Commercial Real Estate Pro Network

J Darrin Gross Podcasts

J Darrin Gross Podcasts

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Retail Trends in Real Estate with Tom Londres – CREPN #241

Retail trends in real estate continue to change with the and for the consumer.

Tom Londres is the CEO of Metro Commercial Real Estate Brokerage based in Philadelphia, PA.  The core business focuses on suburban retail strip centers, big box, community centers, supermarket anchored centers, and downtown urban.  They provide third party solutions for retailers, owners of retail and investors in the greater metro area, including Pennsylvania, New Jersey and Delaware.  

Location, Location, Location

Location was, is and will be key to the value of commercial retail real estate.  Depending on the criteria of a particular business, the value of a location will vary from business to business.  If you are trying to sell tequila on the morning side of the street, you are going to struggle. You have to make it easy for your consumer to access your business.  For a retailer, location is a surgical strike!

Retail Trends

In the 1980’s the growth of the retail strip centers grew with suburban sprawl.  This is when the big box retailers’ growth exploded, think Wal-Mart & Home Depot and the deconstruction of the department store began.  Instead of being located in a department store, the departments became a store of their own. Apparel, appliances, tv’s all became a single mega center, often located across the street from the mall.  

From there came the open air shopping centers with one or two categories under one roof.  

Omni Channel

Online and bricks & mortar used to fight for the customer, you stay in your cage, I’ll stay in mine.  No more.  

Now, we have the omni channel.  No longer can a successful brick & mortar retail business thrive without an online presence, nor can an online retailer thrive without a brick & mortar presence.  They need both. Retail has to have an online presence and a bricks and mortar presence. This race to grow is creating disruption and opportunities for those who can execute.  

Buy online, purchase in store (BOPIS) is the evolution of online with bricks and mortar.  Stores are now trying to balance the physical space needs with just the right amount of merchandise on hand to increase sales when you pickup your online order in the store.

This eliminates the delivery cost, and the numbers show that the consumer will make an additional purchase when they pick up their order in the store.  

Consumer Demands

The consumer demands quality at a good price, now and the ability to get out of the transaction whenever they want.  For the retailer that gets this wrong, they will forever lose the consumer. These consumer demands are changing the physical configuration of the store.  

Stores have to create an experience in their store.  The consumer goes to the store to have the experience, then makes their order.  The product can be shipped direct to the consumer or available for the client to pick up in the store.  

Data Driven 

Today, data drives decisions.  For years data has been collected but only recently has it been analyzed and applied in a recognizable form.  Now the consumer and retailer can lean into the data collection for greater convenience for both parties.  

Apparel Reconfigured

Apparel reconfigured is happening much like the hotel business and Airbnb.  Consumers recognize that they want the nicest brand, but realistically will only use it once.  Instead of a closet full of once worn garments, why not rent. Millennials value material possessions less than prior generations.  They want the experience, not the possession.

Good Stewards

Retailers have to be good stewards to meet the consumers expectations.  Consumers expect a responsible retailer. The consumer is rejecting retailers that ignore conserving energy.  Roofs, parking lots, solar power, recycled water, lighting, etc. If you do not conform and retrofit your store, the millennial buyer will pass you buy for the responsible retail option.

Opportunities in Retail

Disruption continues to reveal opportunities in real estate for those who can see the opportunity.  The reconfiguration of retail is greater in the urban core than suburbia. Mixed use projects and established urban retail show great potential.

BIGGEST RISK 

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

BIGGEST RISK: I’ll give you what I think is the biggest risk or one of the big risks if you owned retail real estate. I’m not going to get into the mind of a retailer where they think they should be other than I think they should be always in the online world and the bricks and mortar world. That, that is universally agreed if you’re a retailer and want to move forward with some exceptions, but if you want to, generally speaking, if you want to be a vibrant, relevant retailer moving forward, you have to have an online and a bricks and mortar presence that’s effortless, that has a great customer experience.

And we can see that with both of those retailers that are disciplined in each one of those corners trying to get, um, into the other space. But I would say if you own retail real estate and you have an exposure, um, high exposure to department stores and apparel retailers, I would say if your portfolio contains a large portion, the percentage of your occupancy, is coming from department stores or apparel retailers. I would say you need to rethink when those options come up. 

Retail from – to

If you have the opportunities to downsize to mitigate your risks, you have to inject entertainment, you have to inject food, you have to inject convenience, services. Fitness, theater. And again, moving towards diversifying your center, not away from retail, to diversify and add apartments. Although some assets would lean towards that just in scale and size you need mitigate and say, I’ll take one wing of retail and make them apartments or luxury condos or townhouses. 

Maybe I’ll add a hotel or something, but generally speaking, if you look at your portfolio, if you’re owner of a retail real estate and you’re leaning more towards a department store and or apparel, I’d say probably rethink it. Because I think apparel is shrinking, uh, in its category and its demand and its consumption. And I think department stores, most of them, if not all of them, will be radically different or completely eliminated within a decade.

For more go to: 

Website: https://www.metrocommercial.com

1031 Exchange for Real Estate Investors with Toija Beutler – CREPN #240

1031 Exchange for real estate investors is often talked about, but not always understood when it makes sense.

Toija Beutler, the principal of Beutler Exchange Group LLC , has been acting as a qualified intermediary to facilitate 1031 exchanges since 1992.  Following is a summary of our conversation.

What is a 1031 Exchange?

Section 1031 of the Internal Revenue Service tax code is where the law originates.  The code was written in 1919, however prior to 1992, there was no regulation. A 1031 Exchange provides the seller of three types of real estate, residential rentals, commercial property and investment land.  Each of these are eligible for exchange.

If a taxpayer elects to exchange one property for a like kind property, they can transfer the tax and depreciation to the new property.  This transfer allows the seller to defer paying the tax normally due upon sale.

A lIke kind exchange allows the seller to sell one type of real estate and buy another.  The program is an incentive for real estate investors to keep their money in real estate.  

What is Deferred?

There are two benefits for the real estate investor who elects to exchange.  The ability to defer both the capital gains and the depreciation recapture from the property you are selling.  When you exchange from one property to another, the capital gains and depreciation recapture that would normally be due at sale, are transfered to the new property.  

Replacement 

To complete a 1031 exchange, the rules for replacement apply to the property, equity and debt from the sale property.  This means that the seller must purchase a property of equal or greater of the net value, invest all of the equity from the sale, and replace the debt that was on the sale property.

The debt on your property can be replaced with cash if you would prefer to not take new debt on your replacement property.

If the replacement property is of lesser value, does not use all of the equity nor replace all of the debt, there will be tax due from the seller.

Timeline

The timeline for 1031 exchanges are carved in stone.  There is no option for extension. When you sell a property, you have 180 days from the sale to complete the purchase of your replacement property.  From the date of sale, you have 45 days to identify 3 potential properties to use for your replacement. Once you identify, you must complete the purchase of one of the three properties for a successful exchange.  

Toija recommends that as soon as you have half a thought about selling, you should engage a 1031 accommodator.  This allows you the best option to complete a successful exchange. 

Questions for Consideration

What are you selling and what do you want to buy?  These are some of the first questions you need to answer.  How the property is titled is how the replacement property will need to be titled.  If you own a property with others and the sellers are not in agreement on the replacement property, you will not be successful.  

Who can you buy from?  Anyone except for a related party, parents, grandparents, children, brothers and sisters are all excluded as options for you to purchase from.

Strategies

Strategies for replacement property need to be considered prior to selling the first property.  For the best outcome, it is advisable to have a conversation with an exchange accommodator and your tax professional to create a successful strategy.   

When a 1031 Does Not Work

A 1031 exchange does not work for a second home.  If twenty-four months prior to the date of sale, and 24 months after the purchase of replacement property, personal use is not allowed.

Nor is a Flip eligible for an exchange.  A flip is inventory.

For a mixed use property, you can exchange the portion of the property that was used for investment.  

Reverse 1031 Exchange

In a forward exchange, the qualified intermediary acts as the seller for you, then applies the proceeds in the new property.  If you find a replacement property prior to completing the sale of your first property, you can utilize a Reverse Exchange. This requires that the qualified intermediary hold title of the replacement property until the first property is sold.  The same 180 day timeline holds true. You must complete the sale of the first property within 180 days from the purchase of the replacement property.

Constructive Receipt

Constructive receipt is what triggers the tax.  When you hire a Qualified Intermediary, they take receipt of proceeds and coordinate with the title company for the placement of the proceeds.  This eliminates the taxable event for you the seller.

BIGGEST RISK 

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

BIGGEST RISK: Failure to engage a 1031 Exchange Company prior to closing. 

For more go to:

Website: www.beutlerexchangegroup.com

How to Manage Your Perfect Portfolio from Anywhere with Minesh Bhindi – CREPN #239

Now, thanks to technology you can manage your perfect portfolio from anywhere on your mobile phone.   

Minesh Bhindi with Perfectportfolio.com shares his strategy for doing just that. 

Today. My guest is Minesh Bhindi. He is with Perfect Portfolio.com and, they strategize to buy below market, cashflow and compound. And in just a minute, we’re going to talk with Minesh about how to create and manage a fully diversified portfolio in prime real estate from anywhere in the world. But first a quick reminder, if you like the show CRE PN Radio, be sure to like share and subscribe. Also, you can leave a comment as we love to hear from our listeners. And don’t forget if you’d like to see how handsome, our guests are, be sure to check out our YouTube channel and that’s Commercial Real Estate Pro Network. With that, I want to welcome my guest, Minesh, Welcome to C R E P N radio.

Minesh

00:50

Thank you so much for having me. It’s a pleasure.

Darrin

00:52

All right, well I’m looking forward to talk with you. I, read up a little bit on your, uh, your background and, I’m excited to, to hear, uh, you know, what, what would you have to say about, uh, uh, managing real estate? But before we get started, if you could take just a second and share with the listeners a little bit about your background.

Minesh

01:15

Sure. So I started off in real estate when I was 16 years old, uh, at 15 and a half. My, my dad has always been involved in real estate. I was watching him negotiate a deal and, uh, with a very arrogant 15 year old mind when he got off the phone, I was just sort of smirking at him and he said, what are you looking at? What are you smiling at? And I said, ah, that sounds easy. I could do that. That sounds, uh, you know, that doesn’t sound too difficult at all. And luckily instead of telling me to screw off, uh, which you would have been perfectly right to do, he said, show me. Uh, and so by 16, I had started negotiating real estate deals and because I was at a very advantageous point that I can see now, I couldn’t see then, which is I could walk away because whether we did a deal or not, I still had to get my homework done.

Darrin

02:04

I still had to go to school. I still had to do the things that a 16 year old is going to do. So I had the advantage of being able to walk away. Um, and so very quickly I started getting really, really good deals. And very quickly I started getting deals that were just unbelievable deals that people couldn’t believe that we could get. I’m talking like 30% discounts on properties where you, you just, you, you could not get these deals before. And so that’s what was going on. And then when I started working with these deals and when I started working on working with investors with these deals and believe it, cause we were structuring deals where you were getting a cash back on completion, you were putting nothing down on the property, you were getting a cash back on completion and you, you were getting basically an interest, almost an interest free loan on the day of completion.

Darrin

03:02

So it was phenomenal. And I did my first deal at the age of 18. It was a, a block of 16 or 18 units that I was negotiating and I decided to buy three of those, did it with the same deal. I bought 500 pounds down to reserve these properties. I got a 68,000 pound cash back on the day of completion and a quarter of a million pounds in equity. Well that was my first, my, my own first real estate purchase after a couple of years of, uh, negotiating deals. So that’s really my background, um, on real estate. And then a friend of mine said, Hey, you should, you should teach this stuff. Uh, and that’s when the education side started.

Darrin

03:46

No, it sounds like you started on third base. I mean that’s, that’s, that’s awesome. To start so early and have a, you know, A), you had the exposure and it sounds like, again, like you, you uh, your father was encouraging as opposed to, uh, you know, uh, resistant to helping or, or even entertaining your interest I think is his kind of thing. Cause it is funny, the, uh, uh, parental child relationship as the kids go through teenage and, and, uh, you know, kind of the smart ass kind of a thing. And, and um, so kudos to your father for, uh, not, not resisting you then.

Minesh

04:22

Yeah. I think if I had failed the first couple of times he would have resisted because obviously then it was the reputation of the company and everything else at stake. But luckily I got the swing of it very quickly because I guess the arrogance and the confidence at 16 and sort of helped, uh, actually negotiate the deals, which was very strange. You know, a lot of people say you shouldn’t be arrogant about it, but if I was to say, what was the one thing that really helped me actually get and secure these deals, it was the arrogance. Uh, and it was that confidence of just being able to say, Hey, look, you either want to do the deal or you don’t want to do the deal. I don’t care. You know, it was, it was really that approach that allowed me to get the deals that people that have been in the industry for 14, 15, 16 years at that time, couldn’t get.

Darrin

05:05

Sure. Well, and I think, you know, you said something right there, the, the ability to walk away is always your most powerful leverage. You know, if you’re emotionally into it and you can’t see the, the faults and you don’t have that, you’ve lost the ability to walk away the other sides though they’ve wo n. Right?

Minesh

05:26

Absolutely, in everything.

Darrin

05:26

Yeah. And, uh, so, yeah, but, but what a powerful message is, you know, somebody just starting out to have that and to see that work and to, to know that that is, uh, you know, it is a power. It’s a tool for you as opposed to, you know, kind of, I hope it works. I hope it works out. It works. And you get all emotionally involved and then you can’t walk away from them and you get crushed by it, or you do win or, um, but, uh, no, that’s, that’s awesome.

Minesh

05:53

Yeah. Right now, you know. Right. And one of the things that interests me is that right now, obviously the market’s everywhere in the world, especially my home market of London, uh, and the U S have gone up a lot. And so people are thinking, Hey, you know, maybe people don’t want to, maybe the seller is in, is, is in power right now. But for me, I think the buyers in power right now. And so I think now is a great time to be arrogant. I think there’s less buyers now than there are sellers. I think a lot of people want to cash in on their profits right now at the top of quote unquote top of the market. Uh, you never know where the actual top is going to be, but a lot of people want to cash out. So now as a buyer’s market, you should be going out, putting out offers. You never know what’s going to land. That’s, I really started off at the time where property was peaking, uh, in London. You know, it was like 2005 ish, uh, that I started. And that’s, you know, it was only two years up until the credit crunch, uh, and three years up until, you know, the crisis happened. So that was my peak period. And it was a buyer’s market at that point. I, I don’t think it was a seller’s money, you know, it was a sellers market.

Darrin

07:00

No, it’s funny to hear you say that. I, I say funny, uh, from a lookback perspective because I think that so often what we, what we’ve been focused on is post-crash and how low things were for getting him a high things they were. And what you’re saying is how much success you were having in the run up manner prior to the crash. Were you, uh, uh, holding any assets in the crash or where were you at? Uh,

Minesh

07:28

we, we S absolutely holding assets in the crash. It was during, it was during the crash that I sort of, um, realized that maybe I should take a different, different turn. And it took a few years for me to figure out what direction to go in with the difference between my portfolio in the crash and other people’s portfolios. In the crash was that the cash backs that we were getting that I was getting, I would actually leave them in the bank and not spend them on a new car or not spend them on a holiday or not spend them on things that weren’t appreciating in value. So when the crash happened, I still had cashflow and cash reserves to actually see through the cap, see through the crash.

Darrin

08:09

Right. No, I think that’s most people I see that a or that I know that, uh, made it through the storm. Uh, like you say, either they were well reserved before or they certainly weren’t foolish with what cash they had in the storm, conservative. But that was what gave them the match. You know, that much more ability to capitalize when things corrected.

Minesh

08:33

Yes,

Darrin

08:33

They were in a position to, to run fast when others, others couldn’t. And capital was capital was at a premium. I mean, you know, lenders weren’t lending. Everybody was afraid that there was more to, you know, crashing. And you’ve mentioned this, nobody really knows. Are we at the top? Uh, are we, you know, at the bottom you knew, you don’t know in the moment that you’re there. It’s only after time has passed so you can reflect and say wow that was the top or that was the bottom.

Minesh

09:00

Exactly. You know, one of the things that was interesting was that one of the strategies that I employed to stay in the game, so to say was that all the cash reserves that I had, you know, in 2008 when the market started crashing by about March, 2009 the stock market had bottomed. So this is why we talk about the perfect portfolio. It’s not just about having assets in one and understanding one vehicle. You’ve got to understand multiple vehicles cause while property was still recovering, was still going through the period of recovery, the stock market had bottomed by March, 2009 so I just took the cash reserves at the ridiculously low interest rate that I was paying on them, put that money straight into the stock markets. As the stock market started climbing after March, 2009 I had more than enough cashflow to, to survive quote unquote, the the crash and what was going on there.

Minesh

09:51

So you’ve really got to understand multiple different asset classes and how they work so you can stay in the game longer. That’s what my mentors taught me and that’s what I try and practice.

Darrin

10:00

So let’s talk about that. What, what, what type of asset classes are you in?

Minesh

10:05

Yeah, so we, Perfect Portfolio is focused on real estate, the stock market as a whole, via index funds, uh, and golden and silver. So that’s what we’re really, that’s what we typically focus on. And the idea of a perfect portfolio throughout history and my research shows, if you are sort of between 40% in real estate, 40% in the stock market, 20% in golden silver, you are at a very, very good stable portfolio level.

Darrin

10:32

And is that a, that’s how you manage your own portfolio then? It’s between that, those kind of ratios.

Minesh

10:38

Yes. It’s, it’s almost almost exactly that.

Darrin

10:41

And how much of those are our cash flow as opposed to appreciation is that.

Minesh

10:49

They’re all cashflow. They’re all cashflow assets. We, the way we do gold and silver, it’s cash. It allows us to bring in a cash flow the way we do real estate allows us to bring in our cashflow in more ways than you can do with traditional physical real estate and the way we do the invest in the stock market by the index funds. It allows us to bring in a cashflow. Cashflow is the King of anything that you’re going to do with investing. The only way capital gains really works in the, you know for you is if you make capital gains really fast because then it’s almost like cashflow. If you think about it, right? If you’re trading in and out of an asset and you’re making cash and you’re making capital gains, it’s sort of like cashflow in the short term if you can do it in an in the near term, but if you’re holding on to assets longterm and you want to grow your wealth, there’s three key things. You’ve got to buy those assets. At the best price possible. You’ve got to have a cashflow and then you, you’ve got to reinvest that cash flow into those assets that are going up anyway. Um, and so I like to call that my wealth triangle philosophy. So it’s, it’s very, very simple.

Darrin

11:52

That definitely, uh, sounds like a recipe for success. Um, and the ability to withstand, uh, any kind of shortcomings or market cycles, um, and not just with, but then also, uh, you know, capitalize and grow your portfolio when, when times are are down. I mean, that’s the always the thing is that, uh, you know, I, I think from this, the beginning of this have we talked about when you started, when you were able to be a non non invested emotionally in, in the situation, uh, is something that, that would propel any investor to help any investor and just to be in that position, uh, you know, and be able to, to be the counter action to what the market’s doing and really seize the day kind of thing.

Minesh

12:41

Yeah. And you know, I was very lucky to be in that situation. Um, I don’t overlook that. I was very young, I didn’t have any other commitments. I didn’t have a job. I didn’t have a wife, I didn’t have kids. I didn’t have these things. Um, you know, sort of holding me back or making me second guess myself or making me want it to work so much where I would screw up the deal, you know? Um, so I was very lucky when it came to that. That’s one thing I have to say, but saying that, you know, now we’ve coached people in 46 different countries to do what we do and it just works. You just need the right coaching. You just need the right mindset. And really it’s the mindset. It’s nothing to do with the actual strategy. There’s not too many strategies that work in anything. There’s only a, you know, less than less than five strategies work in anything that you want to do. You just got to have the mindset to see it through. And that’s what we specialize in. Our strategies are very, very simple, but we specialize in actually making people execute on them. And that’s why we’re successful doing what we do.

Darrin

13:44

I like a mindset and a execution. Um, let me ask you in the, the, the assets you mentioned a gold, silver, um, uh, the, um, what was it, the, the index funds and uh, uh, the real estate. Um, can you describe a real estates, such a broad topic? I mean, are you investing in, in specific, uh, pieces of real estate? Are you investing in funds? How are you, how are you doing your, your real estate?

Minesh

14:15

Yeah, so we use rates, which are real estate investment trusts. Um, and we actually use reach ETFs, which is an exchange traded fund. And how it works is very simple. Rates are set up like companies like funds and you put your money into them, uh, and they go out and buy real estate and manage that property in, in, in the best way possible to generate you the highest return. Now their objective is to get you the highest return so that you put more money into the rate. It’s very, very simple, right? Capitalism works. Um, now the rate ETF is sort of one level above that where their job is to allocate the funds in the ETF to multiple different rates to give you exposure across a broad market of real estate. So in essence, with the way that I do it with one stock purchase, I’m investing in eight different sectors of real estate, 154 different real estate projects and I can manage the entire thing from my phone.

Darrin

15:10

And I can also use, you know, the option strategies that we use to generate a cashflow, uh, on my holdings. On top of that, you know, there is in the uh, re TTF that I use, which is VNQ anyone can go and, uh, look at it. It’s got $64.2 billion of assets stored inside of this ETF. So when you are going and knocking on the door trying to do a deal as an individual versus someone with $64.2 billion behind you, who do you think is going to get the better deal? So these guys are able to get much better deals and most importantly, they have the best accountants, the best lawyers managing your portfolio so that you make the most amount of money. Why? Because if you make the most amount of money and their fund outperforms, they’re going to get more money.

Minesh

15:59

It’s very simple. Capitalism works. So that’s why a, I like to use the read ETFs. The results on these have been absolutely fantastic. BNQ provides a 4.52% dividend. It also has compounded at 8.48% since inception. Uh, and the fee for getting involved in this thing is 0.12% yearly. So it’s nothing, you know, compared to what your fees and expenses and everything are. When you are looking at, uh, buying physical property, this is, this is so much better. And on top of those rooms, on top of those returns, we use options to then generate us an extra 1% a month. So you’re adding 12% a year on top of, on top of what I’ve just said. And again, you’re diversified into eight different sectors and 154 different real estate projects with one click of a button.

Darrin

16:53

No, that’s pretty impressive. Um, the dividend, uh, you mentioned the 4.5% or 4.5 to a percent. Is that, is that paid a quarterly or how was that a quarterly?

Minesh

17:08

Yeah.

Darrin

17:08

And then, uh, the 8.4%, uh, compounding, um, are you, I assume that’s a value you would recognize if you were to sell essentially?

Minesh

17:18

Yes, absolutely. Yeah. You’re getting after gain, you’re getting a capital gain, plus you’re getting the cashflow via the dividend and you’re using the options to generate an extra 12% a year.

Darrin

17:27

Got it. So the, the, the asset, uh, the value is going to historically is, uh, is that an average or is that,

Minesh

17:36

yeah, that’s an average average compound since, since inception.

Darrin

17:40

Gotcha. And then tell me about the, the options you mentioned, uh, how is it that you’re able to, uh, utilize options in the REIT there?

Minesh

17:52

Very simple, you know, options allow you to speculate on an, on an asset price. Uh, it allows you to guess or bet what you think is going to happen to a particular asset by a particular time. Um, and all we do is we sit on the other side of the speculators and we collect that money. It’s like when you go gambling, you become the house rather than, uh, becoming the player. And so all we’re doing is sitting there going, okay, this person thinks this real estate fund is going to go up by 10% by the end of the month. And so we own that stock. So we’re going to take a, a premium, uh, to hold that stock and guarantee that stock for this, for whoever that person, whoever the speculator is. Uh, and as per the Chicago board of options, uh, statistics, 90% of speculators in options lose money.

Minesh

18:46

So we’re winning 90% of the time and the other 10% of the time based on the rules of, of, uh, of how we place these options, you’re never going to be in a scenario where you are selling that asset for less than you buy it for. The other key thing that we do is we do not leverage, we do not use margin. We do not use, uh, uh, any form of leverage when it comes to our strategies. So you’re basically as safe as you can get and generating a cashflow via those options while that asset is going up. The fundamental thing to understand is that I am a longterm investor. We are all longterm investors. We believe in the longterm value of the stock market, the longterm value of real estate and the longterm value of gold and silver. The cashflow is designed just to give you that cashflow on a short term basis. So we’re never getting into a position that’s going to force us out because we’re trying to, you know, get very greedy on the short term. It’s never going to happen. That’s why we aim for 1% returns. You can easily try and aim for 7% a month, returns with options, but then you’re taking huge risks. Uh, and that’s not what we’re, that’s not what we’re about.

Darrin

19:54

Got it. How does that, uh, uh, income stream the, the return, uh, compare with like gold, gold and silver and what you’re seeing in the index funds?

Minesh

20:07

On the real estate side? You mean?

Darrin

20:09

The, the percentages we just went through like the dividends and the compounding of the real estate value and uh, uh, the options. How do those percentages compare to, to what you’re seeing in the index funds and, and uh, golden silver?

Minesh

20:24

Yeah, the, the index funds out perform, uh, everything in the short term. Um, I believe gold and silver will revalue at some point and outperform all of them. However, gold and silver is more, that’s why the cashflow side of gold and silver is very important because you could be sitting on a, on some gold or silver for 20 years before it does anything. Uh, and I know there’s a lot of people out there and my peers, the industry that are harping on about owning gold and silver and, and that’s the only thing that you should own. You know, it’s, it’s, it’s funny how they’re the ones selling the physical gold and silver for you to buy in that scenario. But for, from my perspective, you, if you’re invested in gold and silver and you’ve got more of your, more than 20% of your assets in golden silver, and out of that 20%, if you’ve got more than $5,000 in physical gold and silver, that doesn’t generate you a cashflow. You’re being inefficient with your funds. There’s better ways to do it. And that’s how hedge funds do it. And that’s how billionaires do it. And that’s, that’s the way we like to do it.

Darrin

21:26

So when you say cash flow again, I guess from the gold and silver, I’m still not clear on how, how is it you generate cash flow from the gold and silver? I mean, if you physically hold it, it’s, it’s in your possession. How does he generate the cashflow?

Minesh

21:39

So we use the ETFs as well. Uh, we, we, we like to utilize ETFs because they’re there. They’re fantastic innovations in the investment space. And it’s interesting to me how, you know, especially in the gold and silver space, there’s a lot of fear around using ETFs and actually in the real estate space too, it doesn’t, it doesn’t make any sense to me. People are very comfortable buying Apple stock, but they won’t go and buy a real estate stock. It’s just sort of, it’s very, very interesting, uh, why there is that fear. Um, but yeah, we use the ETFs, uh, and we then use options on those ETFs to generate that cashflow.

Darrin

22:13

Got it. Got it. Um, you mentioned your, your longterm, uh, players. Um, how do you, I guess, what do you see? Do you see everything continuing? Do you see, uh, I mean, are there, are there strategies you employ? I mean, it sounds like from the real estate thing, you’re, you’re hedging your bet from getting a spread of risk, uh, amongst different asset classes and working with the biggest, uh, players.  Index funds. I think they are similar from the standpoint of you’re, you’re, you’re, you’re basically tracking that the, the Dow or the index. I mean that’s the,

Minesh

22:50

the S and P.

Darrin

22:51

S and P. all right. Yeah. And uh, the gold, gold and silver, like you said, uh, is it been pretty flat here? I’m not really that familiar with the gold and silver prices right now. Where are they?

Minesh

23:03

Yeah, I’ve been doing pretty well [inaudible] doing pretty words holding on 1550 right now. Um, and it’s done very well last year and it’s going to do very, very well this year as well. And that’s the one thing that people get confused with gold and silver. If anyone’s watched any information on YouTube about gold and silver, what you normally get told is that gold and silver are going to skyrocket when the world melts down. And that’s not true when you look throughout history, the only time gold and silver actually skyrocket is when there is a us dollar crisis. And I don’t foresee a U S dollar crisis for a long time. What I do foresee is the stock market continuing to go up. And as a result of that hedge funds having to reallocate more of dollars as a percentage of their new net asset values in their hedge funds to gold and silver as a hedge. So if they want to put 5% in gold, for example, and they’ve got, you know, let’s say $100 million to play with, and now that hundred million dollars has gone on to $200 million, now they need to put in a bit more dollars into gold to keep that 5% balance. And that’s what pushes the price of gold and silver up while the stock market’s going up.

Darrin

24:12

Gotcha. So it’s basically the, the, the demand based on their growth is essentially a leverage, uh, for you to, to increase your position in gold based on the value of gold or silver going up based on a supply and demand, uh, kind of thing.

Minesh

24:30

That’s absolutely right. You know, you don’t, not with gold and silver, you’re know, we are not waiting for the world to melt, uh, before we make money with gold and silver. I know that’s a, a big thing in the world that, you know, people try and propagate, but that’s not when typically gold and silver, they’ll skyrocket when there’s a U S dollar crisis. Typically that’s when it happens. It’s nothing to do with the stock market. It’s nothing to do with anything else. In 2008, the stock market went down, gold and silver went down and have a guess why, because the hedge funds were reevaluating their portfolios. The net asset values went down. They had to reallocate out of gold. So it’s very simple from that perspective. You know, anyone who’s waiting for a crisis to make money on gold and silver, you’re gonna we’ll be lucky to see that in our, in our generations.

Darrin

25:20

Well, I appreciate you saying that, cause I think that, uh, given the, um, near-miss to the last crash, I think there’s a mindset of there’s another crash coming and there’s like,

Minesh

25:32

Which is ridiculous.

Darrin

25:32

Right, right. Right. Now I, I’ve, I’ve, I, you know, I, I’ve talked with and read and heard and everybody wants to, to identify the, just the, the average length of a cycle, uh, the averages. And there’s constantly ups and downs and stuff. But I think that, uh, in that conversation, one thing that I find missing is the gravity of the crash and the correction that occurred. Um, if it was a minor, a dip, you know, like a, a w w what’s a recession? Is it a one quarter of negative growth? Is that, is that how we define? Three quarters?

Minesh

26:08

Well, one quarter, three months is typically a recession. Yeah.

Darrin

26:12

Okay. So three, three months. So three months is what a recession is defined by and over, you know, over history. They happen periodically, every, you know, cycle of seven, eight years kind of thing. There’s usually, there’s some sort of a minor correction, but the, the correction was so major and then plus the fixes that were put in place that have, uh, essentially prevented, you know, the opportunity for it to get out of hand doesn’t mean that it won’t get out of hand again. Cause I think that it just, the nature of things as we get comfortable, we kind of loosen the standards, policies change and you know, expectations. But, but there will be another crash. But I think that the, the those that are waiting for the next crash uh, crash, we’re predicting the next crash, uh, as big or bigger than the last crash. Uh, maybe waiting for a long time, just based on what I’m seeing. I think that the economy is relatively strong unless there’s some sort of a worldwide, um, you know, event. I’d love to hear your input on that.

Minesh

27:11

Well, let me say something that’s going to blow people’s minds. We’re not going to see a 2008 style crash in our lifetimes that has done, that happens about every 70 years. Uh, and that style of crash is done. Anyone who’s waiting for an economic slowdown or a, uh, a period of recession, we’ve already had it since the beginning of 2018 and we’ve just come out of it. If you look at the channel for the world, uh, well, even the U S stock market, it’s gone nowhere since February of 2018 and just at the tail end of 2019, it started coming out of that. So that crashed that everyone’s waiting for has already happened on the ride noses. And now we’re in another cycle up in the stock market, in real estate and obviously in gold and silver. So anyone who’s sitting out of the market right now, you’ve already cost yourself 25% last year and you’re probably going to cost yourself somewhere between 10 and 20% this year, just on a capital appreciation, not anything, not even including the cashflow. So if your money sitting in the bank, that is, in my opinion, the absolute worst place to have it right now.

Darrin

28:14

Right, right. So let me ask you, so when you’re, um, making your investments, um, are there any characteristics or you know, I mean, you basically, it sounds pretty simple as far as the three things that you’re investing. You know, when I, when I typically think of real estate, it’s, it tends to be a specific property and there’s characteristics and we can run the numbers and all that stuff. Um, but it seems like you’ve taken all of that out of the conversation. Uh, is it, is it, you’re, you’re investing in a, in a REIT that’s so large, that’s constantly, they’re out there shopping for these deals. And the opportunities that basically as simple as it gets.

Minesh

28:54

Absolutely. And not only are the, are they out there shopping for these deals? They’re out there with their head on the chopping block because the moment they have a bad year, they get all their, all the, all of their funds pulled. So they don’t get the luxury that you and I get when we go looking for real estate, which is our one bad deal out. It’s not a problem. They’re on it 24, seven for you. So you don’t have to worry about that. If they buy, if they perform badly, they’ll get, you know, $70 million pulled from their fund in the next year. Um, and so they’re, they’re, they’re not looking to do that. And these are the best nerds and the best geeks in the world doing all the analysis to keep your portfolio growing.

Darrin

29:34

Got it. So basically the way that you manage your portfolio from remote is that you’re investing with the experts in these different funds. Uh, and from there, from your phone, you’re able to manage, uh, and keep track of what’s going on. And

Darrin

29:54

is that there’s basically, I mean, it’s.

Minesh

29:57

My job. My job is very simple. I need to know when to get in. I need to know what percent to allocate into each asset class and I need to know how to generate that cashflow using the options. Everything else I’ve already said to you, you got to be in, in stock, in the stock market. You’ve gotta be in real estate, you’ve got to be in gold and silver. However you do those things, that’s really the key where the skill comes in and depends on how much money you’re going to make. That is the dependent factor. It’s not about what assets to get into. You need to be in the stock market. You need to be in real estate, you need to be in gold and silver. What you do after that realization is the key on how much money you’re gonna make. I mean, you know, and right now I’m talking to you from Bogota in Columbia. So it’s like, you know, you can manage this portfolio from anywhere, but a multimillion dollar portfolio that I can carry around with me on my phone and track from anywhere. Um, I’ve made, I’ve been traveling since the first week of January. I think I’ve made eight, 8.8%, maybe 8.9% of my money so far while I’ve been traveling. And that’s really the key. It’s what do you do once you decide that this is the asset class and that’s what we specialize in.

Darrin

31:12

Let me ask you, you mentioned the, the dividends, um, which essentially to me that’s the cash flow. Correct? I mean that’s the,

Minesh

31:19

no, so there’s difference because you know, with, with, with gold and silver, there’s no dividends. So the dividends is a part of the cashflow, but the majority of the cashflow comes from utilizing the options.

Darrin

31:33

Okay. Gotcha. It’s the options. Gotcha. Gotcha. Ah, interesting. That’s, that’s a definitely a, a, a unique, uh, perspective. And, and uh, sounds like you’ve had a lot of success with that. How many people, you said 46 countries. You, you’ve worked with, uh, students. Um, how many people have you got a,

Minesh

31:54

We only, we only every single year we cap it off at 155 people. And the reason for that, I don’t know, don’t ask me why it’s not 150 or 160, but it’s 155 people. And the reason for that is very simple. When I started my first education business, the mistake that I made, and bearing in mind I was involved with physical real estate. The mistake that I made was that as I worked with more people in the education business became successful. I had less time to put it into my own investing. And so after the, after the 2008 crash and after my transition into doing it this way, I’ve just realized I didn’t want to make that mistake again because from my personal wealth and my family as well, the majority priority of that is going to come from, uh, my own investments and not actual business.

Minesh

32:40

So we work with 155 people a year. As soon as we hit that 155, if we get 155 people by February, we’ll shut doors up until uh, the next year. It doesn’t really bother me. I like working with good quality people, people that are focused and people that are at least coachable. Uh, we’re not a churn, you know, a churn and burn and dump company were doing seminars every single weekend selling it and not providing support. Once you become a client, you get to access a weekly coaching call for life at no extra cost, you know, so these are the types of things that we’re trying to, we’re trying to do, um, to help people over the long term. That’s what it is for me. It’s about building a relationship and that’s why we have an application process. I review every single application, uh, that we accept. So it’s more of a longterm, um, approach and a more of a relationship building approach than anything else.

Darrin

33:35

Oh, I got it. Love the a, you still got the, the mindset of a, you know, one foot five, we can walk away. There’s not, you know, not a, not too hard or not two 50 if we’re going to make more, you know, more students this year kind of thing. That’s, that’s great. It’s an,

Minesh

33:48

At the end of the day, I know that if I can compound my money at 20% a year consistently, you know, no matter what I do, it’s not worth getting overly stressed on an education business or any business really. You know? It’s just not worth getting overly stressed because if I can compound my money at that level, you know, which I have been doing, I’m set. I’m sitting very, very nicely for my, for my future, you know, and that’s what this is about. The strategies that we teach are really strategies that I wanted for myself.

Minesh

34:19

And this is what I do for myself. It’s, it’s, there’s nothing, there’s nothing that I don’t do for myself that we, that you know, that we, that we teach everything that we do is exactly what I’m doing myself. And that’s what it’s about. That’s how I would like people to live as well. I think there’s a lot of people chasing success and chasing a business and chasing things in such a way which sacrifices their quality of life. And I think, you know, when it comes to real estate, I don’t think there are actually that many people on earth that are super passionate about a building. There are a few nutcases, but I think most people are very passionate about what real estate can give them, which is the lifestyle, which is the security, which is the wealth, which is, you know, the quality of life for their children, their family, their wife, their husband, their, their parents, et cetera, et cetera. Those are the people that I like to work with because those people are not egotistically attached to having 10,000 properties. You know, those people just want the end goal and they’re aware of the end goal. Um, and that’s what I like to work with. Cause the end goal is easy. The egotistical shit in the middle, that’s where it gets complicated. That’s where you can take too much risks. That’s where you can blow the whole thing up.

Darrin

35:32

Right. Right. No. Well, said. Well, said. Hey Minesh. If we, could, I want to shift gears here for a second. Uh, I mentioned to you before we started that by day. I’m an insurance broker and, uh, I work with clients, uh, on a regular basis to assess risk and determine what to do about the risk. And, uh, there’s three strategies we typically, uh, can, you know, rely on, uh, the first strategy is we look, uh, and ask, can we avoid the risk? I, if that’s not possible, we, we look is there a way to minimize the risk? And if we can’t avoid it nor minimize it, then we look to transfer the risk. And that’s what an insurance policy is. And, um, as, uh, for the last year or so, I’ve been asking my guests, uh, if they would, uh, take a second and consider what they see is the BIGGEST RISK. And, uh, just to, to be clear, I’m not necessarily looking for an insurance related, uh, answer. Uh, but, uh, I’d like to ask you if your game, uh, Minesh Bhindi, what is the BIGGEST RISK?

Minesh

36:40

The biggest risk is an external, uh, situation happening in your life that forces you out of an investment earlier than you wanted to be in it. You know, and that’s really the, for most people when they’re investing in the stock market, a margin call comes along and that wipes out, you know, 50% of their portfolio. We don’t get involved with margin, we don’t get involved with leverage. So for us, the biggest, the single biggest risk is a life situation happens. You don’t have enough reserves and now you need to get out. And while you need to do that, the market is down 10% because it’s, it’s, it’s going through a standard correction, uh, that it does every, every 18 months anyway. So that’s really the biggest risk. The, if anyone wants to get involved with investing, there’s two parts to it. The first part is actually making money.

Minesh

37:26

And the second part is investing money. What a lot of people get these two things completely mixed up. The other way around. When you’re investing money, which is what we do, you want to invest with money that you’re not going to miss for 10 years. If it just, if the market shuts down for 10 years, then you know, as Warren Buffett says, you’re not going to miss that money. You’ve got to have enough cash reserves or a lot of people I find are doing is approaching, I don’t have any money. I want to make money. Let me go use an investment strategy to do that. And that’s not, that’s not the right way of doing it. Go make the money first, have the reserves and then start investing. Otherwise, if a life event comes along, you’re going to be forced out of a market and people like me are going to buy all your stock at 50% of the value.

Darrin

38:11

Right? No, that’s, that’s well said. Uh, right out of the, uh, Warren buffet school of, uh, you know, uh, what’s that, uh, say? And he says, when the, when the, all the water is out of the tub, you find out who’s wearing shorts or whatever that is and kind of thing. So, yeah, that’s good. Good. Hey Minesh, where can listeners go if they’d like to learn more, connect with you?

Minesh

38:34

Well, perfectportfolio.com but I’m sure you’ll have a link in the description anyway, so they can go check out the training, um, and, and go watch the training. You know, like I said, we, we specialize really in helping people execute and get the result. That’s why people, you know, people pay over 50% of our fee after we help them make $50,000 in profit. So it’s really a collaborative arrangement that we have. That’s why also we got to review every application. Like when I say we, I have to review every application because I’ve got to trust someone who’s going to actually implement it, uh, and not just get excited and buy things. Um, that’s not who we’re looking for. We’re looking for people who are actually focused on growth and actually focused on implementing the strategies that we teach because we know they work now. We know they work from, you know, people that have never had, I’ve got single moms that are never ever thought about investing in delay, you know, got an inheritance and they, and they have to do it to ex wall street traders that are using the strategy and not everyone’s making it work. Um, so, you know,

Minesh

39:39

that’s, that’s, that’s really what we’re looking for. If it sounds interesting to you, come and have a look at our strategies, you can come and learn a lot on our trainings. We give away a lot of the things that a lot of other people try and hold back. Like, which funds during the, the funds in the, you know, what you invest in. That’s not the secret. The real secret to your longterm success and you actually achieving the security, the freedom that you’re looking for is actually the implementation part. That’s where we help. That’s where we come in. Everything else I can give you, you know, everything else is very simple. Uh, and I can give you that and you can walk away with it and do something with it or not do something with it. But what we specialize in is actually making you do it.

Darrin

40:18

Got it. Minesh, I can’t say thanks enough for taking the time. I’ve enjoyed talking with you. Learned a lot and I hope we can do it again soon.

Minesh

40:28

Absolutely. My pleasure. Thank you for having me on.

Darrin

40:31All right. For our listeners, if you like this episode, don’t forget to like share and subscribe. Remember, the more you know, the more you grow. That’s all we’ve got this week. Until next time, thanks for listening to commercial real estate pro networks, C R E P N radio.

Land Flipping to Financial Freedom with Scott Bossman – CREPN #238

Land Flipping to Financial Freedom is exactly what Scott Bossman has done.

In this episode, you will learn how Scott Bossman realized that his W2 job as a Physical Therapist was not going to provide for his future as he had hoped. Once he realized this, he searched for something that could help him out of his predicament. That’s when he found Mark Poldoski and TheLandGeek.com.

“I purchased my first property about six weeks after I got Mark’s, basic training program. And this may sound funny to a lot of real estate investors out there, but for me, this is a big deal. I purchased a two and a half acre property for $700, and two weeks later I sold it for $2,800 cash. So that for me, right there was just huge proof of concept. I just tripled my money on a land deal. And I’m a physical therapist. Like I don’t have an ounce of business or, or real estate or you know, anything in my body, sales or marketing, I’m not an economist, nothing. And I took this, I took $700 and I turned it into $2,800. That’s what I knew. I was onto something. And, shortly after that, uh, I went into one on one coaching with the Land Geek program, which is a year long intensive process to, to get you to the point where you have a machine up and running. And in that first year we bought and sold 30 properties. In the second year we about doubled that and our business has continued to grow since.”

Now Scott has financial freedom, control of his time and a secure future.

Real State of Retail Real Estate with Chris Ressa – CREPN #237

What is the Real State of Retail Real Estate?

Chris Ressa cut his teeth in commercial real estate as a real estate representative for Sherwin Williams Paint Company.  Historically, Sherwin Williams dominates the contractor market. The growth opportunity with higher margins is in the DIY market.

As a real estate representative, Chris was charged with finding new locations for stores in markets that Sherwin Williams wanted to expand market share.  He worked with local brokers, negotiated leases, and gained critical insight how national tenants view retail space. 

Here he was exposed to the thinking and strategy that national retailers invest in Identifying markets, time lines, and the value placed on space and lease negotiations. 

When he moved to the real estate brokerage side of the business, he found that his experience was helpful, but, real estate is still real estate.  You have to execute.  

Real State of Retail Real Estate

What is the real state of retail real estate?  For context, it has to be stated that the consumers demand drives retail real estate.  Second, the consumer’s behavior has led to the creation of multiple significant asset classes.  

The different types of Retail Real Estate include:

  • Enclosed Malls
  • Outlet Centers
  • Power Centers
  • Grocery Anchored Centers
  • Neighborhood Centers
  • Free standing buildings
  • Lifestyle Centers
  • Mixed Use Developments

For this reason, you have to get granular to understand the nuances of each when underwriting a property, because they all operate differently.  You have to consider what type of retail will create the best opportunity for a tenant.  

Retail Disruption

Disruption in retail is nothing new.  But, not that long ago, the tenant list of an enclosed mall was about 70% leased to fashion and apparel.  Then the outlet center created a direct to consumer opportunity for brands.  

Next was the category killers, the power centers that provided all of the brands and categories under one roof; think Dick’s Sporting Goods and Office Depot/ Office Max.  

Then the multi tenant buildings with the front and center impulse buy, ie Starbucks. 

Lifestyle centers include high end fashion, plus mixed use, are walkable and may include dog parks. 

Online Effect

Now, online sales are changing how the retail consumer buys.  It’s easy to point to Amazon and the volume of sales generated, but there are no known cases where a retailer went out of business because of an online competitor.

Online sales has made most retailers better.  Now the consumer can order online, and pickup at the store.

It’s often reported that Toys R Us, a fortune 300 company, went out of business due to online.  Their annual revenue was $11 Billion. The truth is they were over leveraged and they could not service their debt.  

Online versus Brick and Mortar

Retailers are finding that when they open a physical location in a market, that their online sales increase and the reverse holds true when a location closes.  Good retailers are figuring out how to add to their bottom line and make the consumer experience frictionless.  

A recent study shows that approximately 85% of consumers who order online and pickup in the store will make an additional purchase at pickup.

Right now, in order to get consumers in the habit of ordering online, retailers are providing free shipping and returns.  Will free shipping continue to be offered as retailers build more brick and mortar locations for consumers to return the unwanted purchase?

Retail Growth

The cost to start an online business is nothing compared to a brick and mortar business. But, to grow beyond $10Million in sales, retailers are finding that a physical presence is needed.  At this level, the customer acquisition cost is actually less for brick & mortar versus online.    

Multiple online brands are opening multiple physical locations to lower their cost.  Product distribution necessitates it. Warehousing, retail and online are all working together.

Other brands are working to limit the number of outlets for consumers to buy in order to keep the value of the brand high, ie Nike. 

Brick and Mortar Long Term

Brick and mortar has a convenience edge for the consumer who needs something right now.  Combine this with evolving experience and physical locations for retail real estate is not going anywhere.  For the customer who needs service, a chat bot is no comparison to a live meeting with a person in a physical location.

The store prototype is changing.  Brands are trying to determine the ideal square footage, product mix and layout to meet the consumer needs.  

BIGGEST RISK 

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

BIGGEST RISK:  

So I think both from a real estate end and a retail end. The BIGGEST RISK is human capital. 

When you have an industry. That’s been hammered by Headline News, both the retail and the real estate. When someone is really bright, and smart graduates college, is that the industry they want to get into? And to solve the problems and the challenges that we were just talking about, you need really sharp, talented people. From an industry perspective, I always want those at DLC, but from an industry perspective, retailers, real estate, everybody needs really smart, sharp, talented people. 

Getting the bright, sharp people into retail store management training programs. I don’t know the last time you talked to a millennial, but when was the last time they said, when I graduate college, and I want to be the store manager of Wal-Mart. I don’t hear a lot of people doing that. And I think it’s a great job. And there’s a great career path. 

But the biggest risk is human capital, both on the retail side and the real estate side. In the Great Recession and the real estate side is not limited to my world, but in the Great Recession, you know, in all commercial real estate, very few people were hiring in 2008 to 2012. So you have this labor shortage. 

And I think the greatest risk is in commercial real estate and retail. If all the most talented people in the world move over to the tech world and no one comes into real estate, I think that’s the greatest risk the industry has.

For more go to:

Website: https://www.dlcmgmt.com/

Podcast: Retail Retold

Linkedin: https://www.linkedin.com/in/ressaonrealestate/

Hidden Investing; What the 1% Know with Holly Williams – CREPN #236

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 hidden investing 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

PACE Financing for Real Estate with Scott Krone – CREPN #235

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

Multifamily Syndication 2020 Outlook with Vinney Chopra – CREPN # 234

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.

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

Financial Independence Through Real Estate with Kaylee Mcmahon – CREPN #233

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.  

Financial Independence

Real estate has provided financial 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:

Email: admin@theapartmentqueen.com

Website: theapartmentqueen.com

Podcast: #1 Leading Ladies

How to Leverage Social Media for Commercial Real Estate with Matthew Laborde – CREPN #232

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:

Website: https://elifinrealty.com/

Facebook: Matthew Laborde

Linkedin: Matthew Laborde