Real Estate Investing Blog and Resources

Investing in real estate can be intimidating when just starting out or trying to better understand general industry terms, particularly when it comes to the topic of real estate investing, which covers a wide variety of areas including: property management, banking, land, financing options, budgeting, rental agreements, selling, buying, and so much more. Following a real estate investing blog like this one and reading as many investment advice books as you can will be invaluable in helping you keep up with what’s going on in the market and the latest industry perspectives.

The More You Know

The more information that you have when it comes to a potential real estate investment option, the better. Having more data on the subject will allow you to make smarter, and more informed, decisions. Depending on your short term and long term investment goals, there are a variety of real estate options available today to help meet your needs.

Real Estate Investment Advice

No matter where you are in your investment journey, it is always helpful to get advice and tips from experienced real estate professionals and investors. Whatever your question or area of concern, know that there are resources available to help you augment and enhance your real estate knowledge.

Real estate can be a powerful tool used by passive investors to build massive wealth. Learn more about general real estate investing and explore helpful resources.

The New Rules of Real Estate Investing

The New Rules of Real Estate Investing

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

 

Going Door to Door

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

 

Persistence is Everything

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

 

Start a Genuine Dialogue

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

 

Be Relatable

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

 

Maintaining a Positive Attitude

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

 

Don’t Dwell on Negative Circumstances

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

 

Learn to Accept Unavoidable Challenges

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

 

Familiarizing Yourself With Unconventional Methods

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

 

Rent-to-Own Real Estate

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

 

Owner-Financed Deals

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

 

Securing Larger Down Payments

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

 

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4 Tips to Raise More Money From Passive Investors

4 Tips to Raise More Money From Passive Investors

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

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

 

1. Launch a Thought Leadership Platform

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

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

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

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

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

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

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

 

2. Ask Positive Questions

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

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

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

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

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

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

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

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

 

3. Make Your Own Opportunities

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

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

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

 

4. Find Complementary Partners

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

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

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

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

 

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The $5 Billion Plan for Your Apartment Syndication Business

The $5 Billion Plan for Your Apartment Syndication Business

In late 2020, I achieved one of my original long-term apartment syndication goals: $1 billion under management. A large portion of that $1 billion (a little under $300,000,000) was added in 2020. At the same time, the podcast I created, Best Real Estate Investing Advice Ever, and the Best Ever brand in general, continues to thrive.

Both accomplishments were truly a team effort, and they required constantly evolving and employing new ideas to stay at the top of our game. Here are the five ideas we’ve implemented in our business in the past 18 months to continue to grow our syndication business and the Best Ever brand.

 

1. Protect yourself from the biggest liability you’re currently not paying enough attention to.

For 99 percent of syndicators, the biggest liability is compliance. Sure, they work with attorneys to create their investment documents (emails, investment summaries, PPM, operating agreement, subscription agreement, etc.) and entities. They will also ask their attorneys questions as they arise. The liability is due to the questions that aren’t asked, which puts them at risk.

Our solution: Hire an in-house compliance person. This is a legal expert who knows what questions to ask to cover your blindside.

 

2. Bring the best out of your team.

When you are starting a new company, it is usually just you, your business partner, and maybe a few other people, like virtual or executive assistants. Job duties aren’t very defined since everyone is wearing a lot of hats.

Eventually, as you begin to grow, you bring on more team members and roles and responsibilities become more defined.

When it is just you and your business partner, compensation is usually tied directly to the number and size of deals completed. But once you bring on salaried employees, how each team member’s performance impacts the success of the business begins to blur. Also, their compensation isn’t directly tied to the number or size of deals. As a result, what motivates you and your business partner/s isn’t the same thing that motivates your salaried employees (i.e., the number and size of deals).

Our solution: Create a single key performance indicator (KPI) for each team member. That way, they know exactly what is expected of them and are motivated to exceed that KPI to receive a bonus.

 

3. Enjoy better deal flow, deliver better and more stable returns, and create more sanity.

Most, if not all, syndicators start off raising money for individual deals. They usually have a list of passive investors who have previously invested in a deal or expressed interest in investing. Once a deal is identified, the opportunity is presented to this list. While the syndicators secure commitments, they work with their attorneys to create the deal documents and form the entities. After the deal is purchased, the search for a new deal begins.

There are a few drawbacks when it comes to scaling a business by raising money for one deal at a time. First, it limits your deal flow, because you are usually hyper-focused on a unique asset class in a single market. Second, it is riskier for passive investors, because their entire investment is used to fund a single opportunity. Lastly, there is more pressure on you, because of the race to raise all the money between contract and close.

Our solution: Create a fund instead of doing single asset purchases. Creating a fund will increase your deal flow because you can be more flexible with the types of assets you target. It generates better and less risky returns because funds are spread across multiple deals and markets and less capital sits idle. And it creates more sanity for you because the money is committed before a deal is identified.

 

4. Get better results on your thought leadership platform and in your commercial real estate business.

Something we focus on a lot at the Best Ever brand is the importance of a thought leadership platform. It is one of the best ways to build a reputation as an expert in your industry, which increases your credibility and ability to attract passive investors.

When you are first starting out as a syndicator, you are likely the main (or only) source of content. You are writing, editing, and posting blogs. You are planning and hosting the meetups and conferences. You are scheduling guests, recording, editing, and posting the podcasts. You are the owner of one or more social media accounts. However, as your brand begins to grow, it can become a full-time endeavor. Eventually, you will get to the point where the time spent on maintaining and growing your brand is taking away from your focus on the real estate business. Either the brand suffers, or the business suffers.

Our solution: Transition your thought leadership platform to other people once it matures. This is more than just outsourcing editing. This means having people who create the content, as well as an editorial director to manage all the moving pieces. They will focus on growing your brand, so you can focus on growing your real estate investing business.

 

5. Overcome the success paradox.

Feedback from others is one of the best ways to improve and become a better real estate entrepreneur. However, the more successful you become in business, the less likely you will receive constructive criticism from your team members.

Our solution: Ask three people in your circle to provide you with honest feedback. Also, identify an event that occurred at least a month ago that didn’t go according to plan and think about how you were responsible for it taking place. Lastly, create a Google Form and ask your team members to provide you with anonymous feedback.

 

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Forging an Entrepreneurial Mindset

Succeeding in business is about a lot more than simply coming up with a good idea and putting it into action. To really succeed, an entrepreneur must develop the attitudes and mental habits that will allow their business to flourish. Whether you’re getting started in commercial real estate investing or scaling your existing company, you need to work on yourself to create a winning mindset.

 

The Importance of Developing the Right Mindset

From raising money to building a team, there are many aspects of running a commercial real estate business that require mental fortitude. You simply can’t win in today’s competitive market without embodying the attitudes that are conducive to success. A closed-minded or arrogant entrepreneur will always lose out to a humble and open-minded competitor.

 

How to Build an Entrepreneurial Mindset

A positive mindset isn’t something you should expect to have innately. It’s not that some entrepreneurs are blessed with the right attitudes while others are doomed to failure. You can proactively cultivate a better mindset by learning about the types of attitudes that prove beneficial.

By examining your own mental habits and seeking to improve them, you can become better at management, investor relations, or any other area of business. Here are five possible areas for improvement.

 

Don’t See Transactions as Inherently Confrontational

Whether you’re trying to buy or sell a commercial real estate deal, you need to keep in mind that business transactions are not, by definition, confrontational. Remembering that the other party is not your adversary will help you build trust. It will also remove any sense of anxiety you might otherwise feel.

If you approach every interaction as a confrontation, you’ll create tension where it doesn’t need to exist. Some salespeople imagine that they’re on one side while the potential buyer is on the other. This makes them think they have to trick or beat the other person in order to come out on top.

Alternatively, a salesperson could recognize that they’re simply helping another human being solve a problem. Instead of being on different teams in direct competition, they imagine themselves and the buyers as teammates working together towards a common goal. You can apply this same mindset to all negotiations and discussions involving your business.

 

Strive for Outcome Independence

It’s important to remember that most business ventures have a probability of success rather than a certainty of a positive outcome. Your job as an entrepreneur is to determine whether a particular initiative is likely to work. From there, whether the move actually pays off won’t have an effect on the soundness of your decision. You made your choice according to the potential risk/reward ratio, not because you knew the endeavor would prove successful.

This attitude can be termed outcome independence. A smart entrepreneur should realize that the outcome of a move doesn’t have to define the move itself. Even if a commercial real estate deal or negotiation ends in failure, you can learn from the episode without considering it a mistake.

Take, for example, a commercial real estate investor cold calling property owners. This is an attempt with zero risk and a very high reward. The worst thing the people could do is say “no,” or one of the owners could be willing to sell their property. Even if the investor gets nothing but negative responses over the course of an afternoon, they shouldn’t view the effort as a failure. This represents an outcome-independent mindset.

 

Always Learn From Your Mistakes

Whenever a business project fails, you owe it to yourself to learn from the experience. This is what allows you to grow as an entrepreneur and a person. Any failure left unexamined is an opportunity that goes wasted.

The potential lessons within a project are a major part of the project’s value. Whatever the result of the endeavor, you’ll still have a chance to learn from the experience. One way to think of this dynamic is in terms of 50/50 goals. With every goal you set, only 50% of the success is based on whether or not you actually achieved what you were hoping for. The other 50% comes from the ability to draw some lessons from the experience.

Consider the example of a failed negotiation. Even if you didn’t finalize the deal you were expecting, the endeavor will still be 50% successful if you come out of it smarter and stronger. Not only will developing this mindset make you better at self-improvement, but it will also help you stay motivated. With 50/50 goals, total failure is practically impossible.

 

Fail as Early and Quickly as Possible

Failure is inevitable in business. Some ideas aren’t as good as you thought they were, and some ventures simply don’t work out. While you shouldn’t let failure get you down, you should do everything you can to mitigate the damage. One way to do that is by making your failures as short-lived as possible.

Imagine, for example, that you are running a company that has just launched a new product. As demand exceeds expectations, you press your supplier for more units, unsure of whether they will be able to keep up. If you stick with the supplier even as they barely manage to fulfill your orders, you’re setting yourself for eventual failure when demand finally outstrips the suppliers’ capacities. Instead of delaying the inevitable, consider asking the supplier to provide a massive amount of units right away. When they say they can’t fulfill the order, you’ll have identified the point of failure early enough to change course.

Drawing failure out will only compound the damage. Learning from failure is important, but that doesn’t mean you want your failures to become year-long courses. Learn the lessons as quickly as possible, then abandon the failure before the costs rack up.

 

Don’t Try To Master Everything

While all entrepreneurs would like to be amazing at everything and micromanage every aspect of their companies, such an ambition simply isn’t feasible. The best managers know how to delegate tasks in order to maximize efficiency at every level of a company.

If there are certain tasks that you’re simply not very good at, don’t hesitate to hire someone else to do the job. There’s a reason that division of labor is a fundamental component of contemporary society. Nobody’s perfect at everything, and only vanity would keep you from making use of others’ expertise.

It can also be worth it to outsource tasks that you’re actually quite good at in the interest of freeing up your time. As a manager, you should be focused on strategy and upper-level operations. You are the company’s architect, which means pounding nails and sawing wood isn’t the best use of your time no matter how great a carpenter you may be. If you can outsource a daily task to someone who can do 70% as good of a job as you, it is still worth it. You’ll make up for the loss in efficiency by giving yourself time to work on bigger ideas.

 

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Six Investing Strategies to Thrive in 2021

Six Investing Tactics to Thrive in 2021 and Beyond from Real Page Chief Economist

COVID-19 changed the commercial real estate investing landscape in 2020. Heck, Boise, ID, of all markets, experienced the greatest rent growth one year into the pandemic of 16%.

Now that we are over a year into the pandemic-induced recession, many commercial real estate experts are offering their advice on how you need to change your investing approach. One firm that is leading the way in providing such insights is Real Page.

Greg Willet, Chief Economist at Real Page Inc., was a featured speaker at this year’s Best Ever Conference. In his presentation, he outlined six investing and operational strategies to implement in 2021.

 

Tactic #1 – Throttle up your sun belt assets

One of the best strategies for 2021 is to get in front of the renter demand by focusing on markets that performed well throughout the COVID-19 pandemic. ApartmentList.com is a good resource that tracks rents across the nation on a monthly basis.

Many markets in the Sun Belt region (southern US from southern California to Florida) performed well since the onset of COVID. In fact, with the exception of the major MSAs in California and Texas, New Orleans, Nashville, Orlando, and Miami, basically all Sun Belt markets experienced rent growth rates greater than the national average of 1.1%.

Also, don’t rule out the Midwest. Outside of Chicago, Minneapolis, and Cleveland, the other Midwest cities posted positive rent growth rates in 2020 (most exceeded the national average, too). Demand is not as strong as it is in the Sun Belt regions, but low supply in the Midwest will drive demand in 2021.

 

Tactic #2 – Don’t bank on flight-to-quality

Historically, when a recession occurs, top-tier Class A products discount their rents. As a result, “flight-to-quality” occurs – the lower rents of Class A products attract renters which boosts occupancy. However, during the COVID-induced pandemic in 2020, these rent discounts did not result in an uptick in demand to the extent experienced in previous economic recessions. Instead, renters have had the tendency to move down and downgrade to Class B and Class C products to save money. This trend was also expedited by stay-at-home orders with people moving from expensive urban areas to the less expensive suburbs for more space at a lower rate.

 

Tactic #3 – Explore a low-capital value-add strategy

Similar to not banking on “flight-to-quality,” don’t pursue large value-add opportunities either. Hold off on the bells and whistles and focus on maintenance issues and the appearance of the asset. In doing so, the asset will be more affordable to a larger group of renters.

Another benefit of this approach is your ability to turn around a vacant unit faster (or keep the existing resident) with a lower quality upgrade. This will boost occupancy and support resident retention at lease expiration. Plus, the lower quality upgrade will leave money on the table for a future buyer.

 

Tactic #4 – Measure what is working now

It is the right time to adjust the recipe for your operational “secret sauce.” You do not want to be doing what worked well in the past. You want to be doing what works well now. For example, testing and measuring the success of technology at your properties.

Millennials overtook Baby Boomers as the US’s largest population in 2019. So, pay attention to what young adults are doing and how it impacts the types of units that are in demand. Then, determine how this impacts your marketing needs because certain marketing strategies are better and worse based on what is in demand.

The bottom line is to measure everything to see what is different now compared to two years ago.

 

Tactic #5 – Focus on renewals

Since the onset of COVID-19, there has been large variability in renewal rates across the country. However, you must make it a priority to hang on to the good residents who are making their full payments on time. Taking a hit on rent on a renewal lease might be a good thing if it is a high-quality resident.

Pay attention to the type of units with lower and higher renewal rates and ask yourself, “Why aren’t they renewing?”. It may not be the rental rate or other fees, so focus on the non-pricing factors, like maintenance and customer service.

 

Tactic #6 – Take back control of your brand

Know what you are selling and who the target for your product and message is in this marketplace. The overall message should focus on service, appearance, ease of living at the property, the location – don’t focus on price.

 

Six Tactics to Thrive in 2021

Focus on the markets that outperformed the national average in 2020, especially the Sun Belt and Midwest.

Consider avoiding top-tier, Class A+ and Class A products since many renters elected to downgrade to Class B and Class C in 2020.

Instead, consider a low-cost value-add strategy focused on addressing deferred maintenance and appearance issues.

Test out new operational strategies to determine what works today because what works now didn’t work two years ago.

One of the best operational strategies of 2021 is to retain your high-quality residents, even if it means not increasing their rent at renewal.

Focus your asset’s branding and marketing on lifestyle-related factors instead of pricing factors.

 

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business people weather rate changes

Buy with Conviction!

After graduation from the University of Michigan with a J.D., Sam Zell worked as a lawyer for one week before realizing that being a lawyer was not for him.  Would you believe that before his graduation in 1966, he was managing over 4,000 doors (with fraternity brother Robert Laurie) and outright owned 150 units?  When I learned Zell had quit after just one week as a lawyer, I thought it odd that someone would go through all the work to obtain the J.D., only to walk away so quickly. Why? He saw something and he knew something!

If Sam Zell is a new name to you, take the time to enjoy learning about this colorful and creative entrepreneur. Zell built a veritable real-estate empire with a watchful eye on the legal and compliance departments of companies he visits.  After an interview with “LA Observed” in 2008 where he used some “salty language” an internal company memo commented, “Sam is a force of nature; the rest of us are bound by the normal conventions of society.”  The point being salty language by guests is tolerated, for employees – it’s out of bounds. Zell is an astounding entrepreneur and is as colorful as he is creative.

For “the rest of us” who may never attain the stature of Sam Zell, we may never see the opportunities he saw in the 70s, 80s, and beyond.  However, we are still faced with similar decisions.  Decisions such as which of the core four do we like most?  Where are interest rates headed, and with what impact?  What about the economy, the new administration, oh, and what about that tech stock your friend told you to buy?

Let me remind you of a few tidbits you likely once knew, but like many of us, may have forgotten. Alan Greenspan was coined “Maestro” in Bob Woodward’s book Maestro published in the Fall of 2001.  Why?  After the tech bubble burst, he reignited the economy by lowering interest rates in a dramatic fashion. Greenspan manufactured an artificial yet undeniable force of liquidity and recreated the “Risk On” trade. Team Bernacke and Yellen (our two Federal Reserve board chairs who served the Fed from 2006 – 2018 collectively after Greenspan) continued with this theme and continued large asset purchases at the Fed’s discount window and QE everything.

This does have unintended consequences, however. Does anyone recall a brief moment in time in 2019 when the Fed took its foot off the gas pedal and slowed their purchase of asset-backed securities and the overnight repo rates jumped to 10%?  The Fed subsequently responded and ramped up their asset-backed security purchases to bring the repo rate back down.

After an extended period (going on 20 years plus) of on-again off-again quantitative easing by the Fed, many of us are tempted to look in the mirror and pontificate about the shoulda, woulda, couldas in life that might have been. “I should have put more money into real-estate.  But now it’s too late because interest rates are going to go up and the run has happened.” Right?  Not so fast.

Last summer the Department of Labor (DOL) made a change to how retirement plan administrators (think 401(k) and 403(b) plans) are allowed to invest the assets they manage in their target-date retirement funds.  To affirm this, take a moment to do an internet search for “US Department of Labor Information Letter On Private Equity Investments”. Retirement plan administrators are now permitted to invest a reasonable amount of the assets in their target-date funds in private investments.

Typically, before interest rates went to zero, an age-old rule of thumb for investors was to take the investor’s age, put a percent sign behind it, and that’s the percent of the investor’s portfolio that should be allocated to bonds. Do you think the typical 55-year-old has 55% of their 401k in bonds?  My guess is no. The stock market has been good, and bonds have such low yields, there’s no sizzle.  And, when interest rates go up, bond values go down. It’s difficult for an investor to get excited about bonds.

A compelling argument can be made for syndicated real-estate private investments. Syndicated self-storage assets, for example, are definitely on the come-up. In a deep value-add storage deal, the annual increase in Net Operating Income (NOI) divided by the cap rate is the increase to the property’s value. (Deep value-add meaning increasing the rentable square foot by a large percentage.)  In other words, an 80,000 square foot expansion may add $5-6 million to the property valuation.  These types of private investments may have a five-year cumulative preferred return of 7%, a 50 – 50, GP – LP waterfall split, and an IRR of 14-15% with an Equity Multiple of 1.8 – 1.95.  This is much more compelling than buying treasury bonds or corporate bonds with Yield to Maturities in the low single-digit range.

Here are some questions and I challenge you to think and write down your answer before looking below. In 1982, when Paul Volker broke the back of inflation by hiking interest rates, what was the P/E ratio of the stock market then, how high did the Federal Funds rate go, and what is the stock market P/E ratio today? With the increase in M2 liquidity in our economy, and the recent jump in yield for the 10-year government bond (Feb – March 2021) – what does that tell you about the potential for inflation going forward?

In 1982, the stock market had been in a 14-year sideways moving bear market.  The P/E ratio of the market was 7, the Fed Funds rate got to 18 and the P/E ratio of the market today is in the mid to upper 30’s.  The point – stocks may easily fall in an inflationary environment.

If stocks are richly priced and can repeat the ~50% loss they had in the last two cycles (2000-2002, 2008-2011) would the retirement plan administrator be wrong to replace part of the bond allocation AND part of the stock allocation with private investments like syndicated value add storage assets?  If the P/E ratio got to 7 in the last interest rate hike cycle, where do you think it’s going to go this cycle? I’m not saying the 401(k) administrators will do this, but I am saying they may.

I recently picked up the March 2021 copy of Investment Advisor magazine and read an article about the current allocation of the Target Date fund allocations to private investments. Of 138 Defined Contribution plans they asked, each of which has at least $100 million in assets, 9% have already incorporated Private Investments in their funds.  Real estate private equity is the highest allocation with real-estate private debt, with hedge funds, private equity, and liquid alternatives following behind. That strikes me as quite a move since last summer.

So, Sam Zell is a real estate baron and a brilliant one at that.  You and I may never have the swagger of Zell, but we can still buy with conviction in the face of likely higher interest rates.  Why?  That’s for you to say. Just know that there is at least one fellow real estate investor out there who predicts defined contribution institutional money is coming to syndicated real estate, and a lot of it!

About Ted Greene: 

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

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My 5 Takeaways from BEC2021 Day 1

Four Steps to Build a Team That Lasts

Liz Faircloth, The Real Estate InvestHER

Step 1: Map out where you want to go: Determine your short-term (1 year) and long-term (3 and 5 year) goals. Define an overall vision.

Step 2: Take a personal inventory: Spend half a day figuring out everything you bring to the table from a credit (asset and liabilities), time, experience, skills, personality, and leadership perspective.

Step 3. Determine WHO you need to meet your goals and vision: Based on your business model, figure out the major roles you need to fill. Based on what you bring to the table, determine which roles you will fill and which roles you need a team member to fill

Step 4. Find people to gain alignment and diversity: The biggest mistake when building a team is lack of alignment (values, goals, expectations, entrepreneurial spirit) and lack of diversity (personality, risk, tolerance, skill set, experience). Leverage personality assessments to identify hires who complement your skills and gaps, and who are in complete alignment with your value.

Seven Lessons Learned With $2.8 Billion of Real Estate During COVID

Jillian Helman, RealtyMogul

Lesson #1. Play defense before an economic crisis, not during a crisis: Three things to do during economic expansion to prepare for economic recessions: underwrite well and don’t do deals that don’t met your underwriting criteria; have a strong property management team in place; have open conversations with your lenders to ensure they will pick up your call during a recession.

Lesson #2. The proforma is always wrong: When creating your proforma for a new opportunity, have a minimum contingency budget of at least 10%, scale back the number of units you expect to renovate and lease, assume an exit cap rate that is 1% greater than cap rate at purchase, and increase vacancy and bad debt to stress test.

Lesson #3. Take a breath and be deliberate: Jillian’s top priorities are the health and safety of residents and team, keeping occupancy up, and shoring up cash reserves. This involved taking a deep breathe and deliberating to determine how to best focus on these priorities. She decided to halt renovations, rent increases, and all nonessential repairs.

Lesson #4. Don’t be afraid to innovate: For example, Jillian began using virtual, self-guided tours.

Lesson #5. Do experiments and test the market: In the example above where Jillian experimented with virtual tours, the conversion rate was higher than in-person tours with a leasing agent. Since the experiment works, she doubled down.

Lesson #6. Be a stellar communicator: Provide detailed monthly updates to investors, communicate what you are proactively doing, and be available and receptive to investors.

Lesson #7. Take a position: During COVID, this started by overcoming fear. Then, Jillian took an offensive position, assumed the world wasn’t ending, that the world would recover, and that data supported that investing still made sense.

How to Bulletproof Your Mind for Extraordinary Real Estate Success in 2021

Trevor McGregor, Trevor McGregor International

Your mind is like a fertile garden. Whatever you plant, the soil will return, and your thoughts are the seeds. Plant positive powerful thoughts. To avoid too many weeks growing, you must stand guard at the door of your mind.

The two things that happen during the prime years of your life: The prime years of your life are between 25 to 65 years old. This is when you have the most opportunity as well as when the most regrets are formed.

TFEMAR: a thought turns into a feeling; feeling into an emotion; emotion into motivation; motivation to take an action; the action has a result. Therefore, your thoughts equals your results.

The 4S Success Formula: To be successful, you need to be in the right state, have the right story, the right strategy, and the right stands. Your state is your physiology, focus, and language. Your story is your identity – you are either a victim or a victor. Your strategy should be based on a character trait integration – what would so-and-so successful person do?

Why We Are Currently in an Upcycle

John Burns, Burns Real Estate Consulting

High demand 

  • Consumers made $1.03T more than usual last year due to government stimulus 
  • Consumers spend $535B less than usually last year, despite spending more on goods
  • Consumers saved an additional $1.6T in 2020 compared to 2020
  • Most homeowners and potential new home buyers are far better off financially today than a year ago
  • Google search has risen 56% for new homes, 9% for new homes
  • Millions of workers no longer need to commute

Low supply:

  • Home listings are down over 40% YoY
  • New supply has fallen – 10% fewer communities to sell from YoY
  • Unsold new homes dropped 69% YoY

High demand + low supply = 2021 housing boom

Three Things it Takes to Make the Inc 5000

Defining your culture: Start with your why. why do you do what you do? Why do you go to work in the morning? Then, transcribe your why into a one or two sentence mission statement to inspire you and your team to show up.

Next is to know where you are going and what the end state looks like. This is your vision – what does success look like to you.

Third is to define your values. These are the behaviors you want to see in your organization.

Last is to avoid the say-do gap. Be care that you don’t say one thing and do another, because then your culture isn’t believable.

Developing your plan: Understand what you are going before you do it, but set a time limit. A good rule of thumb is to understand and education yourself for 90 days, develop a plan for 90 days, then go out and take action.

A good strategic plan includes three goals, three to five objectives, and multiple key results over a three year period.

Assemble your team: First, understand your strengths and weaknesses. This is best accomplished by asking your friends, and especially your spouse. Then, find people who fulfill your weaknesses.

When hiring people, focus on their character more than their competencies. You can teach competencies but you cannot teach character. Then, focus on experience but understand their track record to ensure they were successful because of skill and not luck.

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Top 5 Takeaways From BEC2020 Part 2

BEC2021 is less than 24 hours away!

Yesterday, I wrote a blog post that highlighted the top takeaways from the first day of last year’s conference, giving you a behind-the-scenes look at what to expect Thursday, Friday, and Saturday.

In this post, we will focus on the top takeaways from day 2.

The Life of a Champion

Best Ever Conference 2020 Speaker: Andre Reed, Buffalo Bills Hall of Fame Wide Receiver

Andre Reed, NFL Hall of Fame

Value your huddle: Everyone on your team needs to be on the same page. Everyone needs to know what the game plan is and everyone needs to execute the game plan. Everyone needs to respect each other and listen to each other’s input and feedback. Champions lead by influence, not authority.

Know your role: Champions know what they are the best at and what everyone on their team is the best at. Everyone focuses on their strengths for the betterment of the team.

You win some and you lose/learn some: Champions know that things will not always go according to the plan. They know how to handle things when everything goes wrong and make it out the other side stronger.

Champions aren’t randomly made: Being a champion is not based on luck. It is not a shake of the 8ball. It comes from hard work and following the three lessons above.

Multifamily is the Most Lucrative Real Estate Investing Strategy

Speakers: Mark and Tamiel Kenney – Co-Founder, Think Multifamily

Mark and Tamiel Kenney

Multifamily is the best asset class to invest in.

Multifamily has better economies of scale. You can secure nonrecourse debt on multifamily whereas you are personally liable for the recourse debt secured on single family.

You can hire a 3rdparty to manage multifamily whereas you’ll likely self-manage your SFRs.

The value of multifamily is based on performance whereas the value of single family is based on comps.

You can go bigger faster with multifamily.

Demand for multifamily isn’t going away. Traditionally, people transition from renting to buying when they get married and start a family. Currently, millennials are delaying marriage and starting a family, so they are renting longer.

As a syndicator, you can truly make money with $0 down through the acquisition fee, the ongoing asset management fee, and the profit splits. The limited partners must invest money to make money.

Three Secrets to Achieving a $100M+ Net Worth

Speaker: Richard Wilson – CEO, Family Office Club

Richard Wilson, Family Office Club

1. Play a unique game: Come up with a way to separate yourself from your competition. You need a hook. Are you offering a unique product? Or you marketing in a unique way? You need to figure out what you can do to differentiate yourself from the pack.

2. Create a barrel of fish: One of Richard’s competitors sold their family office for $500 million. The business revenue didn’t support the $500 million valuation. Rather it was the network that was being purchased. Revenue is great but having a barrel of fish – a strong network – is even more powerful and profitable.

3. Find a choke point: When you find a situation in business where you or someone else struggles and you have a way to relieve that, it can be very profitable. Find out what someone’s pinch point is and create a business that solves that problem.

How to always hire the right team member

Speaker: Scott Lewis – Spartan Investment Group

Scott Lewis, Spartan Investment Group

Hire team members with experience, which is a combination of skill and luck. Focus on the skill sets your business needs and hire people with those skill sets. Team members must have good character so that they are ethical and responsible when a deal goes bad. Create a culture with a mission, a vision, and values to attract team members who align with that culture.

Three questions to ask potential team members are 1) what is your leadership philosophy, 2) tell me about a deal that went sideways and what you did, and 3) what is your due diligence process.

#1 Way to Quickly Create More Content

Speaker: Neal Bawa – CEO and Founder, Grocapitus

Neal Bawa, Grocapitus

You don’t scale by adding more content. You scale by repurposing content.

Neal’s objective is to repurpose every piece of content at least 10 times. If he records a 1-hour podcast, he will create 1-minute videos and post them to YouTube. The best YouTube videos are pushed to investors and put into an ebook. The podcast and 1-minute videos are also shared on Facebook and LinkedIn. Etc.

To hear more actionable advice from veteran commercial real estate investors, make sure you attend BEC2021 this week. Click here and use the code WINNERS30 to get 30% off your ticket.

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Top 5 Takeaways From BEC2020 Part 1

The Best Ever Conference in 2020 was packed full of actionable investing advice from real estate pros.

In preparation for BEC2021 this week, I wanted to circle back to the top takeaways from last year’s conference for a sneak peek at what to expect from the 2021 line-up of speakers.

In this post, we will focus on the top takeaways from day 1.

Timeless Economic Advice for Real Estate Investors

Speaker: Glenn Mueller – Denver University

Glenn Mueller, Denver University

The three main drivers of real estate demand are population growth, GDP growth, and employment growth. Compared to previous periods of expansion, these three factors were lower during the post-2008 recession, pre-COVID period. Additionally, these factors are nearly identical to the interest rates (i.e., the costs of real estate). As a result, the most recent expansionary period has been more stable and exceeded the typical 10-year periods of expansion in the past.

The three metrics that run real estate cycles are vacancy, rent growth, and income. When vacancy is low, rents increase. When rent increases, income also increases. Since these are the factors that run the real estate cycles, you should be analyzing them on a frequent basis. And the best place to stay up-to-date on these metrics is CoStar. Either purchase a CoStar subscription yourself or leverage a relationship with a broker who has their own subscription.

Lastly, industrial has been the best asset class in the past five years (as well as during the COVID recession). Why? Because of the Amazon and Walmart effect. Amazon’s online business and the resulting increase in Walmart’s online business has benefited the industrial asset class the most.

Multifamily Underwriting Secrets of $2 Billion Real Estate Crowdfunding Expert

Speaker: Jilliene Helman – CEO, RealtyMogul

Jillian Helman, RealtyMogul

The proforma (your income and expense projections) is always wrong.

Secret #1: To minimize the “wrongness, ”always includes a minimum 10% contingency budget. For example, if you expect to spend $10,000 per door in renovation, budget for $11,000 per door.

Secret #2: Use a cap rate at exit that is at least 1% greater than the cap rate a purchase.

Secret #3: Reduce the number of units renovated and re-leased per month. Four to six units per month, sometimes up to eight, is a more realistic assumption.

Secret #4: Increase the vacancy and bad debt during the renovations period. Expect more tenants to leave because of the chaos that comes from the construction process. Also, someone who can afford a $600 rent may not be the same demographic that can afford a $800 rent, so expect a lot of tenants to skip

How a Billion Apartment Syndicator “Wins” Every Year

Speaker: Joe Fairless – Co-Founder, Ashcroft Capital

Joe Fairless, Ashcroft Capital

To accomplish more every year, have a thorn. A thorn is a negative experience that you can draw upon to propel yourself forward. Joe’s thorn was losing money on his first deal, among other things that went wrong with the deal and around the time of the deal.

The three components of a thorn are that it needs to cut deep, it fades over a certain period of time, and the need to document what happened.

If you don’t have a thorn, manufacture one. If you need to manufacture a thorn, you need to know what the quantifiable objective is for the manufactured thorn. For example, if you don’t read one paragraph every day for a week, you have to hold dog poop in your hand and lick it. (that’s right – I said dog poop).

Three Alternative Investments to Create More Revenue

Speakers: Dan Handford – Managing Partner, PassiveInvesting.com, Roni Elias – TownCenter Partners, Jeremy Roll – President, Roll Investment Group, David McAlvany – Precious Metal Portfolios

Dan Handford, PassiveInvesting.com; Roni Elias, TownCenter Partners; Jeremy Roll, Roll Investment Group; David McAlvany, Precious Metals Portfolios

1. Litigation: Roni makes money with a publicly-traded litigation company. Each fund has 1000 cases and he has a 90% win rate on 25,000 cases. The IRR on the funds are in the 60%+ range. For example, a personal injury fund could make a 16% IRR in less than 16 months and then 50% or higher over time.

2. ATMs: Jeremy invests in ATMs. The investment funds have a four year payback period and seven year term. The funds result in a fixed cash-on-cash return of 24.5% and an 18% IRR.

3. Gold: David invests in precious metal portfolios. He likes these investments because they are not tied to the financial markets. If the overall economy worsens, his investments thrive.

The Principals of Peak Performance

Alex Racey, First Principles of Performance

The first principles of performance are eat, sleep, move. These three principals are all tied together. If you are suffering in one, you suffer in all three and your performance suffers as a result.

Most people fall into one of the following three performance categories.

First is “kick the can.” This is someone who was a star athlete in high school or college. They shifted 100% of their focus from athletics to their job. They make a lot of money but their physical, mental, and emotional health is lacking. They tell themselves that they will eventually refocus on their fitness.

Second is “head in the sand.” This is someone who is overwhelmed by the number of fitness routines and diets and say, “screw it” and decide to ignore them all.

Third is “all good.” They work out and eat well but ignore ongoing pain and issues, like joint pain, back issues, etc. Alex says this is the category he falls into.

To optimize your performance, you must optimize your eating, sleeping, and moving. Alex says the best approach is to Google metabolic flexibility for eating, sleep hygiene for sleeping, and minimum effective dose for moving.

To hear more actionable advice from veteran commercial real estate investors, make sure you attend BEC2021 this week. Click here and use the code WINNERS30 to get 30% off your ticket.

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Speaker Preview – Best Ever Conference

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

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

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

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

~ Kathy Fettke
Co-CEO
RealWealth

Kathy Fettke, Co-CEO of RealWealth

Topic: 2021 Housing Forecast with Kathy Fettke

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

 

Trevor McGregor, Coach & Business Strategist

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

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

 

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

Topic: Building A Social Media Content Engine

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

 

Greg Willett, Chief Economist of Real Page Inc.

Topic: Market-Driven Strategies for Investment and Operations

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

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

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Top 6 Winter Hunting Trips

Are you looking for a new way to spend a little of your generational wealth? Have you considered winter hunting? The snow-capped scenery can be gorgeous, and the experience is often peaceful and reinvigorating. Plus, it’ll give you a respite from your passive investing and other wealth building activities.

Hunting can actually be easier in the winter. There are no mosquitoes, and you can walk across icy lakes and rivers instead of going all the way around. You can also follow animals’ footprints in the snow.

Below are some enchanting hunting destinations, places that make investing in winter gear well worth it.

1. Alaska: Black Bears and Lynxes

The lynx, a wild cat with a striking black tip on its tail, dwells in Alaska’s deep, pristine forests. In fact, it’s Alaska’s only native cat. The lynx is itself a hunter, favoring the snowshoe hare for its meals.

Around Anchorage, the lynx population has grown in recent years, and some residents have had close encounters with these beasts. In the state’s southeastern region, however, lynxes are still rare. Thus, that part of Alaska forbids lynx hunting.

Black bears are the smallest bears in North America, but they loom large in many hunters’ hearts. During the warmer months, these bears are active, often running around and sometimes climbing trees. In the winter, black bears typically rest inside caves and other enclosed spaces.

 

2. Montana: Elk and Mountain Lions

Often seen traveling in herds, Montana’s elk belong to a subspecies called Rocky Mountain elk. Their distinctive antlers are long and intricate.

Unfortunately, these elk have posed a threat to many farmers in recent years. Some elk have ruined crops and infected livestock with disease. Thus, hunters play an important role in controlling Montana’s elk population.

For their part, mountain lions mostly live in western Montana, a region that offers these solitary animals expansive forests. Mountain lions have soulful eyes and elegant bodies, but beware. They’re dangerous and best suited for experienced hunters. They frequently kill elk and deer, and they’ve been known to attack people on occasion.

 

3. Wyoming: Antelope

Wyoming has a wealth of antelope, more than any other U.S. state. The antelope there are pronghorns, animals you’ll only find in the western half of North America. They resemble deer, and they have horns rather than antlers. Pronghorns are tan with white patches.

In addition, Wyoming is a great hunting destination because, if you’d like, you can enjoy other winter sports while you’re there. The state’s skiing, ice climbing, and dog sledding opportunities are outstanding. After a visit, you might feel like buying some Wyoming real estate with your generational wealth!

 

4. North Dakota: Coyotes and Red Foxes

Almost anyplace you go in North Dakota, you’ll find coyotes nearby. And they’re particularly numerous in the southwestern part of the state. They live in forests, on prairies and hills, and sometimes near cities.

Coyotes are closely related to wolves, and they look like smaller versions of their wolf cousins. Indeed, a coyote has a pointed snout and a bushy tail.

Coyotes can be tricky to hunt because they’re so evasive; their sharp eyesight and sense of smell help them sense approaching danger. You might have more luck at night since these animals are nocturnal.

How does a fox hunt sound? North Dakota’s red foxes are large and attractive canines. They’re abundant throughout the state, but they really love hilly areas. In fact, they prefer making their homes on top of small hills. Red foxes usually live with a mate and raise one litter per year. They hunt alone, however, often feasting on rabbits, mice, and other small animals.

Red foxes don’t hibernate, so you’ll see them roaming around all winter. Like coyotes, they’re nocturnal, and they spend much of the night hunting.

 

5. Bison: North Dakota

North American Bison covered the Great Plains two hundred years ago. Once estimated at approximately 40 million, the North American bison was reduced to about 1,000 by 1890 for its hides and skins. Fortunately, thanks to American sportsman funding conservation efforts, these creatures have been restored in the North American ecosystem.

Bison hunts can vary greatly based on a hunter’s preferences. Are you wanting a trophy bull hunt or a young cow for more tender meat? Are you longing for a wilderness experience or a ranch style hunt? Are you using a modern rifle or traditional weapons such as bows?

After deep deliberation and no matter your selection, bison may be the perfect hunt for you this winter season.

 

6. Maine: Bobcats

For a special challenge, try hunting bobcats in Maine. They live in thickly forested areas, and they tend to isolate themselves. It can be easier to locate bobcats in the winter as the snow makes it harder for them to find food. As a result, they’ll venture a greater distance to get their meals, sometimes coming close to cities and suburban real estate.

Bobcats look a great deal like lynxes. They often have a wealth of dark spots or stripes along with a black-tipped tail.

Be aware that bobcats are hard to find in northwestern Maine. Therefore, it makes sense to avoid that part of the state during a bobcat hunt.

Finally, before hunting in a certain state, don’t forget about checking the local regulations and investing in the right licenses.

With the proper permits, you can savor an invigorating winter hunt, an icy adventure you’ll never forget. Indeed, being able to afford such an experience is a great reason to study passive investing and other wealth building strategies.

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Investing in Apartments Has Been Life-Changing

Investing in Apartments Has Been Life-Changing

In my opinion, multifamily real estate (apartment investing) can be one of the best ways to grow your wealth. So much so, that my wife and I decided to sell our primary residence years ago and put 100% of our equity into apartments, along with the majority of our investment portfolio.

For those of you who follow Robert Kiyosaki and the Rich Dad Poor Dad philosophy, you know that Kiyosaki is famously quoted for saying “your house is not an asset” meaning your primary residence is not an investment, because it doesn’t produce cash flow each month — quite the opposite in fact as you pay for expenses, taxes and upkeep. That is, unless you house hack, which is topic for another day.

Not only does an owner-occupied home leave you less mobile, it also ties up your money so you can’t use it for investments. In other words, the more you pay down your mortgage, the more you trap your investable cash.

 

A few thoughts on multifamily real estate in 2021: 

  • 75 million+ Baby Boomers are retiring
  • Many of today’s apartment complexes can be converted to retirement communities
  • A large number of millennials aren’t buying homes
  • Institutional and main street investors are searching for yield in today’s low interest rate environment

Multifamily investing can be a great way to build wealth, while helping fill the need for affordable housing, senior living and millennials choosing to rent by lifestyle choice.

 

 

HOW WE INVEST

My wife and I partner with experienced multifamily firms and invest in what’s called a real estate “syndication” or a real estate private placement. This means we, along with other investors, “pool” our money together to purchase large assets that we otherwise would not be able to afford on our own; a 300-unit apartment complex for example. The general partner (or multifamily firm) and their teams will manage the property and renovate the building by adding modern updates and improved amenities such as, in-wall USB ports, smart thermostats, storage lockers, improved landscaping, updating the clubhouse, gym, pool, or covered parking spots; depending on what the property is needing. The goal is to modernize the apartment building to today’s standards and increase the rents to the market level throughout the process.

The value or price of an apartment building is primarily derived from the NOI (net operating income), which is the total collected rents and income minus expenses to operate the property. When the net operating income increases, the value of the complex increases at a multiplier of this number. For example, let’s say you increase the annual net operating income on a property by $100,000 a year and a property in that market sells around a 10x multiple of the NOI. A $100,000 rent increase can bump the purchase price up by approximately one million dollars. This could be higher or lower depending on the market.

 

EXAMPLE

Let’s take a 300-unit apartment building as an example. Rents increase by $28 a month, per unit x 300 units ($28 x 300 = $8,400 monthly x 12 months = $100,800). For resale purposes, these $28 rent increases implemented across all units, could result in the property value increasing by nearly one million dollars. This type of value-add is much more scalable compared to a single-family home renovation.

Whether you invest individually in multi-family or with reputable firms, it can be a great way to generate cash flow, while helping improve communities along the way. My wife and I have dedicated the past 6 years to investing primarily in this asset class for these reasons. Cash flow investing can provide the ability to focus more on what you love and the freedom to focus less on what you don’t enjoy. At the end of the day, we all deserve to focus our time and energy on what makes us happiest.

 

To Your Success,

Travis Watts

 

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Top 10 Markets to Buy Multifamily in 2021

Each year, PwC and the Urban Land Institute releases their annual Emerging Trends in Real Estate report. The report “provides an outlook on real estate investment and development trends, real estate finance and capital markets, property sectors, metropolitan areas, and other real estate issues through the United States and Canada.”

To create the forecast report, PwC interviews and surveys thousands of active real estate professionals.

One of the multifamily-related highlights of the report is a list of “buy/hold/sell” recommendations. For each US real estate market, real estate professionals are asked to provide their recommendation to multifamily investors.

Should you buy multifamily in the market? Should you hold current multifamily investments in the market? Or should you sell your current investments in the market?

Here is a breakdown of the 10 cities with the most “buy” recommendations for 2021.

1. Raleigh/Durham, NC

  • Buy: 72%
  • Hold: 20%
  • Sell: 8%

2. Tampa/St. Petersburg, FL

  • Buy: 68%
  • Hold: 30%
  • Sell: 2%

3. Salt Lake City, UT

  • Buy: 67%
  • Hold: 27%
  • Sell: 6%

4. Austin, TX

  • Buy: 62%
  • Hold: 26%
  • Sell: 12%

5. Boston, MA

  • Buy: 60%
  • Hold: 32%
  • Sell: 8%

6. Boise, ID

  • Buy: 60%
  • Hold: 34%
  • Sell: 6%

7. Nashville, TN

  • Buy: 59%
  • Hold: 37%
  • Sell: 4%

8. Charlotte, NC

  • Buy: 56%
  • Hold: 36%
  • Sell: 8%

9. San Antonio, TX

  • Buy: 55%
  • Hold: 35%
  • Sell: 10%

10. Columbus, OH

  • Buy: 55%
  • Hold: 45%
  • Sell: 0%

 

In addition to the 10 markets above, at least 50% of survey respondents provided a “buy” recommendation for five additional cities – Washington, DC (54%), Fort Lauderdale, FL (53%), Atlanta, GA (53%), Phoenix, AZ (52%), and Inland Empire, CA (51%). A minority of survey respondents provided a “buy” recommendation on all other markets in the US.

Final thoughts: “What should I do if my market isn’t on this list? Should I sell? Should I invest somewhere else?

I think that it depends. Just because a market isn’t on this list doesn’t mean it is a bad market. But it might be!

Also, just because your market is on this list doesn’t mean EVERY deal in that market is a good deal.

Overall, the target investment more is important but it is not the end-all be-all. What is more important is how you buy. To learn more on how to buy right, click here to learn about my three immutable laws of real estate investing.

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12 Most Downloaded Best Ever Podcast Episodes of 2020

2020 was an unusual year for real estate investors with the onset and continued presence of the coronavirus pandemic.

Going into 2021, there is still a lot of uncertainty around the real estate market. What will be the impact of the new stimulus package – was it enough? How long will the eviction and foreclosure moratoriums last? How will the new presidential administration affect the real estate industry?

We want to ring in the new year by providing you with the Best Ever advice that will help you thrive in 2021, regardless of the answer to the aforementioned questions. That is, the most popular episodes on the Best Real Estate Investing Advice Ever Show.

Here are the most downloaded episodes of each month for 2020.

January – JF1960: Starting A Real Estate Investing Business & Growing to 245 Units

  • Guest: Colin Schwartz, Founder of Brick Town Management
  • Guest Bio: Colin Schwartz has been a real estate investor since 2017. At the time of the interview, he owned 245 rental units with another 70 units under contract.
  • Top quote: “If you’re not constantly learning, you’ll soften a little bit.”
  • What you will learn: how to scale a real estate company with your own money and through partnerships.

Click here to listen to the full episode (or read the transcript)

February – JF1989: Learn The Difference Between Preferred & Cash-On-Cash Return

  • Guest: Theo Hicks, Host of Syndication School
  • What you will learn: detailed explanation of the differences between the preferred return and the cash-on-cash return figures presented to passive apartment syndication investors.

Click here to listen to the full episode (or read the transcript)

March – JF2016: Sacrificing Short-Term Satisfaction For Long-Term Happiness

  • Guest: Mark Owens, MarkOwens.com
  • Guest Bio: Mark has been an active, full-time real estate investor for 17 years. At the time of the interview, he owned and self-managed over 100 units and completed approximately 200 wholesales. His 100-unit portfolio consists of single families and 7 to 18 unit multifamily properties.
  • Top quote: “Manage your properties like a business, not a hobby.”
  • What you will learn: how to overcome the biggest enemy stopping you from being happy and successful – the desire for immediate gratification.

Click here to listen to the full episode (or read the transcript)

April – JF2047: 2008 vs. Coronavirus

  • Guest: Chris Clothier, partner at REI Nation
  • Guest Bio: Chris has been a real estate investor for 18 years. At the time of the interview, his company REI Nation managed an $800M portfolio consisting of single-family properties. He also personally owns $12M to $15M in residential and commercial real estate.
  • Top quote: “You need to be in planning mode. You have to plan for the 10 things that could happen.”
  • What you will learn: the biggest differences between the impacts of the 2008 economic recession and the coronavirus pandemic on the real estate market.

Click here to listen to the full episode (or read the transcript)

May – JF2075: Part-Time Real Estate Investor Benefits

  • Guest: Erik Schaumann, ETS Enterprises LLC
  • Guest Bio: Erik has been a part-time real estate investor since 2012. He started investing while working for the Shell Oil Company full time. At the time of the recording, he had over $1.7M asset under management, which included 9 single family properties and multiple syndication investments. Because of his passive cash flow, he was able to retire from his W2 job after 20 years to travel the world with his wife and 6 children.
  • Top quote: “Be realistic in what you are going to need. What is that final number? Be real, don’t overshot it because if you leave your job there are always ways to make money.”
  • What you will learn: how to quit your full-time W2 job through real estate investing.

Click here to listen to the full episode (or read the transcript)

June – JF2111: Going From a Duplex to 89-Units

  • Guest: Brock Mogensen, principal at Smart Asset Capital
  • Guest Bio: Brock has been a real estate investor for two years. During that time, he purchased a duplex, 89-unit apartment, 20,000 sqft of retail space, and 18,000 sqft of office space.
  • Top quote: “Partner with people that lack your strong suit and vice versa because I think those are the best partnership – where each can complement each other.”
  • What you will learn: how to get started in commercial real estate syndications with little experience and while still working a full-time W2 job.

Click here to listen to the full episode (or read the transcript)

July – JF2158: When Is The Best Time To Get Into Multifamily

  • Guest: Travis Watts and Theo Hicks, hosts of Actively Passive Investing Show
  • Top quote: “Everybody has an opinion, but the only opinion that matters is yours when it comes to choosing your future, where you want to go, what you want to. So try blocking out the noise, go inside, and decide what’s right for you”
  • What you will learn: how to know when it is the right time for you to start investing in real estate.

Click here to listen to the full episode (or read the transcript)

August – JF2168: Infinite Wealth Creation

  • Guest: Jim Oliver, founder of CreateTailwind
  • Guest Bio: Jim is the founder of Create Tailwind, a wealth coaching company that has helped thousands of individuals and business around the US create their own wealth and be their own bank.
  • Top quote: “Infinite banking is about the process of acting like your own bank, not the product.”
  • What you will learn: how to become your own bank and buy real estate with whole life insurance.

Click here to listen to the full episode (or read the transcript)

September – JF2201: The Hands-Off Investor

  • Guest: Brian Burke, president and CEO of Praxis Capital and author of The Hands-Off Investor
  • Guest Bio: Brian is the president and CEO of Praxis Capital, a vertically integrated real estate private equity firm. In the past 30 years, he has acquired over half a billion dollars in real estate, including 3,000 multifamily units and 700 single family properties. He is also the author of “Hands-Off Investor,” which is catered to the passive investor to teach them the ins and outs of investing.
  • Top quote: “Don’t take on too much debt.”
  • What you will learn: how to choose the right sponsor with which to passively invest, and the top tactics for asset management.

Click here to listen to the full episode (or read the transcript)

October – JF2232: Self-Made Millionaire

  • Guest: Willie Mandrell, WillieMandrell.com
  • Guest Bio: Willie is a self-made multimillionaire real estate investor, broker, coach, lecturer, and author. He has been investing in buy & hold rentals for 13 years. At the time of the interview, his portfolio consisted of over 40 units worth $10 million.
  • Top quote: “What helps me is I wake up every morning with the same focus.”
  • What you will learn: how to raise money for real estate and whether to raise money as equity or as debt.

Click here to listen to the full episode (or read the transcript)

November – JF2266: Hidden Investing Secrets

  • Guest: Holly Williams, The Hidden Investing Expert
  • Guest Bio: Holly spent 25 years in the advertising industry as an executive while slowly dabbling in real estate. She has two decades of real estate investing experience and owns properties in New York, Texas, Mississippi, and the Carolinas.
  • Top quote: “Through multifamily syndication, I’ve grown beyond my wildest dreams and it’s changed my life.”
  • What you will learn: the financial and investing secrets of the top 1%.

Click here to listen to the full episode (or read the transcript)

December – JF2287: Raising Capital Using Crowdfunding Platforms

  • Guest: Chris Rawley, CEO of Harvest Returns
  • Guest Bio: Chris has been an investor for over 20 years. He is a full-time real estate investor and CEO of Harvest Returns, a platform for passive investment in agriculture. He also owns single family, multifamily, and commercial properties and income producing agriculture.
  • Top quote: “If you’re putting together a syndication, before you go and pay an attorney a lot of money, just look into crowdfunding platforms.”
  • What you will learn: how to use a crowdfunding platform to raise money for syndication deals.

Click here to listen to the full episode (or read the transcript)

What was your favorite Best Ever podcast episode in 2020?

Let us know in the comments below.

And here’s to continued success and growth in 2021.

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Real Estate in the Post-COVID Era

Tired of COVID? Wondering what will happen in real estate Post-COVID?

COVID, COVID, COVID. It seems like that is all we hear about. Well, that and the craziness of the election.  When COVID-19 hit the previously optimistic real estate industry, it hit hard and the industry went pessimistic in a matter of days. There is a disconnect on pricing between sellers and buyers. Lending activity is still slow to recover because of the uncertainty of the economy. It does sound a little dire, I know. But not all real estate is considered equal. Commercial real estate, particularly multifamily in the larger cities, have been more resilient.

As the economy recovers, the federal government still plans to keep interest rates near zero until 2023 in an effort to stimulate growth and there continues to be an  interest in investing in commercial real estate because of its diversification benefits. That being said, there is still a rocky road ahead. What is the outlook for the real estate market? There are alot of predictions floating around so we decided to get to the heart of the matter. 

On December 16th at 1 p.m. ET, we are hosting a live debate on who the winners will be in 2021. Net Sellers or Net Buyers? 

We have invited Brandon Kramer, Senior Associate and Associate Director of Marcus & Millichap, Anna Dwyer, Senior Acquisitions Associate for City Line Capital, Josh Satin, Vice President of Acquisitions for Gelt Inc., and Scott Lebenhart, Director of Acquisitions with Ashcroft Capital to debate what real estate investors should expect through the end of 2020 and into 2021.

It has been proclaimed for years that it is a buyers market. But the dynamics have shifted with the pandemic and it is affecting both sellers and buyers. Who will be the ultimate winner? 

Register HERE to attend the virtual debate and get insight on what to expect.

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10 Ways to Promote and Market Your New Book

Whether you are a multifamily investor, fix-and-flipper, real estate agent, or any type of real estate professional, publishing an ebook or hard copy book is a powerful way to grow your business.

The main reason why is because whenever you publish a book, you instantly increase your credibility and reputation in the eyes of customers (buyers, sellers, investors, etc.).

“Wow, they’ve written a 450-page book on how to complete an apartment syndication. They must be experts.”

By positioning yourself as an expert with your book, you build trust with your customer at an accelerated pace. And as Bob Burg says in The Go-Giver, “All things being equal people will do business with, and refer business to those people they know, like and trust.”

He is a real-world example of the power of writing a book: I recently interviewed Max Keller of “Deals Chasing You.” On the podcast. He wrote the book on senior housing. When he sends direct mailers to generate senior housing leads, he includes a note that if they call, he will send them a free copy of his book. As a result of this simply tweak to his marketing, he quadrupled his response rate.

Writing a book = increased credibility = increase trust = more business.

We have previously written about the logistics on writing a book, which you can read here.

The purpose of this blog is to outline the best ways to promote your new book before and after it is published to ensure a successful launch, getting the book in front of as many of the right people as possible in order to maximize its impact on your business.

When creating a marketing strategy for a new book, it is important to keep top of mind that there are three parties involved in the publication of a new book:

  • The authors: you and any co-authors or ghost-writers
  • The end customer: the people who will purchase and benefit from your book
  • The contributors: anyone who contributed to the information in the book, including editors, formatters, the person who wrote the foreword, people who give testimonials, people who are features in the book, people who provided advice that was included in the book, etc.

Therefore, when you are thinking about strategies for promoting your book, how to tap into the self-interest of each party must be top of mind.

Each of the following strategies benefits either the end customer, the contributors or both. Obviously, the authors benefit regardless from the book sales.

We marketed our most recent publication, Best Ever Apartment Syndication Book, in 10 ways, which I will outline below. However, one strategy that we didn’t utilize for our syndication book but do plan on utilizing for the book we are currently working on (the working title is Best Ever Passive Investor Handbook) is giving the book away for free.

This is the strategy Max Keller implemented (discussed above). Giving a book away for free adheres to something we consistently talk about here – adding value for free.

When Max Keller receives inbound calls from prospective senior housing leads, he not only sends them his book for free but also directs them to the chapter or chapters that will address a specific problem or challenge they are facing. By going above and beyond for these callers before they’ve even expressed interest in selling allows him to receive exclusive deals with no other active buyers or competitors.

Max says his goal is to give away 1 million books!

This is even something that can help you generate book topics. Do you receive the same questions repeatedly from customers? Right a book on the subject. Whenever you receive an inquiry, rather than answering the question (or in addition to answering the question), offer to send them the book for free.

As I mentioned above, we plan on utilizing this strategy for the passive investing book we are working on. Passive investors ask similar questions when presented with opportunities or when initial inquiring. Therefore, we are writing the go-to book on passive investing and will send a copy to investors.

In addition to sending the book for free, here are 10 other ways to promote a new book:

1. Social Media

One of the first ways to start promoting a new book is on social media. In fact, you can start marketing your book on social media before you’ve written a single word.

Here are some examples of social media posts ideas pre-launch:

  • Announce the topic of the new book you are writing
  • Ask for feedback throughout the process, like titles, questions to address, cover designs, etc.
  • Provide frequent updates on your progress (i.e., outline is done, first chapter is done, 50% done, etc.)
  • Provide advice on writing a book that you have learned along the way.

As an example of this last point, we created a post where I posted a few lessons he learned on how to effectively overcome writer’s block.

The purpose of pre-launch promotion activities is to engage your audience and would-be purchasers in the process of writing the book. That way, they feel as if they have a stake in the book since they were involved in its creation process. Plus, they are aware of the book and what will be included far in advance, which increases the chances of them buying (and maybe even promoting the book themselves).

Once the book is published, you can create a post on social, announcing that the book is now available for purchase. On Facebook, you can create a paid advertisement for the book. A 30 to 60 second spoken video explaining what people will learn from the book is the most effective type of Facebook advertisement.

You can also use social media to share some of the other promotion strategies I will outline below.

2. Pre-Order Page

Another effective pre-launch promotion strategy is to allow buyers to pre-order your book.

How to tactically setup pre-orders will depend on how you publish your book. If you are working with a publisher, they will likely need to be the ones who setup the preorder process. If you are self-publishing on Amazon, click here for the process we used to set up preorders.

Once the preorder page is live on Amazon (or somewhere else, again, depending on the publisher), you promote the page on social media.

3. Book Page

Creating a book page on your website is another way to promote your book. The timing of the book page can coincide with the preorder page going live.

Here are examples of the book pages we created for our three books:

Your book page needs to answer the question, “why should I buy this book?” Therefore, it should give would-be buyers an exclusive look, a sneak peek into the valuable information they obtain.

4. Free Giveaways

One of the benefits offered to those who pre-order the book, and something that should be presented front and center on your book page, is a free giveaway.

The free giveaway should be one or more resources above and beyond, yet related to, the book.

For example, for those who pre-ordered our Best Ever Apartment Syndication Book, they received eight free documents. We asked people to email us their receipt of purchase and in return we emailed them the documents.

I think this is the best strategy for promoting a new book. People are more incentivized to pre-order the book because of the fear of missing out (FOMO). Therefore, while writing your book, constantly think about excel calculators, PDF guides, eBooks, etc. you can create and give away.

So that people continue to purchase the book after it is published, you can still giveaway completely different documents or a portion of the ones given away to those who preordered.

Another twist on the free giveaways is to create a contest where people can win a free signed copy of your book. For example, when Theo and I used to do weekly Follow-Along Friday podcast, we did a Best Ever Trivia Question of the Week. The first people to email us (or comment on the YouTube video) the correct answer received a free, signed copy of our first book.

5. Reviews

For the people who organically find your book (i.e., people who are not already in your audience) will make their purchase decision on the reviews – both the quality and quantity. Therefore, you want to obtain many quality reviews as fast as possible after launch. The most effective way to accomplish this is to get reviews before the book is published.

You don’t want fake or generic reviews. These turn off would-be buyers. Instead, to ensure that the reviews are genuine, send a PDF of the book to people before it is published and ask them. Tell them when the book will be published and ask them to leave a genuine review within a few days of launch. Then, once the book is launched, follow-up with that person to make sure they left the review.

They benefit because they get access to your book before it is public for free.

For the Best Ever Apartment Syndication Book, each person on our team was responsible for getting at least five reviews and then following up to make sure those reviews were posted.

Once the book is published, you can generate even more reviewed by leveraging another free giveaway. For the Best Ever Apartment Syndication Book, those who left a review and emailed us a screenshot received a free document.

We were able to generate over 300 reviews for the Best Ever Apartment Syndication Book using this strategy.

6. Testimonials

Obtaining and putting testimonials in your book and/or on your book page is a great way to get other people to promote your book. Therefore, for whatever you are writing about, get at least five people who have already benefited from the advice in the book to write a testimonial. Or, even better, get one person who is well known. For example, I was able to get a testimonial from Barbara Corcoran of Shark Tank on my first book and Brandon Turner on my second book, which were featured on the front cover of the book.

They benefit by having their name and business included in a best-selling book. You benefit because you can use the testimonials to promote the book.

You can include the testimonials on your book page too. Then, people who view the page will not only learn what they will learn by reading the book, but also how the advice has already helped someone else achieve success.

Additionally, the people who wrote the testimonials are more likely to share the book on their social media and other platforms, allowing you to tap into their audience.

7. Foreword

You can use the foreword to promote your book in the same way as the testimonials. Except the person who wrote the foreword is even more likely to share the book with their audience. The foreword is usually multiple pages long compared to a one or two sentence testimonial, and their name is oftentimes included on the cover.

For example, Master Platinum Coach and former Tony Robbins’ Master Coach Trevor McGregor wrote the foreword to the Best Ever Apartment Syndication Book. As a result, we were able to get our book and name out in front of his high performing, large audience.

8. Other Contributors

In addition to the people who wrote the testimonials and foreword, anyone else who contributed to the book can be a promotion source.

This was how we were able to get exposure for our first two book – Best Real Estate Investing Advice Ever Volume I and II. For both books, each chapter was dedicated to a real estate professional I interviewed on my podcast. Once the book was published, nearly all of them shared it with their audience. And why wouldn’t they? The book was basically a biography of their investing careers and their Best Ever advice.

Other contributors that can promote your book, as I mentioned in the introduction, are:

  • Editors: the proofreader and/or copy editor may share the book with their audience to promote their own editing services
  • Designers: the people who designed the cover and/or any interior designs may also share your book to promote their own design services
  • Acknowledgements: anyone who helped in any other way with the book are usually included in the acknowledgments section. Since their name is included in the book and they benefited the creation of the book, they may share it with their audience

Overall, the more you can include other people in the book, the more potential promoters you have once the book has been launched.

9. Your Thought Leadership Platforms

Using a similar approach to promoting your book on social media, you can promote your book on all your thought leadership platforms, like your newsletter, podcast, blog, or YouTube channel.

Once the book is published, you can do a mini-series about the book. For example, Theo and I did a 10-part podcast series summarizing the Best Ever Apartment Syndication Book.

10. Other People’s Thought Leadership Platforms

Another way to tap into other people’s audiences is to promote your book on their platforms. The simplest approach is to be interviewed on someone else’s podcast. You would want to make sure you request that the episode air the week of the book launch.

In addition to providing a sneak peek into the content of the book, offer to giveaway a free document to anyone who buys the book or provide an exclusive discount code.

Once the interviews are live, share them on your social medial and other thought leadership platforms.

In Conclusion – Be Creative

My last piece of advice for promoting your book is to be creative.

The examples above are the things we did to market our three books. But there are countless more ways to increase the exposure of your book. So, for each of the 10 categories, brainstorm other ways you can leverage them to promote your book.

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How to Create a Compelling Property Management Incentive Program

As an apartment syndicator, your most important team member is their property management company. The property management companies main responsibilities are to manage the day-to-day operations and implement your business plan.

However, what if – due to market conditions or lack of skill on the part of the property management company – the your net operating income projections aren’t being met? Occupancy is low. Collections are struggling. Rental premiums aren’t being met.

One strategy to turn operations around, or to avoid operational challenges all together, is to create a property management incentives program.

Why Create an Incentive Program?

An incentive program creates an alignment of interest between you and the property management company. The better they perform, the more money you, and your investors, and they make.

What is an Incentive Program?

An incentive program is an agreement between you and the property management company in which the property management company is given an objective, and if they complete the objective, they are rewarded.

Two Types of Incentive Programs

Incentive programs fall into one of two categories. 

  • Type 1: Incentive programs that begin at acquisition and end at sale. 
  • Type 2: One-off incentive programs that end after a fixed amount of time.

Examples of Type 1 Incentive Programs

The most obvious and common is a program in which the objective is to effectively manage the property and the reward is a property management fee equal to a percentage of the collected income. Plus, they aren’t fired.

Other objectives are investing their own money in the deal, acting as a loan guarantor, or bringing on their own investors. The reward for all three is more equity or cash flow.

You can also create type 1 incentive programs for key performance indicators, or KPIs. For example, the objective is to grow total revenue by a certain % each year. Or maintaining or exceeding a specified occupancy rate. 

Just make sure the objective results in alignment of interest. For example, a bad objective is to grow the occupancy by a certain percentage each year, because there is a maximum occupancy rate. Once they achieve high-90’s, it will become impossible for them to achieve their objective without first sabotaging occupancy so that they can then increase occupancy again to receive a reward.

Examples of Type 2 Incentive Programs

Type 2 incentive programs are used when you want to target a specific KPI that is underperforming. For example, if occupancy drops below 90%, you can create an incentive program. The objective is to achieve a specified occupancy rate within a specific time frame (i.e., achieve 95% occupancy within two months). 

Once the desired objective is achieved, they receive a reward and the incentive program expires.

Type 1 vs. Type 2 Incentive Programs

Both incentive programs can be beneficial.

The type 1 incentive programs create alignment of interest from the start. Whereas the type 2 incentive programs can be used during the business plan to improve a specific lagging KPI. 

However, you need to be careful and mindful when creating incentive programs. For example, if you set an occupancy-based type 1 incentive program (i.e., maintain 95% occupancy), the management company can accomplish this goal by offering unnecessary concessions to increase occupancy. Or for a “number of new leases”-based incentive program, the management company can let in unqualified renters to inflate the number of new leases.

Therefore, type 2 incentive programs are the ideal option for KPI-based objectives. If a KPI is lagging, target it with an incentive program. Whereas the type 1 incentive programs are ideal for non-KPI-based objectives, like effectively managing the property, investing in the deal, etc.

Other Best Practices

The objective of the incentive program needs to be realistic and attainable. For example, an objective to raise occupancy from 85% to 100% in two weeks is too unrealistic. A good strategy to ensure that the incentive program is practical is to plan a brainstorming session with key members of the property management team and discuss objectives and rewards.

Also, be creative with the rewards. They can be financial based, like a gift card or bonus. However, other reward ideas are dinners with you or someone in your company, an extra paid vacation day, a free education or training course, a special trophy or plaque, etc. 

Lastly, the best incentive programs do not punish property management companies for failing to achieve the objective. If they miss the mark on an incentive program, don’t reduce their management fee. However, this doesn’t mean that you NEVER punish (i.e., fire) a property management company

Overall, incentive programs are a great way to create extra alignment of interests with your property management team and can help you target specific KPIs that are lagging behind.

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The Best Time to Get into Multifamily – How To Decide

A large part of how I give back is by giving my time to others. I spend each week speaking with investors across the nation on 15-minute phone calls. Needless to say, this has been a transformational way to gain education and perspective from thousands of highly educated people. In exchange, my goal is always to add value to others by sharing free resources and lessons that I have learned along the way.

A Common Question I Get From Prospective Investors:
“Is this the right time to invest in multifamily apartments?”
My Answer:
“Is it the right time for you?”

I remember in 2009 when I bought my first piece of real estate, I was ready! The media and news were promoting a broken economy, massive job losses, and a collapsed stock market, but I knew that I was ready to start a pursuit in real estate. Had I asked 100 other people what they thought, I would have likely received mixed responses. Most people at that time would have likely said something to the tune of “I would wait and see what happens…” In other words, they were not ready.

I remember when I made the leap from single-family investing to multifamily investing in 2015. Once again…I knew I was ready to get started. But was it the right time? Cap rates were slightly higher and cash on cash was slightly higher as well. Does that mean that today it’s too late? In 2015, the media and news were reporting on North Korea issuing a nuclear warning to the US and it was about to be an election year in 2016 with a lot of uncertainty in the market. Gurus like Robert Kiyosaki and Peter Schiff were calling for a MASSIVE meltdown in the economy and stock market. But I was ready to start a new pursuit as a passive investor.

Is It The Right Time For You?

You are in control of your destiny. You have the power and freedom to decide whether or not something is right for you and whether or not the timing is right. Everyone has an opinion, but the only one that matters is your own. Don’t be persuaded by the media or by others when it comes to your future. Take some time to outline your goals and create a plan of action and then go for it when YOU feel ready.
“If you keep waiting for the right time, it may never happen. Sometimes you have to make the most of the time you have.” ― Priya Ardis

To Your Success
Travis Watts

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An Investor’s Secret to Doing Large Apartment Deals with No Experience

The more investors you speak with, the more you realize that a lot of the traditional real estate advice simply is not true. 

For example, “you need to have experience in order to do large apartment deals.” 

The main reason? We are told that sellers and brokers prefer to work with established apartment operators because their proven track record increases the probability of a close. Whereas a sale is more uncertain when working with a less experienced apartment investor, or one who has not taken a large deal full cycle in the past. 

Therefore, we are told to focus on smaller deals (single family rentals, duplexes, triplexes, quadplexes, etc.) to build a reputation of being a closer and someone who can successfully manage multifamily properties. 

However, I have spoken with countless real estate investors who have gotten into the large multifamily space without following the above advice. They didn’t slowly acquire larger and larger properties. Instead, they either made gigantic leaps or skipped the smaller properties and started off investing in large multifamily properties.

For example, I was able to go from single family rentals to a 150+ unit apartment community.

Another example is Hamza Ali, who Theo interviewed on my podcast, Best Real Estate Investing Advice Ever. He currently owns 1,000 doors in Houston, TX. 

Hamza Ali of Gray Spear Capital is an example of an investor who went straight to multifamily investing. He acquired a 24-unit apartment community from a broker without any previous multifamily experience. 

How was Hamza able to win over both the seller and the listing broker?  

He brought a large, local multifamily investor to broker meetings.

Once Hamza decided to pursue larger multifamily deals, he joined a local apartment meetup group. At the meetup, he met a local apartment operator who owned 1,000 units in the Houston, TX area. After establishing himself as someone who was serious about buying apartment communities, he invited this larger apartment operator to broker meetings.

One of the broker meetings was with an individual Hamza met at the meetup. This is the broker who sold Hamza his first deal – the 24-unit.

After putting the 24-unit under contract, the large apartment operator even walked the property with him.

Overall, Hamza was able to leverage someone else’s experience to close on his first apartment deal with no multifamily experience. 

The large apartment operator didn’t have an official role in the deal. He didn’t sign on the loan nor was he given a stake in the deal. However, by attending broker meetings, he was implying to the brokers that Hamza was a trustworthy individual who would be able to close.

If Hamza attended the meetings alone, chances are that we isn’t awarded the deal. But the presence of a well-known, big-time apartment player instantly increased his reputation in the eyes of the brokers.

 

Now, Hamza applied this strategy to winning over apartment brokers with no apartment experience. However, the concept can be applied elsewhere.

Want to raise money from passive investors but lack experience? Bring a big-time player onto the General Partnership.

Having trouble finding this big-time player? Do what Hamza did, which is to start attending local meetup groups. Even better, start your own. The strategy at the meetup group is to establish yourself as a serious real estate professional. Show up to every meetup on-time. Ask educated questions. Offer valuable information to others. Maybe even offer to work for free for the big-time player from which you want assistance.

Thousands of investors have skipped the beginning or intermediate steps and jumped straight to large multifamily investing. Almost all of them did so by leveraging the experience and reputation of an established operator.

If you use Hamza’s strategy, you will be on your way to building a 1,000 or more unit apartment portfolio.

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Top Regrets of the dying

The Top Two Regrets of The Dying – How To Buy More Time

It’s funny when you stop to think about it. Who doesn’t want a nice car, brand new clothes, a beautiful house in a high-end neighborhood and a vacation home for weekend getaways? All these things can be categorized as having “stuff”.

While stuff can certainly be nice to have, don’t get me wrong; we need a certain amount of it, but what if you could have FREEDOM instead of more stuff? Which would you choose?

“You can have anything you want… But not everything you want.” – Susan Fussell

Would you choose a new car or a big house over your own life? Of course not. Then why is it that so many people are on the pursuit for stuff rather than the freedom of time?

A Powerful True Story

A woman named Bronnie Ware was a nurse in 2009. She worked in a terminally ill care unit with people living out their final days in life. Bronnie decided to ask her patients about their top regrets in life. She first published the results initially as a blog post, then later wrote a book on the topic, but I’ll get right to the point. The top two regrets were:

· I never pursued my dreams and aspirations

· I worked too much and never made time for my family

Moral of The Story

Passive income is not about money or obtaining more stuff. It’s about having FREEDOM and the ability to spend your TIME on the things you LOVE and focus LESS of your time on the things you dislike doing.

How Passive Investing Works

The first step in the journey to financial freedom is having more income than expenses. But what if you had more PASSIVE income than expenses? Meaning money that comes in each month without having to exchange your time and effort for it. This is the true definition of financial freedom.

Wealth is measured in time, not dollars – Robert Kiyosaki

I believe the reason that more people pursue stuff rather than freedom is simple. There is hardly any education on the topic of “Time Freedom”. Which is achieved through building passive income streams.

How To Buy More Time

Passive Investing is often misunderstood. Here are two simple examples of passive investing. *This example is for educational purposes only. Actual returns and yields may vary depending on investments you choose*

#1 You invest passively a high-dividend paying stock or REIT that distributes a 10% annualized return.

#2 You invest passively in real estate syndications (80% of my portfolio – FYI) which distribute rents and other revenue from the property. For simple numbers, we’ll say 10% annualized as well.

Investing $100,000 in each of these asset types would look like this:

Stocks/REITs: $100,000 x 10% = ($10,000 passive income)

Syndications: $100,000 x 10% = ($10,000 passive income)

Neither of the asset types above require your time or labor in exchange for the income they provide. Instead, they allow you to be a passive investor so you can spend less time working for money and more time on the things you enjoy the most.

While $20,000 is certainly helpful, most people living in The United States and the Western World could not retire on this amount of income. The real benefit comes when you have MORE passive income than you have living expenses. See example below:

Stocks/REITs: $500,000 x 10% = ($50,000 passive income)

Syndications: $500,000 x 10% = ($50,000 passive income)

Having $100,000 per year in passive income could certainly afford, at the very least, an option to work part-time and free up 50% of your time. For some, this amount of money could mean full retirement, depending on lifestyle expenses.

The Journey to Financial Freedom Begins with Your Mindset

How much of your time and money are dedicated toward acquiring “stuff” and how much time and money are being dedicated toward passive investments? Passive investing can yield returns that are much more powerful than money itself. TIME is our greatest asset in life.

You may delay, but time will not. – Benjamin Franklin

To Your Success

Travis Watts

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Can You Digitally Invest In Real Estate?

Can You Digitally Invest in Real Estate? – How to Leverage Technology in 2020

Welcome to the digital world of real estate. Though it’s not an entirely new concept, it can be done 100% online…if you choose to embrace a digital model.

Do you remember…

  • Driving local neighborhoods looking for properties?
  • Meeting with brokers and realtors to walk the properties?
  • Going to your rental properties to show them to a potential resident?

Those days are still here…but they are completely optional. Today you can also…

  • Take virtual tours of properties and read through detailed property overviews
  • Leave walkthroughs and broker meetups to a General Partner or Sponsor Team
  • Leave resident showings to a professional property management company

The digital model I am referring to is investing in apartment communities through a syndication. Real estate syndications are a way for investors to “pool” their capital together in order to invest in properties much larger than most can afford or want to manage on their own. For example, let’s say a 300-unit apartment building requires an $8,000,000 down payment. This property could be purchased by 80 individual investors who each invest $100,000 and then share in the profits.

A Quick Story

I made a life-changing decision in 2015. From 2009 to 2015 I was actively investing in real estate, buying my own properties, managing my own properties, and building my own network. The problem was, the more I expanded my real estate portfolio, the less time I had. I had set out in 2009 with a goal to one day acquire 50+ single-family homes and retire with the “good life”. Before reaching 20% of my goal, I was already burning out and I was increasing my stress levels with each property I acquired. Was I building a life of freedom or a part-time job?

The Break-Through

After a mental reboot and several months of educating myself on how to become a passive investor, I finally found the solution; investing in syndications. More importantly, it was exciting to learn how to reap the benefits of real estate that I loved so much (the debt leverage, the tax advantages, the cash flow and the appreciation) without having to be hands-on and without having to trade time in exchange for money. Partnering with an experienced team and leveraging their resources opened a new world for me. The best part was, it was much easier than what I was doing already.

The Digital World of Real Estate

After switching investment models, I began to realize the impact digital tools can have on your real estate success. For example, the ability for a California-based investor to meet a New York-based Syndicator over a Zoom call. Or the ability to attend a webinar or conference from the comfort of your home, or the convenience of using Google Maps to drive out of state neighborhoods to vet out investment opportunities. Over the years, I developed a passion for helping investors learn how to scale their real estate portfolios digitally and passively, so they too can benefit from the power of “Time Freedom” which has had a major impact on my life and the lives of many others.

What Is Time Freedom?

Time Freedom is the ability to do what you want, when you want, as much as you want with your time. It is essentially having freedom over your time, but it is not for everyone. If you are looking to create more time in your life and focus on the things you love doing and reduce the time you spend on the things you do not enjoy doing, then it might be worth pursuing. It has been an enlightening journey to be an educator on this topic and to help others achieve success. Feel free to reach out anytime if you or someone who know would like to learn more about passive investing and how it could benefit your specific situation.

“Being Rich is Having Money; Being Wealthy Is Having Time” – Stephen Swid

To Your Success In 2020,
Travis Watts

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How to Dispute Property Taxes on an Apartment Community

Did you know that property taxes are the single most expensive operating expense you will pay as a real estate investor?

Additionally, the annual tax amount is highly variable depending on the purchase price, purchase timing, and the previous owner’s recent business plan.

For example, if you are acquiring an asset that recently went through a value-add renovation program, expect the tax rate to go up significantly at your first assessment. Or, if you perform an extensive value-add renovation program, expect the annual taxes to go up significantly at your first assessment.

However, you don’t have to blindly accept the new tax amount. In fact, after each tax assessment, you are allowed to dispute the new tax amount by filing an appeal. And I’m going to show you how!

After a recent tax assessment, here is the seven step process to determine if you should appeal your new tax amount and, if so, how:

 

Step 1. Calculate Net Operating Income (without Taxes)

In order to determine your tax rate, you need to determine the assessed value, or market value, of your property. Most tax assessors use a modified version of the capitalization/income approach. That is, they use the net operating income excluding the property tax and a loaded cap rate to calculate the market value of the property.

So, the first step is to determine the net operating income excluding the taxes.

But which net operating income should you use? Since you are appealing your recent tax assessment, you should use the current net operating income at your property.

 

Step 2. Calculate the Loaded Cap Rate

Next, you will need to calculate the cap rate the assessor will use to value your property. You can obtain this loaded cap rate by asking the tax assessor. The loaded tax rate is the market cap rate plus the effective tax rate. You can locate the effective tax rate on the county auditor/assessor site. If you want to know the market cap rate used by the assessor, simply subtract the effective tax rate you found on the assessor/auditor site from the loaded cap rate provided by the assessor. Typically, these rates are expressed as mills. Every 10 mills equal 1%.

 

Step 3. Calculate the Market Value

Divide the loaded cap rate by the net operating income excluding taxes to calculate the market value of the property.

If, for some reason, the assessor uses a different method to calculate the market value (i.e., cost approach, sales comparison approach, or something else), then you will need to determine the market value following that approach. But the above method, the modified income approach, is most common.

 

Step 4. Calculate the Total Assessed Value

The total assessed value is what the taxes will be based on. You can find the assessment ratio for your market on the county auditor site. For example, in Hamilton County, Ohio, the assessment ratio is 35%. Multiply the market value by the assessed value to calculate the total assessed value.

 

Step 5. Calculate the Property Tax

To calculate the annual property tax, multiply the assessed value by the tax rate. Again, you can find the tax rate for your market on the county auditor/assessor site. Typically, the tax rate is expressed as mills. 1 mill is equal to 0.1%.

Multiply the tax rate percentage by the total assessed value to calculate your property taxes

 

Step 6. Call the Tax Assessor

If the property taxes you calculated are less than the property taxes you received in the assessment, the next step is call the tax assessor to discuss your computation.

You may be able to resolve your differences without going through a formal appeal process. Most likely, the dispute will be over the net operating income used, as the tax rates and capitalization rates aren’t typically up for negotiation.

 

Step 7. File a Formal Appeal

If you are unable to come to an agreement with the tax assessor’s office, the final step is to file a formal appeal. You can determine the appeal application deadline by either visiting the county auditor/assessor site or by calling the tax assessor’s office

This is the process for determining the tax rate at your property and filing an appeal on your own. Another option is to work with a property tax consultant who specialize in apartments. They will provide you with their opinion on the property taxes. Generally, they will provide you with a report that includes a best case, most profitable case, and a worst-case property tax scenario.

Additionally, you may also want to consider hiring an attorney who specializes in property tax appeals to argue on your behalf.

 

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

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Hud Loan Programs for Apartment Syndicators: Everything You Need to Know

Hud Loan Programs for Apartment Syndicators: Everything You Need to Know

Let’s talk about one of the top loan program providers that apartment syndicators use on their deals: Hud.

Hud can be a great option for apartment deals. We’re going to cover each of their common loan programs, including their permanent, refinancing, and supplemental loans.

Loan 1: 223(f)

The first Hud loan, which is the permanent loan, would be the 223(f). This is very similar to agency loans, except for one major difference: processing time. Plus, the loan terms are actually a little bit longer. So for the 223(f), the loan term is going to be lesser of either 35 years or 75% of the remaining economic life. 

So if the property’s economic life is greater than 35 years, then your loan term is actually going to be 35 years. It’ll be fully amortized over that time period. Whatever the loan term is what the amortization rate will be. If you’re dealing with a smaller apartment community under the $1 million purchase price, then this is not going to be the loan for you.

In regards to the LTVs, for the loan-to-values, they will lend up to 83.3% for a market rate property, and they will also lend up to 87% for affordable. So that’s another distinction of the housing and urban development loans, which is they are also used for affordable housing. There will be an occupancy requirement, which is normal for most of these loans. 

The interest rate will be fixed for this loan, and then you will have the ability to include some repair costs by using this loan program. For the 223(f) loan, you can include up to 15% of the value of the property in repair costs or $6500 per unit. If you’re not necessarily doing a minor renovation, but if you’re spending about $6500 per unit overall, then you can include those in the loan.

The pros of this loan are that they have the highest LTV. You can get a loan where you don’t have to put down 20%; you can actually put down less than 20%. It also eliminates the refinance as well as the interest rate risk, because it is a fixed rate loan, and the term can be up to 35 years in length. You won’t have to worry about refinancing or the interest rate going up if something were to happen in the market. 

These loans are non-recourse as well as assumable, which helps with the exit strategy. There’s also no defined financial capability requirements, no geographic restrictions, and no minimum population. There’s essentially no limitation on them giving you a loan for a deal if the market doesn’t have a lot of people living in it or the income is very low. 

There are also some cons involved when considering a Hud loan. The processing time is much longer than some. The time for a contract to close is at a minimum of 120 days to six or nine months is actually common. Other loan providers have processing times between 60 and 90 days. Hud loans take a little bit longer to process. They also come with higher fees, mortgage insurance premiums, and annual operating statement audits.

Loan 2: 221(d)(4)

The next Hud loan is 221(d)(4). These are for properties that you either want to build or substantially renovate. 

Similar to the 223(f) loan, these loans do have very long terms. The length of the loan will be however long the construction period is, plus an additional 40 years. That is fully amortized. 

This isn’t the loan for smaller deals, because the minimum loan size is going to be $5 million. So if you have a deal that you want to renovate and has got a $1 million purchase price, you’re going to have to look at some other options. 

Similarly, this is for market-rate properties as well as affordable properties, with the same LTVs of 83.3% and 87% respectively. These loans are also assumable and non-recourse as well as fixed interest with interest-only payments during the construction period.

The CapEx requirements for this loan are quite different than the 223(f). For the 223(f), it was up to 15% or up to $6500 per unit, whereas for the 221(d)(4) loan actually needs to be greater than 15% of the property value or greater than $6500 per unit. 

The 221(d)(4) pros and cons are pretty similar to the 223(f) pros and cons. There’s the elimination of the refinance and interest rate risk, because of that fixed rate in a term of up to 40 years. They’re also higher leveraged than your traditional sources. Those longer processing time and closing times can be a pain. There’s going to be higher fees, and you also have those annual operating audits and inspections.

Loan 3: 223(a)(7)

Hud also offers refinance loans as well as supplemental loans for their loan programs. Their refinance loan is called the 223(a)(7).

If you’ve secured the 223(f) loan or you’ve secured a 221(d)(4) loan, you’re able to secure this refinance loan, and it has to be one of those two. You can’t go from a private bridge loan to this refinance loan– that’s not how it works.

The loan term for the refinance loan is up to 12 years beyond the remaining term, but not to exceed the term. If your initial term was 40 years and you refinanced at 30 years, then this refinance loan will only be 10 years, because it can’t be greater than 40 years. 

It will be either the lesser of the original principal amount from your first loan, or a debt service coverage ratio of 1.11 or 100% of the eligible transaction costs. These loans are also fully amortized. The occupancy requirements are going to be the same as the existing terms for the previous loan. These are also going to be assumable and non-recourse with that fixed interest rate.

Loan 4: 241(a)

Hud also has a supplemental loan program available, which is the 241(a). This is only probable if you’ve secured the 221(d)(4) or 223(f). 

The loan term is coterminous with the first loan. Whenever you acquire it, it’s just going to be the length of the remaining loan. You’re essentially just adding $1 million or $5 million to your existing loan. 

Your loan size can be up to 90% of the cost of the property, so essentially a 90% LTV, because you need to have at least 10% of equity in the property at all times. It’s going to be fully amortized. 

They’re also going to base the loan size on the debt service coverage ratio. Because of this, it needs to be 1.45. That’s a ratio of the net operating income to the debt service. Then, the minimum occupancy requirements are going to be the same as whatever the terms are for your existing loan. Like all the loans, they’re assumable, they are non-recourse, and the interest rate is fixed.

And that’s it for Hud loans! What do you think about taking out loans through Hud for real estate purposes? Tell us what you think in the comments below!

Image Courtesy of Pixabay

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Two Common Real Estate Scenarios: Communication and Protection

Two Common Real Estate Scenarios: Communication and Protection

In this blog post, we’re going to be looking at two niche real estate scenarios that can happen to just about any investors.

The first scenario involves dealing with older potential clients and original buildings. If you’ve been in this situation before, you know that it can be quite a delicate process getting older owners to sell.

Communication Issues

Imagine this: You just found a potentially amazing off-market apartment building deal. It has 150 units and a $4 billion portfolio. It was purchased back in 1978, just over the 39-year expiration of the depreciation tax benefits law. The owner is in his late 80’s and purchased these buildings when they were first built at the time. You give him a call and ask him if he has any interest in selling, but he has trouble hearing you. He hands the phone to his caregiver, who abruptly says no and hangs up. What solution is there?

What one should do in this situation is to get curious. Start asking yourself some questions, then draft a letter to them. This is how you can learn more about their situation while introducing yourself to them. This is your chance to say, “I’m not sure where you’re at in this stage of owning these properties, but I can tell you that you might be worried about tax liability when you sell them. I have experience purchasing these types of buildings and I’d be happy to talk about some solutions any challenges you might be having.”

Penning a handwritten letter shows care and integrity. Keep in mind that many people of a certain age are struggling to keep up with the constant innovations and growth in the tech and digital world. A handwritten letter could be a breath of fresh air and a means to communicate that potential sellers may appreciate.

Protection From Embezzlement

Now, think of this scenario: You’re embarking on a general partnership in the real estate industry. It is your first time committing to such a project, and you’ve heard horror stories from colleagues involving embezzlement, fraud, and massive loss of funds. The general partner controls the business plan as well as the financial account connected to the project. You’re wondering how you can protect yourself from them embezzling funds from the operational account, and what auditing protocol you can use to protect yourself as a passive investor from theft.

There are several ways to approach this, but we can look at the most tried and true method.

You can have some checks and balances before the deal is done, which won’t be very much. After the deal is closed, though, you can do a lot more. For this scenario, we’ll look mostly at what a beginner real estate investor can do preemptively to stay safe in a general partnership.

There is no money for a potentially untrustworthy or shady general partner to take before the deal, but you can do some due diligence prior to a deal. If a shady partner is going to steal money from the entity itself, then they would have to do it afterward. This is because that is when the money is physically in the bank account.

Before the deal closes, there are a few things you should do. First off, you should absolutely take the time to look at the overall structure of the deal to make sure that there is at least an 8% preferred return. Make sure that the general partner is getting paid an asset management fee if and only if they are actually performing. If they’re proving themselves and they’re returning the preferred return, they can get that asset management fee. Otherwise, they get nothing.

Obviously, these are things that aren’t going to outright prevent someone from stealing money in a general partnership. When it comes down to it, they’re just small things you can do to ensure that the deal itself is set up in the mutual favor of you and your general partner, so that you have an alignment of interest.

Those are some things you can do before the deal. Another thing you should absolutely be doing before signing on anything with a general partner is to check those references. You can absolutely not go into a general partnership blind with no knowledge of who you’re working with. Even if the hearsay is overwhelmingly positive, you absolutely need to still check in with the partner’s references. By doing so, you’re going to get a really good picture of what the partner is all about.

Call their references and listen to what they have to say. We’re talking about past partners, firms, project managers, any business colleagues or people who have worked with this particular partner. Even if you get glowing reviews, you should then Google your partner. Those are things you’re probably already doing, but it really can’t be optional if you’re a baby real estate investor. You can be seen as an easy target because you don’t necessarily know the signs and symptoms of a parasite real estate partner. When you Google them, look for the partner’s name or firm title. And don’t be afraid to dig deep.

This doesn’t directly answer the question of how to make sure they’re not embezzling money, and we’re aware of that. However, there is some prep work that needs to be done on the front end to mitigate the risk of getting in with a group that is known for criminal activity. Sometimes that front end research is really all you need to check out.

What do you think about these two scenarios in real estate? Have you experienced either situation in your career? Tell us your real estate story in the comments below!

Image courtesy of Pixabay

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11 Best Markets to Invest in Assisted Senior Living Facilities

If you are a loyal Best Ever Listener and attended the Best Ever Conference 2019, you have heard and seen Gene Guarino of the Assisted Living Academy discuss the power of investing in senior housing.

During my interview with Gene, he explained why he believes that assisted living facilities will be the next mega trend over the next 20 years, in part due to the fact that over 10,000 people turn 65 years old every single day.

To learn more about the business plan for this strategy, check out Gene’s interview or this blog post about how to make an extra $5,000 to $20,000 per month by investing in senior housing.

If you are interested in pursuing this “booming” investment strategy, here are 11 metropolitan statistical areas to target. These are the MSAs with a total population over 500,000 that had the greatest increase in senior population (65 years and old) between 2010 and 2016:

 

11. Colorado Springs, CO

Wikipedia

65 years and older population growth 2010 to 2016: 37%

 

10. Santa Rosa, CA

Shutterstock

65 years and older population growth 2010 to 2016: 37%

 

9. Cape Coral-Fort Myers: 37%

The Florida Living Magazine

65 years and older population growth 2010 to 2016: 37%

 

8. Las Vegas, NV

Wikipedia

65 years and older population growth 2010 to 2016: 37%

 

7. Houston, TX

iStock

65 years and older population growth 2010 to 2016: 39%

 

6. Durham, NC

Livability

65 years and older population growth 2010 to 2016: 41%

 

5. Atlanta, GA

GrandView Aviation

65 years and older population growth 2010 to 2016: 41%

 

4. Charleston, SC

10Best.com

65 years and older population growth 2010 to 2016: 42%

 

3. Boise, ID

Idaho Statesman

65 years and older population growth 2010 to 2016: 43%

 

2. Raleigh, NC

Design Milk

65 years and older population growth 2010 to 2016: 44%

 

1. Austin, TX

65 years and older population growth 2010 to 2016: 51%

 

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

Source: Census.gov
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