Tips for Success After a Bad First Deal with Jamie Gruber

Tips for Success After a Bad First Deal with Jamie Gruber

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

 

Jumping In at the Wrong Time

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

 

Developing a Larger Perspective

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

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

 

Finding the Right Deal

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

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

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

 

Creating His Own Opportunities

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

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

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

 

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Multifamily and Commercial Real Estate Insurance Advice for Investors

Multifamily and Commercial Real Estate Insurance Advice for Investors

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

 

Factors That Affect a Commercial Property’s Premium

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

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

 

The Impact of Age on Insurability

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

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

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

 

The Effect of Geographic Location

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

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

 

The Importance of Replacement Cost

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

 

The Affordability of Deductibles

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

 

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Infinite Banking 101: Confidently Grow and Store Your Wealth

Infinite Banking 101: Confidently Grow and Store Your Wealth

We met with Gary Pinkerton, a successful investor and a wealth strategist at Paradigm Life, to discuss the strategy of infinite banking. Through Pinkerton’s deep knowledge of how insurance companies work and his extensive expertise in other critical areas of personal finance, he has assisted his clients with the purchase of investment properties while also helping them to elevate their net worth.

 

The Need to Store Money

The underlying concept of infinite banking is that everyone needs to store cash for various reasons. This is not money that is earmarked for investments. Instead, it is money that is being saved for a specific purpose. For example, it may be used as a rainy-day fund, a reserve for business activities, a reserve for real estate investing activities, and other similar purposes.

For many people, the money that they don’t want to place in at-risk investments sits relatively idle in a checking or low-interest savings account. Often, the savings rate doesn’t beat the inflation rate. Through the strategy presented by Pinkerton, you can potentially reposition your banking activities so that this money grows at a healthy rate of up to 5% annually.

 

The Concept of Infinite Banking

Insurance companies accept monthly premium payments for each policy they underwrite. They grow these funds on behalf of their customers, and the growth rate may be as high as 5% in many cases. Generally, when you buy a whole life insurance policy, you are presented with a guaranteed rate of growth and an upper limit on growth. Often, the actual growth rate falls somewhere in between the margins.

The insurance companies pool together all of the premiums collected into a large fund, and the money is safely invested back into the economy. A portion of this growth is then returned to the policyholders. This is the mechanism behind whole life insurance policies.

 

A Better Way to Grow Money

One of the unique features of whole life insurance policies is that the growth accumulates tax-free. The policyholder can borrow against the money that he or she has already contributed to the policy without any tax penalty. Essentially, if you have contributed $10,000 in premiums, you can draw against this $10,000 at any time without facing a tax consequence. If you pull out any of the growth, which would be any amount over $10,000 in this case, the excess would be taxed. The taxation is at the same rate that your savings account’s interest would be taxed.

 

Unhindered Access to Your Cash

You can see that infinite banking provides you with a convenient way to grow your money at a higher interest rate than a savings account provides. At the same time, this is a no-risk investment opportunity with a guaranteed rate of return. More than that, the interest rate generally fluctuates within upper and lower limits based on market conditions, so it often is aligned well with the inflation rate at any given time.

You can enjoy all of these incredible benefits associated with building wealth, and you can do so while still enjoying unhindered access to your cash. In fact, you can always draw on your initial capital when you need it, and you can return it to your account through your regular premium payments in the same way that you would continue to contribute regularly to your savings account. Even if you draw your original capital out, the full amount of your original contribution will grow at the same rate. This is essentially similar to saving money in your savings account in many ways, but it allows your funds to grow at a much faster rate even when you tap into them.

 

The Added Benefit of Life Insurance

Unlike term life insurance, whole life insurance has a guaranteed death benefit. Your beneficiary will receive that benefit at the end of your life, and this is similar to the way that an heir may receive other assets at the time of your death. Because of this, a whole life insurance policy is a true asset as well as a savings vehicle.

Keep in mind that the life insurance proceeds can also be applied to a church, a charity, or other beneficiaries. This flexibility gives you the ability to allocate funds as designated. Even if you have taken out a loan against the policy that has not yet been paid off at the time of your death, there is a built-in death benefit. Plus, the policy’s proceeds will also pay off any outstanding balance, so there is never a risk of passing debt onto heirs.

 

A Cash Reserve

While the initial capital in the life insurance policy can grow slowly over time with regular premium payments, you also have the option of contributing a lump sum of cash to the policy. This essentially enables you to borrow a much larger amount of money without incurring tax penalties. At the same time, the full contribution amount is growing at a decent rate. While some people will draw the full contribution amount out for real estate investing and for other purposes, others will keep a reserve. This reserve can be used for a rainy-day fund or for other essential purposes. Generally, you can tap into the reserve within a few days, so the funds remain easily accessible.

 

Is infinite banking a smart strategy for you? After you learn more about it, you can consider buying a whole life insurance policy to experience the strategy’s powerful benefits for yourself.

 

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4 Tips to Raise More Money From Passive Investors

4 Tips to Raise More Money From Passive Investors

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

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

 

1. Launch a Thought Leadership Platform

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

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

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

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

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

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

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

 

2. Ask Positive Questions

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

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

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

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

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

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

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

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

 

3. Make Your Own Opportunities

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

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

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

 

4. Find Complementary Partners

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

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

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

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

 

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How Anthony Chara Scaled His Business From 10 Single-Family Homes to 1600+ Apartment Units

How Anthony Chara Scaled His Business From 10 Single-Family Homes to 1600+ Apartment Units

Anthony Chara impressively increased the size of his business from nearly a decade of looking after single-family homes to overseeing more than 1,600 apartment units spread across the country. Of course, telling Anthony’s story includes sharing investing tips and interesting experiences; however, according to Chara, it all ultimately comes down to one thing: not giving up.

As he mentioned in a recent interview, the most important thing that an investor can do — and the most important thing that people in all walks of life can do —is push past roadblocks and learn from the setbacks we all experience from time to time. The learning that is done during these times is invaluable.

How Did It All Come Together?

Anthony Chara’s housing story started in 1993 when he and his wife moved to a different home but continued owning their former residence and rented it out. That gradually increased to 10 of those types of homes until, eight or nine years later, he started learning and putting into practice new strategies such as fixing and flipping homes and engaging in wholesale deals. He soon realized that doing those things was a combination of hard work and considerable rewards.

He entered the apartment aspect of real estate for the first time in 2003 and quickly discovered that the rent checks that he was receiving from those units were significant, particularly in cumulation but also individually in many cases as compared to single-family homes that he had worked with in the past. In the years that have followed, he has been in business with several 100+ unit complexes with the largest at 410, and this has now become his investing focus.

Working With Insurance Companies

One thing every real estate investor needs to take into account is that it is generally not easy to get insurance companies to pay out what they should when they should — for example, when covered properties are damaged in a hurricane. Anthony Chara learned this firsthand when a hurricane damaged a property that he owned in Panama City, Florida. However, it helped to have a public adjuster looking to ensure that the amount paid out was appropriate given the policy and the incident.

He added that ensuring that you have the right type of coverage prior to events such as these is also a must and, conversely, it can prove to be tremendously damaging from a financial perspective if you do not. He is thankful that he had solid hurricane protection for this property located in a hurricane-prone area.

Benefits and Challenges of HAP and HUD

Anthony Chara has also experienced benefits and challenges from working with the United States Department of Housing and Urban Development (HUD)’s Housing Assistance Program (HAP). One of the most significant benefits that he pointed out is that units that are associated with HAP are ones that he receives steady money from, even if they are empty.

However, many of those who are individual buyers or part of a syndication who want to take advantage of that will need to get a HUD loan; a bridge loan may be part of or a substitute for that process.

Also, consider other issues that could arise when working with HUD. For example, a manager who was working for Chara’s syndicate was blacklisted by HUD for repairs that the individual had overseen at a previous property. That resulted in months being spent on rectifying the situation, on the extensive related paperwork, and on hiring a new manager, a period that was partially extended because HUD must interview and confirm any candidates. In the meantime, HAP-related funds were not being paid.

Chara added that other HAP-related issues can also lead to funding being cut. These issues can include dissatisfaction with the condition of the property or how it is being taken care of. Since this is a relatively unpredictable aspect of the arrangement, it is something that an investor should take into account. As a result, Chara said that a good balance for him is to have about 30% of his units under a HAP contract.

It is also important to consider HAP’s voucher program, which is not as immersive. For example, a renter with a voucher will go to complexes that they like and ask if their voucher will be accepted. Although owners of contracted units have a say in who will live there, HAP employees typically end up making the selections.

What Should Go Into a Pre-Purchase Inspection?

One of the most significant ways to earn more money or, more to the point, not lose more money in the big picture is to inspect properties that are being considered and think of issues that may arise in the years to come. Things to look for, according to Anthony Chara, include the drainage in the area. For example, is there somewhere for rainfall and melting of snow to go? It’s also important to inspect the condition of parking lots, roofs, furnaces, air conditioners, mold, and insects. For example, ensure that asphalt parking lots are regularly sealed and restriped so that they do not turn to gravel and mush as the latter prospect results in a much more significant financial burden than the former one does.

Simply put, being as proactive as possible about things such as these will help investors better scale their real estate business and continue to grow their income.

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7/13—How to Find Good Investments When Prices Are High and Markets Are Competitive

How to Find Good Investments When Prices Are High and Markets Are Competitive

How’s this for a success story? In just the last five years, Steve O’Brien and his team at Atlanta-based Arcan Capital have acquired more than 20 multifamily properties. Together, these assets are worth more than $300 million. How has Steve, Arcan Capital’s co-founder and chief investment officer, prospered in such a hugely competitive marketplace?

Well, Steve’s boiled his strategies down to four main pieces of advice. These tips should help you get ahead in the exciting but extremely crowded real estate industry.

 

1. Maintain Your Reputation

To start with, Steve stresses how building a stellar reputation takes a long time, but the results are priceless.

In the real estate community, many brokers and sellers know each other well. And many people discuss the firms they’ve worked with openly and candidly.

Therefore, it’s vital that, when you promise to do something, you actually do it. For example, don’t ever make a bid if you’re not sure you can afford it. If you follow through every time, people in the industry will know it soon enough.

Imagine that you bid on a deal, but two other real estate companies place higher bids. If those two companies are new and relatively unknown — or even worse, if their reputations are weaker than yours — it’s very possible that you’ll win that deal despite your lower bid.

 

2. Data, Data, Data

The only way to build a strong reputation is to really know what you’re doing. And the only way to know what you’re doing is to have thorough and accurate data.

Before you bid on a property, learn as much as you can about it. Study the local renting market as well. What are local renting habits like? What are area renters willing to pay for various options?

On top of that, you should be familiar with practically every contractor in the region. How much do they charge? How does their work compare? Which of them provides realistic quotes?

You should also get permission to tour the property with a trusted contractor. That way, you can find out what renovations are needed and how much they’ll cost.

Similarly, get to know as many maintenance professionals in the vicinity as possible. You’ll want to consult with a few of them to see how much it’ll cost each year to maintain the property.

Consequently, you can make data-driven decisions about which properties will pay off and how much to bid for them. You can be sure that many of your competitors won’t make such insightful choices.

You can also impress sellers and potential investors with the facts you discover during your research stage. For instance, it might be obvious that a certain property needs new windows. However, a contractor could tell you exactly what kind of window and what type of glass would be best.

Later on, when you describe those ideal windows to the seller and to people who might make investments, they’ll probably be impressed. They’ll see that you really know your stuff. And, once again, you’ll gain a distinct competitive advantage.

 

3. Be Honest With Investors

Of course, your investors are key to putting your deals together. And they definitely have lots of options when it comes to residential and commercial real estate. That’s why you should always take care to strengthen your investor relations.

If these people believe that you respect them and care about their opinions, they’re much more likely to partner with you again and again. After all, that kind of relationship isn’t necessarily common in the real estate business.

Therefore, be straightforward about your expectations for each deal. Never oversell. If you explain that, due to current market realities, a certain deal might yield lower returns than previous deals, most of your investors will appreciate your honesty.

Likewise, don’t take any investments for granted. Maybe there’s someone who’s been investing with you for a long time, and that person is always enthusiastic about your work. Even so, don’t assume this investor will automatically go along with your next deal. Instead, sell them on it as though you were collaborating for the first time.

In addition, you can use different methods to keep the lines of communication open. Business reports, informational newsletters, and phone calls are all great ways to keep your investors connected and updated, even when you don’t have a deal to pitch.

 

4. Go Your Own Way

Whenever you can, look for properties with less competition for ownership. You might find, for instance, that dozens of firms are trying to buy one multifamily home, yet there’s a multifamily residence nearby with a less competitive amount bidders. If so, consider that less popular alternative.

The second property may need more renovation or maintenance work. Maybe its estimated return on investment isn’t as high as some investors would like. However, you might be able to get it at a low price. And, if you have relationships with contractors and maintenance pros who’ll give you good deals, you could see healthy profits from that purchase.

This approach is known as the blue ocean strategy: seeking discounts and low-demand options in order to claim new slices of the increasingly competitive market.

 

As you can see, Steve O’Brien’s real estate triumphs have nothing to do with luck. Instead, Steve has grown his company through copious research, informed decisions, honest investor relationships, a reputation for reliability, and the occasional quest for less sought-after properties. These strategies can ultimately benefit anyone seeking to develop a competitive edge in their chosen industry.

 

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

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

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

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

Start Small

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

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

Network

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

Negotiate Better

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

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

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

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

Don’t Chase Cash Flow in the Wrong Market

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

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

Consider Syndication

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

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

Add Value

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

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

Don’t Underestimate Rehab Costs

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

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

Maintain a Strong Vision

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

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

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

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

 

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

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

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

 

About Rock Thomas

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

 

Start in real estate without purchasing property.

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

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

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

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

To succeed, you want to mind these steps:

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

 

Get owners on board.

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

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

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

 

Do your homework.

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

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

 

Know your data.

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

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

 

Partner with experience.

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

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

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

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

 

Mind your headspace.

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

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

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

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

 

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Reasons You Should Rethink Saving for Retirement

Reasons You Should Rethink Saving for Retirement

Whether you’re hoping to become financially independent now or if you’re wanting financial independence when you’re ready to retire, the conventional methods to save for retirement will do little to get you there.

We spoke with Daniel Ameduri from Future Money Trends about his book, Don’t Save for Retirement. He gave us some of his best secrets for saving for the future and working your way to financial freedom. Daniel is out to disrupt the system and he was happy to share some of his best strategies with us.

Don’t Save for Retirement?

For most of us, when we were fresh out of college and entering our first jobs, we signed up for conventional savings plans like 401(k)s, mutual funds, and ETFs. We’re told that these plans are the best way to ensure our futures and make sure we’re taken care of in our senior years.

But these plans aren’t designed to bring wealth to the beneficiary and benefit those running the industry. There’s no way to get wealthy with these plans, nor is there a guarantee that you’ll even get enough money to live comfortably after you retire.

Daniel suggests taking your capital and investing in something that yields income. He thinks that investing in real estate is a much better way to build up savings for when you retire. You’ll create a passive income for yourself and be able to grow your wealth instead of waiting to see what you’ll get from funds that may or may not produce decent benefits.

Why Conventional Programs Are an Issue

People usually have a three-part plan: they have a 401(k) or equivalent from their job, their savings, and whatever they receive in social security. The average amount in a 401(k) is $58,000, which won’t last many people two years. Social security isn’t enough to cover the cost of living. Savings accounts aren’t worth much, as the interest rates are so low.

Simply put, these programs aren’t setting you up for a lot of comfort in the future.

Look at What the Wealthy Are Doing

One of Daniel’s best suggestions is to look towards the people who have the type of success you want to have. If you look to the middle class and emulate what they’re doing with their money, then you’ll stay in the middle class.

Instead, Daniel suggests looking to see what the wealthy are doing. When looking to the wealthy, he discovered that almost everyone with money was involved in some sort of real estate. That led him to get into investing.

Passive Income Is the Way to Go

Daniel has a slightly different opinion on passive income. He doesn’t suggest that people quit their jobs; instead, they should take the money they would be putting away for when they retire and invest it. The goal is to start with a small passive income with investments you can afford. Then keep putting your money back into it until you’re making enough to be financially free. From there, it’s up to you whether you want to quit your job and how you want to spend your money.

…But Passive Income Isn’t Always Passive

Some people will argue that property investment isn’t truly passive income. Active investing does involve some work on your part. You’ll spend time searching for properties, doing value-adds, and overseeing management.

Daniel feels that active investing is a small amount of work for what you get in return. Other types of investments that may feel more passive, such as stocks or REITs, won’t give you the same type of returns. The stock market is challenging, even for experts. REITs will give you some returns, but you’ll always be sharing with others.

If Others Can Do It, You Can, Too

Many people are reluctant to make bold moves, especially when it comes to their money. However, Daniel’s advice is to look around you and see how many people are finding success. If those people can do it, that means it’s possible. They don’t always have a special skill set — they are just determined to make their money work for them.

Find Someone Who’s Been Through It Before

Daniel is emphatic about working with people who are a few steps ahead of you, especially if you’re getting into an area where you’re not familiar. He tries to find someone who’s been through it at least once because he feels like he can learn from their experiences. Ideally, he likes to work with groups who were around during the 2008 crisis and survived.

Stick With What You Know

While many people will try to diversify and keep moving into new fields, Daniel suggests sticking with what you know. If you’ve found something that’s making you money, keep going with it. Become an expert and scale up from there. You stand to make a lot more money than dabbling in a lot of different types of investments.

Brutally Cut Your Spending

Daniel and his family didn’t have a lot of money when they first got started with their investments. They decided that building up a passive income was important to them, so they cut their spending as much as possible. You may have to forego luxuries like a new car or even expensive groceries for a while until you’ve grown your income.

Final Thoughts

Saving for when you retire is important, but it’s important that you’re making wise decisions with how you save. Conventional programs will only give you so much. If you’re aiming for comfort and true financial freedom when you retire, you should invest in properties and build up a passive income that will see you far into your senior years.

 

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How to Grow Your Podcast and Master Negotiations

Travis Chappell’s career path has definitely included some surprise twists. As a teenager, he thought he’d become a youth pastor. In college, a friend introduced him to direct sales, which he found intriguing. He then worked in sales for several years.

Eventually, Travis discovered the personal development field, which helps people achieve their goals. He took to this industry immediately, devouring as many podcasts about it as he could.

In time, Travis established “Build Your Network,” his own podcast. It’s become a major thought leadership platform, and it’s now one of the top 25 business podcasts in existence. Additionally, Travis is a real estate investor, direct sales consultant, and professional connector. He’s based in Las Vegas.

How did Travis become so successful? In part, it’s because he mastered two skills that have proven instrumental to his career: negotiating and growing his podcast. Together, those talents have helped make Travis an unstoppable force.

 

Becoming a Better Negotiator

Travis believes that you should work in direct sales for a year if you want to become an effective negotiator. That’s because the job teaches so many valuable lessons in emotional intelligence.

For one thing, this position requires you to talk to 20 to 50 people per day. Soon enough, you’ll learn to read crucial nonverbal cues like body language and tonality. You’ll come to understand that when people say something, they’re often concealing their true feelings. For instance, customers might withhold their real opinions because they’re trying to be nice.

Eventually, you’ll be able to recognize the exact moment when you’ve lost someone’s interest or you’re about to be rejected. Thus, you can immediately go off-script and adjust your sales pitch, regaining that person’s attention. You’ll also get accustomed to different personality types. As Travis puts it, there’s no substitute for talking to people.

Today, whenever Travis is working on a real estate deal, he feels completely comfortable hashing out the details with other stakeholders. He points out that many real estate professionals never feel comfortable in such situations, especially when it comes to discussing pricing.

Because Travis is always at ease sticking to his terms, he has a real advantage at the negotiating table. And he attributes that comfort to his days in sales. After all, reading books about negotiations can be a great help, but books can only tell you so much.

For that reason, Travis compares conversing with customers to doing exercise repetitions at a gym. Reading about sales and reading about fitness could give you a solid foundation of knowledge. But books won’t give you real-world business experience just as books in themselves won’t build your muscles.

 

Starting and Building Your Podcast

Travis believes that creating media content is the best way for real estate pros to distinguish themselves from their many competitors.

However, although this industry is intensely competitive, few real estate agents have any desire to start a podcast or YouTube channel. Travis feels that’s a huge oversight.

He frames the issue this way: Real estate depends on trust — the trust of buyers and sellers. Trust comes from relationships. Relationships require spending time together. And producing your own content lets you spend time with people on a large scale.

Even a smaller podcast might attract 1,000 listeners, many of whom will find the podcaster engaging and informative. Ultimately, some of them will feel comfortable enough to do business with that content creator.

Many real estate professionals say that a thought leadership platform won’t help their business much. But, according to Travis, that’s because they’re afraid of failure. They secretly wonder: Who am I to pose as a podcaster? This inhibition is called imposter syndrome.

On top of that, many real estate pros realize that thriving podcasts and YouTube channels require a great deal of work. They must be built from scratch. And many successful people want to avoid the feeling of being a beginner again.

Travis would advise you to ignore such concerns, choose a content outlet, and get going with it. Also, understand that it’ll probably take five to 10 years to cultivate an audience and make real money from that channel.

Moreover, keep in mind that people want to connect with podcasters. When they’re listening to a podcast, they’re usually not thinking about the host’s resume. They just want information and entertainment.

If you’re not confident in your hosting skills at first, your initial podcasts could all be interviews. Contact experts and ask them if they’ll share some of their secrets on your show. This format takes the pressure off the host.

Furthermore, interviews give you a great way to learn about industry topics you’re less familiar with. Indeed, you could approach each episode like an investigative reporter. For example, if you’re involved in commercial real estate, you could invite an accomplished commercial real estate investor. It’s amazing how much you could learn about commercial real estate investing in just an hour or so.

When he started podcasting, Travis didn’t know as much about networking as he would’ve liked. But having networking authorities on his show helped him fill in those knowledge gaps.

As an interviewer, every time you host a well-respected guest, your reputation will get a boost. More outstanding guests will want to come on, and each one will further improve your credibility. In fact, when Travis began his podcast, it was exclusively an interview show. But, over time, his listeners told him they wanted to hear more from him personally. As a result, he now does one show a week by himself.

 

No Time Like Right Now

Travis Chappell’s most important advice is to just get started.

If you want to be a great negotiator, get a job that forces you to talk to customers constantly.

If you want to be a content creator, ignore your insecurities, find interview subjects, and record episodes.

If you want to be a commercial real estate investor, find partners, scrape some money together, and make your first commercial real estate investing deal.

It’s true that experience is the best teacher. And, if you can learn its lessons, success will soon be headed your way.

 

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

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

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

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

 

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

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

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

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

 

Transitioning From Being a Passive Investor to an Active Investor

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

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

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

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

 

What to Look for in a Syndicator

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

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

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

 

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

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

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

 

Blogging and Real Estate Investment

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

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

 

Final Thoughts

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

 

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Small multifamily property

Pros and Cons of Investing in Smaller Multifamily Properties

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

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

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

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

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

 

Challenges Tyler Faces

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

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

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

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

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

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

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

 

Park Your Assumptions

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

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

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

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

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

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

 

Build a Rapport

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

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

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

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

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

 

Learn from the Experience

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

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

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

 

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Best Ever Advice from 11 Military Members on Memorial Day 2021

In honor of Memorial Day, we wanted to highlight military members interviewed on the podcast over the previous 12 months. Below is the Best Ever advice from 11 current and veteran military members:

 

JF2102: From Military to Millionaire with David Pere

“My best advice is get out there and take risks, but just make sure that whatever risk you take won’t break you. It doesn’t matter how many times you fail as long as you’re able to recover from that risk. And as long as you’re not going to get broken by whatever risks you’re taking, the pay-off will always end up being bigger in the long run.”

Click here to listen to David’s full episode.

 

JF2107: Brothers Working Together with Chris & Ashton Levarek

Ashton: “No one is smarter than all of us, so I really think my best ever advice is to really get out and network with the people that are down in the business you want to get into and learn as much from them, and then bring them in on your team. Try to build up that team of people you’re going to work with.”

Chris: “I think you’re only as strong as the people that you’re surrounded with. They’ll not only elevate you, but they’ll support you in your weaknesses. If you come into an area that you’re weak, or you hit a roadblock, it’s fine to get through that roadblock and that challenge, but how do you correct it in the future? You’ve got to create some kind of process or system that then in the future will either simplify that challenge or make sure that doesn’t occur at all. Then you’ll be able to get through to whatever goal you’re trying to achieve without hitting those same roadblocks every time.”

Click here to listen to Chris’s and Ashton’s full episode.

 

JF2155: Sales Skills to Improve Your Business with Bill Kurzeja

“We have two ears and one mouth; use them accordingly. What I have experienced and witnessed throughout my career is that they’re telling you exactly how to win them over. You just have to listen, and you have to hear, and then use that information and apply it back. So, if there was one thing that all of us could do better at, that’s listening.”

Click here to listen to Bill’s full episode.

 

JF2204: Investing While Overseas with Vincent Gethings

“Set goals based off of your potential and not your abilities. A lot of people have these limiting beliefs. They set goals off of what they think they can accomplish right now based off of their current experience, their current education levels, their current partnerships, or whatever they have. So, they set their goals extremely low. They use that SMART acronym, which I absolutely hate because the R in smart is realistic. I absolutely hate that, because you sell yourself so short.”

“So, I think the biggest thing is people sell themselves short because they want to set realistic goals for themselves. They do it based off of their ability and not their potential. So, a big example of that is the 10X rule. I read that and I was like, ‘Well, 20. Well, scratch that off and write 200,’ and that’s what was my goal, and I quickly went from 0 to 120 in a very short amount of time once I did that. So, absolutely set big, hairy, audacious goals, and then take massive action toward them. Don’t be realistic, because it doesn’t give you any room to grow.”

Click here to listen to Vincent’s full episode.

 

JF2208: Veteran to Founder with Seth Wilson

“Think big, but act small. So, think big on what they’re going to do, but make sure that you’re paying attention to the details.”

Click here to listen to Seth’s full episode.

 

JF2224: Note Investing Strategies with Jamie Bateman

“Focus on your strengths and think about how you can add value contributing to something bigger than yourself. Also, just do what you say you’re going to do. There are a lot of people that just don’t follow through and I think your word is really important.”

Click here to listen to Jamie’s full episode.

 

JF2264: Investor Agent with John Chin

“One investor client will change the trajectory of your future because of what they teach you, the access to resources, and how they shorten your learning curve. So, if you’re working with investors, you make friends, and one or two of those friends are going to become your mentor. So, just start working with investor clients. Don’t worry, everything else will take care of itself.”

Click here to listen to John’s full episode.

 

JF2299: Out-of-State Turnkey Properties with Axel Meierhoefer

“Look for the best-balanced deal. The best balance between people saying 1%, and what the property is really worth. The best balance for how much money you want to get in… But fundamentally, the best balance means you want to start now; don’t wait or let people tell you that you have to wait for a long time. Take the best balance that fits for you and start now.”

Click here to listen to Axel’s full episode.

 

JF2342: Military Couple Powers Through Real Estate with Lindsey Meringer & Amanda Schneider

Lindsey: “The people around you, both mentorship and community. And there’s that rule, the sum of five. We’ve surrounded ourselves with like-minded investors; there’s a couple of buddies that I have in special forces that are investors, and we do meetups and everything. And we’re just so driven every day by their social media posts, their text messages, everything. If we got down on ourselves a little bit or a little frustrated, we just look at our community around us and are immediately reinvigorated to go.”

Amanda: “Don’t be afraid of doing your first deal or doing additional deals, even if you don’t have money, because you can make it work. And that’s one thing that just this last year has taught us. We’ve found, we’ve also been able to borrow some money from our IRA creatively, and we’ve just found ways to make it work. If you find a deal and it’s amazing, you’ll find a way to make it work.”

Click here to listen to Lindsey’s and Amanda’s full episode.

 

JF2355: The Benefits of Hosting Real Estate Meetups with Megan Greathouse

“Use time to your advantage. The amount of time that you have to build with real estate is always helpful. So, for instance, a property that I bought four years ago, just by naturally taking care of it and increasing rents as tenants turned over is now worth almost 50% more than it was when I bought it, thanks to buying in kind of an up-and-coming area, taking care of it, and increasing rents. So, all of a sudden, even though cash flows were maybe early on $100 per door per month, and then $200 and then $300 — the cash flow has grown, but my value has also grown and I’m able to refinance and take cash back out and put that into other rentals. And it’s just amazing, the snowball effect that you have over time with real estate. It’s not ‘get rich quick,’ but it’s quicker than just throwing money in a savings account forever. And there’s a lot of power behind it. You make money in a lot of different ways. So, time is actually very helpful in real estate.”

Click here to listen to Megan’s full episode.

 

JF2362: Cherry-Picking the Deals with Gary Spencer-Smith

“Take steps and do it. Don’t sit and wait. Get some knowledge, which is free. You’ve got awesome podcasts that you can listen to. You don’t have to pay tens of thousands of dollars for the knowledge. Get the knowledge that you can for free, pay a little bit of money to get some more refined knowledge, and then go take action. That’s it. Action will teach you more than any mentor or coach.”

“The second tip would be to find a good mentor. You don’t have to pay for that. That would be someone that’s done it, successful, who is willing to let you take them for dinner, take them for a coffee, bounce some ideas. If you can get a good mentor, you’re going to jump leaps and bounds ahead of everything else, and listen to what they say.”

Click here to listen to Gary’s full episode.

 

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How to Achieve Financial Independence Through Passive Investing

How to Achieve Financial Independence Through Passive Investing

Passive investing is one of the best things you can do if you want to achieve financial independence and retire early (FIRE). In a podcast interview with an online blogger and radiologist, we looked at how passive investments helped him become financially stable following a horrible divorce. To protect his anonymity, we will refer to our guest as XRAYVSN.

 

He Lost Everything Before Rebuilding Again as a Passive Investor

Before his divorce, XRAYVSN was financially stable. He lost more than $1 million following the divorce, and his work as a radiologist was not enough to rebuild his nest egg. Commercial real estate and passive investments allowed him to regain the money he lost.

During his 2010 divorce, XRAYVSN spent $300,000 on just his legal counsel fees. By the time everything was done, his net worth was $800,000 in the red. At almost 40 years old, he was completely devastated. His life savings were gone, and he had nothing to look forward to.

Instead of giving up, he began deploying his income in intelligent ways. After a lot of research, he decided to use his earnings to generate passive income. Inspired by the White Coat Investor and Passive Income MD, he began investing in new income streams.

 

How He Achieved His FIRE Goals

Within the FIRE movement, there are different levels of independence. Lean FIRE is when you are able to cover your basic needs. Meanwhile, Fat FIRE is when you can take luxurious vacations and afford almost anything you want. At this point, XRAYVSN is between these two levels of financial independence.

There are a variety of ways that an accredited investor can make money, but XRAYVSN already had a day job. Because he spent so much time working as a physician, he did not want to get started with active investing. Soon, he began researching different real estate investments.

Unlike many FIRE fans, XRAYVSN already had some experience with real estate investing. Before the divorce happened, he had owned several condos. Unfortunately, managing the condos had taken up a significant portion of his time. He knew that he had no interest in becoming a landlord again.

Because of the way the Internal Revenue Service (IRS) taxes earned income, real estate investments were especially appealing. Real estate investments come with extra tax breaks. Each tax break saved XRAYVSN more money, which he could reinvest in real estate properties.

 

Real Estate Investment Trusts

He ultimately decided to use real estate investment trusts (REITs). If you do not want the hassle of being a landlord, a REIT is an excellent alternative. It is essentially a stock that is made up of real estate investments.

Basically, you start by investing your money in a REIT. Then, they invest your money in real estate properties. Each quarter, you are paid distributions based on the REIT’s earnings. While you get paid like a normal real estate investor, you do not have to do any of the work. Because REITs function like stocks, you can easily sell your shares if you need to.

Since REITs are essentially stocks, their value can fluctuate. If the stock market tanks, your investment can disappear along with it. As long as you do not plan on selling your shares in the near future, this is not a major issue.

 

Crowdfunding

RealtyShares and crowdfunding platforms allow normal investors to invest in major real estate properties. Before the Jumpstart Our Business Startups (JOBS) Act, wealthy households were the only people who could invest in certain properties. The JOBS Act made it possible for average investors to invest in these real estate properties.

With many crowdfunding platforms, you can get started with a minimum investment of just $5,000 to $10,000. These investments work by pooling funds from a variety of different investors. If you achieve a net worth of $1 million or more, then you can become an accredited investor. You can also achieve this status if you make $200,000 or more per year.

 

Securing a Syndicator

Accredited investing is designed for sophisticated investors. Once you achieve this status, the Securities and Exchange Commission (SEC) allows you to buy unregistered securities. The SEC assumes investors who reach the accredited level are sophisticated enough to understand the added risk that occurs when you buy unregistered securities.

XRAYVSN quickly attained accredited status, which meant he could get new opportunities through private syndicators. He reached out to these syndicators through their websites and arranged for interviews. Because of how they are designed, these investments typically require a lot more research than standard investments.

Private syndicators spend their time searching for investment ideas. When they find a good one, they send an email blast to their investors. Then, they will generally host a demonstration for investors. Most syndicators require a minimum investment of at least $50,000. These investments are also illiquid, so it is difficult to access your money after you have invested it.

Obviously, this means that you do not want to use these types of investments if you need your money right away. If you want to make a long-term investment, working with private syndicators is a good idea. People can also get started by learning about the program through Syndication School. Because there are good and bad syndicators, it is important to look for red flags before you start passive investing with them. If you are comfortable working with a certain kind of commercial real estate, you should find a private syndicator that works in that sector.

As you look at different syndicators, you should read reviews from people who have already invested with them. You should also look at their results. How do they compare to similar organizations?

Some syndicators like to inflate how much they earn, so watch out for this issue. If one apartment complex is twice as profitable as other complexes in the same area, you should be suspicious. The company needs to have a good explanation for why they are earning so much more money than everyone else. If they do not have a reasonable explanation, you should invest with someone else.

 

Forging Your Own Path to FIRE

In order to become financially independent, you need to look at your burn rate. This figure is the amount you end up spending on your lifestyle and living expenses each year. To retire early, you must be able to cover your burn rate each year. You need to make a passive income stream that can cover your burn rate. If passive investing brings in more money than your burn rate, then you can afford to live a more luxurious lifestyle.

Do not be discouraged if you cannot retire right away. Because of compound interest, your earnings will grow over time. In order to retire comfortably, you will need to save 25 times your annual expenses. This means that you will need $1.5 million in the bank if you need $60,000 a year.

XRAYVSN is working toward an even more conservative goal. Instead of pulling 4 percent out of his retirement savings each year, he plans on only using 3 to 3.5 percent. To achieve this goal, he is bringing in passive income through his blog, private syndicators, and commercial real estate.

As an accredited investor, he can access more investment types than the average investor. Despite his accredited status today, he originally started out with simple crowdfunding investments. Even if all you can do is start small, you can eventually work your way up to accredited investing and achieve your FIRE goals.

 

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JF2326: Highlights From 401(k)aos by Andy Tanner | Actively Passive Investing Show With Theo Hicks & Travis Watts

Investing in 401(k)aos: Highlights from Andy Tanner’s Book

The 401(k) retirement plan has taken its place alongside Mom and apple pie as a pillar of American wholesomeness. Most private-sector employees invest in a 401(k) where offered, and the public sector has its equivalent accounts. As workers, we learn that contributing to an employer-sponsored retirement account is the best way to fund retirement. Andy Tanner, in his book “401(k)aos”, questions this one-size-fits-all assumption. On this Actively Passive Investing Show podcast, we discuss Andy’s five main points and add our observations on the 401(k)’s potentially chaotic role in lives and markets.

1. 401(k) to the Rescue

To understand why the 401(k) is an agent of chaos, we need to look at its history. Invented in 1978 to help workers fund retirement, the 401(k) plan was meant to supplement other options such as IRAs, pensions, brokerage accounts, and personal savings. Ideally, the average American worker would draw from a diverse financial portfolio in later years. A financial strategy could include commercial investing and active investing in providing retirement income streams.

Fast forward to today, and many people rely on their 401(k) as their primary retirement strategy. They expect this account, along with social security and homeownership, to support them throughout retirement. In reality, most people won’t have nearly enough saved to cover their expenses. According to Andy, relying on the 401(k) has created a tragic and chaotic situation. He echoes the original architect Ted Benna in asserting that it was never intended as a primary retirement account.

Another aspect to consider is whether your financial goals are congruent with the 401(k)’s purpose. These plans build net worth, not provide cash flow. If you are involved in passive investing or commercial properties, you care about cash flow. Placing significant assets in a 401(k) may not be your best option, as withdrawing cash before retirement age could incur steep taxes.

2. The Peril of Mutual Funds

If you are an active investor, consider the lack of agency you have with a 401(k). These plans rely on mutual funds as investment vehicles. Further, they offer limited choices and stratify them according to risk. The conventional advice is that younger workers can tolerate more risk and should invest in riskier but potentially higher-yield funds. Older workers should invest more conservatively. Plans usually guide employees through a friendly online algorithm designed to help them allocate their contributions according to risk tolerance.

The issue here is with applying the same general investing strategy to all people. This approach also assumes that age primarily determines risk tolerance, irrespective of individual goals and circumstances. If you are an active investor, you know this view is shortsighted.

Andy flags historical mutual fund performance as a risk. Mutual funds generally track the stock market. If the S&P and Dow Jones indexes are down, your account probably is too. Reallocating a 401(k) is cumbersome and tied to specific time windows. You cannot react agilely to a volatile market, and you can’t plan to hedge losses.

The fundamental issue is that mutual funds are part of the Wall Street system and tied to its fortunes. Real estate and other assets can hedge against Wall Street, especially if they focus on people’s basic needs for goods, services, and housing. Retail shopping centers often survive market downturns. Other commercial properties, such as well-managed apartment complexes, usually thrive.

When you manage your own brokerage account, you can set a stop loss against sudden stock price drops. You can create other alerts that help you succeed with active investing. If your 401(k) nosedives, you wait for better days.

Retirement Fund Waiting Game

You may wonder if you need that flexibility in a long-term savings plan. After all, isn’t the 401(k) meant to be the ultimate vehicle for long-term passive investing? Don’t you want to let compounding and historical market trends work their magic? After all, many Americans lack the resources or knowledge to pursue commercial investing.

Let’s think back to the Great Recession. In many cases, the value of conventional retirement plans dropped by 50% or more. People lost half their retirement savings overnight. While the losses were unrealized, they quickly became real to the many people who needed to draw on the money within ten years. Employees approaching retirement did not have time to make up for the losses. Younger workers waited five years or more for their accounts to regain pre-recession value. If you were planning on borrowing against your 401(k) for an imminent home purchase, medical bills, or your children’s college expenses, you were out of luck.

If we look at the math behind the drops, the portfolio performance needed to recover is greater than the loss. If your account plummets by 50%, for example, you have to gain 100% to return to the initial value. In other words, you have to double your money to break even. This is an odd calculus for an investor, particularly when applied to mutual funds.

3. Feeding Wall Street

According to Andy, you should realize that the 401(k) was invented to enrich Wall Street. Though it may offer some advantages to individuals, its purpose is to promote mass participation in the stock market. Wall Street reaps fees and other profits from this vast investor base.

This doesn’t mean a 401(k) has no place in your financial strategy. Just keep in mind that the vehicle was not designed to benefit the individual. The tax situation illustrates this fact. If you want to withdraw from your account before retirement age, you face a stiff tax rate and penalties. To avoid this, you need to take a hands-off approach to that money or leverage the few exceptions, which still tax you at ordinary income rates.

Let’s take a mutual fund purchase as an example. If you buy a fund on your own through a broker, you can hold it for over a year and then sell at a long-term capital gains tax rate. This rate is 15% for most people. If you buy the same fund through your 401(k), hold for more than one year, and then cash out at retirement age, you may pay up to 37% in taxes on ordinary earned income.

Andy asks the question we should all ask ourselves: Do you plan on making more or less money in retirement than you do now? People’s answers vary depending on their goals. If you plan on making more, however, you are likely an investor. Does it make sense to take a 401(k) tax advantage now and pay much more tax later on that money in a higher income bracket? You may want to calculate scenarios in light of your investment strategy.

4. Abdicating Investing Responsibility

Andy points out an insidious side effect of mass reliance on the 401(k). If you trust your sponsored retirement vehicles to secure your future, you may forfeit owning your financial destiny. It becomes too easy to remain ignorant of basic investment and economic principles. Many people don’t learn financial literacy at home or in school. Without an incentive to learn fundamentals, they may pay excessive taxes because they don’t understand the system. Over decades of hard work, they may overlook opportunities and even risk life savings because they abdicated responsibility.

Structurally, the 401(k) reinforces dependence by offering limited investment choices. You typically have a small portfolio of mutual funds at various risk ratings, sometimes only one fund at each risk level. Your company may also offer a stock fund, but consider that you already invest in the firm by working there.

If you invest privately, you can choose from thousands of individual stocks, mutual funds, and other vehicles. You can complement real estate investments such as retail shopping centers or other commercial properties. Crucially, you can enter and exit investments as you need to.

5. Artificial Market Demand

Not only does the 401(k) affect individual financial habits, Andy describes its impact on the market. The millions of Americans regularly contributing to these plans create artificial demand for mutual funds, stocks, and the behemoth infrastructure that supports them. It is hard to cast the situation as a traditional bubble because retirement vehicles are funded so predictably and on a mass scale. We don’t yet know the consequences of this systemized influx.

The Takeaway

When viewed as an asset among several in your portfolio, the 401(k) offers some advantages. Often you can take out a loan against your vested balance. If your employer matches your contribution up to a certain percentage, you’re receiving free money. Before contributing above the match amount, consider weighing your particular situation’s pros and cons.

Andy’s key takeaway is that investing is a life skill we all need to own. You don’t need a degree in finance or a Wall Street job, but you want to understand tax code and market fundamentals. Know some history for context and be able to soundly evaluate your investment vehicle options. The better you can do this, the better you can invest in your financial future, not just Wall Street.

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Raising Real Estate Capital with Crowdfunding

When raising capital, real estate investors often graduate from personal contacts to complex partnerships or institutions. Another option to consider is crowdfunding. On this Best Ever Show podcast, real estate investor and CEO Chris Rawley explains the power of crowdfunding as a capital source and how to tell if it’s the right option for you.

About Chris Rawley

Chris Rawley has been a professional real estate investor for over 20 years. His portfolio includes single-family, multifamily, and commercial properties. He currently focuses on income-producing agriculture as an opportunity for passive investing. His platform, Harvest Returns, matches quality agriculture deals with investors to raise much-needed capital for U.S. farmers.

Why Crowdfunding?

If you’re doing real estate investing, the conventional funding path usually goes like this. You first use your own money and then approach friends, family, and business contacts for passive investing. When those sources run dry, you may turn to institutional funding or spend considerable time developing partnerships from scratch. Institutions have a high lending threshold and are suited for larger commercial properties such as retail shopping centers. They also come with significant oversight and conditions.

Many individuals engaged in commercial investing have quality deals that don’t meet institutional criteria. Crowdfunding provides a robust, flexible funding alternative. As the deal sponsor, you have access to suitable investors. You also gain legal and regulatory resources that would cost you considerable time and money to build on your own.

Advantages of Crowdfunding

Assembling a syndication deal involves adhering to complex financial regulations and drafting the requisite documents. If you do it yourself, you spend significant time and money on accounting, tax, and legal services. You need to understand the role of the various oversight agencies such as the SEC and hire the right experts. The beauty of crowdfunding is that the platforms handle much of this groundwork for you.

Each platform differs in the type and amount of guidance it provides. For example, Harvest Returns offers its sponsors the benefit of the legwork Chris initially did for his real estate ventures. His business spent considerable money to have securities attorneys put all legal and regulatory requirements in place. As a result, his platform’s listing sponsors benefit directly from this expertise and documentation. They still need to learn the legal environment, but they do not start from scratch and slow the deal.

Another major advantage of crowdfunding is the built-in pool of investors. You don’t have to find and vet your backers. You also have access to a more extensive and diverse group that you would likely discover independently. When the platform accepts your listing, you are guaranteed eyes on your project. You are not guaranteed quick results, but your deal will have the attention of the right audience. This alone is gold for commercial investing.

Crowdfunding may be right for you if:

  • You have exhausted non-institutional resources.
  • You have a successful track record.
  • You have a niche asset class, such as income-producing agriculture.
  • You have a partially funded deal that could benefit from additional investors.

Choose the Right Platform

Crowdfunding investment platforms took off around 2015 and today offer diverse opportunities for various real estate asset classes. You can find platforms tailored to single-family flips, wholesaling, and commercial projects such as retail shopping centers. You can also find options for specialized assets such as specific financial instruments or agriculture.

Chris advises beginning by defining the type of investor you are. Do you fix and flip houses? Do you wholesale apartment buildings? Are you targeting niche real estate markets such as sustainable development? You want to identify the crowdfunding platforms catering to your project niche and research each one to find the best fit.

Most platforms expect sponsors to list exclusively with them rather than attempt to raise funding on several sites. This requirement eases regulatory compliance, and you will likely sign an agreement with the platform you finally choose. A way to feel more comfortable about exclusivity is to speak with other sponsors who have succeeded on that platform. Most sites are happy to provide references. Chris suggests you be wary of any platform that won’t do so.

Your next step is to determine if you qualify for the platforms you’re interested in. They have listing criteria that syndication sponsors must meet. They also differ in the resources they offer, such as regulatory forms. Your best bet is to reach out to them and learn their guidelines and support for sponsors. Most have sales and marketing teams to provide information and perhaps speak with you about your particular situation. Established platforms have more stringent listing criteria, while smaller or newer players often have more flexible requirements.

For their part, investors are looking to mitigate risk. They examine each deal in light of questions such as:

  • Is this project viable?
  • What return can I expect?
  • Can this sponsor deliver results?
  • Can I safeguard capital gains or income?
  • What are the tax implications?

Chris stresses that many investors want to make personal connections and to believe that their capital helps the greater good. If you can demonstrate how your project will benefit the local community or causes such as sustainable farming, your support will grow.

As with any deal, investors look for strong fundamentals. Platforms differ in their due diligence procedures, but you always want to prepare a solid business case and be ready to speak to it.

Build Your Team and Track Record

Investors want to see that a sponsor has a successful track record. As Chris puts it, they don’t want to invest in a newbie’s mistakes. You are best off trying crowdfunding after you have done at least a few successful deals.

For investors, a sponsor’s experience is often the differentiator between two similar offerings. Even a short track record builds credibility. Before attempting crowdfunding, do one or two syndications on your own, either with personal contacts or an established partner.

A credible sponsor has a strong team as well as a track record as an active investor. Investors want to see that you have accounting and legal experts as well as any other business advisers appropriate for your asset class. This shows that you have some experience, are serious, and run your active investing as a business.

Present a Winning Deal

Many platforms conduct a thorough background check on potential sponsors before moving forward with them. They examine the deal’s structure and numbers to determine if it is a viable investment.

Each platform has requirements for putting your listing in front of investors. Your listing needs to differentiate itself from other concurrent offerings. At a minimum, it should include essential details about your project, such as location and asset type. Also, your platform may ask you to provide supplementary information for investors such as a business plan or pitch deck.

Once the raise is underway for your project, potential investors want a thorough understanding of the deal and expected return. Some platforms handle all of the interfacing for you and cater more to passive investing. Others treat the process more as active investing. You might host a webinar or answer questions in a formal round table for the active investor who wants a voice in your project.

Chris has found that people respond well to webinars, as they can interact with the sponsor and ask live questions. They can also meet the members of the sponsor’s team, such as the attorney or CPA. In Chris’s words, the process lends tangibility to the deal and builds trust.

Crowdfunding for Agriculture Investing

The food supply and related issues are hot topics today, and many investors are curious about agriculture opportunities. Crowdfunding is a good option because the platforms present you with curated projects appropriate for your goals. Chris’s platform structures agriculture deals similarly to the real estate deals he’s done for years. They have debt offerings from 7% to 12% and equity deals in the teens. They also offer opportunities in AgTech, which is the application of computer technology to farming. These offerings are higher risk but offer potentially greater returns as much as 40%.

Unlike most real estate, agricultural properties are unique. Each farm is distinctive and should be evaluated on its own merits. Indoor projects have gained momentum and include vertical and hydroponic farms. These options allow more locally grown produce and some refuge from climate and transportation infrastructure impacts. Successful investments enjoy a high rate of return.

Chris keeps the minimum investment in his projects as low as $5,000. This threshold allows more investors to participate and to diversify their portfolios. As for farmers interested in funding sources other than banks, Chris urges them to reach out to his team.

Crowdfunding for syndication is a relatively new and evolving space with numerous platforms catering to all asset classes. If you’re ready to move beyond personal capital, take a look at what it has to offer. Not only might you fund your next deal, but you might also find lucrative investment opportunities you never knew existed.

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5 Ways to Win the Apartment Bidding War

Whether you are new to apartment syndication investing or an active investor expanding your portfolio, you will compete for deals. Other bidders may have more experience or higher offers. How do you win the seller and the contract? Let’s look at five ways to make your offer stand out.

Keep in mind that even in competitive markets, sellers don’t always take the highest bid. Sellers differ in their motivations, and the five tips below will help you craft the best possible offer for the deal you are pursuing.

1. Offer Hard Earnest Money

Hard earnest money is a non-refundable deposit. It is a good-faith move that shows the seller you are serious enough to leave money on the table should something go wrong. It also signals that you can afford to buy the property.

In a typical deal, the earnest money is refundable. You provide a deposit as soon as possible after signing the contract, preferably within three days. The amount is often about 1% of the total price. If you purchase commercial properties for $500,000, you pay the seller $5,000. If you or the seller cancel the contract, you receive your money back.

A bolder move is to make the earnest money non-refundable. Even if the contract is canceled or falls through, the seller keeps the deposit. Sellers are rightfully concerned about buyers tying up the property in contract and then backing out or losing funding. The buyer may find a better opportunity or walk for financial reasons. Meanwhile, the seller has effectively taken the property off the market. Backup buyers may lose interest, and the market could shift by the time the seller relists.

You can view a non-refundable deposit as compensation for the risk the seller assumes by entering a contract with you. First, you want to decide when the money goes hard. The most straightforward option is to make the deposit non-refundable from day one. Sellers find this attractive as they can keep the money no matter what.

However, it may be in your best interest to tie non-refundable earnest money to a contingency clause or other stipulation. You could require that the funds harden at the end of the due diligence period. Alternatively, you could make a portion of the deposit immediately non-refundable and include the remainder after meeting a condition.

Include Contingencies

Even if you harden your earnest money from day one, you still want to include contingencies for events beyond your control. This approach protects you against deal-breaker concerns such as severely failed property inspections or title issues. It still covers the seller in case you back out due to funding or other reasons within your control. If a seller demands a no-contingency hard deposit, consider this a red flag.

2. Shorten the Due Diligence Window

Another way to woo the seller is to shorten the time to closing. If an active investor, you can often shrink the time needed to close from a boilerplate period to a realistic estimate. Advantages to the seller include faster closing and the assurance that you are serious about owning the property. Sellers often have stakeholders in passive investing and are motivated to provide a smooth transaction. Buyers keeping their options open do not press for fast closing. In turn, assuming you have your financing in place, you obtain your investment faster.

The most effective way to shorten closing is to compress the due diligence window, which is when buyers discover most issues. Be aware that the due diligence period protects your right to cancel the contract and reclaim your deposit should you find problems. The average window is 30 days. If you invest in retail shopping centers or other commercial properties, you may need that time or more.

After the due diligence window closes, you can’t cancel the contract or get your earnest money back. This applies even if you find a related problem. To protect yourself, be realistic about the scope of work. Determine the time you will need to conduct all activities, such as inspections and title verification. Build in some cushion for repeat inspections, inclement weather, or other factors that could slow progress. Then see if you can save a week or more without jeopardizing your interests.

3. Sign an Access Agreement

Typically, your property access for due diligence begins after you and the seller sign the purchase sale agreement. An access agreement gives you limited rights to begin property inspections early. Sellers like this option because it shows you are serious and potentially willing to shorten the closing time.

In an early access scenario, you sign an access agreement once the seller accepts your letter of intent and agrees to move forward with your offer. A contract negotiating period follows, which can be brief or extended depending on the deal. An access agreement lets you begin due diligence early by allowing limited property access for inspections.

If all goes well, you can complete at least some of your due diligence before signing the purchase sales agreement. You can even tie the formal due diligence period to the access agreement by starting the clock then. For example, your due diligence window could expire ten days after contract signing. However, you want to be confident of the property and the deal before you shorten your protection under contract.

4. Use the Seller’s Purchase Agreement

Once the seller has accepted your letter of intent, you begin contract negotiations. When active investing, you often provide your version of the purchase sales agreement prepared by your attorney. The seller compares yours with their contract version, and your teams hash out the details until reaching an agreement. The agreement becomes the final contract that all parties sign.

This negotiation process may be fast and smooth on a smaller residential property or with a seller you have previously worked with. If your focus is larger commercial investing, such as in retail shopping centers, finalizing a contract will likely be more complex and lengthy. Backers who are passive investing may not realize that contracts sometimes collapse due to non-financial discrepancies. During negotiations, you risk the deal falling through due to disagreements over legal language or similar matters.

You can mitigate risk by using the seller’s purchase sales agreement instead of drafting your own. Take their documents and have your attorney mark them up with proposed changes. Submit the revised contract to the seller for review. This way, the seller quickly sees which changes you present instead of comparing your version with theirs. The process makes it easier to negotiate specific terms under contention and validate those that are not. You and the seller can reach a final contract more quickly and with less chance of a legal stalemate.

5. Guarantee a Closing Date

A strategy often used in residential purchases is to guarantee closing by a specific date. Sellers frequently have personal contingencies that make a hard close date very alluring. Commercial investing is more impersonal, but timing the close still offers advantages in certain situations.

One scenario is to help the seller secure a tax advantage. If the deal is near year-end, the seller may prefer to close either in the current year or in January. Active investing requires considering the capital needs of any other investors as well as complex financial requirements for short and long horizons. Further, some sellers may have a fiscal cycle that differs from the calendar year. As a motivated buyer seeking a win-win, try to learn the seller’s timing preferences.

Sometimes non-financial events trigger a desire to close before or after a specific date. Major elections, local laws taking effect, and other situations may spur a seller to choose the buyer who can guarantee a closing window. Most often, the seller seeks an early close, but sometimes not. Be clear on which timing scenarios you are willing to accommodate before engaging with the seller on this point. If they ask for a 90-day close when you were expecting 60 days, will it work for you?

Target the Deal

In addition to a favorable price, which strategy should you include in your offer? The answer depends on the deal. Though the market for apartment investing is competitive, your job is to focus on this particular deal. It’s the one you want.

To help you plan your offer, try to learn:

  • About other offers on the table. If they all include non-refundable earnest money, you want to offer more.
  • The seller’s motivations. This will help you understand whether a committed buyer, quick close, highest price, or other terms matter most.
  • Other factors important to the seller. Are there tax considerations driving a desired close date? Did a previous buyer walk, leaving a skittish seller who would appreciate a non-refundable deposit and access agreement?

Keep in mind that you can combine strategies to craft a top offer. An access agreement facilitates a shortened due diligence period, for example. If other buyers are going with hard earnest money, perhaps you can meet an earlier date or raise the amount. With perseverance and flexibility, you can be the dream buyer sellers want.

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Joe Fairless