JF2724: Light Industrial: How to Find Deals, Source Tenants, and Create Cash Flow ft. Kim Hopkins

What are the benefits of investing in the light industrial sector? In this episode, Kim Hopkins—Principal at Iron Peaks Properties LLC—shares the ins-and-outs of this asset, including how she sources and underwrites these deals, finds good tenants, selects good property managers, and more!

Kim Hopkins | Real Estate Background

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Ash Patel: Hello Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m with today’s guest, Kim Hopkins. Kim is joining us from Flagstaff Arizona. She is a principal at Iron Peak Properties, and her portfolio consists of over 300,000 square feet of multi-tenant light industrial in multiple states. Kim is also an LP, multifamily syndication investor. Kim, thank you for joining us and how are you?

Kim Hopkins: I’m good. How are you doing, Ash?

Ash Patel: Wonderful. Kim, before we get started, can you tell the Best Ever listeners a little bit more about your background and what you’re focused on now?

Kim Hopkins: Sure. My background is – not to go too far back, but we weren’t really interested in any other business products early on. Fashion ate my passion, as I like to say, but I always knew I wanted to build a business. I actually got a PhD in mathematics at the beginning. I’m very embarrassed to say that, by the way, because I know that Robert Kiyosaki would make fun of me, and he’s one of my idols. So I’m a recovering academic many, many years ago. We left Academia, me and my husband, soon after graduating, and we went into the real business world. I was actually in tax credits. I got a job as a project manager in tax credits, and ended up building the business, running half the company, and then getting into sales.

In 2014, I read Rich Dad Poor Dad, and decided that I didn’t want to have a job anymore. I wanted passive income and I wanted to build my own business, so we developed to five-year plan in 2014, that alternated buying properties and having kids. Two kids and four properties later, we retired from our day jobs, at the end of 2018, on time and under budget. That’s where we are today. We own multi-tenant light industrial, a little over 340,000 square feet, as you mentioned. We own it in Oregon, Washington, Utah, and Texas.

Ash Patel: Amazing. Kim, why multi-tenant light industrial?

Kim Hopkins: That’s a great question. Multi-tenant – that’s all the advantages of an apartment multifamily investment. If you have a single-tenant property and you use leverage, in other words, a loan, which we do, if you have a single-tenant property and that tenant vacates, now you’re underwater on your mortgage. So multi-tenant affords us the risk diversification of multiple tenants. Sometimes, if one of our tenants leave, we might not even know, because they’re backfilled a month later. It’s faster to fill the smaller tenants, and it’s less of a risk to your mortgage. And then the reason for the multi-tenant industrial is because we don’t get phone calls in the middle of the night to fix the toilet, which we like. Our tenants are businesses, and they’re very self-sufficient businesses, so they’ll often fix things by themselves. Unlike office and retail, there’s very little tenant improvement. So I don’t need to do a lot of improvement to the space, I don’t get a lot of phone calls on the space, and it’s a very versatile space. We have CrossFit tenants, we have painters, contractors, all different types of businesses… So it’s pretty good for recessions and things like unexpected pandemics.

Ash Patel: Kim, when you say multi-tenant light industrial, is that also flex space?

Kim Hopkins: That can be considered flex space as well, yeah. We look for properties with very small office build-out, only about 20% of the space, and some of our spaces have a little more office. So yes, that could be considered flex.

Ash Patel: The typical ceiling height in your properties would be..?

Kim Hopkins: About 12 to 14-foot clear height, some of them are as high as 18.

Ash Patel: Okay. And these are ideal for tenants, like you mentioned. I’ve seen churches in some of them, people that tint car windows…

Kim Hopkins: Yes. We have all that.

Ash Patel: It’s such a versatile space. One of the things I love about that is we’ve literally given people what looks like a dirty garage, and the next time you see it, it’s an incredible space that they transformed on their own dime. You probably had a lot of experience with that.

Kim Hopkins: Yes, that’s very true. Some of the tenants just keep it very simple, and there’s very minimal build-out. But then we have larger tenants, like 10,000 square foot tenants, and they will do the build-out themselves, which we love, because we are not developers. We took a course in development and realized we would lose our shirts, so we don’t do development. Then we’ll give them some sort of rent abatement or amortization of the TI over the life of the lease. But we love when the tenants improve the space for us, which is another benefit.

Ash Patel: Do you typically have to give them a tenant improvement allowance? Or do they just do it on their own?

Kim Hopkins: It really varies. We tend to encourage them to do it on their own.

Ash Patel: So you don’t have to pay for it.

Kim Hopkins: So we don’t have to pay for it, and we’ll just give you free rent, we’ll just call that a day. Now we have a beautiful space that’s improved for the next tenant and we didn’t have to pay for it so that’s our preference. But we’re flexible too, we sometimes pay for it as well.

Ash Patel: Kim, I’m going to guess you didn’t set out to get into this space, that it happened by accident.

Kim Hopkins: Yes, it did happen by accident. We kind of knew we didn’t want to do multifamily, because it’s so competitive and now the cap rates are so compressed. We wanted something similar to that product type, and we knew a real estate agent in Vancouver, Washington where we started. He had a property like this available in 2014 when we started. At first, we said “Absolutely not. There are way too many tenants. We don’t want to babysit.” He slowly talked us into it. We kind of lucked out with the timing; the owner was older, in his 70s, he was getting overwhelmed with the number of tenants, and also, he was still recovering from 2008. So a lot of the leases – there were some vacancies, almost 30%. We got it in contract with this high vacancy, but we really pushed the property manager and told him we would use him when we closed. He actually filled most of the spaces by the time we closed. It was a really good way to start off our investing career.

Ash Patel: And you got hooked on this asset class.

Kim Hopkins: I got very hooked on this asset class. Yes.

Ash Patel: Are a lot of your rents triple net, or are they gross leases?

Kim Hopkins: That’s a great question. Sometimes the bigger tenants… We have a couple of single-tenant properties that are 10,000 square feet, and those are triple net; they understand the concept of the triple net and it’s very simple. For the multi-tenant industrial, we actually find that gross leases are much better for those kinds of tenants, because number one, it’s easier for everyone to understand. No matter how many times you explained triple net to a tenant, at the end of the year if you ask them to pay an extra amount in expenses because you have an overage, they’re always upset, and probably rarely grateful if you pay them 200 bucks instead.

We actually bought, in 2019, a multi-tenant property from a very large syndicator, one of the largest syndicators in Australia. One of his selling points was he had converted all of the tenants to triple net. When we talked to the tenants on-site, guess what their number one complaint was?

Ash Patel: The variable costs.

Kim Hopkins: Yes, they were very upset by that. So we promised them we’d do the exact opposite and we converted them all back to gross. Now everyone’s happy and everyone’s lives are simpler.

Ash Patel: Yeah. Just so the Best Ever listeners know, triple net typically would have the tenants paying for taxes, maintenance, insurance, things like parking lot resealing, exterior maintenance, or roof replacements – they would all share in that cost. When you have mom-and-pop tenants, they can’t really absorb a variable cost; they budget, “My rent is $1,500 a month”, and if they get hit with a $1,000 bill, that’s really hard on them.

Kim Hopkins: Yeah. Just to add to that a little bit, you can add certain items back in as variable costs, sometimes called modified gross. For example, in Texas, they have very high property taxes, which you can fight, by the way. They have very high property tax reassessments; we sometimes have a modified gross lease that says you don’t owe anything ,extra unless the property tax shoots up, in which case, we might pass your pro-rata share on to you.

Ash Patel: And you don’t have any of these properties in Arizona, do you?

Kim Hopkins: That’s a funny story. We actually tried to find a property in Phoenix, Arizona last year and we were in contract. But that clear height you asked about earlier was misstated. They told us it was a 14-foot clear, and we went and interviewed the top leasing broker in town, which is what we always do for our properties, and he said, “That’s my least favorite property in this market.” We said, “Why?” He said, “The clear height. It’s only 12 feet.” We said “No, it’s not. It’s 14.” We went back, measured, and he was right. So we had to pull out of that property, along with other issues with what was stated in the offering memorandum.

But the other issue too is we’re really numbers-driven investors; we’re very, very careful about the numbers and the underwriting. I made a mistake with Phoenix. I was so interested in getting into the Phoenix market that I let my standards lower for cash-on-cash returns. It was just [unintelligible [00:12:21].09] of a margin, so we bought a property in Dallas instead. It made almost 3% more in cash on cash than the property we’re looking at in Phoenix.

Ash Patel: A PhD in mathematics, I would assume you’re very numbers-oriented.

Kim Hopkins: Hey, you’ve got to use your strengths.

Ash Patel: Kim, what is clear height and why is that so important?

Kim Hopkins: Clear height is just the height from the ground to the shortest point of the top of the warehouse. It’s very important, because a lot of these people are distributors, and they have to fit their racks, their lifts, and everything into the warehouse. If it’s too short, you’re going to limit the number of users. As I mentioned earlier, one of our favorite things about these properties is their versatility. That property was really pigeonholing itself to more of an office user, and we try to [unintelligible [00:13:08].22]

Ash Patel: Yeah. There are certain milestones with clear height; like, in a 14-foot, you can get an additional racking there and the forklift can get higher. So that 12 to 14-foot difference may not seem like a lot, but it’s huge in terms of the potential tenants you can attract.

Kim Hopkins: Yes. As you know, when you underwrite a deal, there are always going to be errors and things that you discover along the way. In the Phoenix property, the underwriting was in their favor, so the margins got even slimmer. Whereas in the Dallas property we underwrote, the margins actually ended up being in our favor, so that’s the direction we want to go.

Ash Patel: Kim, how do you find tenants for properties like this?

Kim Hopkins: We really believe in local property management. We’ve lived in Los Angeles for 10 years, we moved at the end of 2020 to Arizona. My investing motto was always ABC, Anything But California. We’ve always had properties out of state, and we’ve, since the beginning, believed in local property management. Our very first property manager for that Vancouver property was an older gentleman, and he basically told us “Look, I know how to run this. I think of this as my property.” At first, we were kind of offended and thought, “Oh, he doesn’t respect us.” But then we realized that that’s exactly what we want, property managers and leasing agents who think of it as their property and treat it as their own. So we really rely on local leasing agents to help us fill the properties, and they advertise through their websites, CoStar, LoopNet, sometimes Craigslist, the usual channels.

Ash Patel: Is it hard to find property managers experienced in flex space or light industrial?

Kim Hopkins: It is, it’s pretty challenging. It’s a unique space, and there are a lot of big companies in the market that will charge a large fee, and they have these young guys on the job… Nothing wrong with the young guys on the job, but they don’t quite get the relationship aspect. We’re looking for guys who are more seasoned. When you go around the property and talk to them, everyone knows that guy’s name and sometimes thinks they own it. In the Texas property we bought last year, we hired the property manager that was already working on the space as the property manager, and everyone knew him. It was just an obvious choice.

Ash Patel: Kim, if you are in due diligence, is finding a property manager part of that process? If you don’t find a qualified PM, would you still close on that property?

Kim Hopkins: That’s a great question, we have a pretty detailed underwriting process that we go through. One of the main steps we go through in the due diligence process is to identify a property manager. That was learned through trial and error of not doing that during the due diligence phase. We will interview several property managers and then we will even put a contract in place with the property manager prior to the end of due diligence, that says it will be effective upon closing. That way, when you’re negotiating, you want to negotiate your rate with them prior to closing. Because after closing, everyone knows that now you are in need of a property manager. That’s how we handle that situation.

Ash Patel: Would you still close if there’s no PM?

Kim Hopkins: No. We would not close if we cannot find a good property manager.

Ash Patel: Okay, that’s critical. You wouldn’t try to self-manage for some period of time?

Kim Hopkins: I don’t think so, because we’re very detailed in our search for a property manager. If we can’t find one during the due diligence process, I do not think one will appear afterward; I haven’t encountered that yet, so I’ll have to let you know.

Ash Patel: Kim, what would you tell people that are searching for multifamily or different asset classes and always bypass when they see a building like this?

Kim Hopkins: I might not necessarily criticize them for that. I really do believe in focusing on one area and focusing on your area of expertise. I’ve learned the hard way that when you don’t do that, you sometimes get into trouble. I would encourage people to pick an asset class and master it. But I would say that if they’re getting into it and looking for a new asset class, for the reasons of risk diversification and easier tenants, that it’s a really good asset class to consider, and it’s very competitive to find right now though.

Ash Patel: I want to go back to finding tenants, because the tenants for this type of space vary. It could be somebody that has a painting company that they’re running out of their garage, or somebody that has an electric company that they’re running at a different storefront. How do you solicit this huge variety of tenants?

Kim Hopkins: I think the space speaks for itself, but one thing we do in our space selection is very important. We have a list of criteria; one of them is that no more than 20% of the space is built out, so no more than 20% office. Because we find that if you have more office than that, it really narrows your tenant pool. You want only 20% of office and then a tenant can add and subtract as they want, but it’s a much more versatile option. We only do single-level properties, no two-story, which also opens it up. We’re careful about the clear height, that’s another thing. And the other thing is we look for properties that are on busy roads and have a lot of good street frontage. I always say to face the street the hamburger way, instead of the hotdog way, so that there’s lots of signage and so you get that retail crossover. If you have an industrial building that’s in the middle of nowhere, which happens a lot – there are a lot of Texas properties that are really far out from town – you’re going to really limit your tenant base.

So we look for places that have that retail crossover, so it can be a CrossFit, it can be a driving school, it’s close to a variety of commercial retail properties, so that sometimes we get storage for big retail businesses. The last thing is we look for properties where no more than 30% of the space is occupied by a single tenant, so that we have these small units that turn over quickly. Just as an aside, I learned a rule of thumb that it takes about a month per square foot of space to lease. A 1,000 square foot unit takes me about a month to lease, whereas a 10,000 square foot unit can take 10 months to a year.

Ash Patel: Kim, some of your tenants will have customers coming into their shop, others will just have vans where employees show up, leave in the morning, and come back at night. What are your parking requirements for customer parking on these properties?

Kim Hopkins: That’s a very good question, too. We do look for ample parking, at least a three to one ratio, 3000 to accommodate that, because we do want that retail crossover; so we look for enough parking for that retail purpose.

Break: [00:19:58][00:22:07]

Ash Patel: Have you built any of these buildings or do you just acquire existing properties?

Kim Hopkins: We’ve just acquired them. We found that it’s not cost-effective even to build them right now, and it certainly wouldn’t be cost-effective for us. The people who are building these properties are building them themselves, they are the GC on the property. Otherwise, they’re just too expensive to build and to build out.

Ash Patel: Why is that? It seems like block walls, metal roofs… Why is that expensive to build?

Kim Hopkins: I think it’s the build-out into the multi-factor. I think if you’re building a single-tenant property, then it probably makes sense right now. But for the multi-tenant, you need the plumbing equipped, so that every tenant has a bathroom, and every tenant has an office. In fact, I was looking at a property way out in the middle of nowhere in Texas the other day that someone had just built. It looked like he might have run out of money, because it was one of these properties he said there was one problem, the units didn’t have bathrooms. He had built one standalone bathroom in the middle of the parking lot. I have a feeling that it’s the plumbing and the offices that add to the build-out and makes it not cost-effective.

Ash Patel: How about sprinklers and floor drains?

Kim Hopkins: Yeah, we look for properties that have sprinklers, but it’s not necessarily a requirement.

Ash Patel: And then drains in the floor.

Kim Hopkins: Yes, they have those as well.

Ash Patel: Is that a requirement for you?

Kim Hopkins: No.

Ash Patel: Alright, so we talked about all the positives about flex space or light industrial. What are some of the negatives?

Kim Hopkins: Let’s see. It is a high-maintenance asset. So it is true that if you have a single tenant triple net lease, it is very low maintenance. The tenants will fix everything themselves, they sometimes actually pay the triple, they actually pay the property tax on some of our properties themselves, so it’s a low-maintenance asset. We have a lot of tenants, we have a lot of financials, we have a lot of leasing turnover, so it is a high maintenance product. That’s why we’re constantly improving our systems, to try to operate it as efficiently as possible. That’s one downside.

The other downside is it’s actually a very high-demand product right now, so they are extremely hard to find. They’re hard to find and they’re very overpriced. Back to my phoenix example, one of the problems in Phoenix right now is one of the biggest real estate offices in Phoenix has set up a partnership with their sister office in southern California, whose sole purpose is to take California investor money and invest it in properties in Phoenix. It’s a running joke now that you see a property for sale and you say to the broker, “Hey, is this a California price?” They’re like “Yup.” The prices have inflated so much because of that demand. So that the other problem, is they’re very hard to find.

Ash Patel: How do you find them?

Kim Hopkins: Well, we started out with a relationship with someone we knew, and then we found a couple of them just on LoopNet, actually. This last property, we finally did what I’ve wanted to do for years… It was a pocket listing, I guess, from one of our current property managers; he brought us the property and he said, “I think it’s going to go on the market. I’m the one listing it.” We said, “What do we have to do to keep this off of the market?” We dropped everything we were doing, put together an offer right away, and got it taken off the market. A few different ways.

Ash Patel: What else do you do to find properties?

Kim Hopkins: Honestly, I’ve tried before to do direct-to-owner. It was just too much of a task for me because it’s just too difficult to identify properties, to begin with. The data online is just not accurate enough. We have a list of brokers we call upon, and we use LoopNet, and then our relationships with our existing property managers, that’s basically it.

Ash Patel: I would start looking at residential listings that list flex space buildings like this. A lot of residential websites will have a search function for commercial properties. Is there minimum square footage that you would have to buy?

Kim Hopkins: We’ll start at about 30,000 square feet.

Ash Patel: Okay, so that might be a bit large. I’ve seen a lot of these 10,000 to 15,000 square foot properties listed by residential realtors.

Kim Hopkins: I will look into that.

Ash Patel: And they don’t list them on LoopNet or Crexi.

Kim Hopkins: That is a very good idea, I will definitely look into that. That’s kind of [unintelligible [00:26:30], one of the things I look for, is problems that go away with the seller. One of those problems could be the agent. If a residential listing agent is listing an industrial property, that’s a perfect example of that, problems that will go away with the seller.

Ash Patel: Yeah, we’ve bought a few, and some of my best commercial deals have been listed by residential realtors. When I say commercial, I mean nonresidential commercial; so like retail, strip centers, office.

Kim Hopkins: That’s very interesting, I will definitely try that.

Ash Patel: It’s a great way to find deals. What happens if you can’t find more deals? How are you going to pivot?

Kim Hopkins: Well, not to answer your question with a question, but what’s on my mind right now is kind of what is our next five-year goal? Do we want more deals? How many? The five-year goal we had in 2014, of financial freedom, was very clear and very motivational. Now that we’ve achieved it, my next question is what do we do next? How many more properties do we want next? I feel like, first, I have to answer that question. Then once I’m hungry and I know what I’m shooting for, then I’m going to go about trying to find new deals.

Ash Patel: Do you take on investors for your deals?

Kim Hopkins: We have taken on some investors and its mostly friends and family. To be honest with you, investors versus no investors, I think that if you run out of cash, investors are an obvious way to go. Your cash-on-cash is certainly higher with investors, but you also have a lot of freedom from just doing the deals yourself. What are your thoughts on that?

Ash Patel: Exactly the same as yours. I never really wanted to take on investors, but I have taken on investors for two reasons. One, people that have let me invest in their deals, I’ve brought them into some of my deals. Then others – I’ve got a lot of high-net-worth friends that just make horrible investment decisions. They invest in bars, restaurants, marijuana companies, and anything that’s sexy and gives them bragging rights, but they don’t make any money. So I’ve encouraged them to invest in some of my deals, to show them that there are some tax benefits to real estate. You actually grow your money and not wait for “Oh, we’re going to sell this in 10 years, and we’ll make millions of dollars.” Or a bar or restaurant, that’s going to fluctuate or get impacted by COVID. But I think in the long run, to scale, you have to come up with a solution. Investor capital is great, but as you said, if there’s a need there, if you’re out of capital, and if you have good deals, it’s an option. But yeah, I’m kind of mixed on it.

Kim Hopkins: The other thing too is we like to hold our properties forever. That’s another issue that we think about as well.

Ash Patel: Why is that? If you purchase a property that’s 50% vacant and you fill it, you’ve now added a tremendous amount of value to it. Why not sell it?

Kim Hopkins: Well, because that’s not how we operate. We are cashflow, long-term investors. If you lease it up, now you have that recurring cash flow forever. There is an example of a deal we actually lost money on, that we did end up selling. But if the property is working well, you can always refinance to recoup some of that. But we’re looking for properties that will cash flow continuously for the long term.

Ash Patel: And do you typically do a cash-out refi if you empower the value of the property?

Kim Hopkins: Yeah, we did refi a couple of properties last year, because the interest rates were so good, but we actually didn’t take much cash out. Again, we chose to focus on optimizing our cash flow, so we just reduced our liability and increased our cash flow by quite a bit each year on those properties. We chose that option instead of pulling our cash out, because it sounds really sexy to pull your cash out of the deal, and it might work; it does work for a lot of investors. But for us, that just increases our mortgage responsibility, and that decreases our cash flow. So from a risk perspective, if there is a recession, we don’t want this super high mortgage payment; we would rather have this increased cash flow as a risk reduction strategy.

Ash Patel: Kim, how do lenders feel about this type of asset?

Kim Hopkins: It depends on the lender, but some lenders don’t quite get it. So we have taken this asset before to some lenders who specialize in multifamily, and we’ve explained to them that this is just like multifamily, but instead of Joe Schmoe renting it personally, we have an LLC here, we have a business. We actually like the one-year leases, because it’s good for us, it’s less of a real estate commission, they turn quickly, and the lender will turn to us and say “You have one-year leases [unintelligible [00:31:25].12] even worse than one-year leases, when we’re buying a property, if we see a lot of month-to-month leases, that’s great. There will be month-to-month tenants whose leases expired 10 years ago and they’re still in the space. That’s a very secure tenant to us, and we’re going to go in and turn them into a year-long lease. But the lender does not see it that way, so it definitely has been a struggle trying to find lenders that understand. We started out with local credit unions who could develop a relationship with us and understood it and got it. Now we kind of transitioned to the life insurance lending space, and that’s been really fantastic. Because we long-term hold, we’re able to get 15-year money, which is incredible on commercial assets like this. Usually, it’s around seven years.

Ash Patel: When you say 15 years, is that 15 years locked on the interest rate?

Kim Hopkins: 15-year term and 15-year locked, with a 25 to 30-year amortization.

Ash Patel: Okay, got it. What percentage do you put down?

Kim Hopkins: We started out putting down 25%, and now we’re a little bit closer to 30, just the way the market is going.

Ash Patel: I would find local lenders – not credit unions, local lenders near each property, and see if they’ll finance it. I would try to get 20% down.

Kim Hopkins: Well, we’ve tried that. We’ve tried it on this last Texas deal. It just depends. Their terms were not nearly as good as the life insurance company. The life insurance company had lower rates and a longer-term. The longest term we can find with local guys was seven years and that was a stretch for them. I think it depends on the market and just the one we were working with.

Ash Patel: Got it. Kim, what is your best real estate investing advice ever?

Kim Hopkins: The best real estate investing advice ever? I would say to you start with the big picture and really know what you’re aiming for. I hear a lot of people talking about, oh, they’re going to buy, and the money they’re going to make… But I want to know their big picture. What’s your goal? Is it to quit your job? Is it financial freedom for you? Do you want to spend more time with your family? What is your big picture outside of real estate? When I was working in my job and I was really tired of it, what kept me going in sales was knowing that my big picture was financial freedom. So I would start with that. Before you climb the ladder, make sure it’s leaning against the right building.

Ash Patel: Kim, are you ready for the Best Ever lightning round?

Kim Hopkins: I think so.

Ash Patel: Alright. Kim, what’s the Best Ever book you’ve recently read?

Kim Hopkins: I actually have two. The first one is The 12 Week Year by Brian Moran and Michael Lennington. That was a really interesting book. Basically, the point of that book is at the beginning I always plan out my goal for the year, my various goals for real estate. The premise of this book was “Hey, instead of planning that for a year, plan it for 12 weeks, instead of 12 months. Stay on top of it every single week, to make sure to achieve those 12-week goals.” I know it sounds really simple, but that’s been really helpful for me. I basically condensed my goals for the year into 12 weeks, so I’ve been a little busy since January.

The second book really ties with the first, it’s a book called Who, Not How by Dan Sullivan. That’s been really important to me, because if you’re trying a year’s worth of goals in 12 weeks, you better figure out how to delegate. That’s something I’ve really struggled with in my career, learning how to delegate and outsource. That book has been very helpful to me as well.

Ash Patel: Kim, what’s the Best Ever way you like to give back?

Kim Hopkins: The Best Ever way I like to give back is I love helping people get into real estate. Like I said earlier, we’re a big picture, but also an analytical team. We really like to help people start with that big picture or their purpose, and then we like to help them drive from the numbers. I find, a lot of times, like you said, your friends, you want them to invest in real estate, but that restaurant is something sexy… And I would just start with the numbers and say “Okay, here’s where you want to go. Here are the numbers you need to get to hit this. Here’s the size deal do you need to do and here’s the return on that deal, and really work on the numbers.” I’m interested in discussing real estate at every level, with every kind of person, whether they know a lot more than or they’re just starting out. I think helping someone find their path to financial freedom is the best way to give back.

Ash Patel: Kim, how can the Best Ever listeners reach out to you?

Kim Hopkins: They can reach out to us, our website is ironpeakdproperties.com They can send emails to me at info@ironpeakproperties.com.

Ash Patel:  Kim, thank you so much for your time today and for sharing your story. Have a PhD in mathematics and in 2014, coming up with a five-year plan, hitting it early, sharing this incredible asset class with us, and a lot of tips and tricks. Thank you again.

Kim Hopkins: Thank you so much, Ash. I really appreciate you having me on the show.

Ash Patel: Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five-star review, share the podcast with someone who you think can benefit from it. Please also follow, subscribe, and have a Best Ever day.

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How to Close on an Apartment Syndication Deal

How to Close on an Apartment Syndication Deal

Closing an apartment syndication deal is different from closing a traditional multifamily residential property. Even so, it’s nothing to feel stressed about. Instead, if you approach it methodically, it should be a painless process, and it’ll position you for long-term success.

Below are the major steps that such a real estate closing requires.


Conducting a Total Financial Analysis

First of all, go over your entire budget. Make sure your rent premiums are accurate. Verify your continuing revenue streams. Review your ongoing expenses: payroll, repairs, and so on. And don’t forget upfront costs such as renovations and upgrades.

You can use your due diligence reports, which you filled out when your new property was under contract, to help you complete this top-to-bottom financial review.

Similarly, look at your property management company’s report, the document that lists each unit’s deferred maintenance projects. Some of those residences might need new flooring, cabinets, or appliances. Most likely, these numbers will be somewhat different from what your underwriting indicated.

Confer with your property management company as well. Those pros can approve or adjust your renovations budget and schedule.

When you’ve finished this review, you may need to alter your business model to an extent. Share those changes with your investors. Of course, if you’re now projecting higher returns, everyone should be happy.

Don’t panic if you’re looking at lower returns. You may have to adjust the price you’re offering for the property. Or you could try to locate extra financing. However, if you’re facing significantly lower returns, it might be wise to retract your offer altogether.


Sending the Money and Legal Documents

By now, you should have found, applied for, and qualified for a loan. And you should’ve raised and collected all the passive investments you’ll need, enough to cover the loan’s down payment, the closing costs, and an operating account for the first several months of ownership.

Likewise, if you charged an acquisition fee or any other fees, that money should have come in. Plus, if you’re not paying them yourself, you might want to raise funds for your due diligence expenses.

In addition, at this stage, all of your operating agreements and other legal documents should have been signed by all of your general and limited partners. And you should have all those forms in your possession.

A few days before you close, you’ll sign your loan and title documents. Those signings will probably take place in front of a notary. You’ll then ship those forms to the title company or your lender. Plus, you’ll deposit any closing funds into your lender’s escrow account.

If a lending institution is involved, it will review the documents and funding before transferring the money to the title company.

The title company will send the money to the property’s owner and issue the deed to the LLC you’ve set up. At last, the deal will close, and you’ll be the property’s new owner.


Emailing Your Team

The moment you learn the apartment syndication deal has closed, notify your real estate investors and property management company. Indeed, you should draft this email a few days in advance.

Sending this email isn’t a matter of politeness. It’s actually your first official duty as the new multifamily property owner.

In fact, you could email the people at your property management company ahead of time, predicting the hour that the closing will go through. That way, they can be sitting in the parking lot when the closing email arrives, ready to spring into action.

Incidentally, you might be employing the old management company, in which case the staff will already be set up for the transition. Keep in mind, though, that unless that old company is truly outstanding, it’s probably a better idea to start fresh with your own managers.

In any event, here’s how you could format this email:

1. Share the Big News

State that you’ve closed on the property and congratulate everyone.

Proceed to tell your recipients that the closing documents have been signed, and you or your property managers now possess the keys.


2. Set Communication Expectations

Explain how you intend to stay in communication with the entire group: how you’ll contact them, how often, and what those messages will entail. Also, can they expect your updates on certain days — the first day of each month, for example?

Each update will review all the operational and financial changes since the previous update. You could email your group newsletters, hold conference calls, mail business documents, or decide on some combination thereof.

During the first year, you’ll likely be in touch with everyone more frequently, perhaps every week or every other week. That’s because so many things will happen in those first 12 months: renovations, new leases, residential turnovers, and so forth.

As things settle into a routine, however, you can contact your group less often: maybe once a month, once a quarter, or even once a year.


3. Set Financial Expectations

List your monthly, quarterly, and yearly financial expectations for this property.


4. Share a Financial Document

Provide a link to a financial document, which will contain information about distributions and taxes.

Specifically, it will tell the group how often you’ll send distributions, when the first distribution will arrive, and how that money will be paid. Can the investors choose their own payment methods?

Furthermore, what’s the amount of that first distribution, and what will the amounts of subsequent distributions be?

Those sums will likely equal the prorated preferred return divided by 12 and then multiplied by the amount of each person’s investment.

Also, will the distributions always be equal? It’s likely that, if you exceed your financial projections one year, you’ll send larger distributions at year’s end.

As far as the tax info, this document will tell everyone which tax documents you’ll send out each year. The K-1 form will be among them.

If you’re not sure how to format this financial document, you could hire a freelance designer online for an especially crisp and attractive style.


5. Be Positive

It’s great to include a few positive statistics or news stories as well. For instance, you could provide data about the robust local demand for apartments. Other examples include low unemployment numbers for your area, high job growth stats, or links to articles about businesses that just opened. These items should lift everyone’s spirit.


6. Sign Off

You could close this email by sharing your own enthusiasm for the deal. Encourage the group members to contact you with their questions, too.

Finally, before you send this crucial email, quickly reread it to make sure everything’s correct. Once you hit the send button, your apartment syndication deal will be complete. You’ll instantly become an asset manager. Why not take a moment to celebrate? Then let the asset managing begin!


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Filling Vacant Units with Short-Term Renters

Filling Vacant Units with Short-Term Renters

The ability to identify incredible business opportunities and to find an optimal way to benefit from those opportunities are equally important to entrepreneurs, and Jason Fudin has accomplished these objectives through WhyHotel. WhyHotel serves the important purpose of matching short-term renters with new multifamily properties. By doing so, he helps new apartment communities become profitable much sooner than they otherwise would. Recently, Jason Fudin had the opportunity to speak with Joe Fairless in detail about his business.

According to Jason, the typical new apartment complex takes approximately one year to lease up to the market occupancy level. With between 200,000 and 400,000 apartment units being created in the United States each year, approximately half of these units are vacant at any given time. Jason recognized the potential that these units have while he was working for Vornado on high-rise real estate developments. The concept of turning these vacant units into short-term rentals led to the establishment of WhyHotel. WhyHotel is a unique platform that provides full hotel leasing and staffing services for new developments only.

Specifically, Jason Fudin contacts new multifamily developers with an offer to fill a portion of their vacant units with short-term renters for between eight and 24 months. This enables those properties to make a much-needed income while the other units are being leased up. Jason uses the term “pop-up hotel” to accurately describe the service that he provides.

When Jason Fudin discusses the profitability of moving his operation into a new property approximately every year or two, he talks about margins. Specifically, the margin on using the property for a conventional hotel is significantly smaller than the margin for running the business in an existing structure that is currently vacant. WhyHotel is able to establish a healthy profit margin with reduced overhead compared to a conventional hotel and without the risks associated with property development.

Because WhyHotel is now an established firm, it is well-known by most of the major players in the apartment development world. Initially, Jason had to sell the concept and explain why his company was the best for the job. However, now that the company is so well-known and respected, the job of prospecting has dramatically reduced. At the moment, some of his clients have already realized the value in WhyHotel’s service, and they are depending on that service as part of the overall development and interim cash flow plan. Essentially, WhyHotel is becoming an integral part of the development project in some cases.

WhyHotel offers new apartment developments another key benefit that extends for the property’s first few years. When a multifamily property is new, you generally need to make rental concessions and offer rental rates at the bottom of the market to get the vacant units leased quickly. During a typical lease-up scenario, it could take approximately three years for these to burn off and for the property to run at the market level. Because WhyHotel generates immediate income for the apartment complex, it is able to work toward a stable rent roll and market rents more quickly.

As beneficial as WhyHotel’s service is to its clients, many developers have passed on using their services for a couple of key reasons. One of these reasons is related to regulations and zoning. The developer may have already been through the wringer with planning commissions, zoning hearings, and more, and it is not agreeable to open that door up again.

In addition, some developers object because the concept of a pop-up hotel is foreign to them, and the company is a relative newcomer to the scene. However, Jason acknowledges that the latter challenges are less problematic now as the company is becoming more established and has more references. WhyHotel fully develops the units as hotel units, and it completely returns them to like-new apartment units at the end of the contract. The property developer has no exposure to these expenses.

At the beginning of a deal, the parties will agree on terms in a Letter of Intent. These terms cover the length of time that WhyHotel will occupy the units, how many units will be occupied, revenue distribution, and more. Then, a detailed contract is drawn up, and this is usually between 40 to 60 pages long.

Once the contract has been executed, WhyHotel’s go-live team steps into action. This is the point where units are furnished, and on-site staff is hired and trained. Bookings are usually accepted approximately three to four months prior to the opening date.

Currently, WhyHotel operates in Baltimore and Washington, D.C. It has spent the last few years concentrating geographically close to its base of operations. This has been to build the brand, establish regular customers, and optimize revenue. However, WhyHotel plans to expand to several other major markets throughout the United States in the coming years.

A pop-up hotel has a bold appeal to a consumer. Short-term renters get to stay in a space that is nicer than a residence inn. They also get a full cable and internet package, appliances, apartment-style amenities, and support from round-the-clock hotel staff. WhyHotel uses Airbnb, Vrbo, and other similar services to find customers, and they also use a variety of other direct channels.

The last few years have been eye-opening for Jason Fudin and his team at WhyHotel. For example, they are learning how to save money by using various services over alternatives. They also are fine-tuning how long it takes to set up a new unit from scratch. Prior to his experiences at WhyHotel, his work at Vornado taught him to be patient while working on major projects, and he currently applies this to the growth of WhyHotel.


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From No Real Estate Knowledge to Over $40 Million AUM

From No Real Estate Knowledge to Over $40 Million AUM

Michelle Bosch has been a full-time real estate investor since 2002, and she is a co-founder and Chief Financial Officer at Orbit Investments. Over the years, she has purchased more than 4,000 properties, and the company currently holds more than $40 million in assets under management (AUM). However, she came from humble beginnings.

She immigrated to the United States from Honduras, and her husband is also an immigrant. Michelle spent her first several years in the United States attending business school and working in a professional position. She quickly realized that she wanted a different life experience and turned to real estate. She and her husband had no prior real estate knowledge, so they started investing in land rather than in homes as most other investors do. This quickly led them to own and manage a live auction company that hosted quarterly land sales.

Those profits were used to purchase single-family homes starting in 2009. They purchased homes priced between $30,000 and $50,000, and they rented them out for up to $1,100 per month. They grew their portfolio and branched out to multifamily properties in 2016. To date, they have been involved in three syndicated multifamily deals. However, they continue to work on land deals as their bread and butter.

Specifically, they reach out to landowners who may not be interested in holding their property any longer. Because of technology like Google Earth and others, they no longer need to walk properties. Instead, they focus on identifying properties and lining up buyers for them through their auction platform. The couple has assembled a great team of skilled individuals who share core values and goals.

Because of their current real estate knowledge, Michelle Bosch and her husband focus on three primary types of land. These are infill lots in cities, land in the path of growth, and recreational land in desirable locations. After they identify an area they want to focus on, they buy a list of people who own vacant land. Over the years, they have fine-tuned a prospectus letter. They now just send that same letter out to property owners each time they identify a promising market. Typically, they can get two to three good deals off of a 100-piece mailer. Michelle noted that they only send out 100 letters at a time because they cannot handle more volume. However, she did note that they could handle more volume if they preferred to not provide personalized service and develop a relationship with each buyer and seller.

They also have refined a script for gathering details and gauging interest once a landowner reaches out to them. More than that, they have developed proprietary software to help them screen their calls and to ensure that each caller gets prompt, personalized service. Some of the questions they ask upfront relate to the owner of record, easements, access, utilities, and more. These questions ensure that they are talking to the person who has power over the deal, and they enable Michelle and her husband to quickly gauge value.

When the couple started out, they were relatively new immigrants and had thick accents. They were concerned that their accents would discourage people from working with them. However, Michelle says that was never actually the case. Instead, people loved to talk about their land. Often, the land was inherited or was purchased by an out-of-state buyer who ultimately changed his or her plans for using it.

They have two different purchase processes for the land they find. One process is to pay cash for the land themselves before trying to find a buyer. The other option is to do a double close if they have already identified a buyer. Michelle Bosch and her husband use a variety of platforms to identify buyers. For example, they list land for sale through platforms like LandWatch, Craigslist, Facebook Marketplace, and Zillow.

They utilize a software program linked to Zillow and Trulia to review comps quickly. This enables them to estimate value more accurately without having to walk the land or spend hours conducting research. For infill lots that do not have a lot of comparables available, they often look at the developed value of the land nearby and subtract construction costs. They make an offer that is approximately 20% or less of the land’s researched, present-day value. While some people may be offended by such a low offer, others quickly act on it.

Michelle Bosch and her husband have spent the last few decades building up their real estate knowledge, and they have learned a few things along the way that they are happy to share with others. She wholeheartedly believes that the road to prosperity is rooted in simplicity. You do not need to create a complex deal structure in order to profit from it. She also places emphasis on building a solid team. These are individuals who believe in your goals and who are able to fully support you because of that shared vision.

When Michelle reflects on the past, she said she would look at larger and more valuable pieces of land from the beginning. These enable them to turn a “one-time cash” profit by flipping the land. Otherwise, they can lease it out to get “temporary cash” from monthly payments. When they pull together profits and park the cash in a long-term investment, such as through multifamily syndications, they create passive income. In hindsight, she believes that focusing her goals on building that strategy earlier in life would have made a significant difference in their current situation and opportunities.


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Gaining a Leg Up in a Changing and Competitive Marketplace

Gaining a Leg Up in a Changing and Competitive Marketplace

Gary Boomershine, who founded REIvault and RealEstateInvestor.com, spoke with Joe Fairless about some of the most valuable insights he has learned throughout his lengthy career. He initially founded RealEstateInvestor.com in 2005 out of necessity to get a leg up in a competitive marketplace. At that time, Gary had spent the last few decades working in IT sales in Silicon Valley, and he had just recently returned to real estate investing.

Today, he is active in buying and selling, flipping, and private lending. Residential homes are his bread and butter, but he has also dabbled in multifamily and other property types. While he was investing in real estate as a full-time job, he launched REIvault as a side project. REIvault is a cold-calling and lead generation service provider. His 250 investor clients compete directly with Offerpad and Opendoor.


Investing in Relationships

Gary is currently active with nine masterminds. While he contributes up to $50,000 per year to invest in each mastermind, he professes that this is money well spent. The investment enables him to connect directly with smart, talented, and like-minded individuals who are a source of coaching and inspiration. In addition to talking business with his group members, he gets real-life advice on finding a work-life balance.

While real estate investing with a buy-hold strategy is passive, the process of wholesaling and rehabbing properties constitutes a true business with long hours. By connecting with others who are in a similar place in their lives and in their business activities, he is able to find ways to balance and optimize his time.


Mastering Time Management

When Gary Boomershine talks in detail about time management, he describes the 5/10/3 approach to scheduling his day. He wakes up at 5 a.m. every day, and the first five hours of his day are purely devoted to personal time.

Two hours of that time are allocated toward health and fitness with a cardio-based workout. He then takes approximately 90 minutes to journal. This enables him to improve his mental focus on the things that are most important for the day. He specifically talks about how important it is to define goals and to create a plan for achieving them, and this is part of the value he gets out of journaling.

The other 90 minutes of his daily personal time is allocated for various other personal tasks, such as spending time with his wife, doing chores, reading the Bible, and more. At 10 a.m., he focuses on work activities. Starting at 3 p.m., his attention turns to one thing that will drive his business forward.

Gary adopted the 5/10/3 practice from a professional coach who reminded him that we all have the same 24 hours to spend each day. Optimizing that time with the 5/10/3 approach has been effective for Gary to date because it enables him to achieve his goals and to find balance.


Achieving Mental Clarity

Gary emphasized the importance of journaling in his daily life. He prefers to write his thoughts down with pen and paper rather than on the computer. Generally, he focuses on what he wants to achieve and how he wants to do it.

Gary rarely revisits his journals. Instead, they provide him with a way to organize his thoughts and to identify the things that he wants to intentionally focus on. More than that, journaling gives him mental clarity so that he can be a great leader in his family and in business. It also enables him to properly leverage the talents of others so that he can focus on activities of more value each day.

He also talks about the difference that the traction principle has made with his business operations in a competitive marketplace. RealEstateInvestor.com has 90 employees who all work remotely. He pulls them all together quarterly for a face-to-face meeting. That brings them all up to speed and gives them focus for the next quarter. He is moving toward using this principle more consistently with REIvault as well.


Choosing Your Top Three

Gary Boomershine establishes three things each day that will receive his full attention. On the specific day that he spoke with Joe Fairless, he discussed structuring a creative deal involving an office building with a gym.

He also recorded a video with one of his mastermind group members, Chris Arnold from Multipliers. The video delves into the importance of working old leads regardless of how poor they initially seemed. More specifically, because the market has tightened up, cold callers and direct marketers increasingly need to fine-tune their sales skills in order to be effective in their positions. The video he created provides those marketers and sales professionals with a powerful tool to use in today’s competitive marketplace.

The third thing that Gary focused on that day was planning a family trip to Montana over Labor Day.


Final Thoughts

When Gary talks about his best advice for others, he refers to insight from two investment gurus. First, he talks about Robert Kiyosaki’s definition of wealth. According to this definition, wealth is not a fixed dollar amount. Instead, it is achieved when your passive income surpasses your living expenses and enables you to spend your days how you want to spend them.

Second, he emphasizes the value of Warren Buffett’s KISS principle. This principle, which is also referred to as “Keep It Simple, Stupid,” reminds us to focus on the big objectives and not to get caught up in the fine nuances when working in a competitive marketplace.

From his own life, Gary Boomershine has a few other words of wisdom to share. He has learned the hard way to carefully vet potential partners before teaming up with them. More than that, he stresses the importance of giving back in a meaningful way and leading an intentional life that is rooted deeply in your personal goals.


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From the Corporate World to Mobile Home Parks

From the Corporate World to Mobile Home Parks

Who knew that working in the world of mobile home parks could be so lucrative? We recently spoke with Ryan Narus, who has grown his mobile home park investment business to over 500 mobile home pads. Ryan started out as a car salesman and then moved to the corporate banking world before making the leap to becoming an investor.

Read on to see what you can learn from Ryan about networking, going above and beyond, and betting big on yourself.


Success Looks Different Now Than It Did in the Past

Like many of us, Ryan was told to go to college, get a job in the corporate world, and then move up the ladder to success. But Ryan quickly realized that that strategy is no longer viable.

What worked for our parents doesn’t work today. If you want a job that offers financial freedom, you have to make it for yourself. There are ways to earn money and scale a business, but you have to take the initiative. You can’t depend on another company to get you where you want to be.

Even if you work your way up to the top, there’s only so far you can go if you don’t own the business. Your best chance of success is to start your own business.


Don’t Let “No” Stop You

Ryan heard the word “no” a lot when he was first starting out. He even had 40 banks reject his financing application. Where many may have given up, he kept going.

If you want to get into real estate investing, you have to go in knowing that it’s not going to take off the minute you start. There will be obstacles and pitfalls along the way. The reason so many people fail is that they gave up too soon.

You have to have a mindset that you won’t give up, no matter what. Once you make it beyond the others who quit too soon, you’ll be primed for success.


Find People You Can Help — and Who Can Help You

Everyone has something to offer. If you can find people whose talents complement your own, you can accomplish so much more together. Ryan’s business partner specializes in underwriting. He linked up with a broker who needed help. The broker then helped him by giving him early access to deals coming on the market.


Network, Network, Network

No matter what phase of the real estate investing process you’re in, it’s all about who you know. Ryan credits a lot of his success to networking with as many people as possible. His goal is to get people on the phone.

Ryan finds people anywhere he can. He’s willing to talk to just about anybody, not just his best prospects. He networks in person and through social media platforms like Facebook and LinkedIn.

He also suggests networking with people who are both slightly ahead of you in the game and slightly behind you. He often has people who are a little further along who’ll offer him a property off-market because they’re getting ready to take their business to the next level and don’t want to deal with the hassle of putting it up for sale.

He also likes to pay it forward. If he’s offered a property that doesn’t work for him, he’ll often recommend someone he’s networked with.


Choose an Avenue That Matches Your Skill Sets

There are many types of real estate you can choose to focus on. While each can be lucrative in its own way, it’s more about your approach. Dig deep and figure out what skills you have. Even if you think those skills may have nothing to do with investing. You’d be surprised how a skill can transfer from one area to another.

Ryan chose to work with mobile home parks because he had spent a few years working as a car salesman. It was an emotionally grueling job that required him to continually put himself in front of people who may not want to talk to him. He used these skills to make it in mobile home parks because he deals with many of the same types of situations.


Be the Person Who Takes a Different Approach

The investment market is hot right now. Everyone is looking to buy, and sellers have their pick of buyers. Ryan said that one of his secrets to success was always offering a little something different than what everyone else was offering.

While others are being formulaic in their approach with people who own trailer parks, he recommends tailoring the pitch to each individual. He and his business partner take the time to get to know them and will do whatever it takes to close the deal, even if it means going to the person’s house. Tenacity can be incredibly powerful.


Don’t Be Afraid to Bet Big on Yourself

Many get into the investment game but only go halfway. They keep their day job while doing investments on the side. While they may have a few minor successes, they often bemoan that they could have so much more success if they just had a little more time.

Ryan knows many people like this. His advice is to not be afraid to go all in. It’s difficult to build a full business if you aren’t willing to bet big on yourself. That often means quitting your day job and giving up some security for a while.

Going all-in can be terrifying, but according to Ryan, you should imagine how you’ll feel when you’re old. Will you be glad you stayed at your job where you were never able to build something for yourself, or will you wish you’d taken the leap and bet big on yourself?

Obviously, you shouldn’t walk out of your job today, especially if you have a family to support. But start making an exit plan. Put up money so that you can try your venture for at least a year. If things don’t work out, you can always find another job. If things do work out, you’ll never regret your decision.


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The 3 Main Apartment Syndication Accounts

The 3 Main Apartment Syndication Accounts

Real estate investing can be a great type of investment to add to your portfolio regardless of the level of risk you want to take on. Among the most effective forms of real estate investing is apartment syndication, which is commonly referred to as multifamily syndication. This investment occurs when numerous investors pool their money together to purchase larger apartment buildings that would be difficult to manage as an individual investment.

Through apartment syndication, each investor takes on a share of the risks and rewards associated with the investment. If you’re involved with asset-managing this type of investment, you’ll be tasked with controlling several different bank accounts, all of which you should understand before getting into multifamily syndication. The following provides a detailed guide on the three main apartment syndication accounts you’ll have.


1. Operating Account

The primary bank account that you’ll be dealing with in a multifamily syndication is an operating account. All of the revenues that are collected when managing the property go into this account. The potential collected revenues include rents, security deposits, and any fees that tenants are required to pay. These fees can include carport rental fees, pet fees, valet fees, and application fees. All money that tenants pay will go into the operating account, which makes this account relatively easy to manage.

Keep in mind that money also comes out of this account for any expenses that are incurred while managing the property. Some of the expenses that must be paid when managing a rental property include ongoing maintenance and repair work, taxes, insurance, and property management company fees. Because the operating account contains all revenues, it should be the account that you use to pay investors, which could be done on a monthly, quarterly, or annual basis.

Since the operating account is a bank account, payments can be made via check or direct deposit. No matter which system you use, it’s important that payments are made smoothly and without issue to keep investors satisfied. Before opening this type of account, it’s highly recommended that you place an upfront fund into the operating account, which is designed to cover any unexpected expenses that occur in the first few months of owning and managing the property.

After one year of managing the property, you should have more than enough revenues collected in the operating account to cover unexpected costs while also paying investors right away. If a boiler in the apartment building happens to malfunction in the first month after the property has been purchased, the costs associated with repairing or replacing the boiler would need to come out of the operating account even if you don’t have enough funds in there. As such, investor payments would likely be delayed. You can avoid this issue altogether by raising extra capital upfront and placing it into the operating account. This fund should be anywhere from 1%–5% of the building’s total purchase price.


2. Capital Account

When you’re managing this type of investment, the other account you receive alongside the operating account depends on the type of loan you obtain, which means that there are essentially two accounts that you’ll hold when asset managing an apartment building. If you apply for an agency loan, you could receive a capital account. This account is available when securing a Fannie Mae or Freddie Mac loan. It’s also important that renovations aren’t included in what the loan covers.

If you need to perform renovations on the property, the costs associated with these investments would come out of your capital account. Once your contractor completes the job they’ve been hired for, they should be paid from this account. Keep in mind that your capital account should be funded by your investors when you need to make renovations and pay for other capital expenditures.

This account is necessary because investor money can’t be placed into an operating account. When investors wire funds to you, all of these funds should be placed into your capital account, after which you can pay yourself while also paying for the loan and any closing costs. All additional investments will remain in the capital account until they need to be used for renovations.


3. DACA Account

The third and final of the syndication accounts that you can have when managing this type of investment is a DACA (Deposit Account Control Agreements) account, which occurs when you obtain a bridge loan or similar loan program that provides coverage for renovations. In this situation, the lender you partner with may task you with creating a DACA account. When you open this type of account, all of the rents you collect each month should first be placed into the DACA account before you send them to your operating account. While this might seem like a hassle, many lenders allow funds to be transferred from the DACA account to the operating account on the same day.

This requirement is put in place because lenders may not want the money you collect from rents to go directly to you in the event that there’s an issue with the renovations. When lenders provide you with money for renovations, they will have requirements for the debt-service coverage ratio alongside additional timeline requirements and occupancy requirements.

Let’s say that you’re required to complete renovations in a specific period of time. If so, your lender will have a professional inspector come to your property to make sure that the renovations are being completed according to plan. In the event that you aren’t meeting the debt-service coverage ratio requirements or the timeline requirements, you will likely go into a “cash management” phase, which means that your lender will take money from your DACA account to cover the costs associated with the issues that arose.

If the money were to go directly into your operating account without first going into a DACA account, it would be more difficult for the lender to collect the money they’re owed. You will then need to meet the necessary requirements before you can get out of “cash management” and start receiving your money again.


Final Thoughts

These are the three types of syndication accounts that you could have when involved with asset managing a deal. With this information in hand, you should be able to avoid making the mistake of paying investors from your capital account or covering renovations with your operating account.


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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How Apartment Syndication Can Free You From Your Full-Time Job

How Apartment Syndication Can Free You From Your Full-Time Job

Finding a way to leave behind the stressors of the rat race and to enjoy life on your own terms is a primary goal for many people. While many continue to dream, Pancham Gupta has found a way to make that dream his reality through apartment syndication. Gupta had the opportunity to speak with Joe Fairless about how rapidly he executed his transition to commercial real estate investing on a full-time basis.


Starting with Single-Family

Pancham Gupta immigrated to the United States in 2003 to complete his college education, and he focused exclusively on his professional career until 2012. At this time, he purchased his first single-family home in New York. This expanded to include other single-family homes as well as a few duplexes and triplexes. As he grew his portfolio of residential real estate investments over the next few years, he continued to work full-time in his financial technology job. However, managing real estate was consuming an increasing amount of time.


Scaling with Apartment Syndication

Gupta continued on this path of pulling double duty as a full-time worker and a part-time real estate investor for several years. As he purchased more properties, the amount of time and energy required to manage those properties increased as well. With a limited amount of time and energy available, he realized that scalability was a serious factor that required consideration. By 2017, Pancham Gupta had decided to move forward with his first apartment syndication investment. Between 2017 and 2019, Gupta has been involved in four syndication projects that are valued between $2 million and $19 million. Through his work on these multifamily projects, he has been able to quit his full-time job and focuses exclusively on commercial real estate investments.

In fact, his portfolio of real estate investments has double-digit cash flow and is valued at more than $32 million today. This portfolio is rooted in five different states. He initially invested in smaller residential properties in New York because that is where he lives and works. Those properties produced a healthy stream of income when he purchased them, but their profitability waned over the years as market conditions in the area changed. Gradually, he branched into other states with more lucrative real estate investment opportunities.


Partnering Up

In 2017, Gupta joined together with his current partner at Mesos Capital. Together, they pulled together $781,000 from family and friends, and they invested in a 44-unit apartment complex. Specifically, the two partners and one other investor contributed $100,000 each.

The other funds came from family, former colleagues, classmates, and others with who they developed strong relationships over the years. The 44-unit multifamily property was in Charlotte. They originally purchased it for $2 million, and they recently sold it for $3 million. After considering upgrades and closing costs, their profit was approximately $650,000.


Raising Funds by Earning Trust

When Gupta was asked about how easy it was to raise the money, he mentioned that having established relationships with high-income individuals was a benefit to him. However, he also mentioned that you can meet such individuals in a wide range of locations. Because of this, the possibility for apartment syndication is open to anyone.

Gupta also mentioned that earning their trust was important. Individuals must trust that you will add value to their portfolio before they write a large check for a real estate investment. More than that, you must spend time talking to them about the value of the deal.

While Gupta says it is easier to get investment capital from those who have more cash to spare, he says that you still have to put in the same amount of time and effort to get them to sign on. However, individuals with deep pockets may also have access to more investment opportunities. With this in mind, there is a need to convince them that your investment opportunity is the right one for them. In some cases, it takes years to get them to sign on.


Building Up to Bigger Investments

The second multifamily property that the partners purchased was a 76-unit property in Charlotte with a sales price of $4.56 million. The third property was a 28-unit apartment complex in Charlotte, and they locked in that investment at $2 million. The fourth property was by far their largest commercial real estate investment. It is a 242-unit apartment complex in Jacksonville that they purchased for $19 million.

The first three syndicated deals were purchased in Charlotte in large part because Gupta and his partner were familiar with that particular market. The smallest project was located down the street from the 44-unit property, so its strategic location brought the potential benefit of scaling operations. After Gupta quit his job and was able to spend more time researching markets, he and his partner had the confidence to invest in the larger property in Jacksonville.

Today, the partners are focused on investments with at least 75 units simply because of economies of scale. Generally, Gupta sees that one leasing agent is needed for every 90 to 100 units. By focusing on a larger number of units, they can optimize operations on the ground.


Final Thoughts

When Gupta discussed lessons learned through his syndication efforts to date, he brought up the need to raise more capital than you think you will need. Specifically, one of his properties had a major repair issue that cost more than twice what they anticipated. They had to go back and raise that extra money before the repair work could be completed.

Today, Pancham Gupta is principal at Mesos Capital, and he runs a podcast that focuses on personal finance education for high-income individuals. As he looks forward to future investments, he and his partner are looking for opportunities in high-growth areas. These are areas with population growth, job growth, and growth in the real estate market.


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Multifamily and Commercial Real Estate Insurance Advice for Investors

Multifamily and Commercial Real Estate Insurance Advice for Investors

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


Factors That Affect a Commercial Property’s Premium

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

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


The Impact of Age on Insurability

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

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

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


The Effect of Geographic Location

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

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


The Importance of Replacement Cost

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


The Affordability of Deductibles

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


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Infinite Banking 101: Confidently Grow and Store Your Wealth

Infinite Banking 101: Confidently Grow and Store Your Wealth

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


The Need to Store Money

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

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


The Concept of Infinite Banking

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

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


A Better Way to Grow Money

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


Unhindered Access to Your Cash

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

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


The Added Benefit of Life Insurance

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

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


A Cash Reserve

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


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


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4 Tips to Raise More Money From Passive Investors

4 Tips to Raise More Money From Passive Investors

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

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


1. Launch a Thought Leadership Platform

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

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

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

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

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

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

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


2. Ask Positive Questions

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

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

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

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

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

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

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

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


3. Make Your Own Opportunities

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

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

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


4. Find Complementary Partners

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

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

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

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


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

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

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

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

How Did It All Come Together?

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

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

Working With Insurance Companies

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

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

Benefits and Challenges of HAP and HUD

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

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

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

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

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

What Should Go Into a Pre-Purchase Inspection?

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

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

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

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

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

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


1. Maintain Your Reputation

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

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

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

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


2. Data, Data, Data

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

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

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

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

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

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

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

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


3. Be Honest With Investors

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

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

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

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

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


4. Go Your Own Way

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

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

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


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


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

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

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

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

Start Small

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

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


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

Negotiate Better

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

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

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

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

Don’t Chase Cash Flow in the Wrong Market

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

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

Consider Syndication

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

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

Add Value

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

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

Don’t Underestimate Rehab Costs

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

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

Maintain a Strong Vision

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

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

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

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


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

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

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


About Rock Thomas

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


Start in real estate without purchasing property.

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

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

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

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

To succeed, you want to mind these steps:

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


Get owners on board.

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

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

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


Do your homework.

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

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


Know your data.

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

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


Partner with experience.

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

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

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

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


Mind your headspace.

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

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

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

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


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Reasons You Should Rethink Saving for Retirement

Reasons You Should Rethink Saving for Retirement

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

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

Don’t Save for Retirement?

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

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

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

Why Conventional Programs Are an Issue

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

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

Look at What the Wealthy Are Doing

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

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

Passive Income Is the Way to Go

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

…But Passive Income Isn’t Always Passive

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

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

If Others Can Do It, You Can, Too

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

Find Someone Who’s Been Through It Before

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

Stick With What You Know

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

Brutally Cut Your Spending

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

Final Thoughts

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


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How to Grow Your Podcast and Master Negotiations

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

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

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

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


Becoming a Better Negotiator

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

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

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

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

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

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


Starting and Building Your Podcast

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

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

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

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

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

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

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

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

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

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

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

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


No Time Like Right Now

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

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

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

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

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


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

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

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

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


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

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

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

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


Transitioning From Being a Passive Investor to an Active Investor

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

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

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

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


What to Look for in a Syndicator

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

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

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


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

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

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


Blogging and Real Estate Investment

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

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


Final Thoughts

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


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Small multifamily property

Pros and Cons of Investing in Smaller Multifamily Properties

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

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

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

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

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


Challenges Tyler Faces

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

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

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

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

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

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

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


Park Your Assumptions

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

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

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

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

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

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


Build a Rapport

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

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

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

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

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


Learn from the Experience

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

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

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


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Best Ever Advice from 11 Military Members on Memorial Day 2021

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


JF2102: From Military to Millionaire with David Pere

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

Click here to listen to David’s full episode.


JF2107: Brothers Working Together with Chris & Ashton Levarek

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

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

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


JF2155: Sales Skills to Improve Your Business with Bill Kurzeja

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

Click here to listen to Bill’s full episode.


JF2204: Investing While Overseas with Vincent Gethings

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

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

Click here to listen to Vincent’s full episode.


JF2208: Veteran to Founder with Seth Wilson

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

Click here to listen to Seth’s full episode.


JF2224: Note Investing Strategies with Jamie Bateman

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

Click here to listen to Jamie’s full episode.


JF2264: Investor Agent with John Chin

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

Click here to listen to John’s full episode.


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

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

Click here to listen to Axel’s full episode.


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

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

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

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


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

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

Click here to listen to Megan’s full episode.


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

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

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

Click here to listen to Gary’s full episode.


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How to Achieve Financial Independence Through Passive Investing

How to Achieve Financial Independence Through Passive Investing

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


He Lost Everything Before Rebuilding Again as a Passive Investor

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

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

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


How He Achieved His FIRE Goals

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

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

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

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


Real Estate Investment Trusts

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

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

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



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

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


Securing a Syndicator

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

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

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

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

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

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


Forging Your Own Path to FIRE

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

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

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

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


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Raising Real Estate Capital with Crowdfunding

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

About Chris Rawley

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

Why Crowdfunding?

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

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

Advantages of Crowdfunding

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

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

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

Crowdfunding may be right for you if:

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

Choose the Right Platform

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

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

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

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

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

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

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

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

Build Your Team and Track Record

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

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

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

Present a Winning Deal

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

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

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

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

Crowdfunding for Agriculture Investing

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

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

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

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

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5 Ways to Win the Apartment Bidding War

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

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

1. Offer Hard Earnest Money

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

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

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

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

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

Include Contingencies

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

2. Shorten the Due Diligence Window

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

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

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

3. Sign an Access Agreement

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

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

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

4. Use the Seller’s Purchase Agreement

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

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

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

5. Guarantee a Closing Date

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

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

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

Target the Deal

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

To help you plan your offer, try to learn:

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

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

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