Commercial Real Estate Pro Network

J Darrin Gross Podcasts

J Darrin Gross Podcasts

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CREPN #149 – Why Multifamily Syndication is a Great Option for Real Estate Investors with Vinney Chopra

Multifamily Syndication is a great option if you are looking to scale your real estate investment strategy.

Real estate investing takes tremendous amounts of capital.  When you run out of your own money, do you stop, or try to keep going?

Vinney Chopra is an experienced deal sponsor who has purchased over 38 properties through multifamily syndication.  Today, he takes us through the why, what, who, how it works.

What is a Syndication?

When you run out of your own money, your ability to grow your real estate portfolio will stop.  Unless, you learn how to attract other people’s money, OPM. Syndication is an investment vehicle that allows unrelated investors to pool their capital together.  The combined funds allow you to purchase larger, more expensive multifamily properties than you are likely to qualify for on your own.

The syndication forms an entity that has two general groups; general partners and limited partners.  

The general partners are the sponsors, or the syndicator, of the deal and are responsible for finding and actively operating the multifamily property.  Additionally, the general partners attract investors. The investors are passive and join property purchasing entity as limited partners.

Because you have investors trusting you to take care of their money, the SEC requires multiple documents that make clear to all parties the risk.  The documents also make clear how the entity is to operate, responsibilities of the parties, and how the money will flow.

You will need a securities attorney to prepare the Private Placement Memorandum, Operating Agreement and the Subscription Agreement for each syndication.

Rule 506 B or C

There are multiple vehicles for raising capital.  The two most common for multifamily investing are 506b or 506c.  Both allow for you to raise capital from accredited investors. The distinct difference between the two is based on whether or not you have a pre existing relationship with the investor.

Regulation 506b requires that all investors have a pre existing relationship you the deal sponsor.  You can also have up to 35 “sophisticated investors” participate in this structure.

Regulation 506c requires no pre existing relationship.  Additionally, you can advertise far and wide and attract any accredited investor to participate in your deal.

Click the link for a FREE EBook about multifamily syndication.

www.vinneychopra.com

Call / text (925)766-3518

CREPN # 148 How Blockchain Technology will Disrupt Real Estate Investing with Joe Snyder

How will Blockchain Technology disrupt your real estate investing business?

You’ve heard the word blockchain, and maybe associated it with a cryptocurrency like bitcoin.  It is true that bitcoin uses shared ledger technology, but it would be wrong to assume that cryptocurrency is a blockchain.

Joe Snyder, the CEO of Lannistor Holdings, takes us through what a blockchain is and how it will be used in real estate investing in near future.

What is blockchain?

The simplest description of a blockchain is:

  • a digital, secure, decentralized ledger which guards against a single point of failure.

All users with access to the ledger can see the in real time, exactly what is the current status.  Because there is not one central point, the opportunity for a hack or corruption are reduced.

Every major industry, government and education institution is looking into how they can employ blockchain technology.  They are looking at how using a shared ledger can result in cost savings and loss mitigation.

It is estimated the next 36 months shared ledgers will be introduced and become the standard for many current paper systems.  

How Technology Applies to Real Estate Investing?

You are a real estate investor asking how will Blockchain affect your real estate investing.  A couple of easy applications are chain of title and lender investor records, ie mortgage backed securities.  

For your real estate investment, a clean title is a must.  If your title has a hidden lien, no lender will lend, and you will not be able to transfer ownership to a willing buyer.  Shared ledger technology would allow for the local government, seller, buyer and lender to determine with certainty if there are any claims against the property instantly.  

Do you remember the mortgage meltdown and the mess created by mortgages that were packaged, securitized and resold?  There were multiple stories of homeowners losing their homes because the bank or loan servicing company was selling the home because they could not identify performing mortgages from non performing .

A blockchain would have provided instant identity for the homeowner to stop the sale, and or the lender to recognize the loan was performing.  

These are just a sample of how shared ledger technology will affect real estate investing.

For more go to:

https://www.lannisterholdings.com/

https://www.lannisterdevelopment.com/

https://twitter.com/lannisterceo

CREPN #147 – How to Reduce Your Multifamily Operating Expenses with Jack Howell

Learn how you can reduce your Multifamily Operating Expenses by using micro water meters.   

The ability to increase your net operating income and property value can be affected by either increasing your rents, lowering your expenses or both.

When you use micro water meters to measure your building water usage, you have instant actionable performance data that you can immediately respond to and correct the leak.  Your ability to timely stop your leak can reduce your operating expense, save money and water.

Jack Howell with ION Energy Solutions, monitors over 800,000 micro water meters daily.  Because ION measures so many units, they have the experience and data benchmarks to recognize instantly when one of your units has a leak.

Operating Expenses

The average cost of a gallon of water is $.01.  The average usage of a two bedroom apartment is 100 gallons per day.  If one toilet flapper chain gets hung up and the flapper does not close, and the toilet fills for six to seven hours, that toilet can waste as much as 3,000 gallons in one day.  That’s more water in one day than should be used in one month. If that one toilet leaks for 30 days, it’s easy for the cost of wasted water to add up.

Water leaks have little to do with gallons and everything to do with time.  An average medium leak will waste 1,000 gallons per day. How long would it take for you to determine you have  medium leak? How much will your medium leak cost you over 3 months?

There are multiple reasons to consider installing micro meters.  The primary reason are financial. Less water used, results in a lower water bill.  Additional reasons include that the micro meters qualify for Green Loan Incentives. Use of micro water meters can also fulfill some of your reporting requirements for Low Income Housing Tax Credits.   

If you own multifamily property and are looking for ways to reduce operating expenses, you need to know about the savings available through the use of micro water meters.

For more go to: www.IONENERGYSOLUTIONS.com

CREPN #146 – Mastering the Art of Commercial Real Estate Investing with Doug Marshall

To master the art of Commercial Real Estate Investing is to recognize and understand that investing is more than just the numbers.

Investing is much more subjective than objective.  Each deal lis different. You have to recognize and understand what is important to the parties in the deal.  You have to be a good communicator, ask questions and listen in order to understand what is really in play.

Doug Marshall of Marshall Commercial Funding has just released his book Mastering the Art of Commercial Real Estate Investing.  He provides some insight about the book and what he has learned as a commercial mortgage broker and real estate investors.

Commercial Real Estate Investing

There is so much to learn about real estate.  Most investors focus on the numbers. If they go it alone, they learn the hard way, and make avoidable mistakes.   Investing in commercial real estate is not something to do for a fast buck. To invest in real estate you have to take a long term view, 5 – 10 years.

Key takeaways from Mastering the Art of Commercial Real Estate Investing

  • Why buying commercial real estate is a good investment.
  • The 6 immutable laws of real estate investing.
  • Habits of highly successful real estate investors
  • Lessons learned from a loser property.
  • How to get the best possible loan for your property.
  • The 6 Different calculations every real estate investor needs to know backwards and forwards.

Inside the book you will learn how to:

  • Value Commercial Real Estate
  • Determine the loan amount based on the lender loan parameters
  • Calculate the property’s cash on cash return
  • Determine the effect of leverage on the property’s cash on cash return
  • Determine the amortization schedules affect on your investment return
  • Determine the minimal financial requirements lenders have in order to approve you for the loan

Real Estate Financing

Inside the book, you will learn how to go about getting commercial real estate financing:

  • Go back to a lender you have done business with
  • Shop the mortgage market on your own
  • Use the service of a commercial mortgage broker

For more go to: http://marshallcf.com/

CREPN #145 – Why Multifamily Real Estate Investing with Vinney Chopra

Multifamily Real Estate Investing is proven to be one of the best ways to create generational wealth.

Vinney Chopra is a multifamily syndicator and previous guest on CREPN #118.  Together, over the next several weeks, we will make the case for investing in multifamily real estate.  So, if you are not yet convinced, listen and subscribe so that you catch the following episodes.

Why is Multifamily better than Single Family Real Estate?

Single family real estate investing can be deceiving.  Each house is its own business. One source of income and multiple potential expenses  You may think you are making cash flow. However as soon as an unexpected repair or vacancy comes up, your cash flow can be wiped out instantly.

Multifamily property is its own business.  You have economies of scale. There are multiple income streams, one from each resident and considerably fewer shared expenses.    

Valuation

Single family property are valued by the price per square foot that the neighbor received in a recent comparable sale.  You have no control over the value.

Multifamily property value is based on the net operating income, noi, earned by the property.  This number is divided by the local capitalization rate, cap rate, for the type of property. If the seller has not kept up with rents, or you identify expenses that can be reduced, you can improve the noi and the value of the property.

Financing

When financing a Single Family property, the bank looks at you the borrower.  Each property has its own loan and as your portfolio grows, your debt to income ratio increases.  This rising debt to income ratio will cap your ability to add additional properties and grow your portfolio.

Multifamily financing looks at the property and its ability to generate income.  Rents minus operating expenses. This number needs to be at least 125% of the cost to service the debt or the bank will not lend on the property.  

Taxes

Ordinary income vs Capital Gains.  

Depreciation is a paper loss you recognize when you file taxes.  For residential properties there are two options; straight line over 27.5 years or accelerated through a cost segregation study.  Depreciation provides a paper expense against the income generated by the property. This paper expense improves the overall cash flow by reducing the taxable income and thus the income taxes due from the multifamily property owner.

Upon sale, assuming the property sells for more than the purchase price, the depreciation is recaptured.  Additionally, investment real estate held over two years is subject to capital gains tax rate instead of ordinary income tax rate.  The tax rate for capital gains is lower than the individual ordinary income tax rate.

For investors wanting to defer the taxes, they can elect to defer the taxes by using a 1031 exchange as long as they follow the rules and invest in a replacement property.

For more go to:

www.vinneychopra.com

Call / text (925)766-3518

CREPN #144 – Real Estate Investing Vision, Infrastructure and Process

Real Estate Investing is  a team sport. From beginner to experienced veteran, real estate investors need vision, infrastructure and process to grow at scale.  

If you fool yourself to believe you can go it alone, you will suffer costly avoidable mistakes that experienced investors could have helped you avoid.

All the world’s best performers, regardless of discipline, have coaches or mentors who provide valuable feedback that helps them stay on the path towards success.

The landlordcoach.com is where Mark Dolfini shares his twenty years of landlord experience.  shares his twenty years of landlord experience. The wins, losses, and how he mapped his path from a do it yourselfer to a documented success, that is scalable.    

Vision:

The first step is to create the vision, the map.  How can you achieve your goals if you don’t know where you want to go.   How would you know if you reached your goal if you have no goal? A vague idea is not a vision.  You have to get specific. Identify exactly what you want, and by when.

Infrastructure

Infrastructure is the foundation, the track for how to run your real estate business.  Do you have the right tools? The right tool to make achieving your goals easy.  Good infrastructure can appear invisible when it allows your business to run effortlessly.  When your business lacks infrastructure, it is easy to tell. Every problem gets a custom solution.  This is not scalable.

Process

Process is the locomotive that pulls expectations and behavior to a desired outcome.  Process provides the ease so that you can repeat your results. This gives all parties involved a clear expectation for what will happen when they follow the process.

Regardless of your desired outcome, or your position in real estate investing, you can do more with less aggravation if will invest in your vision, infrastructure and process.

For more go to:

https://landlordcoach.com/

The Time-Wealthy Investor

CREPN #143 – Is a Part Time CFO Right for Your Real Estate Business with Brent McClure

To the untrained real estate investors eye, the financials provide an excellent map of where your business has been.  They provide income, expenses and the bottom line telling you if you made money or lost money.

How do you know if a part time CFO is right for you?

Click to get your FREE

10 Item checklist for Accurate Books

Cost vs Benefit of a CFO

Instead of hiring a costly full time CFO, you can benefit from the professional ability at a fraction of the cost by hiring a part time CFO.  In most cases, Brent McClure has been able to pay for his services in by increasing his clients bottom line.

An experienced CFO can look at the same information and provide a good estimate of where you are going and what needs to change if you want a different outcome.

Three Stages of Real Estate

Acquisition:

In the acquisition, you need to know what the sellers numbers mean.  A trained CFO can determine if there any room to cut expenses so that you can improve the net operating income.

Operation:

During the operation phase, you are dealing with the day to day activities of running a business.  Collecting rents, renting units, maintenance, banking, taxes, insurance, creating financial reports, etc. A trained CFO can put into place the needed controls to contain cost and eliminate waste.  

They can also prepare standardized financials for you to present to lenders or potential partners when you are looking for additional capital.

Disposition:

Prior to sale, disposition of your property, is the time to keep great records.  Record keeping is key to determining the value of your property. If your financial records are incomplete or miscategorized, you will lower the value of your property and leave money on the table.

In each case, a trained professional can identify the expenses that are out of line and provide controls and ways to lower your costs.  

For more go to: https://www.brentmcclure.com/

CREPN #142 – Underwriting your Multifamily Insurance Cost Per Door

Underwriting your Multifamily Insurance is more than plugging in a number.  

Multifamily Investors want rules and systems to make analyzing a deal easy.  If it was easy, there would be no value. Insurance is an operating expense that can vary from seller to buyer and property to property.  Here are some things to consider when underwriting your multifamily insurance.

Click here for a FREE copy of 10 Steps to Lower Multifamily Insurance Cost.

Insurance is regional.  

Some insurance companies offer coverage nationwide, but the rates are specific for the territory where the property is located. That’s because different territories have different exposure to weather related events.  

Think about it; the midwest has hail and tornadoes versus the southwest which has hurricanes and floods.  The northeast has long cold winters with deep heavy snow and the northwest has rain.

Each region has a different set of risk that can cause a claim.  

The Prospectus

Think about who put the prospectus together. The seller’s multifamily broker.  The broker has two jobs. The first is to get the listing, and the second is to get the seller as much as he can.  

When writing the prospectus, the goal is to show the highest NOI and value possible.  The expenses are likely a combination of actual and industry averages. I’ve seen brokers who will disregard the seller’s insurance cost and use the industry average because it supports a better NOI and value.

The Seller’s number

What do you know about the seller?  Chances are, you are nothing like the seller.  Does the seller have multiple properties with the carrier he is currently with?  How long has he been with the insurance company? What deductibles, limits and coverage does he have?  

All of these are issues that affect the cost of insurance for your property.  Unless you are a carbon copy of he seller, you are different, and will likely get a different insurance cost. 

Insurance is Subjective

Pick your insurance broker wisely.  Work with an agent or broker that specializes in multifamily, and you will get the best price the insurance company can offer.  

The insurance brokers job is to gather the information.  Then create a story for the underwriter that makes them want to apply all the available credits to get the best rate possible.

For more go to:

www.jdarringross.com

CREPN #141 – Multifamily Underwriting Basics with Michael Becker

Multifamily Underwriting is full of opportunities to over or under analyze numbers to determine if a deal is a winner or not.

Michael Becker with Strategic Property Advisors has been both a lender and investor.  He has seen the cycle of ups & downs and shared his thoughts on what investors should look for when underwriting a multifamily real estate opportunity.

Rents & Taxes

Value add deals are what every real estate investor is looking for.  When you look at rent comps, make certain you are comparing like product.  Are you comparing a C class property to a B class property or are you comparing C vs C?  If the comparable property not the same class or in the same neighborhood, find a different property.

Taxes are an easy way to upset your deal.  You must understand how the local taxes work and will affect your deal.  Using the seller tax expense is not reasonable regardless what the selling broker prospectus says.

Exit Cap Rate

Cap rate is the measure of market supply and demand.  If there are more buyers than sellers, the cap rate will compress.  When the reverse is true, the cap rate will expand. What will our exit cap rate be?  A conservative estimate is to increase your purchase cap rate by 10 basis points per year held.  

Expecting your exit cap rate to be the same or lower than your purchase is unrealistic, but a nice benefit if it happens.    

Rent & Expense Growth

Rent growth is what every real estate investor wants.  It is not uncommon to find a property that is under rented with substantial room for rent growth in year one.  However, it is unwise to project subsequent years rent growth beyond national averages of 2 – 3 percent.

Expenses should also be projected to increase at similar 2 – 3 percent.

These are some basic underwriting points every investor should consider when underwriting your next multifamily deal.

For more go to:

http://www.oldcapitalpodcast.com/

http://www.spiadvisory.com/

 

CREPN #140 – How to Attract Investors & Raise Capital Online for your Real Estate Investment with Kevin Bull

Attract investors & raise capital, and grow your real estate portfolio.

It’s been said that you are not a true real estate investor until you run out of money.  Because it is only then that you are forced to find willing partners with money if you want to continue growing.  The alternative is to go get a W-2 job.

Have you run out of money yet?

When you run out of your own money, you have to change your real estate investment strategy.  Most investors turn to their intimate circle of influence, family and friends, for their initial capital raise.  Unless your uncle is Sam Zell, you are going to need to reach beyond family and friends to find more investors to keep growing.

Help for Real Estate Investors

For experienced investors, there is help.  InvesTechs.com is a marketing firm focused on helping real estate investors / sponsors attract, find, market to and raise the capital you need to grow.  They know your business and how to help you attract capital.

How it works:

First, build the platform.  Investechs meet with sponsors to learn about you and your offering.  Then they help you tell your story to attract investors with the capital you need.

InvesTechs will create your professionally branded webpage and all the content pieces you need; written, video, webinars, etc., to clearly communicate your offer and attract potential investors.

Finding Investors & Promoting your Deal

Once the material has been created, InveTechs use target marketing to put your information it in front of your ideal investors in your area.  These are people with money looking for investment opportunities like yours. By automating this initial communication, you are able to focus your limited time on those investors who are truly interested and more likely to invest.

For these interested investors, you can schedule some calls and face to face meetings to gain further understanding of each other to confirm your offer is a good fit for the investor.

Invest Now

For accredited investors who are ready to commit, Investechs has partners that will qualify and collect the money online.  This proven system will make you stand out to potential investors and allow you to continue to grow your real estate portfolio.

For more go to: www.investechs.com