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Commercial Real Estate Pro Network

Commercial Real Estate Professionals who work with Investors, Buyers and Sellers of Commercial Real Estate. We discuss todays opportunities, problems & solutions in Commercial Real Estate.
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Now displaying: Category: Real Estate
Feb 20, 2020

Hidden investing? What do the top 1% know that you do not? 

The 99% Plan

Holly Williams is a successful advertising professional who worked hard, and climbed the corporate ladder.  All during the climb, she did what she was taught to do; get a JOB, work hard, live below her means and save for her retirement.  

As her parents aged, she experienced first hand the sad ending waiting for most Americans who follow the investment plan her parents taught her.  What she learned while watching her parents age, was that the plan is designed so that you die broke. Nobody ever talked about how the plan includes that you die broke.  Why is that?

No one ever talks about how you get your money out of the 401k.  Most people know that when you sell, you have to pay taxes. But, nobody talks about what happens when your account goes down and you still need to sell your shares to get the cash you need to live.  How it is extremely unlikely you will ever make that money back. And as you get older, the government forces you to take the money out so that they can collect their tax. 

Her parents aging combined with her increasing tax bill made her hyper aware of the government’s goal for the masses; die broke.  Her plan was broken.

Hidden Investing

Then she met fellow Texas Tech alumni & NYC advertising executive, Joe Fairless, who shared with her an opportunity to invest in commercial real estate.  She liked Joe, and wanted to help him, but did not expect anything to come of it. Wow, was she wrong!

In the months that followed, she received income.  At the end of the year, she received a K-1 with depreciation which reduced her taxes.  She learned first hand how the tax code favored real estate. Then she found out what an accredited investor was, and that she was one.  She also learned about the private investment management advice resources available to the top 1% of Americans and family offices that are not available to the masses.  

1% of Americans

Eyes wide open!  Holly was making good money.  She thought she had an idea of how much the wealthy Americans made for an annual income.  Maybe a couple of million dollars per year and they probably paid 50% in taxes.  

Then she learned the truth about how much the Wall Street fund managers make; $20million and more!.  The advisors who were advising her made no more money than she did, and only knew to tell her to stay invested in the market.  Investing in real estate is risky!

Since she was an accredited investor, if she had a prior relationship, she was qualified to invest in sophisticated alternative investments like real estate syndications.  This is typical of the level of investment the 1% invest in. They get close to the source of the opportunity compared to the diluted returns available to the masses.   

Real Estate Investing

Real Estate investing is specifically encouraged by the tax code.   For accredited investors, when you invest directly, bypass all the middlemen, you are able to  lower your taxable income due to depreciation, and you have the ability to shield your gains from tax.  This is unlike investing in a REIT where you are a shareholder in a fund that most likely made a loan and receives interest payments.  When you invest as a limited partner in a syndication, you are an owner and entitled to owner benefits. 

In addition to the tax benefits, you can benefit from a value add strategy.  This can be accomplished through improved management or actually improving the property.  The key is to find an experienced investor who can assess the situation and identify the opportunity others cannot see.  

Income Versus Wealth

Most Americans are focused on creating more income.  A bigger paycheck equals more taxes and a bigger lifestyle for most.  Earn more so they can spend more.  

Real estate provides the opportunity to invest and create wealth.  You purchase a cash flowing asset with leverage. It grows in value, and allows you to shield both your income and gains from taxes.  

Even though the IRS tax code favors real estate, most Americans are unable to break from the heard.  They welcome the opportunity to invest in a stock or start up, but real estate still seems risky. Buying from a name brand mutual fund seems less risky than investing directly with an experienced key principal who knows how to improve the property, create cash flow and reduce their taxable income. 

Keep More

Holly has learned a great deal about Hidden Investing and how the 1% is able to invest in more secure opportunities.  To share her new found knowledge with others, she has created a learning and investment platform, KeepMore.com where her motto is: Get more, Earn more and Keep more.  

BIGGEST RISK 

Each week I ask my guest, “What is the Biggest Risk Real Estate Investors face?”  

BIGGEST RISK:  Oh, I know that's an easy answer. Because I had some real estate, but the majority of my net worth was in the stock market. The stock market is all about hope. It really is. If Trump tweets, it goes up. Tweets again, it goes down. You know, we can have a company with the best earnings ever and their stock goes down.

It makes no sense. Unless you're really good at picking these stocks. I just think that that that hope is not a strategy. 

With every investment that I make, I can tell you exactly what we're doing to mitigate that risk. How fast the area is growing. What's around the investment.  I can tell you all of that. 

So I just feel more comfortable. Because I absolutely don't know in the stock market. And the people we give our money to don’t either. No idea. Not a clue. They just say, “stay in and don't panic”. Right?

For more go to:

Website: www.Keepmore.com

Book: www.hiddeninvesting.com

Feb 18, 2020

Oh, I know that's an easy answer, though, because almost I had some real estate, but the majority of my net worth was in the stock market. And I know and you're it's it's all about hope. It really is. I need Trump tweets. It goes up. Tweets again. It goes down. You know, we can have a company can have the best earnings ever and their stock goes down.

 It makes no sense. And a lot unless you're really good at picking these stocks or whatever, which anyway. 

You know, I just think that that that hope is not a strategy. And with every investment that I make, I can tell you exactly what we're doing to mitigate that risk. Exactly what happened in 2008 or whatever in the last recession. Exactly. Who's how fast the area is growing how fast. that's what's around there. What? I can tell you all of that. So I just feel more comfortable. Because I absolutely don't know. 

And the people we give our money to either. This guy's get to come see me. I guarantee he doesn't know. No idea. Not a clue. Just stay in and don't panic. Right?

Feb 13, 2020

PACE (Property Assessed Clean Energy) Financing is a finance tool every real estate investor needs to know about to help acquire or renovate your property.

Scott Krone, principal at CODA Management Group, a real estate design & design firm.  CODA as designed & built single family, multifamily, commercial property convert to mixed use, and churches. Most recently, CODA has focused on re-adaptive use, converting empty warehouses into self storage facilities.  

PACE Financing 

Property Assessed Clean Energy (PACE) is accessed through the US Department of Energy, but not widely available throughout the country.  To access PACE Financing, the state where the property for which the funds will be utilized must be located in a state that has adopted the PACE program.  

The purpose of PACE is to encourage and improve the energy performance of a structure or building.  The money provides financing of these improvements through real estate taxes instead of traditional debt.  This structure changes the picture of debt for lending, as lenders look at the obligation as equity versus a liened debt position against the property.  Your payments are now operational, property taxes. Banks love it!

There are two forms of PACE financing; public and private.  Public is run through the Port Authority. Private 

PACE Structure

The structure of Pace financing is similar to traditional debt financing in that the principal & interest which is spread out over the life of the improvement.  For instance if the HVAC system has a life expectancy of 20 years, they will amortize the payments over 19 years.  

Like any construction project with financing, the monthly draws are submitted to the bank after the work has been completed.  For those elements that are recognized as energy related and included under the PACE financing, a separate draw is requested.  

Your PACE payments are an additional tax assessment usually split into two annual payments.

Tax Structure with PACE

The tax structure for PACE provides multiple benefits.  

  • Funding for your qualifying project needs is provided as a loan through PACE.  
  • Repayment is spread out over the life expectancy of the improvements.
  • PACE financing is considered equity, not debt.
  • Lower capital raise from investors.
  • Property taxes are frozen for the duration of the repayment schedule.
  • PACE financing and property tax lock is transferable.

PACE Eligible Components

The list of qualifying building components look to three areas for improvement; water, energy and renewal energy.  Structural components are generally excluded, however a new roof with additional energy saving insulation is included.  An easy way to think of what is qualified, is to think of LEED certified buildings and the components.

Capital Stack with PACE

In a typical property purchase with debt, the borrower brings the down payment, equity and borrows the balance from a lender.  For PACE qualified projects, your down payment can be lowered because the PACE financing is recognized as equity in the project.  For instance:

Project Total $1,000,000

Down Payment: $   150,000

PACE Financing: $   150,000

Debt Financing: $   700,000 

Typically PACE can provide up to 20% of the appraised value of the property after construction.  

While you have 30% equity in the project, your investors only had to raise 15% of the equity, which dramatically increases the return on the project to your investors.

PACE Lender

To qualify for PACE, you first have to establish a baseline for the existing building systems in place.  Once the baseline is established, the systems to be replaced are evaluated for the estimated savings. CODA has worked with Petros PACE Financing, a lender that specializes in PACE.  

BIGGEST RISK 

Each week I ask my guest, “What is the Biggest Risk Real Estate Investors face?”  

 

BIGGEST RISK:

Well, you know, people ask me about this in terms of real estate, what's going to happen with the economy, as you know, with political elections, what is it going to go up or down a recession or continue in this? You know, We're in one of the longest expansion periods in a long time. And for me, on a national level, I don't see that there's going to be a lot of risk within real estate as a whole. 

Based upon the interest rates, I think if the market does begin to slow, you know, the Fed is going to lower the prime. We wait. We may get down to two or even zero interest rates just to keep the economy going. So from that perspective, I think that real estate is still a solid play. 

But if I'm looking for us. What we have determined internally is that there's too much political instability here where we are in Illinois. And so what you were saying in terms of like, can we can we avoid it? You know. 

Illinois is having a decrease in population of 6 percent over the past 10 years, which is putting a greater burden on the people that are remaining. And we have the pension problems. And, you know, historically, you know, people say, well, you know, they just did a bunch of things to approve legislation which are basically sin taxes. 

But my concern is the money is not actually going to pay off those pensions. It's just going to be used to spend in other areas, which is historically have happened in Illinois for the past 20, 30 years. So why is it going to be different? 

What we have done is we've stopped buying in Illinois. And for us, that's how we are mitigating or perhaps even transferring because we're looking at states that are more tax progressive and where we're seeing growth. 

And so that is what we're trying to do is and that's why we've expanded throughout the Midwest. That's why we have the properties in Ohio. We're looking in Louisville or we're looking in Kentucky. We're looking in North Carolina. We're looking at Michigan. 

We're looking at places that are trying to encourage economic development. So either through PACE the Opportunity Zones or the tax benefits for it so that we have greater stability and less risk.

For more go to:

Website: www.codamg.com

Feb 11, 2020

Well, you know, people ask me about this in terms of real estate, what's going to happen with the economy, as you know, with political elections, what is it going to go up or down a recession or continue in this? You know, We're in one of the longest expansion periods in a long time. And for me, on a national level, I don't see that there's going to be a lot of risk within real estate as a whole. 

Based upon the interest rates, I think if the market does begin to slow, you know, the Fed is going to lower the prime. We wait. We may get down to two or even zero interest rates just to keep the economy going. So from that perspective, I think that real estate is still a solid play. 

But if I'm looking for us. What we have determined internally is that there's too much political instability here where we are in Illinois. And so what you were saying in terms of like, can we can we avoid it? You know. 

Illinois is having a decrease in population of 6 percent over the past 10 years, which is putting a greater burden on the people that are remaining. And we have the pension problems. And, you know, historically, you know, people say, well, you know, they just did a bunch of things to approve legislation which are basically sin taxes. 

But my concern is the money is not actually going to pay off those pensions. It's just going to be used to spend in other areas, which is historically have happened in Illinois for the past 20, 30 years. 

So why is it going to be different? So what we have done is we've stopped buying in Illinois. And for us, that's how we are mitigating or perhaps even transferring because we're looking at states that are more tax progressive and where we're seeing growth. 

And so that is what we're trying to do is and that's why we've expanded throughout the Midwest. That's why we have the properties in Ohio. We're looking in Louisville or we're looking in Kentucky. We're looking in North Carolina. We're looking at Michigan. 

We're looking at places that are trying to encourage economic development. So either through PACE the Opportunity Zones or the tax benefits for it so that we have greater stability and less risk.

Feb 6, 2020

Multifamily Syndication 2020 Outlook, Vinney Chopra provides his thoughts for the coming year, 2020 and beyond.  

Vinney Chopra purchased his first multifamily property, a 14 unit property for $180,000 in 2008.  Today he has grown his portfolio through syndication to 4,100 units worth over $300 million.

Before 2020

It took eleven months for Vinney to raise the money he needed to purchase his first 14 units in 2008.  At the time, the financial world was in complete melt down. Banks were not lending, and investors were fearful that losses would continue.  Don’t forget, Vinney had never done a multifamily syndication before. But that did not stop him from talking daily with investors and real estate brokers. 

Vinney’s concentrated efforts during the 11 months created momentum.  Immediately following his 14 unit purchase, he closed on a second property with 109 units.  He was constantly talking with investors and brokers. Instead of getting discouraged, he kept in touch and underwrote the properties and made numerous offers.  Eventually, sellers and investors were ready to make deals, and because Vinney stayed with it he and his investors benefited.  

Mindset

Scarcity versus abundance.  Looking backwards is helpful for where we have been, but not so useful for drawing a clear picture of where we are going.  Ask any economist or investor, “what does the future hold for multifamily?” Most will reflect on the incredible period of recent growth and encourage you to sell or accumulate cash and wait for the crash that is overdue. 

If you believe in scarcity, and you are expecting a crash, it’s hard to instill confidence in your potential investors that now is a good time to invest.  Scarcity yells, WAIT! We should wait until prices cool and deals are more like they were in 2008.  

If you believe in abundance like Vinney, you remain active in the market looking to land deals.  

From 2008 to 2014, Vinney and his partner did 14 syndications valued at $100 million.  Since November 2014, Vinney and his wife have done $230 million, more than double what he did at the beginning of the recovery.  

The key to his success is that he stayed in the market.  Even when he did not buy a deal in 2018, he stayed in touch with brokers and investors.  He studied different markets looking for growth indicators and emerging markets.  

Emerging Markets

To make a sound investment, you need an emerging market.  A healthy market for multifamily includes job growth, and inflow of residents that need housing. When demand for housing exceeds supply, you have found a market worth pursuing.  The growth of potential renters is made up of three distinct groups, millennials, baby boomers, and immigrants. 

Combine this growing demand with the lack of affordable single family homes compared to wages and the demand for rental housing looks strong for the next 20 to 30 years. 

Vinney has successfully invested and exited from multiple deals in markets like Texas and Georgia where the demand is super strong.  In one case, he invested in 2017 and sold in 2019 for a 50% gain!

Calculated Risk

There are no guarantees, but if you do your homework, and understand the market dynamics, you can hedge your bet, minimize your downside and take a calculated risk.  Housing is a primary need, and apartments are more affordable than single family homes.

The market is dynamic.  In 2018, the surge of new investors flooded the market, so much so that Vinney did not buy one property.  He believes that the demand was so great, that investors were overpaying for properties. In 2019, he found the over paying buyers were not as numerous, interest rates were lower, which increased cash flow.  The combination of these circumstances provided better investment options and he purchased two large newer properties.

Life is full of risk.  If you put your money under your pillow, or in the bank, you will make next to nothing.  When you leverage into real estate, the bank provides up to 80 percent of the capital needed to buy your property which is in high demand.

Year over year, rents increase, net operating income increases, values in crease, and so too does your equity.

Value Add 

Value add is the best way for a buyer to create equity in his new purchase.  An experienced buyer can recognize opportunities the seller is blind to. Value add opportunities range from minimal efforts from raising the rent to market to a heavy lift investing millions into capital improvements.  

The key to a successful value add strategy is to recognize the opportunity, and properly underwrite for the cost to implement the changes quickly.  You want to hit the ground running as soon as you acquire so that you can benefit from the improved cash flow and increased valuation.  

When approaching potential investors, it is important to have a sound strong business plan that assures the investor there is a plan to take care of and return their investment.  

Underwriting is key in any market.  A good deal is always a good deal.

Multifamily Syndication in 2020

Multifamily Syndication is full of opportunity in 2020.  Investors are looking for greater returns than what they are getting in the stock market.  For syndicators who recognize this, and understand how investors can invest their retirement funds, 2020 can be a great opportunity for both syndicators and investors.

The national commercial real estate brokers, CBRE, Berkadia, Marcus Millichap have published their market forecast and in all cases, the next 20 years look bright.  

Relationships

Relationships are key to be successful in multifamily syndication.  If you have not yet syndicated a deal, Vinney suggest you work with seasoned syndicator to learn how to do it properly.  Once you have some experience, you have multiple options available to you. You can raise money or be the key principal leading your own syndication.

Today is Your Time

Life is full of risk.  If you put your money under your pillow, or in the bank, you will make next to nothing.  When you leverage into real estate, the bank provides up to 80 percent of the capital needed to buy your property which is in high demand.

Rents increase, net operating income increases, values in crease, and your equity does too.

BIGGEST RISK 

Each week I ask my guest, “What is the Biggest Risk Real Estate Investors face?”  

BIGGEST RISK:  

Wow, I'm so glad you shared that because I settled three lawsuits. You know, just in the last quarter of 2019. So it's very fresh in my mind. And actually, one lawsuit was going on for about two and a half years. Nothing major, but it was major in the sense that something happened with one of my contractors on one of my property. And I'm so glad that I have had full coverage, you know. And they said you settle the issue for almost like seven hundred some thousand dollars. And I didn't have to pay a penny. 

Another thing, you know, Darrin, my fire happened, you know. Right there in Atlanta property and that was a fire. I had a twenty thousand dollar deductible only, and that settled for two point three million dollars just to let you all know. But it was only possible because of people like Darrin, you know, who were able to sit down with me and make sure that we get the proper insurance. 

I got hacked also in 2017 lost $250,000. And guess what? I did not have the Cyber Insurance. And that got me hurt. And, you know, I never looked back. I always look forward and say, what can I do today to make myself better? And that's OK. But now I'm fully taken care of by my I.T., Cyber Security and Insurance and everything. So the key thing is I think insurance plays a very important role. 

I had another lawsuit with the, you know, firing somebody and they said it's racial discrimination firing. So these are very important issues. You've got to make sure you've got great attorneys, first of all, who are with you, dealing with you, looking at your contracts and everything. I'm very happy to say I didn't have to pay much again. You know, it could have been millions of dollars of lawsuit. But by hiring the right people and having the right insurance companies and all that, it helps a lot.

For more go to:

Website: www.vinneychopra.com

Book: Apartment Syndication Made Easy

Text: Learn to 474747

Email: jon@vinneychopra.com

Feb 4, 2020

Wow, I'm so glad you shared that because I settled three lawsuits. You know, just in the last quarter of 2019. So it's very fresh in my mind. And actually, one lawsuit was going on for about two and a half years. Nothing major, but it was major in the sense that something happened with one of my contractors on one of my property. And I'm so glad that I have had full coverage, you know. And they said you settle the issue for almost like seven hundred some thousand dollars. And I didn't have to pay a penny. 

Another thing, you know, Darrin, my fire happened, you know. Right there in Atlanta property and that was a fire. I had a twenty thousand dollar deductible only, and that settled for two point three million dollars just to let you all know. But it was only possible because of people like Darrin, you know, who were able to sit down with me and make sure that we get the proper insurance. 

I got hacked also in 2017 lost $250,000. And guess what? I did not have the Cyber Insurance. And that got me hurt. And, you know, I never looked back. I always look forward and say, what can I do today to make myself better? And that's OK. But now I'm fully taken care of by my I.T., Cyber Security and Insurance and everything. So the key thing is I think insurance plays a very important role. 

I had another lawsuit with the, you know, firing somebody and they said it's racial discrimination firing. So these are very important issues. You've got to make sure you've got great attorneys, first of all, who are with you, dealing with you, looking at your contracts and everything. I'm very happy to say I didn't have to pay much again. You know, it could have been millions of dollars of lawsuit. But by hiring the right people and having the right insurance companies and all that, it helps a lot.

Jan 30, 2020

Financial Independence through Real Estate is available to you.  

Kaylee Mcmahon is proof that if you are willing to hustle, you can create financial freedom through real estate.  She is based in Texas and has tried a lot of different things, learned a lot and grown an impressive portfolio in a short amount of time.  

Single Family Real Estate

In the beginning, Kaylee got her real estate license and worked as an agent and broker listing and selling single family properties.  This availed her to do flips and learn how to manage projects. Flipping houses taught her that she has little patience for babysitting grown men, contractors, who cannot perform as they have promised.  But the experience taught her what is involved in renovating a property. 

Marketing 

Regardless of what you do, in order for others to know what you do, you have to market yourself.  Kaylee was featured on Ryan Harper’s Propelio TV, YouTube channel, which created a video resource for real estate investors.  Here, she met and networked with real estate professionals with many different skill sets while growing her sphere of influence in real estate.  

The Apartment Queen

At one of Propelio’s large networking events, she heard Will Crozier talk about the $780 Million  portfolio of multifamily properties he acquired in just eight years. He explained how the economies of scale multiply with multifamily.  At that moment, she knew the path to her future and true financial freedom through real estate. The Apartment Queen was born.  

She connected with Will, and other investors and learned all she could.  

Multifamily Syndication

To date Kaylee has syndicated six apartment properties in just under three years.  The first two deals happened almost simultaneously. Kaylee raised all the money herself, and leveraged the experience of her partners.  The experience of her partners provided Kaylee with a sounding board for her to solve the problems and issues that go with syndicating multifamily properties.   

Her partners also provided the networth required with the banks to qualify for the loans.  Lenders require your net worth be greater than the value of the property you are acquiring.  When you are just starting out, this is a great opportunity to find and work with a high net worth investor. 

Raising Money

Raising money in the beginning is tough.  You have no track record, everything is new.  The key she has learned is to continuously be raising capital.  When she meets with her investors, she qualifies what her investor is looking for and how much they have to invest.  Then she stays in touch with her investors.  

Her efforts have paid off.  Now her deals are getting oversubscribed, and she is able to raise millions in hours.  

Independence

Real estate has provided independence for Kaylee.  As an agent, she made enough money so that she could afford to live on her own.  Her success has allowed her additional opportunities for networking and travel so that she can get away from work and recharge.  Being alone provides her the time to evaluate what she is doing and how it is working for her.  

BIGGEST RISK 

Each week I ask my guest, “What is the Biggest Risk Real Estate Investors face?”  

BIGGEST RISK:

I think the BIGGEST RISK in what I do, multi-family investing, is making sure that the deal the way that you buy it. If you don't buy it, right. Sorry, sucker! 

The point is, is you want to buy it at the right price to where there's a margin of error. There's a margin. So, for example, if you screw something up, it's like, OK, well, we have enough cash sitting over here, we can fix that problem. Or you want to be as far away from foreclosure point as possible. 

You know, everyone's everyone's freaking out honestly about, you know, these the cycle changing and coming.  I think people are freaking out and that's going to cause an issue. I don't think that there really is going to be an issue probably for another three years. But I think because people are preemptively freaking out. You know, so you have to mitigate the risk.

So one thing I build in to the underwriting on a deal is you want to look at the market vacancy. So for me, I go ahead and say, OK, let's look at the deal. If we have to drop the rents or if we have to increase vacancy 10 percent. So I do that and then I take the rent number or the rent amounts we think we can get. And when I reduce rent and take the actuals. What it's doing today, not what we think we can, which is twelve. But on an actual worth doing today, I take that down 10 percent. 

Let's decrease rents 10 percent because we have nonrecourse debt on these loans. Right. I check out the expenses and I use the expenses at the same rate of growth. So like if to expense growth every year. Expenses are going to increase. And so I say, OK, we're gonna grow 2 percent every year. 

I could talk on this forever, but there's there's several stress tests that we put our deals through to make sure that we can ride out a recession, which I think is the biggest risk.

For more go to:

admin@theapartmentqueen.com

Website: theapartmentqueen.com

Podcast: #1 Leading Ladies

Jan 28, 2020

I think the BIGGEST RISK in what I do, multi-family investing, is making sure that the deal the way that you buy it. Because like honestly, the way you buy it means everything. I mean, if you don't buy it, right. Sorry, sucker. You know, whether whatever whether it's you know, you're not operating it right? 

The point is, is you want to buy it at the right price to where there's a margin of error. There's a margin. So, for example, if you screw something up, it's like, OK, well, we have enough cash sitting over here, we can fix that problem. Or you want to be as far away from foreclosure point as possible. So and it's the same thing with what's going to happen here with the election coming and the economy changing. You know, everyone's everyone's freaking out honestly about, you know, these the cycle changing and coming, And it should have already happened, honestly. And so I think what's going to happen and I'm listening and I'm listening and, you know, you have to be aware. I think people are freaking out and that's going to cause an issue. I don't think that there really is going to be an issue probably for another three years. But I think because people are preemptively freaking out. I think something's going to happen in the next twelve months. The 12 to 24 months, honestly. But I'm just gonna go ahead and assume twelve months, worst case or best case or whatever, and prepare for that. You know, so to mitigate the risk.

What's cool about apartments? I'm going to read this line from this book. I just spoke at a trust company today and I was like, hey, guys, like multifamily real estate is so cool because of this statistic right here. So I'll read it for everybody, so this book is awesome. I don't know if you can see it, but it's. The Perfect Investment by Paul Moore. And it's great for my passive investors. I give it to all of them so they can see why this is so different in single family. So "the multi-family delinquency rate at its peak was 90 percent lower than the residential rate in most of the downturn since the Great Depression". 

So meaning that Fannie Mae, Freddie Mac, nonrecourse loans, they do so much due diligence on the operators,the deal itself, everything. I mean, I just signed on a Freddie loan last week, you know, for this deal that we're done now. And they just have to vet all of us. We have to get an organization chart. We have to give them our track records. I mean, on and on and on. So it's not I can't say the word safe, but I mean, you have to mitigate risk. And so just knowing that that is happening because of the way the underwritten, a lot of my passives love nonrecourse loan debt on the deals that they might invest in because they know that's the case. So that's that's one thing I'll point out. As far as the difference between single and multi, that helps just inherently avoid some risk.

Then for us, we have to underwrite the deal conservatively. So everybody in their mother is going to say, oh, I'm conservative. What does that mean? You know, it's not I'm conservative like I'm a Republican. What it means is, like I've said, OK, so if you look at the market vacancy, the market rent, the market's expenses and some other things, and we'll just stick with those for now. What is the market bearing right now? What is it done in the last three years? What is it done at its worst? And what what could it do? Because I don't have a crystal ball. But there's some economists, friends of mine and some friends. 

I've been in the biz for a long time. And I kind of use these stress tests, if you will, to test the deals. And if they pass these tests, then I feel comfortable moving forward with that deal, because like I was saying, you know, if you set it up right, you're going to make it through a recession versus, you know, the housing single family goes like this, you know, and you just have to ride the wave. And I don't want to ride the wave. And I don't want my people to ride the wave. 

I don't buy these outright with my own cash. I use investors money to invest. So we have to buy. right. Because I would die if somebody was like, "oh, I gave you my educational savings account for my child" or "I gave you my retirement my whole life. I would literally die". If I ever screwed someone over by not doing my due diligence.

So one thing I build in to the underwriting on a deal is you want to look at the market vacancy. So for me, I go ahead and say, OK, let's look at the deal. If we have to drop the rents or if we have to increase vacancy 10 percent. So I do that and then I take the rent number or the rent amounts we think we can get. And when I reduce that 10, actually, no, I take the actuals. What it's doing today, not what we think we can, which is twelve. But on an actual worth doing today, I take that down 10 percent. Let's decrease rents 10 percent because we have nonrecourse debt on these loans. Right. So they required that we keep the student population under a certain percentage. That we keep the occupancy over a certain percentage, that we meet these certain things to keep the loan, to keep qualified for the loan. 

There might be a time period where people aren't getting jobs and they're losing jobs. They don't have enough money to pay rent. And so to keep them in there and to keep our occupancy high enough to stay in that loan and not make it a recourse loan, we may have to drop the rents it up or an amount. So worst case they can see goes up 10 percent. Rents decrease 10 percent. That's a really good spread that I use. See how far it is both over the debt service. What we have to pay and then plus the bill to keep the lights on. One thing that I guess I automatically do this, but somebody else brought it up.

Hey, I check out the expenses and I use the expenses at the same rate of growth. So like if to expense growth every year. Expenses are going to increase. And so I say, OK, we're gonna go 2 percent every year. We're going to go at the rate of growth, 2 percent every year. So I think that's reasonable. It's not super low. Some people do like 1 percent or whatever. It's at the rate of growth which the wash. It makes sense. Anyway, I could talk on this forever, but there's there's several stress tests that we put our deals through to make sure that we can ride out a recession, which I think is the biggest risk.

Jan 23, 2020

Do you know how to leverage Social Media for Commercial Real Estate?

Matthew Laborde, principal of Elifin Realty, a commercial real estate brokerage in Baton Rouge, LA, is successfully leveraging social media to create a recognizable brand and attract clients.  He worked hard and in just three years he was the 2nd largest producer in the firm! On his 27th birthday, he started his own firm, Elifin Realty. 

How to Start with Social Media

How do you start to use social media?  You start. When Matthew started in commercial real estate at nineteen years old, Matthew had sworn off social media.  Prior to 2018, he used social media to connect with others, and rally for a cause. He did not use social media for business.  

Why use Social Media for Business?

If people don’t know you are in business, how are they going to find you?  The first time you post for business is awkward. It will continue to be until you find your way.  Your goal in the beginning is to connect with people and find the people who are your fans or potential clients.  

Start by connecting with others and commenting on their posts.  Get comfortable being uncomfortable. Your connections, will become your audience.  They will choose to engage with you if your post provides value for them.  

Be Vulnerable Make Deeper Connections 

Your audience will be compelled to pay attention if they find you are willing to be vulnerable and show more than just a highlight reel.  Matthew jumped off the vulnerable pier and into the deep end of uncomfortable when he made the decision to document his journey towards starring in a musical.  That may not sound like much unless you don’t sing, dance or act.

Matthew posted pictures of him in tights, and singing in public.  To deepen his connection with his contacts and further his progression of performing in front of others, he posted a challenge for anyone, anytime to request him to sing a song in public.   

What to Post

Learning what to post can take time.  Just remember you are trying to connect with your contacts and provide value.  This does not have to be just information about your business. You can comment on activities in your community or comment on other people’s page if you have something that is relevant.  

Matthew and Elifin utilize the different platforms to post a sample of the original post found on their website.  This is an excellent way to gain SEO ranking on your website by linking to your website utilizing your keywords.

Answer questions that your customers have asked you.  Elifin has created a list of questions that clients ask, where members of the firm provide video answers.  

Where to Post on Social Media

How many social media platforms do you need to be on?  Matthew has limited his posting to two: Facebook and Linkedin.  If it is anything related to business, Matthew post, the post the exact same information on each Facebook & Linkedin.  Find where your clients and prospects engage on social media and post there. 

Traction on Social Media

How long does it take to create traction on Social Media?  When you commit to utilizing social media and you are posting regularly.  

  • Authentic
  • Provide value to client
  • Keep posting
  • Post more often

You are probably thinking, “one more thing to do”, “every day”, right?  Matthew has figured out how to continue to post regularly without a lot of extra effort.  

To do this, he recommends that you find a part of your day that you can create a small nugget of content you can post.  Think of the questions your clients or colleagues asked during the day and take a minute to provide an answer on video speaking to your audience.  If you read a trade journal, or something of local importance, take a minute and comment online. Over time, you will develop an identity, and people will recognize you as an expert.   

Do I need to Spend Money

You do NOT need to spend money to establish yourself on social media.  If you connect with others, post valuable content regularly that speaks to your audience, you do not need to spend money on ads.  Organic, original content will 

BIGGEST RISK 

Each week I ask my guest, “What is the Biggest Risk Real Estate Investors face?”  

BIGGEST RISK: Matthew Laborde, what is the BIGGEST RISK? 

Matthew: The BIGGEST RISK, so I'm going to stay on topic for this one and I'll speak to the biggest risk for business owners and agents, right. In general, especially for the, I would say the veteran agent, the more mature agent and older agent.  

The older business owners not engaging in social media is a huge risk.  It's this wide open field that you might, as the veteran, you might have the capital to invest, to have to hire people to do this for you.  But if you don't believe that it can help your business, and if you don't take the time to understand it, then you're going to miss a huge opportunity and open it up for a younger generation, like myself, to come in and take market share. So I'd say that's a huge risk that you need to consider.

For more go to:

Facebook: Matthew Laborde

Linkedin: Matthew Laborde

Website: https://elifinrealty.com/

Jan 21, 2020

BIGGEST RISK: Matthew Laborde, what is the BIGGEST RISK? 

Matthew: The BIGGEST RISK, so I'm going to stay on topic for this one and I'll speak to the biggest risk for business owners and agents, right. In general, especially for the, I would say the veteran agent, the more mature agent and older agent.  

The older business owners not engaging in social media is a huge risk.  It's this wide open field that you might, as the veteran, you might have the capital to invest, to have to hire people to do this for you.  But if you don't believe that it can help your business, and if you don't take the time to understand it, then you're going to miss a huge opportunity and open it up for a younger generation, like myself, to come in and take market share. So I'd say that's a huge risk that you need to consider.

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