Business Development in Real Estate

Of course, finding and looking into new deals and investment leads is one way for you to expand your real estate horizons and develop a sustainable business. There are, however, other ways to scale up without sacrificing quality or your peace of mind. Having a thorough strategy for how you want to build and grow your organization will give you a competitive advantage and help you to make better decisions.

Intelligent Growth

Growing a real estate business is similar to any traditional business because there are critical factors that must be taken into consideration in order to be successful and avoid expensive mistakes. Some examples include learning which property valuation methods to use, which type of property to avoid, or how to expand or curate your target market. Here, I have compiled an extensive amount of information for you to use and learn from, in order to discover how business development in real estate works and tips for lucrative real estate investing. The more you know, the better you will be able to adapt to changing market needs. Whether you want to learn more about business development in real estate or start growing a real estate business, apply to work with me today to get started! Additionally, if you would like to find out why so many passive investors trust my business skills, apply here.
Investing in and Managing More Than $2 Billion in Real Estate with Alexander Radosevic

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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9/30—Scaling the Real Estate Ranks with Cory Boatright

Scaling the Real Estate Ranks with Cory Boatright

Cory Boatright is a successful real estate investor and investing coach who started his journey off the same way many other investors get started. To date, he has more than 1,000 property transactions tallied at more than $100 million under his belt. He also owns and operates 422 multifamily units through syndications. Boatright has a wealth of knowledge from his extensive hands-on experience. He spoke with Joe Fairless to share some of his valuable insights with others.

 

From Single-Family to Multifamily

Boatright, who lives in Oklahoma City, purchased his first single-family house 21 years ago. Over the years, he transitioned from bird-dogging to short sales and loss mitigation. For the last six years, he has worked extensively on wholesale activities. Today, he is focused on finding off-market multifamily properties with between 75 and 150 units that have value-add potential.

Boatright sees a gap in direct response marketing to identify potential sellers without the need to pay for a broker’s fee. Because his wholesaling business only takes up approximately 15 hours per week, Boatright has ample time available to directly market for apartment projects.

 

Time Optimization

He also spends time tracking his activities. By doing so, he trains himself to focus on things that move the needle forward in his life. This is a concept that he also teaches to his investing students. Essentially, he monitors activities over each hour and identifies those activities that were valued at $10 per hour versus $100, $1,000, and $10,000 per hour. By focusing on the things worth more and delegating low-value items to others, he is able to optimize how he spends his time.

One example of a high-value way to spend time is building a relationship that ultimately may pay off dramatically in the years ahead. Another example would be getting a small commission from lining up a deal and letting someone else handle the hard work on that deal.

 

Identifying an Ideal Target

When Cory Boatright reflects on his direct response marketing efforts, he talks about extracting data from ListSource to identify owners of apartment complexes with 10 or more units. Through his effort to date, he found that some owners were not aware of their vacancy rate, net operating income, and other critical factors that are tied to the successful and optimized operation of a multifamily investment property. Others have found themselves in over their heads because they failed to anticipate the amount of time and energy it takes to keep up with such a large property.

These and other factors are common in medium-sized apartment complexes in the Oklahoma City area, and Boatright sees the opportunity to target those owners through direct marketing. Often, after getting a phone call response from his direct marketing efforts, he asks the property owner to have coffee and discuss their pain points. This lays the foundation for a potentially lucrative wholesale deal.

 

A Personal Touch

Notably, Cory Boatright has been using direct response marketing with single-family homes for more than a decade. While he has found that postcards are a cost-effective way to reach those property owners, another approach is needed to reach apartment complex owners.

One approach that he has taken recently is to create a personalized letter and to send it out via a FedEx envelope. After all, everyone opens a FedEx envelope and looks at its contents. He looks for the best way to actually get in touch with an individual and to get them to take interest in what he is saying. He believes that spending a little more money to be successful in this area is a true value-add activity that yields incredible rewards through an executed deal.

 

Additional Resources

Cory Boatright has used a variety of methods to identify potential deals and to build a database of apartment property owners. When a real estate agent is used, the seller generally has to pay a five- or six-digit commission to the agent. When Boatright does the legwork himself, he saves the owner that money and potentially builds value into the deal from the first step.

In addition to ListSource, one of the methods that he uses to find the owners of commercial projects is CoStar. The cost to use this service is steep, so it is up to the investor to analyze the pros and cons. Boatright also uses skip-tracing, but it is most effective with marketing to single-family homes. He uses American Tracers, Delvepoint, and IDI to save time and energy in this area.

 

Persistence Is Key

On a broader scale, Cory Boatright states that one of his best pieces of advice to other investors is to be persistent with single-family properties. He believes that many investors give up too soon and may find value if they keep going.

For commercial real estate investments, he advises other investors to take things slowly. An entire apartment transaction boils down to finding success in that last week leading up to closing. There can be extensive delays, so being patient as you navigate through the delays can ultimately pay off on a grand scale.

 

Looking Ahead

Today, Cory Boatright identifies distressed apartment complexes. He specifically focuses on the Oklahoma City area because he is familiar with that market and has a detailed list of property owners in the area. Once he purchases an apartment complex and turns the property around, he sells it for a sizable profit. These are often through syndications.

To be successful in his wholesaling activities, he has to ensure that he has all of the facts upfront. Missing out on a key piece of information upfront may ultimately cost tens of thousands of dollars or more down the road.

Looking forward, Cory Boatright strives to focus on being grateful. This concept reminds him that his worst day could be someone else’s best day. It also keeps him centered so that he can identify the things that are most important and meaningful in life despite the highs and lows.

 

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From Getting Started in College to Running a Successful Real Estate Investment Company

From Getting Started in College to Running a Successful Real Estate Investment Company

College is a time for classes, internships, friends, and parties. For Prady Tewarie, it was also a time for launching a commercial real estate business. That’s right: He became a buy-and-hold investor while still an undergraduate.

Today, Prady’s based in Boston, and his real estate investment company specializes in converting condos. And he currently has more than $100 million in assets.

What’s behind Prady’s astonishing success? His intelligence, creativity, and business aptitude account for a great deal of it. For example, he recently bought a property in East Boston with two condos, and he turned those two spaces into four luxury condos. In essence, he purchased two condos for free.

Then there’s Prady’s willingness to work really hard. As a college and law student, he often spent more than 100 hours per week on his coursework and fledgling firm. He’s remained a prodigious worker to this day.

Beyond those attributes, three other qualities have played an outsized role in getting Prady to where he is now.

 

1. An Eagerness to Evolve

Over the years, Prady’s career has continually progressed. In college, he bought and sold small businesses that were struggling: cafes, barbershops, and so on.

Later, Prady started purchasing multifamily properties. He rented many of those units to Boston-area college students.

A major step forward came when Prady started developing his own properties. He was craving a new professional challenge, and one of his brokers suggested apartment development.

Becoming a project developer definitely changed Prady’s life. He had to learn multitudes of new skills. He had to be a hands-on leader, and he needed to be present at construction sites for many hours a day. He had to set up his own complex systems and stay exceptionally organized at all times.

Prady also had to take some serious risks. Development projects can be extremely expensive, and they generate no cash flow until they’re finished.

 

2. The Ability to Build a Team

Teams of experts have been instrumental to Prady’s success. In fact, he assembled his first such group when he was still in college.

Soon after getting started in business, Prady realized he could only do so much himself. Even more challenging, his real estate knowledge was scant at best.

Prady understood that, without contractors, brokers, and others to assist his projects, it would take him a long time to learn everything he needed to know.

Thus, with some humility, Prady approached various professionals. He told them about his new real estate investment company, and he freely admitted his lack of knowledge.

The alternative to seeking help was to feel underskilled and overwhelmed. In that case, he might have abandoned his entrepreneurship dreams at a young age.

Prady says that many budding business people don’t even try to contact experts in their field, believing there’s no chance they’ll get a response. Naturally, some people won’t ever respond. But Prady has found that many pros are willing to give advice to newcomers.

Some of those experts may eventually want to collaborate with you. However, you should do a few things to forge that kind of partnership:

  • Express your love and enthusiasm for your industry.
  • Build those relationships slowly, putting care and effort into them. Over time, bonds can form.
  • Have an enticing incentive structure in place.

Because Prady was so persuasive, he assembled a team of real estate authorities relatively quickly. And he was able to leverage their expertise to dramatically scale up his business.

In addition, whenever Prady wants to add someone new to his team, he looks to his existing team members to find that person. That is, if he wanted to hire an architect, he wouldn’t just go out and recruit one. Instead, he’d ask his employees to recommend architects they know personally.

That way, everyone on the team is connected to each other. There’s a greater sense of loyalty within the group, and Prady can feel confident in his hiring choices. After all, if someone ever failed to deliver, the employee who recommended that person would, as Prady puts it, “feel the heat.”

That level of trust and camaraderie is vital. Indeed, Prady relies on his team before a project even begins. Whenever he goes to an open house, he brings along several of his experts so that they can all evaluate the property together. That input leads to much more lucrative purchasing decisions.

 

3. The Personal Touch

Throughout his career, Prady’s people skills have provided him with major advantages as well.

For example, when Prady was renting multifamily units to Boston-area college students, he added high-tech elements like iPads and automated systems to those residences. By contrast, his competitors focused on upgrading the look of their apartments: installing new countertops, flooring, and so forth. But, since most students were more interested in technology, Prady could significantly raise his rents.

Nowadays, when Prady passes by properties that appeal to him, he’ll often stop and chat with the owner. He’ll also state that he’d be interested in buying the place should it ever go up for sale.

Furthermore, Prady offers to assist property owners in making those sales. For instance, he might pay their brokers’ fees, help them move their belongings, or supply them with legal counsel. Once again, this human touch can pay considerable dividends.

In the end, Prady’s overarching philosophy is simple. While skills and knowledge are valuable, the most important thing in commercial real estate — and every other business — is taking action. Those who take action are those who win. And Prady Tewarie will surely be taking bold, decisive actions for a long time to come.

 

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High-Performance Real Estate Investing With Nonperforming Notes

High-Performance Real Estate Investing With Nonperforming Notes

Great entrepreneurs often share a special talent: They can turn bad situations into good ones. They can earn profits from seemingly unprofitable properties and take opportunities that might scare many other businesspeople away.

Paige Panzarello epitomizes this ability to spin straw into gold. As a Simi Valley-based entrepreneur and investor, Paige is responsible for real estate transactions totaling more than $150 million.

What’s particularly fascinating is that much of Paige’s income now comes from nonperforming notes — in essence, loans that are going unpaid.

Paige’s story provides valuable lessons, especially in terms of the personal attributes that are crucial to professional success.

 

1. Boldness

About 20 years ago, Paige started out in real estate. She inherited a number of properties in California and Arizona when her grandmother passed away, and she decided to turn that bequest into a business. Paige began by overseeing 38 residential units in Arizona townhomes.

In itself, the decision to manage those properties rather than sell them was bold. A high percentage of their units were unoccupied. Taken together, the properties were $4 million in debt. On top of that, Paige knew nothing about the real estate industry at that time.

Paige was unrelenting, however. She gathered real estate experts around her, and she learned new things all the time. It helped that she was in the habit of asking questions constantly.

In time, Paige compiled her own real estate investment portfolio, which included a sewer treatment plant that her grandmother had left to her mother. She increased that plant’s output, so to speak, before selling it to the local government.

Moreover, Paige didn’t stop at real estate. She also created a construction company with 36 employees. And, when she founded this business, she didn’t know anything about construction. But she soon mastered that field as well.

Paige’s construction firm handled its own projects along with those of other companies. Most of them were located in Arizona, and some were in California.

 

2. Integrity

Integrity is vital to Paige. For example, after the economic crash of 2008, she sold many of her assets to stay afloat rather than declare bankruptcy. All told, she lost about $20 million in cash, but she managed to pay back everyone she owed. As a result, she now views that painful chapter in her life as a learning experience.

For a while after the crash, Paige avoided real estate investments altogether. Instead, she founded small businesses in other fields. One was a teeth-whitening business, a company she still owns.

However, those smaller companies never provided the personal fulfillment that real estate investing did. And they certainly didn’t provide the cash flow. Paige realized that she couldn’t stay away from her true calling, and she returned to the profession she loves.

 

3. Tenacity

Unfortunately, by this point, Paige had sold off every real estate asset she once owned. She had to start again from scratch.

Instead of looking back with regret, though, Paige focused entirely on the future. She rebuilt her real estate brand quickly and forcefully. She became active in wholesaling, tax liens, and tax deeds. She fixed up and flipped properties, too.

Most important of all, Paige started learning about real estate notes, which changed the course of her career.

 

4. Finding Positive Opportunities in Negative Situations

Earning money from a nonperforming note is a terrific example of turning a liability into an asset.

Basically, a note is a legal document through which a borrower promises to pay back a lender. Of course, for various reasons, borrowers sometimes fail to make those agreed-upon payments. In such a case, an investor might purchase the note from the lender.

As a result, the lending institution gets some or most of its money back and no longer has to worry about missed payments. And the buyer will try to make money from the note.

Investors can acquire nonperforming notes at steep discounts. At one time, Paige was able to buy them for 40 to 55 percent of their value. The price now tends to range from 55 to 62 percent, which is still a significant bargain.

Asset managers bring these notes to Paige’s attention. She and her team sometimes buy bundles of notes, which are called tapes. Other times, they’ll sift through tapes to find the most promising notes.

While there’s some competition in the note-purchasing space, buyers can be surprisingly collaborative. They’ll often bring each other leads, for instance, or find ways to divide up tapes among themselves.

Furthermore, note investors occasionally combine their money to purchase tapes together. They then split the monthly payments. This strategy can be ideal for closing deals whenever tapes are massive and expensive.

But how does Paige actually make money from nonperforming notes? Well, once purchased, such a note goes to her loss mitigation team.

Those professionals will rely on one of 23 methods to make money from the note, techniques they call exit strategies. In most cases, they’ll employ one of these four exit strategies:

  • Foreclosing, which is Paige’s least favorite option.
  • Arranging a short sale, which means selling the property for less money than is still owed.
  • Seizing the property’s deed as payment for the loan.
  • Collaborating with the borrower to help that person pay the mortgage once again. This choice happens to be Paige’s favorite.

Before Paige buys any nonperforming note, she and her colleagues will carefully study the situation to determine the optimal exit strategy.

 

Don’t Be Afraid to Fail

Summing up, Paige Panzarello believes two attributes are most responsible for her professional accomplishments: her due diligence and her unwillingness to fear failure. And, along the way, she’s been able to aid many borrowers in paying their mortgages. It’s a great example of a successful person helping others turn difficult situations around.

 

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

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

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

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

 

Consider Various Costs

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

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

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

 

Determine Value

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

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

 

Diversify

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

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

 

Remain Diligent and Disciplined

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

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

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

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

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

 

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How Mini Masterminds Set Investors Up for Success

How Mini Masterminds Set Investors Up for Success

In some of our previous blog posts about the Best Ever Conference, we’ve mentioned something called Mini Masterminds. These educational small-group sessions are a favorite among Best Ever Conference attendees, but how much do you actually know about them? Here, we’ve compiled everything you need to know about the Mini Masterminds experience and how it may be the key to reaching your business goals.

 

What Are Mini Masterminds?

Every year The Best Ever Conference welcomes the best-in-class real estate professionals who are looking to make an impact on their business. BEC2022 attendees have the exclusive opportunity to join our Mini Mastermind program once they register for the conference. These sessions are made up of small groups with 6–8 peers who meet virtually to connect prior to the conference. 

In these sessions, attendees will begin to learn from one another, share best practices, and continue to build relationships in an intimate setting. The groups meet monthly to discuss various real estate topics such as:

  • Business goals
  • Identifying opportunities
  • Marketing to the right audience
  • Networking and building connections
  • Preferred asset types
  • Strengths and weaknesses
  • Vulnerabilities and risk mitigation 

 

Who You’ll Meet

Mini Mastermind members enjoy the immediate benefit of networking with other BEC attendees, generating ideas to build their businesses, and receiving feedback and support. The sessions provide the rare opportunity to connect with other professionals in a way that fosters education and growth. What do you want to learn? Who do you want to meet? It’s a group that you will continue to grow with leading up to the conference.

Below are testimonials from just a few Mini Masterminds participants:

 

Andrea Weule of AC Investment Group

Andrea said, “I love being able to meet with a group of investors with different backgrounds from across the country. I’ve gained new insight into our investments. It’s great to be able to contribute to others’ success and pick their brains for ideas as well. Looking forward to continuing our relationships for years to come.”

Frank Rush of East West Property Management 

After completing his first meetup, Frank said,It seemed like a diverse group of entrepreneurs, and I am excited about the upcoming sessions and to eventually meet in person at the conference. I am sure there will be some great benefits that come from it all with the possibility of working directly with a member of the group on a future deal in some shape or form!”

 

Kris Kohlstedt

“The Mastermind has been a great networking tool allowing me to build deeper relationships than what I’d get in person in one meeting,” Kris said of his experience. “I get to ask questions and share in a group that I feel can provide great experience and knowledge to my obstacles in business.”

 

How You Can Get Involved

The Mini Mastermind program is included with the purchase of each BEC2022 ticket, and once you sign up, you will have the opportunity to start connecting with other attendees immediately. 

Participants who sign up now will have the opportunity to begin connecting early in the year and to continue to build these relationships well before finally meeting in person at the conference. The BEC team will coordinate your Mini Mastermind group with you and send out the invitation details.

Purchase your ticket to the Best Ever Conference today to see for yourself what you can gain from Mini Masterminds.

 

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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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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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Boost Your Investment Growth in 2022 With the Best Ever Conference

Boost Your Investment Growth in 2022 With the Best Ever Conference

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

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

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

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

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

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

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

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

To purchase your ticket today, visit besteverconference.com.

 

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

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

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

 

About Rock Thomas

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

 

Start in real estate without purchasing property.

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

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

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

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

To succeed, you want to mind these steps:

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

 

Get owners on board.

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

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

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

 

Do your homework.

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

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

 

Know your data.

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

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

 

Partner with experience.

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

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

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

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

 

Mind your headspace.

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

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

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

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

 

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The Three Pillars of a Deferred Sales Trust Marketing Campaign

In a previous blog, I explained what the Deferred Sales Trust™ is and how it works. But how do you unlock the power of the Deferred Sales Trust to unlock capital from new sources and from existing ones? In this blog, I’ll explain the three pillars of creating a Deferred Sales Trust marketing campaign and how this tactic will inform your current investors about your strategy and attract a sea of new accredited investors.

 

What kind of investor will a Deferred Sales Trust marketing campaign attract?

A Deferred Sales Trust marketing outreach campaign will allow you to attract ultra-high net worth investors from a diverse set of investments. By ultra-high net worth investors, I’m referring to those who have estate tax challenges (net worth above certain limits). For example, a recent ultra-high net worth Deferred Sales Trust client of Capital Gains Tax Solutions who has a net worth of $25M was selling a multifamily property in Colorado. They felt stuck since they had next to zero basis, $1.8M in capital gains tax liability, did not want 1031 and overpay for a property and they were facing a 40% estate tax if they just kept 1031 exchanging. They decided not to sell, that is, until they learned about the Deferred Sales Trust because it solved problems for them and moved them one step closer to their ideal wealth and estate plan.

By a diverse set of investments, I’m referring to those who own other asset types, other than real estate; such as cryptocurrency, businesses, artwork, collectibles, and public stock all of which are not 1031 eligible. Yes, all kinds of asset types, not just real estate. Also the ultra-high net worth investor.

Since a Deferred Sales Trust marketing plan focus allows you to attract the ultra-high net worth investor from a diverse set of investments, you will increase the amount of money you can raise and open up a blue ocean opportunity. The more investments you raise from ultra-high net worth investors the bigger deals you can do. A Deferred Sales Trust marketing campaign is a key to scaling, raising capital for your syndication business, and serving your current investors who want to sell the other assets they own and invest with you.

 

The three pillars of a Deferred Sales Trust marketing campaign.

Now that you know the benefits of the Deferred Sales Trust marketing campaign, what are the best practices to create and grow one? I find that there are three pillars to a Deferred Sales Trust marketing campaign.

 

  1. Attract the ultra-high net worth investor from a diverse set of investments.

To attract the ultra-high net worth investor from a diverse set of investments you have to identify the problem, ask them to clarify their ideal outcome, and deliver a proposal to solve their problem while helping them unlock their ideal outcome. Be specific here. What assets of all kinds do they own now? What is their capital gains tax if they sold? Why haven’t they sold? What would cash flow mean to them? What would diversification mean? How much more impact will they have on their family and causes they believe in by moving funds outside of their taxable estate?

Step one is to attract ultra-high net worth investors from a diverse set of investments. Pro tip: start with your existing investor base and then branch out to new investors.

The second part is capturing their interest in the Deferred Sales Trust. Create a landing page with a free e-book and title it, “Eliminate the 1031 exchange forever: how to defer capital gains tax of any kind and invest passively with NAME OF YOUR COMPANY.”

 

  1. Host live hands-on workshops to educate on the Deferred Sales Trust. 

Once someone has shown interest, you need to help them take the next step by walking them through step by step how this works.

The more clarity and deal stories you provide through Deferred Sales Trust content, the more they will see the benefits and be attracted to use the DST.

 

  1. Scale your business.

After attracting the ultra-high net worth investor and delivering the Deferred Sales Trust and your CRE investment opportunity to help them reach their ideal wealth plan, the investors’ confidence in you will grow and they will invest in your deal with you. But this isn’t the end of the strategy. As you convert more and more of your existing clients using the Deferred Sales Trust, referrals will come and a new blue ocean of investors will come.

To benefit the most from a Deferred Sales Trust marketing campaign, you need to capture their story and then share their story. My favorite is via a video/podcast which I post on Youtube, Itunes, and Spotify to name a few.

 

Would the Deferred Sales Trust marketing campaign work for my business?

Overall, a Deferred Sales Trust marketing campaign is a great way to efficiently scale raising capital for your syndication business. The strategy is to attract ultra-high net worth investors with a lead magnet and develop the relationship through providing a solution to their capital gains tax problem which helps them take one step closer to their ideal wealth plan. Then, as existing investors are converted to Deferred Sales Trust investors, capture their story on a video/podcast to scale even more.

 

About the Author:

Brett Swarts is considered one of the most well-rounded Capital Gains Tax Deferral experts and informative speakers in the nation. His audiences are challenged to create and develop a tax-deferred transformational exit wealth plan using The Deferred Sales Trust™ (“DST”)  so they can create and preserve more wealth. Brett is the Founder of Capital Gains Tax Solutions and host of the Capital Gains Tax Solutions podcast. Each year, he equips hundreds of high net worth business professionals with the DST tool to help their high net worth clients solve capital gains tax deferral limitations.

 

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How to Scale Raising Capital For Your Syndication Business Using The Deferred Sales Trust™ (DST)      

A Deferred Sales Trust offers a unique way to unlock capital from accredited investors who are selling highly appreciated assets of any kind. Armed with this information and insight you can position your business as a solution for your current investors and attract future investors like never before.

 

Why use the Deferred Sales Trust™ (DST)?

A Deferred Sales Trust marketing campaign unlocks many different ways to raise capital.

Examples of this include:

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

 

What is a Deferred Sales Trust?

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

In simple words, if you sell an asset for $10 million using an installment sale contract, and finance the sale, you as the seller may not have received full constructive receipt of the cash. You have become the lender. You do not pay tax on what you have not received if you follow IRC §453 since it allows you to pay tax as you receive payments. The buyer you lent money to will typically pay an agreed-upon amount of down payment to you upfront (you would pay tax on this) and then pay the rest of the purchase price to you plus interest in installments over a specific term of time. The deferral takes place as you wait to receive payment, which is typically 3-5 years.

According to the Oklahoma Bar Association, IRC §453 was designed to “eliminate the hardship of immediately paying the tax due on a transaction since the sale did not produce immediate cash. Furthermore, if the purchaser defaulted on the installment note, the seller may have paid tax on money he never actually received.”

 

How a Deferred Sales Trust can help you scale your syndication business.

The reason why a Deferred Sales Trust marketing campaign allows you to scale your syndication business is that it rapidly increases the money-raising process. Without a Deferred Sales Trust, you need to manually raise capital from family, friends, and others in your circle of influence, one person at a time after they sell their highly appreciated asset and after they have paid the capital gains tax which can be 30-50% of their gain. When the pain of paying the tax outweighs selling and investing with you, many elect not to sell and therefore not invest those funds with you. To raise the capital you need to solve the problem your investor is facing.

Capital Gains Tax Solutions Case Study 1: Saving a failed 1031 exchange. Dave’s story.

Steps to Dave using the Deferred Sales Trust:

  1. Sold 128 unit apartment complex for $7.6M.
  2. Funds sent to 1031 Qualified Intermediary.
  3. 1031 failed and funds sent to Deferred Sales Trust (DST) Bank Account including deferral of $1.1M of capital gains tax.
  4. Some of the funds sent to an apartment syndication fund and to an individual apartment syndication deal.

 

Have you done a survey of your existing investors to ask them where their capital is? Here are two questions to ask your existing investors right now:

1) Do you have highly appreciated assets of any kind you would like to sell, defer the tax, and invest the funds into real estate all tax-deferred?

2) What would converting your highly appreciated asset, which may not be producing cash flow of any kind, to cash flow from passive real estate mean to you?

I believe you are more likely to stay top of mind and unlock capital when you can help your investors by providing valuable solutions to their capital gains tax.

 

Capital Gains Tax Solutions Case Study 2: Selling a business and building 70+ multifamily units in Tennessee. Shea’s story.

Steps to Shea Using The Deferred Sales Trust:

  1. Shea sold his marketing business for $2.6M. (It did not qualify for a 1031 exchange)
  2. Funds sent to Deferred Sales Trust (DST) Bank Account including an extra $600,000 of capital gains tax-deferred.
  3. Some of the funds invested into active new contraction of 70 units in Tennessee which he is building with his partner.

 

About the Author:

Brett Swarts is considered one of the most well-rounded Capital Gains Tax Deferral experts and informative speakers in the nation. His audiences are challenged to create and develop a tax-deferred transformational exit wealth plan using The Deferred Sales Trust™ (“DST”)  so they can create and preserve more wealth. Brett is the Founder of Capital Gains Tax Solutions and host of the Capital Gains Tax Solutions podcast. Each year, he equips hundreds of high net worth business professionals with the DST tool to help their high net worth clients solve capital gains tax deferral limitations.

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Six Characteristics of a Great Leader

Six Characteristics of a Great Leader

When you see the word “leader” what pops into your mind? The President? The CEO of a billion-dollar company? The head coach of a championship sports team? A military general?

Most people have a similar concept of what and who a leader is. Determining the similar characteristics between this archetype can help us as commercial real estate investors build wealth, build a legacy, and do more good in the world.

Brandon Turner of BiggerPockets was one of the featured speakers at BEC2021. In his presentation, he provided the top six characteristics of a great leader, as well as how to become a better leader in your commercial real estate investing business.

 

A Great Leader is a Quitter.

“Find a way to quit your job as soon as possible by paying an expert to do it.”

There is a reason that all successful companies have countless Executives, Presidents, VPs, Directors, Associates, Analysts, etc. under the leadership of one CEO. It’s because great leaders work on their business, not in the business. And running a commercial real estate company is no different.

Sure, when you are first starting out, it might be just you and a business partner performing all the job functions. But a great leader hires expert team members to focus on the day-to-day tasks while they focus on the overall direction of the company. Or in the words of Brandon, “Your job is to be a general”. As a general, you lead the expert soldiers under your command into battle.

A Great Leader is a Cutter.

“Only focus on the one or two things you need to be doing.”

Any job function in a commercial real estate business can be broken down into a “dollar-per-hour” task. Every hour of work on said task results in X amount of dollars of revenue for the business.  Once you have hired expert team members to perform the lower dollar-per-hour activities, it frees up your time to focus on the higher dollar-per-hour activities. In fact, a great leader will focus on one or two activities with the highest dollar-per-hour output.

For example, a great leader will focus on creating multi-year goals for how to scale their commercial real estate company. Then, they may formulate an overall strategic plan for accomplishing these goals. But rather than acting on the strategic plan themselves, they assign the implementation of the strategic plan to an expert team member.

A Great Leader is a Caster.

“Write down the vision for where you want your company to go.”

One of the things Spartan Investment Group attributed to their ability to be named one of the nation’s fastest-growing companies by Inc. Magazine was their culture. A commercial real estate company’s vision is the cornerstone of its culture.

A vision is an image of where the company wants to see itself in the future. It will involve what success looks like to you, your team members, and your customers, as well as the behaviors you will need in your company to realize your definition of success. As a leader, you are responsible for casting a vision that is inspiring to your team members and customers, and you must ensure that you and your team members are living out the vision each day.

A Great Leader is a Coach.

“Ask the right questions to improve the performance of your team.”

In sports, when a team performs badly, the head coach is usually the first person to get fired and replaced. On the other hand, the greatest coaches win games and championships year-after-year, decade-after-decade, even though the team consistently changes. College sports is the perfect example with complete turnover every four years. That is because the coach is one of the keys to success. One aspect of great coaching (and great leadership) is the ability to get the most out of a team.

As a commercial real estate investor, a great way to maximize the performance of your team is to conduct frequent performance reviews – ideally once a quarter. A best practice is to ask each team member to analyze their own performance – what they did well, what projects they are proud of, and what they can improve upon. You should provide them with similar feedback – here’s what you did well and here’s what you can improve on. Then, come up with goals or tasks for how to improve their performance over the next quarter based on the combination of your and their feedback.

A Great Leader is a Scout.

“Find and attract top talent.”

Continuing with the sports analogy: Did you know that the University of Alabama’s football team spent 12.3%, or $2.6 million, of their budget on recruiting in 2019? Strong leadership is just one ingredient to success. The other is the ability to find and attract top talent.

Attracting and finding top talent presumes you know what “top talent” is. According to Real Estate InvestHER founder Liz Faircloth, the two biggest mistakes commercial real estate investors make when building a team are a lack of alignment and a lack of diversity. Top talent must align with your culture (mission, vision, and values) because when they don’t, they tend to get fired or quit, which wastes your company’s time and resources. Top talent also has diverse personalities and skillsets. Another important aspect of top talent is their character. Most skills and competencies can be taught, but character cannot. They are either a good person or they are not. Also, top talent has been successful because of skill, not luck, and a deep dive into their track record is required to determine which is the case.

The most important thing to know about attracting top talent is to make sure you are living out your culture. Don’t say one thing and do another, because top talent who were attracted to your company will quickly quit when they realize you say one thing but do another.

A Great Leader is a Student.

“Recognize you don’t know what you are doing and that you need to continually grow.”

Some interesting statistics: Tony Robbins read 700 books in seven years. Warren Buffet spends five to six hours reading daily. Bill Gates reads 50 books a year. Mark Cuban reads for three hours daily. Why are the world’s richest people reading so much? Because great leaders are continually growing.

Another great way to grow as a commercial real estate investor, in addition to reading, is to ask for feedback. However, due to the “success paradox,” the more success you achieve, the less feedback you will receive from others, which may stunt your growth. Therefore, a tactic to overcome this success paradox is to ask for anonymous feedback from your team using a Google Form. Also, find a few people in your circle of influence (the best would be a spouse or significant other) and ask for candid feedback.

What Makes a Great Leader?

A great leader focuses on the most important tasks and outsources the rest to expert team members.

A great leader casts an inspiring vision for themselves, their team, and their customers.

A great leader helps their team constantly improve and attracts the best of the best.

A great leader is also constantly improving themselves by being a student of their industry and of life.

 

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6 Things You Must Know When Scaling from Residential to Commercial Investments

6 Things You Must Know When Scaling from Residential to Commercial Investments

Few investors are content with their current portfolio – most want to scale and add more units. This is especially true for residential investors looking to make the leap to commercial apartments. However, there are pitfalls that could derail your goals if you are unaware of the landscape. Many investors begin with residential multifamily (two to four units) with plans to move up to commercial multifamily (five or more units). It’s kind of like trading in those green houses in Monopoly for the red hotel. But unlike the popular board game, it’s not as simple as collecting more rent. There are key differences that investors should be aware of when making the leap from residential to commercial multifamily apartments.

Scaling from residential to multifamily entails managing a different caliber of challenges. Recognizing the key differences allows you to prepare and position yourself accordingly when pursuing larger opportunities. It also allows you to avoid key mistakes when scaling into commercial apartments. Here is a list of differences to note and mistakes to avoid.

1. Predictability

One of the main differences between residential and commercial apartments is the scale. Residential properties are two to four units, while commercial is five units and above. However, the number of units only tells part of the story. The more units you have, the easier it is to anticipate and forecast monthly income and expenses. If you have a two-unit property, you are either 100% occupied, 50% occupied, or 0% occupied. And one major expense can wipe out all the cash flow for a year.

Conversely, if you have a 100-unit property, one resident moving out does not drastically change your occupancy, operations, or projections. In fact, you are anticipating a certain amount of turnover each month for a net occupancy in the 90-95% range. This predictability allows you to make better financial projections, thus reducing the risk of the unknown. With that noted, you want to make sure you accurately forecast expenses because an extra $50 per unit, per month in expenses quickly adds up.

2. Sophistication

In residential real estate, it is common to come across an owner who is motivated to sell due to a lifestyle change, inheritance, or financial distress. You may also come across an inexperienced real estate agent that underpriced or overpriced a deal. And while this is possible in commercial multifamily, don’t get your hopes up.

For starters, factor in that commercial property owners have been successful enough to actually own a commercial property. These properties require more experience and capital than residential properties. Also note that these properties have less volatility than residential, and multifamily has appreciated drastically over the last 10 years, with the price per door shooting up 156% according to a study by Commercial Search.

Consequently, you are less likely to encounter a desperate, motivated seller in the commercial multifamily space. In a seller’s market, owners are actually interviewing you to see if you are worthy of their time. A colleague of mine learned this the hard way when an owner sent her a list of questions to answer before they would even let her tour a building. You’ll need to establish credibility with brokers, owners, and other industry professionals if you want to gain traction with commercial apartments.

3. Valuation

Residential properties are valued based on neighborhood comps, so if your neighbor does not maximize their value or sells at a discount, it will impact your valuation. Most investors of two to four-unit properties are not professional investors, so they may not actively raise rents or employ the strategies and techniques to maximize returns.

Commercial properties are sold based on the profits they generate. In this case, you are not as impacted by your neighbor selling at a discount. You will have more control over the value with the ability to increase revenue and manage expenses. Income is not limited to rent, as you can charge other fees and offer revenue-generating services such as coin-operated laundry, storage, covered parking, and more. All of this additional income boosts cash flow and the overall value of the property.

4. Management

Residential properties are easier to self-manage or find a qualified property manager (PM). Typically, these property managers operate multiple properties at a time. Most charge a fee based on rent collected, with additional fees for services like coming onsite to the property.

Smaller commercial properties (five to 10 units) will operate similarly but require a PM that can dedicate time to maintain the personal touches of a small commercial property. The next size up is 10 to 75 units and many investors struggle to find quality PMs in this range. These properties tend to overwhelm residential PMs and offer little financial upside for seasoned commercial PMs.

This caught me completely off-guard when I bought a 28-unit building and found a sizeable gap between my expectations and realities. Half of the companies we interviewed were not qualified to manage the building and the other half declined because they felt it was too small for their business. We eventually found a good fit, but this was a major eye-opener. If you are looking for deals in the 10-to-75-unit range, spend an ample amount of time finding a quality PM.

Larger apartments (75 units or more) can handle a dedicated onsite staff. This provides a professional solution for residents with business hours to address their needs. It also allows for better attention to details, such as picking up litter, which would be difficult to manage without onsite staff. In addition, you still have the resources of a larger PM firm to help you drive efficiencies and optimize income.

5. Debt

Standard residential debt is a 30-year term, amortized over 30 years so the only factor investors consider is the interest rate. For commercial apartments, the terms range widely from bridge loan products to agency debt. Bridge loans are shorter in nature, usually two or three years, with higher interest rates. Agency loans are usually set for five, seven, 10, 12, or 15 years. The amortization schedule is usually set at 20, 25, or 30 years. And then there is the pre-payment penalty to consider.

Outside of the terms, the loan qualification process differs among the different types of loans. Residential loans examine the borrower closely and want to see a strong work history with W2 income. Lenders rely heavily on your credit history and investigate your source of capital to ensure you have the funds to cover the down payment for the investment.

Commercial lenders look at the borrower, but they are usually more concerned with the property’s current performance and your business plan. They will underwrite the deal and use their own numbers to determine their comfort level. To qualify for a commercial loan, borrowers will need to show the net worth and liquidity equal to the loan amount, along with evidence of some operational experience. If there are gaps with your personal balance sheet or experience, commercial lenders will allow you to bring in partners to help meet these requirements.

6. Equity Structure

When acquiring residential properties, you are typically going to own them yourself or partner with one or two other entities. Typically, all parties will apply and sign on the loan and share the equity according to each member’s contributions. This scenario is called a joint venture or JV.  Commercial apartments present an array of options for stacking the capital. If each investor will be active, a JV is still common. However, if some of the investors will be passive, this is considered a syndication, and typically you will have a class of shares for the active partners and a separate class of shares for all of the passive or limited partners. This can get fairly complex and requires the assistance of a securities attorney to ensure you are in compliance with current regulations.

These six areas certainly are not the only differences worth noting, but they are some of the areas that surprise many investors. Whether you plan on moving into commercial apartments to invest in syndications or just to get more doors under one roof, you will want to understand the key differences between residential and commercial multifamily to make a smooth transition.

 

John Casmon has helped families invest passively in over $90 million worth of apartments. He is also the host of the #1 rated multifamily podcast, Target Market Insights: Multifamily + Marketing. Prior to multifamily, John was a marketing executive overseeing campaigns for Buick, Nike, Coors Light, and Mtn Dew: casmoncapital.com

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How to Scale Your Syndication Business

How to Scale Your Syndication Business

Michael Blank, the founder of Nighthawk Equity, was one of the featured speakers at this year’s Best Ever Conference. In his presentation, he explained how a thought leadership platform is the key to raising more capital from passive investors and ultimately scaling your syndication business.

What is a thought leadership platform?

A thought leadership platform offers unique information, insights, and ideas that will position the owner of the platform as a credible and recognized expert in a specific business niche.

A thought leadership platform may take many different forms. Examples that other investors and we have found successful are:

  • Start a YouTube channel – interviewing real estate investors and entrepreneurs and/or providing daily/weekly/monthly insights.
  • Write a book and self-publish in the Amazon store.
  • Create an interview-based podcast and post to iTunes, Soundcloud, and other popular podcast business thought leadership platforms.
  • Create a blog, posting to your own personal site, and leveraging existing platforms like social media sites, LinkedIn, BiggerPockets, etc.
  • Start an in-person meetup group in your local market.
  • Host an annual real estate conference.
  • Create a weekly or monthly newsletter sent via email or mail.
  • Start an exclusive investor club.

What will a thought leadership platform achieve? 

The reason why a thought leadership platform allows you to scale your syndication business is that it automates the money-raising process. Without a thought leadership platform, you need to manually raise capital from family, friends, and others in your circle of influence, one person at a time. With a thought leadership platform, you will build new friendships and business relationships and maintain and grow existing ones. You will stay top-of-mind of prospective passive investors and other real estate entrepreneurs because you are constantly providing valuable, free information. Essentially, you will continuously and automatically network with people on a global level – even while you are asleep.

A thought leadership platform will allow you to attract the right passive investor. I will go into this in more detail in the next section of this blog. But high level, you can attract your “target investor” based on the type of content you create with your thought leadership platform.

Since a thought leadership platform allows you to automatically attract the right investor, you will increase the amount of money you can raise. The more money you raise, the bigger deals you can do. The bigger the deals, the more revenue you can reinvest into your thought leadership platform to attract more investors. Consequently, a thought leadership platform is a key to effortlessly scaling your syndication business and serving your passive investors.

The three pillars of a thought leadership platform

Now that you know the benefits of the thought leadership platform, what are the best practices to create and grow one? Michael finds that there are three pillars to a successful thought leadership platform.

 

1. Attract the right investor

To attract the “right” audience you have to identify your ideal potential investor. Be specific here. What is their demographic (age, occupation, location, income, etc.)? What are their interests?

Step one is attracting the right investor. The second part is capturing their contact information. You need to know who they are and how to reach them in order to convert them to an investor. The best way to capture their contact information is to offer them a “lead magnet” in return for their email address. For example, Michael’s lead magnet on his website is the “Nighthawk Investor Club.” When someone provides their contact information, they receive membership in an exclusive club of other passive investors.

The point is that people aren’t just going to proactively provide you with their contact information. They need an incentive, which is the purpose of the lead magnet.

 

2. Develop the relationship

Once someone has provided you with their contact information, you need to develop the relationship. They most likely aren’t going to invest immediately after signing up for your lead magnet. You’ll first need to earn their trust. This is accomplished by serving them valuable free content that educates them about your investment strategy. The more service you provide through free educational content, the more they will trust you and perceive you as a credible, expert commercial real estate investor.

Lead them on their investing journey with continuous content. Take them from someone with minimal to no knowledge of your investment strategy to having the confidence to invest in their first deal with you.

 

3. Scale your business

After attracting the right investor and developing the relationship, the investor will trust you enough and have enough confidence in their understanding of your investment model to invest in a deal. But this isn’t the end of the strategy. As you convert more and more leads into actual investors, your company will generate more and more revenue.

To benefit the most from a thought leadership platform, you need to reinvest a portion of your revenue back into your brand. Hire team members to help you manage and grow the thought leadership platform. Create additional platforms. Improve the quality of your current thought leadership platforms by hiring a graphic designer or podcast or video editor. Invest in paid advertising on social media to attract more leads. Revamp your website. Etc.

Overall, a thought leadership platform is a great way to efficiently scale your syndication business. The strategy is to attract the right investors with a lead magnet and develop the relationship through providing continuous valuable content. Then, as more leads are converted to investors, reinvest a portion of the revenue back into the thought leadership platform to scale even more.

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Scaling a Commercial Real Estate Investing Business with a Full-Time W2 Job

Scaling a Commercial Real Estate Investing Business with a Full-Time W2 Job

Our parents influence us in so many ways. In Brock Mogensen’s case, his Dad inspired a passion for real estate and active investing. Brock’s father owned two duplexes, and the money those properties brought in was a big help to the family.

These days, Brock is at Smart Asset Capital, which is based in Milwaukee. Its portfolio of commercial properties includes 18,000 square feet of office space, 20,000 square feet of retail space, and an apartment complex with 89 units. Those numbers are even more impressive when you consider that Brock has only been in real estate for two years.

Moreover, Brock has built up his real estate holdings while working a full-time W2 job. If you’ve ever thought that a regular job would leave you no time for active investing, Brock’s story should convince you otherwise.

Entering the Real Estate Market

When Brock was a college freshman, he came up with a simple plan: He’d save his money to buy a duplex as soon as he could. And that purchase would launch a side career as an active investor in real estate.

About two years ago, Brock accomplished his initial objective. He bought a duplex by house hacking it. Typically, a house hack is when you buy a multifamily home via a mortgage. You move into one of its residences and rent out the other units. With the rent money you collect, you pay off the mortgage until you own the place.

Once Brock owned this residential complex, he began to realize how many real estate options were available to him: wholesaling, flipping, syndication, and more. Ultimately, he chose syndication, which involves collecting funds from a group of investors to buy properties.

Once Brock decided on syndication, the real work began. He took courses and attended real estate events. He read books and listened to podcasts. Altogether, he spent about six or seven months consuming information about real estate and commercial investing.

After that, Brock felt confident about his chances in the real estate industry. He believed he had the analytical abilities and the knowledge to succeed.

Finding Partners

The next step was networking. Through the Bigger Pockets online community, Brock met a real estate professional he enjoyed talking to. They went out for coffee a few times. Despite their different backgrounds, the two had similar goals for the future. In fact, they could sum up their real estate plans in five words: “We want to go big.”

Not long after, a broker brought a deal for an 89-unit duplex to the attention of Brock and his partner. However, they realized it was too big for them given their relative inexperience. Brock also felt the price was too high.

Soon after that, Brock met his partner’s friend, a businessman with a large real estate portfolio and a management team in place. The three joined forces, and they decided to start a new company. Smart Asset Capital was born.

The First Deal

About four months later, Brock found that 89-unit duplex on the online real estate marketplace LoopNet. By this point, the owner wanted to sell it as quickly as he could, and Brock’s team made an offer. His group eventually bought it for $3.55 million, which was a real discount.

However, Brock’s second partner, the one with the largest portfolio, had doubts about this duplex at first. He thought the group didn’t have enough cash on hand to make it worthwhile. He also felt that, since Brock already owned a duplex, they should diversify and pursue a different type of building. But Brock was adamant in supporting this deal, and he finally persuaded his partner.

To finance this duplex, Smart Asset Capital raised $830,000 in private equity, which mostly came from Brock’s partners’ network of investors. Given his lack of industry connections then, Brock personally raised less than $100,000. Some of that money came from friends of his family.

The Smart Asset Capital principals soon closed the deal, and the 89-unit duplex was theirs. They then planned to make multifamily residences their core business.

In recent months, however, Brock and his partners learned about two outstanding properties that were on the market: one complex with 20,000 square feet of retail space and one with 18,000 square feet of office space. Thus, the Smart Asset Capital leaders changed course somewhat; they decided to close on those commercial properties.

As a result, the company now has different groups of assets. And its founding partners will continue to bid whenever a promising commercial investment opportunity comes along, regardless of its asset class.

The Secrets of a Thriving Partnership

At this point, you might be wondering what accounts for the success of the Smart Asset Capital partnership. Brock feels that, above everything else, one aspect is key: These three individuals balance each other extremely well.

Specifically, Brock brought his analytical abilities and talents for underwriting and reporting to the firm. For their part, his two partners have sales backgrounds and extensive industry connections; their investor databases contain long lists of names.

Brock feels that it’s vital for every businessperson to collaborate with people who have different strengths and different weaknesses. That way, the resulting group won’t be deficient in any area, and it will be powerful in many.

Indeed, on any given workday, all three Smart Asset Capital founders are able to focus on their strong points. Brock works largely on underwriting, investor relations, and asset management. His partners, meanwhile, concentrate on sales.

At the same time, these roles aren’t completely separate from each other. Brock gets involved in selling from time to time, and his partners help with the reporting tasks and asset management.

Not to mention, this partnership is equitable. The three men split their profits evenly; everyone gets 33.3 percent.

A Week in the Life of Brock Mogensen

Asset management is definitely complex, but Brock has an organized weekly schedule to handle it.

During the day on Sunday, Brock reviews his notes from the prior week and creates an agenda for the workweek ahead.

On Monday morning, Brock analyzes the company’s key performance indicators (KPIs). They include statistics such as tenant turnover rates, operating expenses, and revenue growth numbers.

Brock’s virtual assistant, a full-time employee, compiles the weekly KPI report and sends it to all the partners. At one time, Brock created this report himself, taking an hour out of his schedule every Monday morning to do so.

Then, on Monday night, the Smart Asset Capital founders hold a group call with their property manager. They rely on Brock’s agenda for their discussion points.

Throughout the week, Brock continually checks out the company’s account on AppFolio, a leading property management software program. That way, he can keep track of the KPIs and make sure nothing seems out of the ordinary. In addition, he takes copious notes, some of which he’ll later turn into questions for the property manager or discuss in meetings.

In fact, Brock feels that analyzing real-time data is the most important part of real estate investing. Incorporating this data into models effectively and accurately allows for effective management and planning.

Running a Real Estate Company as a Part-Time Gig

Many people are surprised to learn that, while managing a real estate company and overseeing its properties, Brock works a full-time marketing job. But Brock is used to juggling a packed schedule. When he closed his first deal, he was in an MBA program and taking three classes.

Will Brock ever leave his marketing career to become a full-time real estate investor? He still isn’t sure. He likes having two income streams. If, however, the real estate cash flow hits a certain target someday, he says he’ll certainly consider leaving the other job.

Also worth noting, although he has a steady income as a W2 employee, Brock keeps large reserves of cash in the bank. That way, he has enough funds on hand to keep his real estate business going in the event of an economic disaster or a period of financial uncertainty.

Brock says that many people with W2 positions hold themselves back, believing they don’t have time for business ventures on the side. Or a W2 employee might simply use that job as an excuse to not be an active investor. Perhaps that person is a little afraid to get started.

Do you have a full-time job? Are you looking to become an active investor in real estate during your spare time? If so, Brock recommends that you take the two initial steps he took. First, choose a specific aspect of real estate investing and really study it, just as Brock studied underwriting. Next, find partners to collaborate with, people who are authorities in areas where you lack expertise.

 

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Four Step Process to Build a Powerhouse Commercial Real Estate Team

If you were lucky enough to go to the Best Ever Conference 2021, you may have watched the Real Estate InvestHER presentation by Liz Faircloth. During the presentation, Faircloth covered the best insights into how to build a team for real estate investing. It was an amazing look at just how easy it can be to invest in real estate as long as you do everything the right way. Through four simple steps, you can take control of your financial future, build your nest egg and create a strong real estate team.

How to Build a Real Estate Team

On average, commercial properties generate an annual return of 6 to 12 percent. If you invested in a $1 million property, then you can expect returns of $60,000 to $120,000 per year. This rate varies based on the area, but it is much higher than the average return of 1 to 4 percent that you can get from a single-family home.

In order to achieve a great return from commercial real estate investing, you need help. Buying properties, collecting rent and analyzing balance sheets take time and effort. To make sure your real estate empire is a success, you need to build a strong team to support your investing decisions.

1. Map Out Where You Want to Go

Where do you plan on going with your real estate investments? Are you trying to increase your annual returns? Do you want a property that appreciates a lot?

Before you can build a team or make an investment, you have to know what you want. You should sit down and create a list of short-term and long-term goals. Basically, you need to create a vision and mission statement. Once you have a clear idea of where you are going, you can figure out the best steps for getting there. You can also look at the things that are currently holding you back and change them.

In general, you should always use SMART goals for your business and your future team.

  • Specific: You have to know what you want, or you will not be able to achieve it. Your goal should include what you want to accomplish and why you want to accomplish it.
  • Measurable: If your goal is to get a return of 9 percent, you can easily measure your results and see if you were successful. The best goals can be easily measured so that you can know if you are successful or not.
  • Achievable: While deciding to become the leading investor in the world sounds great, it probably is not an achievable goal. If a goal is impossible to do, you will become disillusioned. Instead, you should focus on making goals that are realistic and attainable.
  • Relevant: Good goals are relevant to what you are doing. They are also achievable based on your current resources and abilities.
  • Time: You need to make time-based goals because deadlines are great motivators. A deadline gives you something to work toward.

2. Take a Personal Inventory

Next, you need to take a personal inventory of where you are at. Before you can figure out how to build a team, you need to consider your resources. What kind of credit do you have? Do your assets outweigh your liabilities? In order to hire someone, you should initially figure out what you can afford.

You should also consider your personal traits. Your personality, experience, skills and leadership traits determine whether you can successfully hire and train employees or not. What do you bring to the table?

This personal inventory is also useful because it is a chance to learn more about yourself. For example, you can always take a leadership class if you need to become a better leader. If you lack accounting skills, you can make sure to build a team that includes an accountant.

Ideally, you should spend at least half a day taking a deep look at your personal inventory. Before you hire someone, you need to know which areas you excel at and which areas need work. Then, you should pick team members who balance out your strengths and weaknesses.

 

3. Determine Who You Need to Meet Your Goals

Now that you know what you excel at, you can focus on bringing in a team that helps you achieve your goals. You should figure out which roles you want to fill and how you fit into the team. This means you have to be realistic about your strengths, personality traits and experiences.

While every team is different, the following is an example of what your team structure could look like for commercial real estate investing.

  • The Hunter: This person is in charge of acquisitions and looking for properties.
  • The Brains: The brains of your operation will handle planning.
  • The Money: This individual will take care of funding your projects.
  • The Hammer: The hammer is the person in charge of execution. They handle all of the negotiations.

4. Focus on Gaining Alignment and Leveraging Diversity

Two of the biggest mistakes investors make when building a team involve alignment and diversity. Your organization has a certain level of entrepreneurial spirit. Additionally, your employees are expected to meet certain expectations and goals. Because of this, you have to hire someone who is aligned with your values.

Someone may look great on paper, but they will not stay long if they are not aligned with your organization. When someone does not fit in with the organization’s culture, they tend to quit or get fired right away. Instead of wasting your time and resources on the wrong applicants, look for alignment as you build your team.

You also need to build a diverse team because diverse personalities and skills provide balance. As you interview people, consider their experiences, levels of risk tolerance and personalities. Then, you should try to hire team members who give your team diverse points of view.

It is almost impossible to understand someone’s complex personality and background in a single interview. Fortunately, there is an easy tool you can use instead. Personality assessments are a quick, simple way to understand an applicant’s personality. As you read through the personality results, you should avoid hiring people who are just like you. Many managers make this mistake, and it will reduce your team diversity if you are not careful.

Learning how to build a team is important if you want to be successful. As your commercial investments grow, you will not be able to manage everything on your own. Through a strong team, you can become better at commercial real estate investing and increase your profitability.

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Three-Steps to Scaling a Commercial Real Estate Investing Business

Once you’ve created a commercial real estate investing business and have made several successful deals, you might feel like you’ve hit a perceived ceiling in the number and types of investments that your business can make at its current size. If so, it may be time to scale your business. Many real estate investing businesses make the mistake of believing that growth and scale are the same thing. Your business can grow by adding a single commercial property investment each year. However, scaling this type of business requires a completely different set of skills.

When you scale a business, you can create a sturdy foundation that supports future growth. Whether you want to eventually manage hundreds of commercial units across the country or would like to expand to international markets, there are three basic steps that you must adhere to if you want to effectively scale your business.

 

1. Maintain Clarity of Vision

In order to effectively scale a commercial real estate business, it’s important that you maintain a clarity of vision with everything that you do. The first thing that you should do before working on scaling your business is to determine how big you want to be and why you want to scale to this particular size. The size of your investing business will determine the exact types of systems that you need as well as the number of people that you should hire.

Clarity must be had in several different areas, which include your expected ROI, the size that you want your business to be, and potential outsourcing. Without a clear vision in place, you will likely scale at a slower pace than you would like, which only serves to waste time and money. The size of your company is likely the most important aspect of scaling a business. If you aren’t clear about the intended size, you may end up hiring too many employees.

While you’re working on identifying how large you want your investing business to be, it’s important that you understand the risks that come with scaling a real estate investing business. If you hire less employees than you require to manage each property, you may find yourself in a situation where you’re unable to effectively manage all of the properties that you’ve invested in, which increases the possibility that one or more of your investments would fail.

To understand just how dangerous it can be to scale too quickly, a study that was performed by Startup Genome found that startups that focused on high growth have a failure rate of nearly 75 percent. This high rate of failure is due mainly to premature scaling, which is why a clarity of vision is integral to successful scaling. To properly scale a real estate investing business of any size, focus on how you can improve the internal processes that you’re currently doing instead of looking solely at what’s next.

While a clarity of vision is important when you’re trying to hire the right amount of people, your vision should also be used to attract top industry talent. Experienced and reputable professionals will invariably be able to choose which company they work with, which is why your investing business must be appealing to the talent you seek.

Whether you’re hiring an accountant or property manager, being able to demonstrate a clear vision about how your business will scale in the coming months and years is critical towards making sure that the individual chooses to work with your company. While you might have been involved in the finer details of every previous investment that your business has handled, this might not be possible if you plan on substantially scaling your business. If your company is set to make dozens or hundreds of investments in commercial real estate, you must be confident that the hires you’ve made are the right ones.

2. Determine Your Strengths

In order to scale your real estate investing business, you should have a firm grasp on the strengths that you have when it comes to making investments. Ask yourself what you’re specifically good at and what you like to do when investing in real estate. Once you have identified what your strengths are, you can focus on these while incrementally outsourcing every additional task to other people.

No matter how efficiently you work, there aren’t enough hours in the business day for you to handle every facet of your real estate investing business. When you scale an investing business, you’ll need to start delegating tasks and outsourcing some of the work that needs to be done to locate, assess, and manage properties that you want to invest in. While it can be difficult to separate tasks by strengths and weaknesses, the investments that you’ve already made should give help you better understand what your strengths are when it comes to investing in commercial properties.

Maybe you’re effective at identifying properties that would make good investments and provide you with a steady return. If you prefer managing the properties that you invest in, consider taking a more active role in some of your properties. For any tasks that you might be unfamiliar with or don’t have enough experience to handle, delegate these tasks to some of the employees you’ve hired.

It’s also highly recommended that you outsource some of the less important tasks to third parties. For instance, property management companies can be hired to manage your properties. Once you’ve delegated all of the activities and tasks that you won’t be taking part in, you can begin to scale your business. The foundations will be in place to handle the immediate growth that your business will encounter as it scales.

3. Hire the Right Team

Nothing is more important than hiring the right team for your real estate investing business. Each task that an employee handles will be essential for the continued success and growth of your company. Buying commercial real estate is a difficult and time-consuming process no matter how experienced you are in making these types of investments. Whether you’re investing in office space or retail properties, you’ll want a core team by your side who you can be confident will continue to effectively manage your company as it scales.

As touched upon previously, make sure that you incrementally outsource tasks that you aren’t necessarily good at to other employees. If you have a clear vision of what your business will be like once it scales, your company should be appealing to prospective hires. Some of the hires that you might want to make when preparing for scaling your business include:

  • A leasing agent
  • A turnover coordinator, which is a position that’s usually held by the property manager
  • A rehab coordinator to measure the budget vs. the actual cost
  • A maintenance technician
  • A construction manager if the building has yet to be developed
  • Real estate agents
  • Accountants
  • Lawyers

By doing your due diligence with each employee, you should be able to make some great hires. With reputable and experienced individuals in each important position, you can trust your employees to do the jobs they were hired for without feeling the need to micromanage them. While some aspects of buying commercial real estate and managing the properties you invest in will need to be learned on the job, two qualities that aren’t teachable are ethics and drive. When you screen potential hires, do so based on those two qualities.

Now that you understand the steps that are necessary for properly scaling a business, you should be able to start this process with the confidence that mistakes will be kept to a minimum. Keep in mind that the protocol you use for managing a single property is the same protocol you’ll use when investing in 50 properties. With a strict set of guidelines in place, scaling your real estate business should be a straightforward process.

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Residential Lenders Tighten Their Lending Standards – Why This Is Good News for Multifamily Investors

A little more than a year before the onset of the coronavirus pandemic, I wrote a blog post entitled “Why I Am Confident Multifamily Will Thrive During and After the Next Economic Correction” (which you can read here).

The economy was experiencing a record long expansion and showed no signs of stopping. However, like most economic expansions, various economic and real estate experts were warning about an impending recession.

“The stock market is inflated” and “real estate prices and rents will not increase forever” they said. 

However, whether the economy continued chugging along or experienced a minor or massive correction, I was confident is multifamily real estate’s ability to continue to perform. 

My confidence was not emotionally driven or biased because I am a multifamily investor. It was based on my analysis of the facts. The most telling fact was the change in renter population

Historically, more people rent during recessions (which is one of the reasons why I was attracted to multifamily in the first place) and more people buy during economic expansions. The former held true for the 2008 recession as more people began to rent. However, during the post-2008 economic expansion, the portion of renters continued to increase (more US households were renting in 2016 than at any point in 50 years). 

Therefore, I predicted that the portion of renters would increase or, at minimum, remain the same during and after the next correction. 

Then, coronavirus hit and induced an economic correction (or a temporary slowdown, depending on who you ask).

But, sure enough, a study published on June 17th, 2020 projected a decline in homeownership and concluded that  “the demand for rental housing will increase somewhere between 33% and 49%” between 2020 and 2025.

In both my January 2019 article and the June 2020 study, one of the reasons why more people are renting is due to tightened lending standards (other reasons were student loan debt, inability to make a down payment, poor credit, and people starting families later).

A metric that is used to measure lending standards is the Mortgage Credit Availability Index (MCAI). The MCAI is based on a benchmark of 100 set in March of 2012 and is the only standardized quantitative index that solely focuses on mortgage credit. A decline in the MCAI indicates that lending standards are tightening while an increase in the index are indicative of loosening credit.

Between December 2012 and November 2019, the MCAI was steadily trending in the positive direction, increasing from the high-80s to the high-180s.

  

However, starting in December 2019, the MCAI began to decline. The three largest drops were in March 2020 (decline of 16.1% to 152.1), April 2020 (decline of 12.2% to 133.5), and August 2020 (decline of 4.7% to 120.9, the lowest since March 2014).

Joel Kan, Mortgage Bankers Association’s Associate Vice President of Economic and Industry Forecasting said in the August 2020 report, “credit continues to tighten because of uncertainty still looming around the health of the job market, even as other data on loan applications and home sales shows a sharp rebound. A further reduction in loan programs with low credit scores, high LTVs, and reduced documentation requirements also continued to drive the overall decline in credit availability.”

People will always need a place to live. Their only two options are to rent or to own. As indicated by the massive MCAI declines since the end of 2019, less and less people will be able to qualify for residential mortgages. The programs available to people with low credit or who cannot afford a high down payment have disappeared. 

Therefore, by default, more people will be forced to rent.

One last interesting thing to point out is how the MCAI during the current economic predicament compares to the 2008 recession. 

Here is an expanded MCAI graph that shows credit availability back to 2004. The pre-2011 data was generated biannually, making it less accurate than the post-2011 monthly generated data. However, the graph still highlights an important point. At least as it relates to the availability of credit at the time of this blog post, the current economic recession is nowhere near as severe as the 2008 recession.

To receive the monthly MCAI report, click here.

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How to Successfully Scale Your Real Estate Business

Building a real estate business from the ground up is certainly an exciting endeavor, but once your business is going, you may find yourself at a crossroads. Should you stay in your comfort zone by maintaining the status quo in your business? Or should you work on taking your company to another level?

If you’re seeing a positive return on your investment in real estate, you may naturally consider exploring various ways of maximizing your business’s potential. But if you don’t have much experience with scaling a business, you may find yourself at a standstill.

Fortunately, you don’t have to stay there.

Here’s a rundown on how to scale so that you’ll have an increasingly successful real estate business long-term.

How to Scale a Real Estate Business Tip 1: Master Your Marketing

This is an essential step in building a successful real estate business. Specifically, if you’re looking for lead generation ideas, it’s critical that you understand who your clients are first. For instance, who truly make up your buyers if you’re into wholesaling or flipping? Or who are your tenants if you’re renting out properties?

You can gather a lot of this information from sources such as surveys, Facebook reporting, or even your business website analytics. These sources can tell you your ideal customer’s psychographic and demographic makeup.

Also, find out what your ideal customer’s pain points are. For example, what tends to keep your customers up at night? It’s also a good idea to find out which marketing channel provides you with the best return on your investment for reaching your target customer. As an example, using Facebook is particularly helpful for generating a list of buyers as part of your real estate business development process.

How to Scale a Real Estate Business Tip 2: Automate or Outsource Your Activities

If you’re serious about creating a successful real estate business, it’s imperative that you complete an in-depth analysis of the business to see exactly where any bottlenecks and inefficiencies are occurring.

For instance, maybe you can take advantage of cloud computing to streamline your business process. You could also make your job easier by setting up a marketing system that will work while you’re asleep. You might also benefit from getting rid of any daily task items that have a low return on your investment; for instance, you may want to spend less time on social media if it’s not leading to substantial business gains.

Another way you can grow a successful real estate business is to outsource any non-essential tasks. Sure, this may seem scary if you’re used to handling a variety of tasks for your business. However, if you can hire an expert to help you with duties like producing marketing content for your real estate business website, you can devote more time and energy to developing your skill set as a real estate investor.

How to Scale a Real Estate Business Tip 3: Grow Your Real Estate Network

If you want to have a successful real estate business, it’s critical that you develop a strong investment network and continue to build on it. That’s because your business relationships are among your most critical assets in the real estate investing world.

For instance, let’s say that you are trying to raise capital. A good partner—for example, the right passive real estate investor—can easily elevate your real estate business by making an excellent apartment acquisition deal possible. Not all potential partners will be a great fit for you, but you need just a few good ones to get a leg up in the real estate investing industry. Real estate conferences, investing clubs, and networking meetings are excellent places to start building industry relationships.

How to Scale a Real Estate Business Tip 4: Establish a Niche to Build a Successful Real Estate Business

As a general rule of thumb, people enjoy working with others with whom they are comfortable. This is why it’s a smart idea to develop a solid niche in the real estate industry rather than trying to dabble in a number of areas of real estate. The better you are in your specific aspect of the industry, the more credible you’ll appear.

For example, if you’re especially passionate about buying and holding properties to rent out, your goal should be the best buy-and-hold investor in your market. In addition, try to focus on a specific type of real estate property, as this will make it more effortless for you to recognize great deals when they crop up.

The more experience you gain in the market, the more you’ll be viewed as a field expert. In time, you’ll see your credibility pave the way for brand-new deals for you.

Important Considerations When Trying to Build a Successful Real Estate Business

If you’d like to scale your real estate business, note that this won’t occur by accident. Instead, you’ll need to plan for growth and surround yourself with a strong team who can help you to reach that next level.

As a real estate entrepreneur, you want immediate results. I get it.  However, it’s paramount that you don’t rush things when trying to build a successful real estate business. You need to know that the particular strategies you’re using or targeting are actually healthy for the business.

Keep in mind that the seemingly minor adjustments you make today can have a huge impact on your company down the road. Also, don’t look down on the opportunity to make steady, slow progress in your business’s next phase. This, in fact, may actually lead to faster growth than you initially thought was possible.

Start Creating a More Successful Real Estate Business Now!

Growing any business comes with its challenges, and real estate businesses are no exception. Still, that doesn’t mean that scaling your real estate business is impossible. It’s very possible when you have the right real estate strategies and people on your side.

I am more than willing to help you to grow your business like never before. I currently own over $600 million in real estate after getting my first major break in 2012, when I raised a million dollars in private investment dollars and purchased an apartment community. Enroll in my private real estate program and find out how I can also help you to develop a successful real estate business.

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Overcoming 6 Obstacles Faced by Aspiring and Growing Real Estate Investors

Anyone who has looked into investing in real estate has found that there are frequently investment barriers that must be overcome. I am often asked: What is the biggest obstacle you faced either when you started investing in real estate or as you grew your business?

This is such an important question that I reached out to some of the top investors in the field to see what they had to say.

1 – Tracking Passive Investors

Allison Kirschbaum is an established real estate investor who is trying to scale her business. The biggest investment barrier is keeping track of all the new investors her company meets without having them fall through the cracks.

There are many CRM providers who offer tracking services, but they can be quite costly, especially if you are just starting out. That’s why I created my very own investor tracker, which I am willing to give out FOR FREE. Not only does this spreadsheet allow you to keep track of potential and current investor information, but it also automatically creates data tables to track the cities with the most investors (in terms of people and dollars) and the sources that generate the most investor leads. You can even use this tool for tracking the money raising process for a specific apartment deal.

If you are facing a similar obstacle as Allison, email info@joefairless with the subject line “Money Raising Tracker” to receive my custom investor tracker spreadsheet.

2 – Finding Deals in an Expensive Market

Two investors are finding it difficult to locate qualified deals in their local market. Sarah May lives in the highly competitive Denver market, and Killian Ankers also lives in an expensive real estate market. Both are open to start investing in real estate in an out-of-state market, but among their investment barriers would prefer to remain local, because they know their home markets like the back of their hands.

My company faced a similar obstacle in 2017. My target market is Dallas, Texas, which was and remains highly competitive. Our solution was to get creative. We found an on-market opportunity that was highly publicized and marketed by a broker, which resulted in an ever-increasing price. Instead of walking away from the deal, we had our broker reach out to the owner of the apartment community across the street, and we were able to negotiate and put the property under contract at a significant discount! If we had only purchased the on-market opportunity, it wouldn’t have made financial sense. But due to the cost-saving associated with purchasing two apartment communities on the same street, we were able to close on both.

On the other hand, if you do decide to pursue investment opportunities in a market outside where you currently reside, finding credible, experienced team members is a must! This process begins by selecting and evaluating a market, and then interviewing and hiring a property management company and a broker.

3 – Shiny Object Syndrome

Micki McNie is facing an obstacle to which everyone can relate – focusing on a single real estate strategy. Shiny object syndrome befalls investors of all experience levels. The near infinite number of potential investment strategies can paralyze an aspiring investor. Then, the longer you’re in the industry, the more people you build relationships with, which naturally results in being presented with a greater variety and volume of new and exciting investment opportunities.

How does the aspiring investor decide which investment strategy to initial pursue to avoid investment barriers? Well, I think you need to identify the root of the problem first. Are you truly struggling with selecting the best investment strategy or are you just using that as an excuse to not take action? If it is indeed the former, pick the investment strategy that aligns most with your current interests and unique skill sets and show up EXTRAORDINARY, always keeping in mind that investors have had success in every investment strategy for the past 50 years! If it is the latter, you need to learn how to identify and crush your fear barriers!

How does the established investor overcome investment barriers and avoid chasing after opportunities that are outside of their skill set? Accountability! And if you’ve found that holding yourself accountable is a challenge, outsource that responsibility by either starting a meetup group (social approval is a powerful way to keep you on track) or hiring a mentor.

4 – One Person Team

Neil Henderson has hit a barrier in growing his business because he’s trying to wear too many hats at once. He’s a loyal employee at his full-time job, father, husband, underwriter, marketer, capital raiser, negotiator, and thought leader. Similarly, Vince Gethings struggles with finding the time to operate his business as he adds more units to his portfolio and balances his remaining time between family and work.

Whether you want more time to explore other non-real-estate-related passions or spend more time focusing on the long-term vision of your real estate business, the way to overcome investment barriers starts with outsourcing and automating some or all of your business, in addition to building a solid, trustworthy real estate team.

5 – Us!

Curtis Danskin believes that the number one obstacle keeping real estate investors from starting and scaling their business is themselves! They know what actions they need to take, but – for whatever reason – chose not to.
To overcome this challenge, identify the self-sabotaging behaviors in which you are partaking and implement strategies to rid ourselves of these bad habits.

6 – No Experience or Money

Scott Hollister just got his start investing in real estate lacks the experience, net worth, and liquidity to enter the real estate arena. He’s already identified a solution, which is pursuing seller financed deals, but doesn’t know where to get started. In particular, he doesn’t know how to find seller-financed opportunities.

Fortunately, success leaves clues. Here’s how an active real estate investor was able to close on seven seller financed deals.

Another strategy for those whose primary investment barriers center around lack capital is house hacking, where you purchase a two to four unit property with a low down payment owner-occupied loan and live in one unit while renting out the others.

Do you need help overcoming obstacles? Whether you’re just getting started or you’ve been in the biz for years, consider applying to my Private Real Estate Program and take the next step towards financial independence.

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The Fundamentals of Scaling a Business: Q&A w/ BiggerPockets CEO Josh Dorkin

Josh Dorkin knows a thing or two about growing a business. Not only is he the CEO of BiggerPockets, which boasts more than 825,000 members and landed at #400 on the Inc. 5000, but he also produces the top-rated real estate podcast on iTunes, which raked in $7 million in ad revenue last year, and founded a publishing firm.

 

I had the opportunity to pick Josh’s brain (part 1 and part 2) for his Best Ever entrepreneurial success habits.

 

Read on for Josh’s advice on growing a company, his Best Real Estate Investing Advice Ever, his morning routine, and more.

 

 

Is there one person that sticks out in your memory as having been helped by BiggerPockets in all the work that you have done?

 

The one person that sticks out, the instant answer to that is Brandon Turner. Those of you who are unfamiliar, Brandon Turner is co-host of The BiggerPockets Podcast. He works for us, and initially, when I came to know Brandon years and years ago, he was a user on our platform; he was trying to find financial freedom and used the BiggerPockets platform to get there.

 

He was the pure representation of who we were and what we strived for. He was this guy living in the Pacific North-West who had been kind of floundering around in his life. He was trying to figure it out, like the rest of us. He came across BiggerPockets and the idea of real estate, and used BiggerPockets to help him build this passive portfolio of real estate.

 

Of course, living in the area that he lived in, he was at a point where he no longer needed a job. He had created that freedom for himself. He was writing for BiggerPockets, and at that time I was in need of help. I needed to hire somebody to come and join me as my first employee, and we got to know each other and I brought him on.

 

Brandon really just is that pure representation of who we are, but there’s countless stories. Not a day goes by where we don’t hear from somebody who’s like “You guys are transforming my life. You guys are helping me out. You guys have helped me quit my job” or “Helped me retire” or “Helped me build income for my family”, or whatever it is. That’s why we do it. We’re here to help people succeed.

 

 

What are the 3-5 most important things in your experience to growing and scaling a company?

 

One, having a good idea that’s scalable – start there.

 

Two, having some kind of plan, whether or not it’s written… I don’t think you need necessarily a written plan from zero (I didn’t).

 

Three, your business has to solve some kind of need for the customer that somebody else is not serving. I say that out loud and I think about McDonald’s versus Burger King. Burger King is solving a need, McDonald’s is solving the same need, but now it’s flavor choices, right? So, do you like A or B better? But having a USD (unique selling proposition), something that is unique or that you believe to be unique about what it is that you’re doing – you’re building, you’re offering service, products, you name it.

 

Four, being passionate, or having a team of people that are absolutely passionate about that idea. It’s pretty rare to see successful companies get to a point of success where the founders or creators or people running the show that don’t have some kind of passion for it, it’s too hard; it’s too much work, it’s too difficult to struggle through that without having that passion. Also, having a dedication to people and to your own people. You can’t build a scaling company without taking care of people, and I’m saying that and I can think of examples of companies where they have a really crappy culture and I’m like “Hmm, maybe not…”, but at the end of the day I think what goes around, comes around.

 

Five, I think something that we didn’t do in the past – and by “we” I mean businesses in general – is becoming very data-oriented. Metrics and data and understanding your business from a data perspective. I think you often see small businesses where they don’t get it struggling a lot. Knowing your numbers — let’s take real estate investors. If you’re a real estate investor and you market by mail, if you don’t know your send and open rates and your cost per send and your funnels, you’re just throwing money out the window. You don’t know what you’re doing, you have no way to measure whether or not what you’re doing is successful or not.

 

 

What feature of the BiggerPockets platform do you think is most underutilized?

 

I would have to say the member notes. Here’s what member notes are – you can go to anybody’s profile and take a note on them. I can go to your profile, Joe, and make a note and say “Yeah, Joe and I had a conversation about X, Y and Z.” Only I can see it, nobody else can see it on the platform. It’s almost like a mini CRM, right? The next time I come back and the next time I interact with you I can be like, “Hey, Joe… Remember we talked about X, Y and Z the last time we connected?”

 

I think partially that’s due to people not knowing what it is. We have not updated that in a very long time; we are working on some really nice and sexy redesigns of certain parts of the site, including user profiles and our onboarding, and as part of that, I think we’re going to be creating a little more clarity in that tool. I think it’s extremely useful, I use it all the time. I talk to you about whatever I talk to you about, I put it on there, and the next time I come back and I’m ready to talk to you again, I know exactly what we chatted about.

 

 

When you were considering starting BiggerPockets, what was a number one fear holding you back from starting?

 

There was no fear that held me back from starting. I didn’t start BiggerPockets to create a business. I started BiggerPockets to help me stop screwing up in real estate. So, my biggest fear was continuing to screw up in real estate.

 

There was nothing that was kind of “Alright, if I create this thing and nobody shows up, then nobody shows up. I’ll figure something else out, I’ll find my answers in some other way.”

 

 

How has podcasting enhanced your business and opened up doors and connections that you wouldn’t have had otherwise?

 

I think by having a big show that has a big audience, it gives you the ability to talk to and reach out to people who you may not have had the opportunity to do that with. So, it builds your name, it builds your brand, and especially if you do a good job and stay true to who you are and what you’re doing, then ideally that continues.

 

I’ve gotten to talk to authors that I may have not otherwise met. There’s not a show that we have where I don’t learn something. So, for me as a person not affiliated with BiggerPockets, it’s so powerful. And as the CEO of BiggerPockets, obviously having those people and those stories inspire other people is also so powerful.

 

 

What are your morning routines or daily practices that you do on a regular basis?

 

I go back and forth with a miracle morning – or non-miracle morning – routine; it depends how spent or burnt out I am. I don’t ever get up and then go to my phone, or go to my internet or anything like that. I like to get up, I like to stretch. On the good mornings, I like to exercise. This is all before anyone else in the house is awake.

 

Then get up, get dressed, do my thing, take care of my kids, get them ready for school, driving to school, and then at that point I will look at work. I don’t do work before my kids are off to school; I’m there, I’m present… I’m not playing on my phone, stressing about e-mails, dealing with any of that stuff. The morning is for me, followed by family, and then I head to work, and then work begins. After work, when I get home – four, five, six o’clock, whenever it is, I’m present again; phone’s away, not working. I may jump on social media from time to time, because it’s a hobby, but I’m not doing work per se until my kids are asleep. Family time is family time, and then when the kids go to bed, I usually like to thaw for a little bit, and then maybe I’ll do some work, as needed.

 

It’s very different than had you asked that question four years ago, which would have been “I get up, I work, I take a shower, I work some more while my kids are getting fat (or whatever) and then I leave to work, and then I come home and I work, and then I work through dinner, and then after dinner I continue to work, and even though I’m with my family, I’m not there.” I came to the realization that I was doing that, and hated myself for it, and said “This is just not who I want to be. I am a father first and foremost, and my family is the most important thing to me and my life, so I’m not going to let anything, especially my company, get in between that.”.

 

On those good mornings, when I’m fully miracle-morning-ing, I don’t actually do the full miracle morning, which refers to a book called The Miracle Morning by Hal Elrod, for those of you who don’t know… But I’ll stretch, I’ll do some meditation, I’ll do some exercise, and I’ll do some reading. Those tend to be the four things that I do.

 

 

What’s your Best Real Estate Investing Advice Ever?

 

Figure out your why. Why is it that you’re getting into this for? If you don’t have a strong why, then you’re not ready to begin. If you’re already an investor and you’re thinking about scaling your business or growing your business, what’s the why? What’s driving you? What’s motivating you? Because if you don’t have it, do you know who’s not going to have it? Your partner, your spouse, your family. So, you’d better have a solid why that everybody can buy into, because otherwise there’s going to be opposition at every step from those people who should be supporting you.

 

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

 

 

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The Real Estate Ladder of Success: How I Created the World’s Longest Daily Real Estate Podcast

In late 2016, I wrote a blog post entitled “5 Reasons You Are Not Scaling Your Business & 5 Keys to Push to the Next Level,” which was based on an interview I conducted with my business coach Trevor McGregor. Trevor has over 10,000 hours of business coaching under his belt. One of the five commonalities he found between entrepreneurs that don’t scale their businesses is a lack of consistent and persistent action. They take action for maybe a year, but are disappointed in the results, or lack thereof, and give up or just coast on by.

 

One of my favorite quotes from Tony Robbins that addresses this concept is “we overestimate what we can do in a year, but we underestimate what we can do in two, three, five, or ten years.” Since we are living in an instant gratification world, we expect to receive instant fruits from our labor. However, if we aren’t thinking in terms of multiple years or decades, we will continue to be disappointed with our results.

 

My personal journey is evidence that supports this concept. I recently released my 1000th podcast episode. If I expected instant results, I would have given up podcasting after a few episodes since my audience was only comprised of my parents, a few friends, and my dog. However, after consistently putting out podcasts for 1000 days in a row, I was able to create the world’s longest running daily podcast, and as a result, my company has achieved a portfolio of over $130 million in real estate in under 24 months.

 

Using this idea of consistent and persistent action, in combination with other Tony Robbins’ success principles, Trevor McGregor created the concept he calls The Real Estate Investor Ladder of Success. In our recent conversation, he outlined this ladder and explained how it can be used to gauge where you are showing up in your business and determine if you are putting forth the persistent and consistent action required to scale your business.

 

The Real Estate Investor Ladder of Success

 

Either draw out or visualize in your mind a vertical ladder with six rungs. Each rung on the ladder represents how you are showing up in different aspects of your business, or life in general. The higher up the ladder the ladder you are, the better you are showing up.

 

Rung #1 – Showing up POOR

 

The very first run of the ladder is what Trevor calls showing up POOR. He said, “We often say in real estate that if you show up poorly in something – let’s say it’s property management – what kind of results do you think that you get?” If you think the answers is poor, you are mistaken. The answer isn’t no results either. Trevor said, “Poor equals pain! You know that as a property manager if your property management isn’t good, poor doesn’t equal poor. It actually hurts. It’s like a kick in the teeth. It gives you pain.”

 

Poor = Pain

 

Hopefully, if you are a best ever reader or listener, you aren’t showing up POOR in any aspect of your business, so let’s move to the next rung of the ladder.

 

Rung #2 – Showing up GOOD

 

If you are on the second rung of the ladder, you are giving a little more effort and are showing up as GOOD. What kind of results do you think you’ll see when you show up GOOD?

 

POOR.

 

Trevor said, “GOOD isn’t enough anymore. There’s too many people out there looking for deals, vying for investors, so we often say that good these days equals poor results.”

 

If you’re just good at communicating with contractors, for example, yet you see poor results, that’s because you’re showing up on the second rung of the ladder of success. If you want better results, you need to climb to the next rung of the ladder.

 

Rung #3 – Showing up GREAT

 

The next rung up, number three, is showing up GREAT. “Imagine yourself if you’re a real estate investor that has efforts that are great, in today’s world, again, great isn’t great enough, because we say that GREAT equals [GOOD],” Trevor said. “If you’re just great at finding deals today, when there’s literally tons of other investors out there doing the same thing, being great at finding deals will give you good results.”

 

GREAT = GOOD

 

Three rungs up and you should start to see a pattern. Poor = pain, good = poor, and great = good. You must show up at a higher rung than the results you want to achieve.

 

Before moving to the next rung, draw – on paper or in your mind – a horizontal line between rung three and four. Because when you’re showing up at rung four or above, you start playing the game of real estate at what Trevor calls “above the line.” At the very least, you want to be showing up above the line.

 

Rung #4 – Showing up EXCELLENT

 

When you’ve reached rung number four, you are showing up as EXCELLENT. Based on the pattern thus far, what do you think your results will be when you are EXCELLENT?… GREAT.

 

“If you’re excellent at negotiating deals or negotiating terms, or finding anything like that in your toolkit, you’re going to get great results,” Trevor said.

 

EXCELLENT = GREAT

 

Rung #5 – Showing up OUTSTANDING

 

When you are one rung away from the top, you are showing up as outstanding, meaning you will see excellent results. Trevor said, “As an outstanding investor, if you’re outstanding at raising capital, you’re going to have excellent results and be able to rinse, then repeat it and do more deals.”

 

OUTSTANDING = EXCELLENT

 

Rung #6 – Showing up EXTRAORDINARY

 

If you are at the top of The Real Estate Ladder of Success, you are showing up extraordinary. At this level, you apply yourself and you wake up every day and show up extraordinary in everything you do. As an outcome, you will produce excellent results.

 

People who show up extraordinary have a unique selling proposition and are able to market who they are and what they do with an extraordinary elevator pitch. If you adopted this extraordinary mindset, do you think you’d attract more people to your real estate outcomes?… You bet!

 

EXTRAORDINARY = OUTSTANDING

 

 

Trevor asked, “Where are you showing up today? Are you poor? Are you good? Are you great? Or are you playing above the line and you’re excellent, outstanding or extraordinary?”

 

It’s a conscious choice.

 

A philosophy that I got from Tony Robbins is that there is no failure, there’s only feedback. Maybe you’re playing at level three right now and you want to go to level four; or maybe you’re playing at level four and you want to go to level five. You have to align your state, your story and your strategy each and every day, to be able to show up and do it at that level.

 

Something else interesting about the success ladder, Trevor said, is “it takes a massive jump to go from poor up to good. It’s massive. But to go from good to great is literally about one yard, or one meter. To go from good to excellent is about one foot; that means you’ve got to do things just a little bit better. To go from excellent to outstanding is almost six inches, and then, just like an Olympic athlete, to go from outstanding to extraordinary or extra-ordinary is what we call a two-millimeter shift. It’s the small things, it’s the subtle differences in how you show up and how you play full out] that are really going allow you to live at the highest level.”

 

How to Objectively Determine Where You’re Showing Up?

 

How can we have an objective evaluation of where we are at on the success ladder? Trevor said, “it’s really situation-specific. We’ve all got things that we’re really good at and that we love to do and we kind of default to that, and we know that there’s other areas in real estate that we need to seek outer advice. I think the categories that you would break down into is ‘Who are you? What is your X factor or your unique selling proposition? What is your platform? What are you really good at? Is it finding deals? Is it working with contractors? Is it raising capital? Is it property management?’ and literally go through each of those categories and give yourself a score. When you give yourself a score, you’re literally saying ‘Where am I showing up on the six levels? Am I good? Am I great? And if so, what would I have to do differently to go to excellent?’ … It’s not about having necessarily a quantum leap and going from good up to extraordinary; it’s starting to understand that it’s the little things that add up to the big things. Going to some networking events, putting in more offers, driving more neighborhoods, getting really good at asking investors for capital. And again, we always want to shine our shield and sharpen our sword so to speak, so that we know we’re getting better.”

 

The outcome of this exercise is to raise your standards. It’s changing yourself from saying “I should” to “I must.” When you make that shift, like I did a few short years ago, and you resolve to get better one small step at a time, that is how you exceed your expectations for how much you can achieve over the span of year/decades.

 

Conclusion

 

The Real Estate Ladder of Success has six stages. At each stage, you put forth a specific effort and receive a specific outcome:

 

  • Rung #1 – Showing up poor equals painful results
  • Rung #2 – Showing up good equals poor results
  • Rung #3 – Showing up great equals good results
  • Rung #4 – Showing up excellent equals great results
  • Rung #5 – Showing up outstanding equals excellent results
  • Rung #6 – Showing up extraordinary equals outstanding results

 

Your overall goal should be to wake up every day and show up extraordinary. However, your first goal, if you’re showing up poor, good, or great, should be to show up above the line, meaning reaching rung #4 at the very least.

 

Determine where you are currently showing up on the ladder of success and brainstorm ways to climb to the next rung. Once at the next rung, repeat the exercise until you are consistently showing up extraordinary, and as a result, you will see the outstanding results you’re striving for.

 

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bussiness team growth

4 Tactics to Get More Out of Your Business Team

If your vision is to scale and create a massive business, at some point, you will need to hire employees. If you have never managed a team before, you likely won’t have a clue what you’re doing. Even if you have management experience, it’s a whole different monster when you are at the top of the food chain.

 

Fortunately, Shawn Casemore, who has published over 1000 articles, booklets, and resources on improving individual and organization performance, specializes in teaching business leaders how to effectively manage a team. In our recent conversation, Shawn provided 4 tactics to get more out of your real estate or business team.

 

1 – For contractors, consultants, and non-employees, make your business their priority

 

If you are a real estate investor, whether you’ve manage a team or not, you’ve worked with contractors. We all how much of a hassle that can be.

 

To get more out of your contractors, Shawn said, “you have to realize those folks have their own businesses and have their own priorities, and therefore you need to somehow make your business a priority.”

 

One method, which is what you see on the real estate TV shows, is to go out and beat up on your contractor and threaten to pull business if they don’t get their act together. However, TV isn’t reality. Go in and yell at a contractor and they may perform even worse.

 

Instead, here a few examples provided by Shawn on how to make your business the contractors priority that doesn’t involve throwing a temper tantrum:

 

Leverage

 

Give them more business and they will give you more attention. Simple.

 

Make them feel like they are a part of the business

 

For example, Shawn said, “when you’re going out to take a look at a property, you bring your contractor … with you. Do you involve them in the decision making? Do you actually give them the chance to take a look at situations and provide potential solutions, and when they do, do you thank them for it and you take some of their advice?”

 

When dealing with contractors, Shawn said, “it becomes trying to ensure that other people who support me, although they’re not an employee, they feel like this is their business. That comes back to building relationships, which includes things like trust [and] honesty. And you’ll find that a lot of contractors will be very receptive to that, because everybody treats them like crap, so they’re happy to work with those who actually treat them like a human being.”

 

Don’t be a jerk

 

As business owners, we are constantly in the business mindset. We are fixated on the finding the next deal, developing the next opportunity, or maximizing our cash flow. As a result, we’re so busy and stressed out that we may run over those who support us, hopefully inadvertently, and we can come off as jerks.

 

Shawn said that when we are in this business mindset, “that stress then when you turn to answer some questions of your employee or contractor comes out that you’re a little bit of a jerk. And then what do they think of you? They think you’re a jerk, so are they going to stand behind you? Are they going to be there when you really need them? The answer is no.”

 

Therefore, you must complement the business mindset (i.e. focusing on the next deal, cash flow, profitability) with a separate, people-oriented mindset. Shawn said, in regards to the people-oriented mindset, “in order to be successful, I can’t do this alone. I need people, be it employees or contractors, or otherwise, and people are receptive to other people. People are receptive of being treated fairly, being treated honestly. In fact, I can actually warm people up a little bit if I start to maybe go that extra mile or if I drop off a coffee. When I go in to see my contractors, I always try to grab some coffee for the guys.”

 

Other example that your contractors would absolutely love is to drop off a case of beer if they are working late on a Friday or a weekend.

 

2 – Ask for feedback, advice, and ideas on projects

 

Another way to get more out of your team is to ask for input on projects you are working on. For example, Shawn said “I was just speaking with a client this morning. We were working with kind of a subset of a small group of people in the organization. We identified some very minor changes to something. This morning we sent that out to the broader team before it went live and said, ‘Hey, give us your feedback. What do you think?’”

 

It’s important to understand that your team isn’t an amorphous blob. They are a collection of individuals with their own experiences, including personal experiences, work experiences, and their own ideas, and everybody wants to share those ideas and experiences. Therefore, Shawn said, “if you want to create a stronger team and a better business, you need to really understand that everybody’s an individual, and deal with them on an individual basis to get the most out of them, to get these ideas that help them feel like they’re part of something.”

 

Always ask for input and feedback from employees. Some of it might be terrible advice if they don’t have the experience that others on your team do, but many people just want to be heard, even if their ideas aren’t acted upon. If you can listen to them and start to capitalize on the good ideas, you will build a very strong team and an even stronger business.

 

3 – Schedule face-to-face personal meetings

 

Again, when we are in the business mindset, we may neglect to schedule enough time to meet with our employees. Shawn said, “you need to calenderize some time where you’re only dealing with your people… This isn’t a stop by a property and just say, ‘Hey, how’s it going? What’s new?’ … I tell my leaders all the time: Stick it in your calendar every Friday to spend the afternoon or the morning going around and just talking to people. You might not hit everybody every Friday, but make a point of doing that. What you’ll find is you’re able to better understand everybody as an individual, therefore when you’re positioning things, ideas, viewpoints, [and] asking questions, you can position it from a perspective that they personal appreciate.”

 

What if you have a remote team? Will having this interactions over the phone suffice? The answer is no.

 

Face-to-face interactions are important because you’re forced to pay attention and vice versa (you’ll see if they are sending emails), you can see their body language to see how interested they are, and it saves a lot of time (you can get across the same message in a 5-minute phone call that you can in 30 emails).

 

Therefore, if you have a remote team like Shawn, he says, “I schedule time (if they have Skype, or Zoom, or something else) where we get face-to-face. Maybe it’s once a month, maybe it’s once a week, depending on how important that person is to the business and how frequently you can interact… Face-to-face is key with those remote people to ensuring that you’re having a valuable dialogue.”

 

4 – Provide Individualized Recognition

 

Now that you realize you must treat each member of you team as an individual, it should go without saying that you need to recognize them as an individual as well. For example, Shawn said, “let’s say you’ve got a few people on your team and you have a great year and you do the cliché send them all a jacket or give them all a ball cap. That’s fine, but if you’ve ever received the jacket from maybe a business you were working in at some point, some people love that jacket, some people would rather have cash, some people didn’t like the color, some of them got their names spelled wrong. So when you look at recognition or just thanking people, that also has to be individual.”

 

Recognizing each team member as an individual is the only way to ensure that it’s actually valuable to them. In doing so, you are going to find people more appreciative and more supportive of your business

 

Conclusion

 

The four tactics for getting more out of your business team are:

  • For contractors, making your business a priority to them and making them feel like a part of the team
  • Asking for feedback and input on projects
  • Consistently have face-to-face interactions
  • Provide individualize support

 

Related: All You Need to Know About Building a Solid Real Estate Team

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

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build

5-Steps to Build a Million Dollar Consulting Program From Scratch

One of the most common questions newbie real estate investors ask is “How can I invest in real estate if I have no money?” Standard responses are, “Well, you have a few options. You can become a wholesaler. You can pursue zero money down creative strategies. Or you can raise money from private investors and become a syndicator.”

 

However, there is another option to building a war chest of cash to invest in real estate that many newer investors overlook. They can start a consulting program.

 

That’s right! And in my recent conversation with Sam Ovens, who has created 9 millionaires and 136 six-figure consultants from his trainings, he provided a step-by-step guide to create a consulting program from scratch.

 

Sam said, “When you’ve got not money, cash flow is the most important thing in the world because you have to keep yourself alive and you have to stay in the game.” But most importantly, he found that “you have to have confidence. If you don’t have a certain amount of cash in the bank, you start making lousy decisions, and you’re desperate. You’ll want to jump at a deal which you usually wouldn’t jump at if you have enough cash to float you through the year.”

 

If you want to start a consulting program, you don’t need a lump of cash upfront. Rather than selling a product, you are selling a service. You are selling advice.

 

So how do you launch a successful consulting program? Well, the following is Sam’s five-step process.

Step #1 – Pick Your Niche

The first step towards creating a consulting program is selecting a specific niche. The keyword here is specific.

 

“The man who chases two rabbits catches none,” Sam said. “A lot of entrepreneurs are too afraid to narrow their reach because of what they might miss out on, but they don’t understand without narrowing their niche, they don’t get anything.” You can always widen your focus later, but it is mandatory to select a narrow niche upfront.

 

How do you determine which niche to pursue? Sam says, “It honestly doesn’t matter. You can’t pick the perfect niche. There’s no way to do that. This isn’t a science or at least a science that exists at the present moment in time.”

 

Instead of wasting time trying to find the perfect niche, Sam recommends performing a thought experiment: Imagine someone has a gun to your head. They’re going to blow your brains out in ten seconds. What niche are you going to pick? Whatever comes to mind is a good place to start.

 

“Your mind is like an algorithm,” Sam said. “It optimizes. If something doesn’t work. It’s like ‘Okay, we don’t do that again.’ If something does work, it’s like ‘Maybe we’ll do more of this.’ So it doesn’t matter what you start with, it’s just that you need to start.”

 

So gun to your head right now, what niche do you pick?

Step #2 – Know Your Audience. Know What You’re Selling.

“People feel like they have to go out and just learn a whole bunch of skills and acquire a whole bunch of knowledge, and it’s the wrong way to go about it,” Sam said. “If you just go out and you start learning – learning what? What are you optimizing for? … Whenever you’re going to learn or whenever you’re going to acquire information and knowledge, you need to have a reason why. You need to have some sort of intent. Then once you have that intent, it’s very easy to acquire the knowledge.”

 

If you don’t know what your end customer wants, then how do you know what skills and knowledge you need to acquire? You don’t, which is why the next step is to go out into the market and find real problems that need solving.

 

Sam explains it to his clients this way: “Imagine that there’s a girl called Suzie and she’s sitting on a park bench. You’re siting on a park bench opposite her and you’ve got to guess what Suzie wants for lunch. You have no idea what Suzie wants for lunch. You could sit there and think about it all day. You could read every book there is. You could listen to every podcast. You could read every blog … and you still wouldn’t really know what Suzie wants for lunch… Very simply, Suzie is the market You need to go out to your market.”

 

If your market is real estate investors, for example, you need to reach out to them and ask them the following question: “What are the most painful problems you face on a day-to-day basis as a real estate investor?” And you don’t stop with asking one investor. Sam said, “One person can be wrong. One person can be an outlier. You need to listen to enough of them. I would say a sample size of about 20 or more. After you’ve talked to 20 people in one specific niche, you’ll start to recognize a pattern and you’ll start to recognize recurring themes between these conversations.”

 

When have these conversations and are attempting to uncover pain points, it’s important to remain as objective and unbiased as possible. Don’t fall into the confirmation bias trap. “A lot of people, they already know what they want to sell to the market,” Sam said, “so they go there and they’re asking questions to position it just so that they can sell their thing.” You need to remove all of our biases. You cannot have an agenda because you either won’t find a pain point, or you won’t find the biggest pain point.

Step #3 – Structuring the Offer

Now that we know what the market needs, we can structure an offer to fulfill that need. When structuring an offer, Sam uses what he calls a minimum viable offer, which is based on the concept Minimum Viable Product from Eric Ries (The Lean Startup). “[Eric] found in the sales world that people were building these big bloated products that had like a thousand features and they were like rocket ships, and people were sick and tired of all of this crap; they just wanted something lean, and just something that was simple and could do the job. So these new protagonists emerged in the market who were people who focused solely on minimum viable products and made them dead simple, and they were actually able to beat the fancy, complex products. It was a case where simple beats complex. In the consulting world right now it’s gotten complex, so it’s a ripe time to come in with that same strategy.”

 

Minimum viable offer is the same as minimum viable product, except selling services instead of products. Sam said, “We look at the customer’s problem and we ask the question to ourselves ‘What is the least amount of work I can do to get that person what they want?’ … I’m just trying to offer the least possible because that means it’s easier for me to deliver. It mean’s it’s simpler for the client. It’s more simple to communicate and it’s a lot easier to do.”

 

Your answer to that question is your starting point. Then, you go out to the market, sign up customers, and begin working with them, at which point they will either get the result they want or they won’t. Then, you go back to your original answer and determine what you can improve, where you went wrong, what you should do more of, and what you should do less of. Now you have a new starting point, so you go back to the market and start the process over again. Sam said, “It’s just an iterative process, each time coming closer and closer to the perfect offer.”

Step #4 – Pricing the Offer

When determining how much to charge for your offer, Sam recommends pricing it at around 10% of the value. “These days, it’s all about value,” he said. “You really have to determine what is it worth for this person to have their problem fixed.”

 

Here is an example Sam provided for how to price an offering:

 

“Let’s say we’re in real estate investing and this guy has a bad deal; it’s bleeding him out like $2000 per month. If he doesn’t fix that, it’s going to cost him $2000 per month for some horizon of months. You could assume maybe six months – it would cost him $12,000. Then if we would have priced our offer, if we thought we could save him from that deal, we could say ‘Okay, the value would be $12,000 for him,’ and to make it a blockbuster deal, we want to price on 10% of value. If he’s going to save $12,000 if we charged him $1,200 for that, then it’s a no-brainer, right? That way you’re going have an awesome offer.”

 

In this example, we could technically charge $10,000 or more, but by offering your services at 10%, Sam said, “You don’t even need to market. You don’t need webinars. You don’t need all this crazy copywriting, which all these copywriters do and put highlighter and countdown timers everywhere. It’s just a bloody good offer and people talk about it.”

Step #5 – Learn the Skills and Knowledge

Once you know what the market needs, you now know what skills and knowledge to acquire.

 

Sam said, “Learning things is very easy. Knowing what things to learn is the hard part. That’s how we figure out what to learn. We optimize off the market. We go speak to the market, find out what Suzie wants for lunch, figure out a solution to give Suzie what she wants, and then acquire all the knowledge and information necessary in order to fulfill Suzie’s want.”

Conclusion

A great way to build up a nest egg to use for real estate investing is to start a consulting program. Building a consulting program is a five-step process:

 

  • Select a specific, narrow niche
  • Know your audience to know what to offer
  • Structure your offer using the minimum viable offer concept
  • Price your offer at 10% of value
  • Obtain the skills and knowledge needed

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

I’d also be VERY grateful if you could rate, review, and subscribe to the Best Ever Show on iTunes by clicking this link: http://bit.ly/2m2XyM1

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wallet with cash

How To Get Rich By Investing: 7 Principles for Attaining a $500 Million Net Worth

 

There’s rich, and then there is super-rich. If you are rich, you stay in the nicest hotels, eat at the fanciest restaurants, and drive the trendiest cars. The super-rich own those things. If you’re wondering how to get rich by investing, there are seven key principles to follow.

 

John Bowen, who founded four multi-million dollar businesses, authored more than 15 books, and is a regular columnist at HuffPo and Financial Planning, is a leading expert on extreme wealth, which he defines as a net worth of $500 million or more.

 

These are not your everyday entrepreneurs. In fact, according to the Credit Suisse 2016 wealth report, there are less than 2,500 US citizens with a net worth of $500 million or more. With an estimated population of 322.8 million, less than 0.0008% of the population meet the requirement for the “super-rich” designation.

 

Obviously, these are great individuals to look to if you’re attempting to learn how to get rich by investing in and/or creating successful companies. So, John recently conducted a study of elite business owners with the purpose of identifying exactly how they were able to achieve such high levels of success. Upon analyzing the r