to your first day of volunteering and ask others to invest in your deals. Focus on giving back. Try to get on the board with the intentions of giving back even more. When you are volunteering, focus only on volunteering. But once you start to build relationships with other board members outside of volunteering, you can begin to organically bring up things that interest you, with apartment investing being one of them.

 

There are many ways to attract passive investors and this list is by no means exhaustive. However, I have used every strategy on this list to raise capital for my deals (hence the “proven” in the title). I recommend picking one of the strategies that interest you the most and focusing on scaling it for at least 6 months. Once it is rockin and rollin, pick a second strategy and repeat until you’ve built yourself a passive investor lead generating machine.

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Best Ever Podcast guests

Top Best Real Estate Investing Advice Ever Shows of 2018

Here are the most downloaded Best Real Estate Investing Advice Ever Show episodes of 2018, which were listened to over 200,000 times!

 

Top 5 Regular Shows of 2018

JF1231: Leveraging Technology to Automate The Money-Raising Process with Craig Cecilio

JF1227: 3 Apartment Buildings Closed in Just 12 Months with Mark Yuschak

JF1217: 2018 Market Predictions from Expert Economist with Peter Linneman

JF1225: Deal Machine Helps Investors Find Property Owners Faster with David Lecko

JF1330: BRRRR 101 – Real Life Examples of Scaling Using This Famous Method of Investing with Joe Cornwell

 

Top 5 Follow-Along Fridays/Friday Shows of 2018

JF1228: Two Unique Ways to Find Your First Off-Market Apartment Deal

JF1221: Your Guide to Evaluating an Apartment Community Before Making an Offer

JF1291: What Is the Best Apartment Investing Strategy?

JF1305: The Psychology of Success: Why Your Mindset Will Make or Break You with Rod Khleif

JF1340: Can Your First Investment Be An Apartment Community?

 

Top 5 Situation Saturdays of 2018

JF1229: Hard Money Lending & Business Consulting All-In-One with Doug Fath

JF1306: He’s Got Capital For Your Deals with Dan Palmier

JF1313: Making the Move From Single Family to Multifamily Investing with Anna Simpson

JF1362: Make $500k in One Year with BRRRR with Adam Kitchener

JF1299: Finding a Niche, Creating & Executing a Business Plan with Nathan Tabor

 

Top 5 Skillset Sundays of 2018

JF1230: Find an Asset Class with Less Competition and Dominate It with Tyler Sheff

JF1244: FBI Negotiating Strategies for REI Deals with Chris Voss

JF1223: How to Professionally Generate & Convert Leads with Scott Corbett

JF1314: Raising Capital & Finding Funding with Lee Arnold

JF1307: Apartment Due Diligence – How to Evaluate the Mechanics of a Deal with Nathan Tabor

 

Comment below: What was your favorite episode of 2018?

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Joe Fairless Top Blog Posts 2018

Top 8 Best Ever Blog Posts From 2018

Happy New Year everyone!

To start the new year, I wanted to share the most viewed Best Ever blog posts from 2018 with the purpose of creating a one-stop shop for your favorite blog posts from the past 12 months:

 

8 – Apartment Syndication School

Syndication School is a weekly, two-part podcast series focused exclusively on providing aspiring and active apartment syndicators with the knowledge and the tools (we provide FREE documents and spreadsheets for each series) needed to launch, scale, and maintain an apartment syndication business. We update this page each week with new podcast episodes and documents, so be sure to bookmark this page!

Read this blog post by clicking here.

 

7 – 6 Creative Ways to Break into Multifamily Syndication

The two main requirements before becoming an apartment syndicator are experience and education. You’re a loyal Best Ever follower, so you should have the education piece covered. However, if you are lacking in the experience arena, here are 6 ways to get hands-on apartment syndication experience in preparation for venturing off on your own.

Read this blog post by clicking here.

 

6 – BRRRR Strategy: Formula to Buy 5 Rental Properties in 2 Years and Payoff in 7

This 2:5:7 strategy implemented by Andrew Holmes is one of the fastest strategies to achieve financial independence that I’ve ever come across. A variation of the renowned buy, rehab, rent, refinance, repeat aka BRRRR strategy, follow this strategy to purchase a minimum of five properties every two years and pay off the debt in seven years to set yourself up for long-term success and debt-free wealth.

Read this blog post by clicking here.

 

5 – 16 Lessons On Buying Apartment Buildings From Over $400,000,000 in Apartment Syndications

This blog post is a beast. Coming in at nearly 6,000 words, it covers nearly every lesson I’ve learned since doing my first apartment syndication deal in February 2014.

Read this blog post by clicking here.

 

4 – Best Ever Apartment Syndication Book

In 2018, Theo and I released a 450 page textbook on how to launch an apartment syndication empire from scratch. We’ve received a TON of positive feedback about the immense value provide by the Best Ever Apartment Syndication book for which my team and I are eternally grateful. Head on over to Amazon today and pick up a copy. Be sure to leave a review and send a screenshot to info@joefairless to receive a free package of additional apartment syndication resources and have the opportunity to be featured on Follow-Along Friday.

Read this blog post by clicking here.

 

3 – Success Blueprint: How to Find Tax-Delinquent Properties & Contact The Owners Via Direct Mail

Written over 2 years ago, this article, which summarizes the Best Ever advice of wholesaler, fix-and-flipper, and buy-and-hold investor Mikk Sachar, is one of our all-time most popular blog posts. Learn everything there is to know about conducting direct mailing campaigns to delinquent tax lists.

Read this blog post by clicking here.

 

2 – The Top 14 Best Ever Apartment Investing Books

Remember the two requirements to becoming an apartment syndicator? That’s right – education and experience. Read the books on this list and you will cover that education requirement, and then some.

These are the 14 books that I attribute in part to my ability to go from making $30,000 a year in a corporate 9 to 5 job to controlling over $400,000,000 in apartments in less than 5 years.

Read this blog post by clicking here.

 

1 – Passive Investor Resources

The most popular page from 2018 is our passive investor resources page. If you are a sophisticated or accredited investor who is interested in learning more about investing in apartment syndications or a syndicator who wants to learn more about why a passive investor choses one general partnership over another, this is the go-to, comprehensive resource created specifically for you!

Read this blog post by clicking here.

 

Again, Happy New Year and I wish you continued success in 2019!

 

Comment Below: What is a topic you want to see us cover in 2019?

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What is Wholesaling Real Estate Investing & How to Get Involved

Want to build wealth sooner rather than later? You generally can’t go wrong with real estate investing, as long as you know what you’re doing. In fact, research shows that 90% of millionaires across the globe achieved their financial success as a result of real estate investing.

 

Of course, breaking into the real estate field can be a daunting task. Fortunately, that’s where wholesaling real estate investing comes in!

What is Wholesale Real Estate?

This refers to properties that are drastically discounted — or significantly under market value. If you choose to take part in wholesaling, you’ll essentially look for a discounted property that you can control via a purchase agreement. Then, while you’re under contract via this agreement, you’ll look for a buyer who wants to buy the contract.

What Else Is There to Know about Wholesaling?

As a wholesaler, when you decide to sell contracts, you’re not actually selling properties themselves. Rather, you’re selling to other buyers your right to purchase these properties. Basically, you’re looking for deals and then passing them along to end investors. The benefit of the wholesaling process is that it helps you to avoid risk and also avoid tying up your capital for as long as it would take to complete a rehab.

Steps for Wholesaling Real Estate Investing

To get started, it’s critical that you first research the local market in which you plan to find deals. For example, you should take a close look at what housing prices are there to see how low they go (the lower, the better). Then, you should start working on your list of buyers.

The buyers list is one of the most important tools you’ll use when wholesaling, or serving as a middleman between sellers and buyers. A practical way of building your buyers list is to attend local real estate networking meetings or to even going on real estate investing podcasts. The more individuals who know you in the industry, the more likely you are to get leads regarding properties you can pursue as a wholesaler.

The Capital Angle

It’s also paramount that you line up the capital you need to bring your deal to fruition. This is possible by aligning your wholesaling service with a hard money or private seller right away. In this way, you can purchase the house if you end up needing to do so.

Get Started!

If you are eager to create more wealth for yourself and your loved ones, wholesaling real estate investing is a smart place to start. However, failure to make the most of each step of this process will prevent you from experiencing the level of profitability your competition is quickly realizing. Take your time and review as many resources as humanly possible to learn all you can about wholesaling.

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New Year’s Resolutions Every Real Estate Syndicator Should Have This Year

For the longest, you dreamed of becoming a thriving real estate investor. The only problem was, you needed money to make money and you did not necessarily have all of the funds required to kick start your real estate investment empire. Fortunately, you decided to become a real estate syndicator and now it’s all about continued growth and sustainability for your business.

Here’s a look at a few New Year’s resolutions and real estate investment strategies that every syndicator like you should have:

 

Take Diversification More Seriously As Part of Your Real Estate Syndication Business Plan

Your job is to manage every aspect of a property purchase that you and other investors take part in after pooling your resources together. You’ll also likely help with managing the property you found for the deal. A major benefit of being a real estate syndicator versus just an investor is that you can reap acquisition fees along with a portion of the rental profits that your property generates over time for all investors involved.

However, a lack of diversification is a major mistake that many syndicators make when choosing their properties. Let’s take a look at a couple of different types of diversification you should strive to achieve in the new year.

Niche-Related Diversification: 

Your portfolio ideally should feature various types of real estate. For example, you should take time to learn about areas such as apartments, mobile home parks, and even undeveloped land, to name some. After all, these assets are more stable and thus might fare better than office properties would in a struggling economy. Understanding asset trends and cycles is key to having a robust portfolio.

Geography-Based Diversification: 

In addition to purchasing various types of real estate properties through the syndication process, you should make it your mission in the new year to diversify your holdings geographically. This is wise because, if you have all of your real estate properties in one state, for example, this exposes you to regional economic risks that are hard to overcome if you don’t also have properties in healthier markets at the same time. Complete serious market analysis before diving into investments, but consider branching out.

 

Investigate Properties Thoroughly Before Risking Your Money

Another smart New Year’s resolution to have as a real estate syndicator is to master how to keep control of your target property long enough to finish investigating it as an investment. In this situation, your aim is to maintain control of the property without risking your money.

If you’re interested in purchasing a property with other investors, note that the seller’s aim is to obtain from you the most money possible and to do this in the quickest manner possible. However, you can structure the purchase contract in a way that will minimize your exposure while maximizing your time simply by including contingencies that are well structured.

A Closer Look at the Purchase Contract Structure: 

As a real estate syndicator, you can make your deposit and the purchase of the property subject to your acceptance of several conditions, which will give you enough time to fully investigate the property. The conditions you should look for include, for example, an acceptable property condition and status of all leases. You should also be happy with the property’s history of expenses and income, the title’s state, and any other items that can impact the property’s value, such as the presence of a man-made or natural hazard.

Special Contingency: 

You can also include a special contingency in the purchase offer that states that you have the right to cancel the property purchase transaction if you’re unable to subscribe your group of investors during a specific time period. In other words, if you can’t raise enough cash in time, your transaction will be canceled and your deposit will be returned to you.

 

Take Advantage of Options to Purchase

Another smart New Year’s resolution to adopt as a real estate syndicator? Start using purchase options. Let’s take a look at why this is.

Sellers may quickly become uncomfortable with you if you include several contingencies in the purchase contract that feature lengthy removal periods. Rather than working with you and your group of investors, they may simply wait for faster buyers. However, by using an alternative tool known as a purchase option, you gain the undeniable right to buy a given property in the period of time you specify in your purchase option.

More Details about How Purchase Options Work:

An option may range from a single week to an entire year, depending on the situation. However, most are around three to six months. In addition, you may be able to make a smaller option payment for a briefer period — an arrangement that is known as a “free look.” This smaller option payment may be a few hundred dollars, for example.

Pros and Cons of Purchase Options:

 A major benefit of using purchase options is that they are typically less costly than escrow deposits because nobody becomes tied up in the purchase contract. However, options do come with a downside as well: They are not refundable. That means if you fail to purchase the given property, you lose your option payment.

Still, the ideal situation is for you to structure the option so that you receive an extension period in the event that you decide you’d like the property. Note that you’ll need to submit more money each time you take an extension, though. Also, you’d be wise to still outline contingencies in your purchase contract. The difference in this situation is that you won’t have as much time to approve the several conditions you call attention to.

 

Hone Your Real Estate Syndication Business Plan Today!

Being a real estate syndicator can no doubt be exciting, but it can also be intimidating if you don’t know what steps to take to protect your money. Work with me to learn more about how you can minimize your risk and maximize your profits for the coming year and beyond!

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Top 4 Real Estate Market Trends & Red Flags to Look For, Before Investing

You no longer have to sip your cup of joe on your way to your 9-to-5. Instead, you’re sipping coffee as you browse the Internet from home, looking for the next piece of real estate to flip for a profit. All of a sudden, you shake your head and snap back to reality. You were daydreaming. But who says your dream of becoming your own boss as a real estate investor can’t become your reality?

 

Research shows that investment in commercial real estate in particular increased 17% between the fall of 2017 and the fall of 2018, and residential real estate also remains attractive to investors. So, if you’re asking yourself, “What is the best long-term investment?”, now appears to be as good a time as any to seriously explore investing in single-family homes, apartment communities, or even business spaces as your next career move.

 

Of course, just like the greater economy, the real estate market goes through various highs and lows, so it’s critical that you assess the current market before simply diving in. Here’s a rundown on the top four real estate market trends or red flags to look for before investing in a deal.

1. The Demand for Property

If you notice a slip in property demand and/or you see businesses folding in a real estate market, this is a sign that you should not invest your money in the area right away for two reasons.

 

First, if companies are shutting down rapidly, this means that property values overall may start to decline as people move away and seek new job opportunities. Second, if business owners are avoiding the area, this might mean that the demand for properties in that area is low for one reason or another. If you ignore these signs and move ahead with a property purchase there, you may not get much return on your investment when you decide to sell. Or it might take a while for you to unload it.

 

Reasons for Low Interest in an Area

If a certain area is not piquing the interest of buyers, the culprits could be increasing crime rates, new developments close by, subpar school systems, or a less-than-stellar economy. No matter what the situation may be, it’s a good idea to select locales that are established or are rising in popularity if you want to avoid profit loss in the future.

2. The Job Market

In a similar vein, before purchasing real estate in a certain market, you should take a detailed look at your target area’s current job trends. For instance, are hiring volumes climbing and what kinds of positions are available?

 

This is critical because job market trends have a correlation with real estate market trends. For instance, if jobs in an area are not high-paying and don’t offer much growth potential, there will be fewer reliable renters or buyers available to you.

3. The Commercial Sector

A commercial sector that is stagnant in an area is a major red flag for investors. If businesses in a locale haven’t been there very long or if there aren’t many new companies moving in, this area might not be the wisest place to pursue an investment property. Many companies invest in their communities, so areas with lots of industry or other businesses are likely more financially sound.

 

Also, see if any major employers are planning to close their doors or downsize in the near future. If it appears that large employers plan to stay put long-term, this is good news for you. You can find information about which companies are planning to stay or go by reviewing local newspapers or even city council meeting and zoning board meeting minutes.

4. Community Planning

If the community you’re targeting for your investment property has a solid master plan in place, it’s likely a good one to stick with. That’s because master plans essentially lay out communities’ visions for themselves, and visionless communities will likely end up fizzling out at some point.

 

Elements of a Solid Master Plan

 

A strong master plan at the community level should explain not only how the community sees itself but also how it plans to turn its vision for itself into a reality. This plan outlines truly realistic and relevant changes, and it also focuses on actual solutions. Furthermore, it fosters innovation and promotes problem-solving. If there is little evidence that a community’s master plan is being executed, you may want to bypass that community when it comes to looking for a real estate investment property.

Start Real Estate Investing Today!

If you’re asking, “What is the best long-term investment?” and you are interested in getting your feet wet in real estate investing, I can help. In no time, you can experience the unique monetary potential that real estate has to offer. Get in touch with me today to find out more about the current real estate market trends and to start earning money as a real estate entrepreneur.

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Basics You Should Include in Your Real Estate Investment Strategies

One of the smartest moves you could make as you search for streams of reliable revenue (both passive and active) is to get serious about real estate investing. That’s because research shows that real estate is among the safest types of investments you could make.

 

The question is, how exactly can you get started? Here’s a rundown on the basics you should include in your real estate investment strategies.

Active Strategies: Rental Properties

When it comes to investing in property, you have a couple of avenues that could lead to real profits for you: active real estate investing and passive real estate investing. We’ll first take a close look at active strategies, which include rental properties.

 

Investing in rentals—which is among the most frequently used strategy—basically involves buying homes or apartment communities, advertising for tenants on social media or rental websites, and then renting out your properties for amounts that will cover your mortgage payments and operating expenses with cash flow left over. As an investor, you can choose to manage your properties on your own, but the process may be easier if you hire a property management company to oversee them instead. The property management company can locate and interview potential tenants, collect rent payments, and address complaints that might arise.

 

Real Estate Investment Strategies for Beginners: Who Should You Target with Your Rentals?

 

Note that research shows that millennials should make up around 30% of the pool of buyers over the next decade. In addition, nearly 50% of them live in the suburbs. Therefore, purchasing rental properties in the suburbs versus urban areas may be a smart move for your business.

Vacation Rentals

Buying vacation rental properties is another excellent component of some real estate investment strategies. After all, many people around the world prefer to stay in homes that are privately owned versus hotel rooms these days. You can simply purchase either a turnkey property or one needing repairs and get it ready for guests. Afterward, you can list your short-term rental on a website such as VRBO or Airbnb. The particular booking agency you use will likely handle correspondence and payments on your behalf for a portion of the profits you receive.

 

Vacation rental properties can be especially invaluable investments if you live in a location that receives many tourists. At the same time, you’ll need to be okay dealing with constant tenant changes, repairs, money handling, and cleaning, for example.

Property Flipping

If you are interested in fix and flip properties — perhaps because you’ve seen it done repeatedly on television — you are in good company. Research shows that home flips reached their highest number in 11 years in 2017 at more than 200,000.

 

If you decide to flip a house, you’ll need to look for properties that need multiple repairs. The great thing about these homes is that you can generally get them for very low prices. You can oftentimes find them on online real estate listings or even via word-of-mouth through local real estate investing clubs. Then, you can fix up the property and sell it for a larger amount than you poured into it. The process can no doubt be daunting, which is why many investors hire professionals to help them with it.

How Quickly Can You Sell Your Property?

Research indicates that homes featured on the Multiple Listing System (MLS) are selling much faster today than they did years ago. In fact, homes’ median length of time on the market was 91 days back in March 2012 compared with 34 days in March 2017. This is great news for investors like you who are interested in flipping and selling homes in the coming months!

Passive Real Estate Investment Strategies: Real Estate Investment Trusts (REITs)

Passive real estate investing is generally a good option if you don’t have much experience with managing rental properties or if you have significant funds and would like to diversify your income. For starters, you can invest in REITs—companies that finance or own commercial properties via equity investments or debt. REITs usually offer real estate portfolios, rather than single properties, to investors.

 

These companies will basically sell REIT shares to you and you’ll earn dividends on them. The benefit of this strategy is that you can earn money from various properties in a less risky manner than you might with rentals.

Online Real Estate Investing Approach

With today’s increasingly popular real estate investment platforms online, you as an investor locate portfolios that align with your interests and needs. In this way, you can choose which portfolios to invest directly in. Then, the team associated with the platform will identify, acquire, and manage real estate assets on your behalf.

 

These online platforms are a lot like today’s in-demand crowdsourcing platforms. One of the benefits of this approach is that it doesn’t have to cost you a lot of money. In fact, you can begin online real estate investing with a site such as Fundrise, which requires just $500 to get started.

Real Estate Limited Partnership (RELP) Approach

A RELP is a group of people who invest in properties together. Joining these types of partnerships is yet another one of today’s many promising real estate investment strategies.

 

RELPs usually have development firms or property managers as their general partners. Once they are formed, they seek extra financing from investors like you for their real estate–related projects. In exchange, they’ll give you ownership shares, and you can be a limited partner. In this role, your influence on real estate decisions might be limited, but you also limit your liability. Therefore, if your RELP ends up facing a hardship, you won’t be liable for anything beyond your own capital contributions.

Start Implementing these Real Estate Investment Strategies Today!

If you are eager to boost your income or even quit your 9-5, now couldn’t be a better time to start tapping into the above-mentioned strategies. Get in touch with me today to learn more about the many real estate investment strategies that can help your company financially.

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What it Means to be an Accredited Passive Investor & the Requirements to Become One

Being an accredited passive investor gives you the ability to make and participate in a wide variety of real estate investments. These may include single-family homes, commercial spaces geared towards businesses, and even apartment syndications.

According to federal securities laws and the Securities and Exchange Commission (SEC), an accredited passive investor is defined as a person or entity that is able to invest in securities, such as apartment deals, and non-registered investments. Both securities and apartment syndications are an extremely lucrative way to build sustainable passive income. Whether you’re looking to build your investment portfolio or simply want an additional stream of income, becoming an accredited investor is the first step to making that a reality. So what are the accredited investor requirements and how can you ensure that you become one?

Your Income and Net Worth

In order to qualify as an accredited investor, you must meet at least one of the following requirements: have an annual income of $200,000 or more ($300,000 if you have a joint income with your spouse) for the last two years or have a net worth that exceeds $1 million, either individually or joint. Basically, this ensures you can manage the risk inherent in investing.

When determining your net worth, be sure to exclude the value of your primary residence. Add the value of all your other assets (investments, bank accounts, vehicles, vacation homes, etc.) and subtract any liabilities (various loans, home equity line balance, etc).

Verifying Your Claims

Once you have met the accredited investor requirements, then you are considered an accredited passive investor. There isn’t a certificate, form to fill out or formal process to recognize you. You’re either accredited or you’re not. However, the SEC may require that individuals or entities selling to accredited investors verify that these requirements are met, depending on the investment offering type.

For apartment syndications, if the deal is a 506(b) offering (which is what we do), you can self-certify your accredited investor status. If the deal is a 506(c) offering, you must submit your financials, including W-2 forms, tax returns, and any additional documentation that further confirms your financial standing, to a 3rd party to verify your accredited investor status prior to investing.

Benefits of Accreditation

There are many benefits to becoming an accredited investor, particularly when it comes to real estate investing and building sustainable wealth through real estate. If you are able to meet the accredited investor requirements, then you will be able to meet with apartment syndicators, venture capitalists, hedge fund managers and more to further discuss your investment opportunities.

As a passive investor, it is possible to eventually live on cash flow brought in by your investments. When buying into an apartment deal, for example, you will get a portion of the rent from the residents, as well as the eventual sale of the property. This means bringing in money for bills and leisure while making time for the activities and people you love.

For more detailed information on becoming an accredited investor and to learn more about investment opportunities for accredited investors, check out my comprehensive Passive Investor Resources guide.

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