Commercial Real Estate Pro Network

J Darrin Gross Podcasts

J Darrin Gross Podcasts

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Real Estate Investors Mindset with Rod Khlief – CREPN #222

Mindset is the first thing Real Estate Investors have to get right to become successful.  

Rod Khlief is an experienced investor, author, podcast host and mentor.  He has owned over 2000 single family residents and hundreds of apartments.  He also lost millions in the crash and has since recovered. His ability to rebound is directly attributed to the power of mindset.  

Real Estate

Rod immigrated to the US from The Netherlands with his mother and brother.  They were poor, ate expired food, and wore clothes from thrift shops. To make ends meet, his mother babysat the neighbor kids.  Over time, she was able to save up enough money to purchase the house across the street for a rental.  

One day she explained to Rod that the home had doubled in value overnight.  That’s when Rod made the decision to get his brokers license as soon as he graduated high school.

Year one was slow, he made only $8,000. Year two, he made $10,000.  But by the end of year three, his income had grown to $100,000. How was this possible?

Mindset

How is it possible to grow your income 10x’s in one year?  Truly 80 to 90 percent of your success is anything is attributed to mindset.  

Rod focuses on mindset with his podcast, live events and his students.  The framework he uses to help others design their life requires that you take some time, an hour when you will be uninterrupted.  Take this time to focus on what you want your life to look like, design your life. If you want a private island, write it down. List the income you want.  What do you want to learn? Who do you want to help? Write it down. Do not limit your thoughts and don’t analyze.

Timeline

To make it possible, you have to attach your goal to a timeline.  Set a timeline for when you will have accomplished each goal. People overestimate how much we can accomplish in one year and underestimate how much we can accomplish in ten or twenty years.

Focus on the Goal

Pick your top goal and the two or three goals you want to accomplish in one year.  Under each, write a paragraph using emotionally charged words, why this is so important.  Next write what pain you will experience if you fail to reach your goal.  

Why is it important to attach your goal to pain if you fail to reach them?  Humans will work harder to avoid pain than reach pleasure. This will motivate you and get you out of your comfort zone.  Go for it! Live a life of no regrets!

Visualize 

Visualize your goal.  Immerse yourself in the goal.  Find a picture, go experience the goal, to inspire you for when you reach your goal.  Put the picture on your phone, screen saver, or in your wallet. You need a constant reminder of your goal.  

Professional athletes practice visualizing the event, and the success.  When you practice visualizing, the exercise prepares you similar to the physical practice prepares you.

Life Seminar 

What do you call it when you loose $50,000,000?  In the crash of 2008 Rod loss $50,000,000 in real estate.  Instead of crying, Rod considers this a seminar. This is because not only did he lose money, but he learned a valuable lesson.  What was the lesson?

Q: Why did his single family properties struggle while the multifamily did well during the crash? 

A: Logistics.  The logistics of multifamily make multifamily much more efficient to operate compared to single family houses spread out all over the city or cities.  

In an apartment complex, each unit has the same type of systems.  This allows your team the luxury of learning once and having multiple opportunities to repeat the lesson learned.  This saves time, allows you to buy in bulk and save money.  

In single family homes, each one is different.  Different plumbing fixtures, faucets, lighting, appliances, etc.  Each home is its own lesson, never to be repeated just like the last one.  Every lesson learned can be drawn from, but not replicated for efficiency. Each home has its unique fixtures and appliances, which prohibit purchasing in bulk.  Don’t forget that each home is located in a different location which requires travel, time and money.  

Summary: Multifamily allows for systems and you have less of a downside when considering vacancies.  They are easier to scale and purchase. Lenders look at the property’s cash flow to approve the loan rather than your balance sheet when buying single family homes. 

BIGGEST RISK 

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

BIGGEST RISK:  Irrational exuberance.  In today’s market, people are overpaying for properties that do not support the price.  You have to communicate with your team, and look under every rock. Double check your numbers.  Don’t overpay for a property.  

For more go to:

Website: rodkhlief.com

Podcast: Life-time cash flow

FEMA Flood Insurance and Real Estate with Scott Van Hoff – CREPN #221

FEMA is the agency within the Department of Homeland Security that controls the National Flood Insurance Program.  

Scott Van Hoff is the Flood Insurance specialist with FEMA.   Real estate investors need to know, now more than ever, how to determine if a property is in a flood zone that will require flood insurance.  

FEMA

FEMA stands for Federal Emergency Management Agency and is responsible for the National Flood Insurance Program, NFIP.  Communities enroll in the FEMA which makes the NFIP available to its residents.

In exchange, the community agrees to actively manage new construction in the floodplain by not issuing building permits below the base flood elevation related to the 100 year floodplain.  This agreement makes insurance available to people in the floodplain who would not be able to purchase flood insurance, and keeps additional people from building in an area likely to flood. 

Flood Map Revisions 

FEMA is required to periodically update the flood zone maps based on priorities set by Congress.  The path of water changes due to natural causes such as erosion and development. And the mapping technology continues to improve, which provides for more accurate maps.  

When a map is revised, and the property zone changes, from flood insurance being not required to required, it may not be realized by the seller.  This scenario typically comes to light when a seller who has owned a property for many years and has either a private or no mortgage.   

Flood Zone Change

Unfortunately, this happens all the time.  The seller does not know, and the real estate brokers do not ask, nor want to know.  A buyer may assume, by omission, that the sellers information is correct. Then the bank provides a closing estimate the day before funding.  On it you learn the requirement for Flood Insurance needed to close the loan.  

You have invested all this time, and money into the purchase.  Are you going to walk away from your earnest money? 

To protect yourself from this scenario, check the FEMA Flood Maps in the beginning of your due diligence.  It can save you a lot of time and money.  

Base Flood Elevation

The Base Flood Elevation is the required height above the one hundred floodplain needed to avoid the requirement for flood insurance.  If a property has a stream or body of water that runs through or adjacent to it, it is likely that the entire parcel will be designated within the flood zone.  

Removing Property From Flood Zone

In order to remove the structure on the parcel from flood zone, it will be necessary to prove that the structure is elevated above the base flood elevation.  FEMA provides a process to do this called, “Letter of Map Amendment”, LOMA. This is a process that requires an elevation certificate be produced by a surveyor and submitted to FEMA with application for LOMA.  Upon approval, FEMA will file and provide you with a Letter of Map Amendment. When you show this to your lender, the requirement for flood insurance will be dropped. 

If your property is truly in the flood zone, it is possible to lift your building and raise the first floor above the base flood elevation.   There are companies that specialize in this type of work and can raise the building and build a taller foundation then set your building upon the new foundation. 

Flood Insurance Zones

Flood insurance is required by any lender when lending on a property located in a flood zone with a greater than 1% chance of flooding.  The zones are rated as follows:

  • Zone “A” – The Special Hazard Flood Area 1% chance flood plain or the 100 year floodplain and are located near a river or stream.
  • Zone “V” –  V is for velocity and references the wave action for coastal water.  Coastal property can have either an “A” or “V” zone rating. 
  • Zone “X” is for the 500 year flood zone.  Properties in this zone are not considered to be at risk for flood and do not require flood insurance. 

Other zones: 

  • Zone D these zones have not been studied, and typically do not have any population nor structures in the area. 

Flood Insurance

Historically, Flood insurance was only available through the National Flood Insurance Program, NFIP.  Recently, the market of available insurance companies has grown to include private carriers. The private companies will likely only insure less hazardous zones, for less than the NFIP program.  

Declared Flood Disaster

When an area suffers wide area flooding, FEMA shows up to help the local residents and coordinate relief.  A common misconception is that FEMA hands out money to help you rebuild. FEMA will make available to those who suffer great loss, small grants from $2,000 to $4,000.  FEMA does not make low interest loans, but the Small Business Administration, SBA does, and works with FEMA to help you if you are in need.

BIGGEST RISK 

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

BIGGEST RISK: The rising sea level, especially in our coastal areas. From the perspective of a homeowner or somebody who’s making a long term investment, you might be, you know, in this location, in this home or owning this property for a few decades. There certainly may maybe a likelihood, certainly an opportunity that there’s going to be greatly increased risk in increased cost to the homeowner as a result of changing flood and changing risk conditions.

All too often I see that especially retired people living in a retirement home, working and literally be priced out of their homes because of the cost of covering or covering that risk, the cost of insurance. This is something it does concern me private, because we have so many people in that situation in these coastal areas. Coastal areas attract people, especially in their retirement years, it seems. And I’m concerned about that increasing risk in people’s ability to adapt to that financially.

For more go to: 

Website: www.Floodsmart.gov

Maps: FEMA Map Service Center

Wealth Creation Mindset with Dovid Preil – CREPN #220

Wealth Creation is all about mindset.  

Dovid Preil has worked in all different aspects of real estate, from mortgage brokering to multifamily syndication.  The through line he has found in all successful real estate investors is mindset.  

Importance of Mindset 

Mindset is based in knowledge and experience.  Without either, you are left with fear. The fear is a recognition of the risk, and risk is rooted in the probability of loss.  Fear of loss is powerful. It will keep you from the ability to take action. 

Risk 

That’s risky!  Investing in something you do not understand, is very risky.  Real Estate is not rocket science, but if you do not understand it and how you can lose, your likelihood of success is low.  When you don’t know what you are doing, and you follow the herd, you are waiting to lose. The solution is get educated.

Investor Mindset

The investor mindset is focused on how to invest and create wealth rather than spend an increase in income.  This is not limited only to people with a large salary. If your focus is to make more so you can spend more, your mindset is not focused on wealth creation, rather you are focused on consumption.  

Investors take the time to study a market so that they understand the market and the risk.  No asset is immune from loss, but real estate has historically been a great hedge against inflation.  Over time, it trends up, and unlike the stock market, it is not easy to push a button and sell. If you have a long enough runway, real estate will work out.

Wealth Creation

Wealth creation starts with a plan.  This plan has goals and with each goal accomplished, a new goal is set.  

Keys to Wealth Creation

  • Budget: When you live within your means and your budget, you create habits.  Habits become discipline. When you create a habit of saving, you can set goals, and save so that you have the ability to invest.  Once you have $10 to $20k, you can invest. But if you never have the savings, you will never have the resources needed to invest.
  • Focus: Learn one asset at a time.  There are an unlimited number of options to invest in; Stocks, Bonds, Currency, Real Estate, Precious Metals, etc.  To experience the upside of any market, you have to focus and learn the asset, and how you can make money without a high degree of risk.  Budget your time to learn the asset.  
  • Action: In order to gain experience, you have to take action.  Once you have learned the asset, built a plan that you can execute easily, you have to take action.  Without action, all of the efforts are for not.  

BIGGEST RISK 

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

BIGGEST RISK: Investing with the wrong people.  If you work with good honest people, you have the best chance of coming out ahead.

Technology is changing real estate.  Amazon has totally changed the retail real market.  3-D printing is changing construction. How will it change the cost and opportunity to build a building?  What about the goods that are currently manufactured, and warehoused waiting for you to order? Will the demand for warehouse space decrease due to the use of 3-D printing?

For more go to:

Linkedin: Dovid Preil

Website: www.ydlpinvestments.com

Email: dovid@ydlpinvestments.com

Benefits of Cost Segregation with David Deshotels & Jodi Nielsen – CREPN #219

Cost Segregation is a tool given by the tax code to real estate investors that improves cash flow instantly. 

Jodi Nielsen, National Senior Account Manager & David Deshotels, Executive Vice President of Cost Segregation Services Inc provide real estate investors with the how and why they can utilize the tax code to lower their taxes, save money, improve cash flow.  

FREE: TAX SAVINGS COST ANALYSIS 

Cost Segregation Study

Cost Segregation Study takes an engineering approach to determine what the components of the building are.  Then, it breaks the whole building into its components parts. These component parts are then categorized as personal property, and assigned a life expectancy of 5, 7 or 15 years.  

Depreciation

Depreciation is the accounting of a portion of the whole that has been used up, and is loss.  This loss reduces its value and is accounted for annually when filing income taxes. It is an expense against income.  Subtracting this depreciation expense from income reduces your taxable income.  

Straight line vs Accelerated 

Start with a value of $100,000

Pre Tax income of $20,000

Straight line:

27.5 years: $100,000 / 27.5 = $3,636 annual depreciation expense.

Taxable income: $20,000

Depreciation: – $3,636 

Taxable Income: $16,364

Accelerated Depreciation:

5 years: $100,000 / 5 = $20,000 annual depreciation expense.

Taxable income: $20,000

Depreciation: -$20,000

Taxable Income: $      0

This shorter timeline accelerates the depreciation and increases the depreciation expense, which lowers the Taxable Income and increases cash flow.  

The net result can be tax free income for the real estate investor.  This is especially true in the early years of ownership. This is one of the primary incentives for investors to hold real estate.  

Bonus Depreciation

Bonus Depreciation used to be available only for buyer or builder of a new property.  The new tax laws allow you an additional 100% depreciate any eligible property if it is new to you.  This adds to the value of a cost segregation study.   

Partial Asset Disposition

Partial asset disposition allows you to take into account and write off the loss of the unused property when you replace elements of your building.   For instance, if you buy a building and have to replace the carpet. If you expense the cost of the new carpet, you will get to record the expense of the new item, but will not get the benefit of the unused property that you tossed in the dumpster.  

Additionally, if you have not done a Cost Segregation study, you will miss out on the additional depreciation allowed in the 2017 tax act.  Bonus Depreciation provides an additional amount of depreciation for qualifying property in year one of purchase.  

Tax Payor Status

Your tax payor status will determine how much depreciation you are allowed to use.  

Real Estate Professional

For those investors who are full time investors and do not have a W2 job, they can utilize the depreciation against 100% of their gross income. 

Passive Real Estate Investor

If you are a passive investor, and have a W2 job, you are allowed to deduct up to the amount of passive income received.  If you have more deductions than you can take, the deductions will be carried forward for future use. This can be used to offset the taxable gain when you sell the property.

Misconceptions of Cost Segregation

There are some common misconceptions around cost segregation.  Following are a few:

Misconception: I can’t do a cost segregation study on my old building.  

FACTS: This is not true.  As long as the building is new to you, you are eligible to utilize cost segregation.

Misconception: My building is not worth enough to utilize cost segregation.

FACTS:  As long as your building is worth $150,000, cost segregation may be of benefit to you.

When Not to Use a Cost Segregation Study

A cost segregation study will not work for you if you are a non profit that does not pay taxes.  Additionally, if you are looking to flip a property in less than 3 years, it may not be worth doing a study.  

The recapture rate of Personal Property can be negated if planned for properly.  If you exchange into a new building, the Personal property recaptured, will be calculated at a higher rate than the permanent structure.  However, if you do a cost segregation study on the new property, you will have a new schedule of depreciation plus the bonus depreciation in year one.  

BIGGEST RISK 

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

BIGGEST RISK:  

Per Jodi:  The biggest risk is you’re sitting basically if you own a building you definitely owe it to yourself op to look at. Because you’re sitting on cash that you don’t have to sell another widget. You don’t have to make another widget. You don’t have to find another contract. It’s your money that you’re just basically sitting on by owning a building that you could use now. And so why not at least look at the look at the numbers to see if it makes sense for you at this time instead of letting more time go by just straight lining. And then also with the partial asset disposition I would say it’s very important to take advantage of it.

Per David:  We’ve had plenty of companies that have called us back years after having done their study. And they suffered catastrophic loss be it a tornado or fire or whatever it is and they won’t say, do you guys still have those 500 pictures of my building that you took when you did the study? It’s like sure we’ve got those and it’s so we have they’re building just completely documented from top to bottom one in the other. We’ll come out and take hundreds and hundreds of pictures depending on the size of the property to completely document that. So if there is catastrophic loss it’s it’s a documentation to say hey here’s what the building was. Here’s all the furniture fixtures and so forth. And it’s been very helpful to people in times of crisis.

For more go to:

Jodi Nielsen

Phone: 651-210-1921

Email: jodi.nielsen@costsegregationservices.com

David Deshotels

Email: david@costsegregationservices.com

How to Extend Your Building Roof Life with Dennis Ghormley – CREPN #218

How to extend your building roof life is a value add topic for all real estate investors.

Building owners with composition shingle roofs, Dennis Ghormley with Roof Maxx explains how to extend your roof life and receive a 5 year transferable warranty. 

History of Composition Roof Shingles

The history of composition roof shingles begins with the raw materials.  The shingles are a petroleum based product. Originally, they were made from waste product of the oil refining process.  Over time, oil processing has become more efficient and so has reduced the amount of waste byproducts. That’s good for the environment and the oil business profits, but not for the composition roof shingles.

The improvement in oil refining lessened the quality of composition shingle, so much that the roofing manufacturers had to start with raw crude oil in order to create a finished product that would last as long as prior products.  

Unfortunately, the concentration of raw material used for roofing shingles is lessened when unable to start with the byproduct.  Because the new roofing raw product started with a pure raw material instead of a waste product, the cost of the material and the end product naturally increased.  

Cost of Capital Improvement

Capital improvements are just a part of owning property.  The substantial cost of capital improvements requires property owners either inject additional capital into the property or reduce cash flow distributions to pay for the improvements.  

How to Extend Your Building Roof Life

Roof Maxx is the manufacturer of the all natural, soy-based, environmentally safe product that is sprayed onto your composition roof.  The product penetrates your old shingles and gives them improved flexibility and the ability to keep your building’s roof free from leaks. 

Depending on the condition of the roof, age, pitch, etc, will depend on the potential outcome from a Roof Maxx treatment.  Ideally, a property owner treats their composition roof in the first 5-7 years. The expected roof life of a composition roof can be extended from 5 to 15 years depending on when the roof is first treated and the number of subsequent treatments.  The treatment comes with a 5 year transferable warranty.   

Cost to Extend Building Roof Life

The cost to extend the building roof life when applying a treatment of Roof Maxx is significantly less than the cost of a new roof.  Typical treatment cost between 10-15% of the cost of a new roof. The product is relatively new to the market, but has been very well received.

Roof Maxx will not save every roof, but for those that qualify, the 5 year transferable roof warranty will provide the buyer confidence that the roof will last at least 5 years from the date of application.  The cost savings of a treatment versus a roof replacement can buy the property owner time to budget for a replacement, or to transact the sale of the property.

Environmental Benefits of Extending Roof Life

The environmental cost of re roofing is not small.  By extending the roof life of your building, you are reducing the consumption of wood and petroleum products required to reroof a building.  Additionally, you are eliminating the disposal waste that is added to landfills when you reroof. Annually, it is estimated that over 10 million tons of roof material is kept out of landfills by the usage of Roof Maxx.

BIGGEST RISK 

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

BIGGEST RISK: The longer a roof is on the structure, the more risk that that property owner has. If we can keep the roof on the property longer, and mitigate the risk of leaks and other issues that come from the failing roof and also the risk to the environment where we can keep the roof waste out of landfills.  

For more go to:

https://www.roofrc.com/

dghormley@roofmaxx.com

(503-766-3729) and (360) 207-4572

 www.roofmaxx.com

Passive Investing in Multifamily Syndication with James Kandasamy – CREPN #217

Passive Investing in Multifamily Syndication is ideal for any investor who lacks the time or interest in dealing direct with the challenges but seeks the benefits of real estate. 

James Kandasamy was trained as an engineer, but is now a full time real estate investor.  He started investing in what he knew, single family homes. But, soon he realized the difficulty to scale when investing in single family homes.  First, the lenders cap the number of loans you can have at 10. In order to grow beyond this arbitrary limit, you have to get creative and either put some loans in your spouse’s name, or get a commercial loan.  

Then you have multiple locations, which require multiple regular trips to check up on your properties.  Don’t forget your insurance policies, which typically will have a separate effective date and bill for each property.  All of this makes it difficult to grow and scale your portfolio. His desire to grow and scale caused him to give up on single family and pivot to multifamily.

Markets

Real estate has a physical location, so determining where to invest is important.  Some investors make a science out of determining where to invest, while others invest in their backyard, because they know the neighborhood.  

James is physically located in Austin, TX, where the current growth rate is 150 new people arrive each day.  Texas has no state income tax and is attractive for employers. The pro business attitude is attracting tech companies and start-ups, which hire and attract millennials.  The question of where to invest was a simple for James to answer. He knows the local area, and that it is growing, which equals demand for housing and specifically, multifamily real estate.   

Value Add 

 Value Add strategy is when you buy a property and positively change the net operating income, which increases the value of the property.  There are many different ways to increase the value of the property, from simple to involved.  

The strategy you chose is usually determined before you purchase the property during due diligence.  This is where you are able to look at the sellers numbers and operation and determine what needs to be done to increase the value.  A simple case may be just raise the rents to the current market rate. The more involved strategy will likely include significant renovations, or rebranding to breath new life into the property and attract residents willing to pay more.    

There are multiple real estate investment strategies you can employ.  One benefit that commercial real estate has over single family is the ability to directly affect the value of your property, regardless of your neighbors.  Repositioning a property to increase its value, is the strategy that is referred to as “Value Add”. 

Operational Expenses

Operational expenses are key to determining the value of your property.  James company, Achieve Investment Group has a distinct advantage as a vertically integrated company.  They provide property management, asset management and construction management all in house. The three disciplines allow them to quickly identify opportunities to add value. 

Property management is able to quickly review the operation expenses and identify any numbers that are suspect.  Suspicious number are most evident when the seller uses a third party management company. The vertical integration model provides James and his investors with additional, direct control.  James has found that inside management typically saves him and his investors around 10% on expenses.

If you are not vertically integrated, you can partner with other providers like a property management firm to help analyze the operations of a property you are considering for purchase.  

Mismanagement is very common, and easy to fix with the right team.  For the management professional who is familiar with the asset class and market, they can easily identify expenses that are either unnecessary, or out of control.  This can significantly improve your net operating income.   

Capital Expenses

If your value add strategy involves significant renovations, these will require additional capital.  How much capital is determined through your contractor estimates based on what your vision for the property is.  It is critical to have a well defined plan, budget and timeline so that you can raise the amount of money you will need to create the value you are projecting.  Your passive investing investors will expect you to hit your numbers.  

Passive Investing

Achieve Investment Group controls over 1300 units in central Texas.  All of these units have been acquired through syndication. In order to acquire so many units, James has networked with accredited investors.  

James wrote  Passive Investing in Commercial Real Estate to help educate investors on what to look for when selecting a passive investment.  Selecting the deal sponsor is key, and finding one that you can trust is the most important.

Passive investing with accredited investors provides the syndicator, Achieve Investment Group, with needed capital.  The investors get the opportunity to reap the rewards of real estate without having to be actively involved in the acquisition and daily operation of the property. 

The typical hold time for an investment property that Achieve acquires is 5 years.  This allows the time needed to improve the property and positively affect the improvements.  A year of market rate rents in the improved property provides the financial proof of value needed for sale.  When investing passively, investors look for capital preservation, positive return, and the return of their investment capital. 

Keys to Successful Value Add

The keys to executing a successful Value Add strategy start with the purchase.  It cannot be stressed enough, that in order to have a successful deal, you have to “Buy Right”.  Failure to buy right will make your impede your success. You have to buy right.

Next, you must operate the property in a way that maximizes the value.  If your due diligence revealed, low rents, or high expenses, it is up to the property management and asset management to correct and improve the property value.  

This includes training your tenants.  If prior management allowed slow payment, and did not enforce the lease, your management will have to set the new tone early and guard against the tenant training management.  

A successful track record of acquiring, repositioning, selling and providing positive returns to passive investors will attract additional investors.  Passive investing for the investor is based on the ability to trust the deal sponsor. A sponsor with a proven track record, will be more appealing than one without success.  

Benefits of Passive Investing in Real Estate

Passive investors can lower their tax liability when investing in real estate.  The US tax code is pro real estate investment.  

Tax Benefits of passive real estate investing are impressive.  Positive cash flow from a passive commercial real estate investment is off set by the three deductions; depreciation, mortgage interest and the loan cost.  

  • Depreciation is an annual percentage of the building value that is lost through use.  This is an accounting exercise that is calculated and claimed when you file your taxes.
  • Mortgage interest currently is an expense that can be deducted when filing taxes.
  • Loan fees you pay when obtaining a mortgage are an expense you can deduct when filing your taxes.

At year end, the sponsor, or syndicator, will provide you with a K1 to use when filing your taxes.  The K1 will show both income and deductions. Most likely, the deductions will exceed the income in the early years of your investment.  The unused deductions are not lost, but rather carried forward and can be used to offset the capital gain and depreciation recapture due at sale of the property.  

BIGGEST RISK 

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

BIGGEST RISK: I think the BIGGEST RISK, is not doing due diligence properly either on the physical property inspection or even on the you know the business plan right. To make sure your business plan is correct. Because when you buy a deal we always have to make sure that we understand everything about the deal.

We’re buying multi multi-million dollar deal that we are syndicating we have passive investor money in the line. Our money is on the line and we want to make sure that we do as much due diligence as possible. So, that because it is our list that I fear is always likely did I miss out something. I’m always checking and checking and checking and double checking triple checking and making sure that I know everything that I do.

For more go to:

Website: Achieve Investment Group

Email: james@achieveinvestmentgroup.com

Podcast: Achieve Wealth Podcast

Face Book: Multifamily Investors Group

Linkedin: James Kandasamy 

Book: Passive Investing in Commercial Real Estate

Change Your Mindset – Build Your Network – Grow Your Multifamily Portfolio with Jens Nielsen – CREPN #216

Change your mindset, build your network and grow your multifamily portfolio.   Simple, right? Learn how Jens Nielsen did just that and grew his multifamily portfolio to 600 units in less than 4 years. 

Jens Nielsen immigrated to the US from Denmark and plugged into the economy doing all the prescribed things responsible adults do; get an education, a job and save for retirement.  He and his wife currently reside in beautiful Durango, CO, where he is able to pursue his passion of cycling. Jens had a good IT job, but was not satisfied with the returns from the stock market.  He realized he was building wealth for others, but that his own financial future seemed less certain.  

His questionable future, led him to consider other possibilities.  Where could he change the outcome and improve his future so that he could be assured of the financial freedom he sought?  His search quickly lead him to real estate. Then he found the power of multifamily real estate.   

But how Jens the IT guy attract investors to invest with him in multifamily real estate?

Building Your Network

Building  your network is key if you eventually expect to invest with others.  You may think you want to go it alone, but quickly you will realize that in order to truly reach your goals, you will need others.  So if you accept that you will need others to help you grow your real estate portfolio, the next question is are you building your network?  

If not, why not?  Are you stuck? Where should you start?  These are the conscious questions you have to ask yourself when you decide to build your network.  

Why Build Your Network

Why build your network?  If you are a person of action, and you are truly committed to actively investing, your actions will lead you to real opportunities.  When that day comes, will you be able to take advantage and close the deal? If you have built your network, and you are trusted, you are halfway home.  

How to Build Your Network

The easy way to start building your network is to tell others what you are doing.  Jens had a group of friends he cycled with. It was in this group, where he shared about his investing experience.  Each time they got together for a ride, the opportunity to share what he was doing in real estate just happened. As the group members followed Jens journey, their interest and curiosity grew.  Jens asked members of the group if they would be interested in investing with him when he found a new opportunity. The conversation naturally lent itself. If followed a progression of enthusiasm generated interest from supportive friends because he was sharing what was going on in his life.    

Next, he reached out to his network, and started scheduling coffee meetings, etc,  In each meeting, he would ask if the person was interested in hearing more from him about his investing journey.  The meetings made him realize that others he knew could be interested as well in learning about the opportunities in multifamily real estate.  

Build Trust

So, he emailed his list, and offered the opportunity to receive his periodic updates as he learned more.  He sent the email, and over time, the subscriber list grew. Each month, he learned something new and shared it with his list.  His consistent action demonstrated to his readers over time, that he knew the topic well. All of this sharing gave his readers a level of trust in him. 

Is There Anyone You Know That I Should Know?

You are working to build your network and meeting with a lot of people.  Before the meeting ends, ask the question, “ Is there anyone you know that I should know?”  This makes them think, and will plant a seed for later to connect you with others providing the best warm introduction, referral.  

His Network Answers: Where to invest?

Where to invest your friends and family’s money is not a question to take lightly.  A member of Jens cycling group referred him to a commercial real estate broker in Albuquerque.  The introduction led Jens to visit and confirm that Albuquerque was a good opportunity, which he shared with his network.  Each time he purchased a property, he shared the details with his network, which continued to feed their growing curiosity about the investment opportunity in real estate. 

Location, location, location is rule number one for real estate investing.  Most people think this means the street address, or which side of the street the property is located on.  Experienced investors will start with the market fundamentals.  

The market is a reflection of jobs, population growth, median income, crime, etc.  In the market, you need to be aware of the path of progress. If all the location questions are not answered in the affirmative, it can be the difference between an average investment and a home run.  

Investing with Others

Investing with others is a journey.  First he invested passively in other sponsors deals.  Next he invested on his own. Then he did a joint venture with others.  Each new successful deal, built his resume of credibility. Now his investors, know him and his story, and are comfortable with the idea of investing in real estate.  

Today, Jens works with a mentor and regularly attends real estate investor conferences where he networks with other like minded investors.  His network has allowed him to raise millions of dollars for multifamily syndication. And now Jens is ready to sponsor a syndication.  

Mindset Change

It took some time, but he was able to change his mindset.  He got educated, and shared with others what he learned. His willingness to take control of his financial future required that he look at the world differently.  Yes, there were some missteps, but soon others saw Jens and recognized he was different. He was no longer just Jens as just the IT guy. Now they know him as Jens the Real Estate Investor because he did the work and shared his journey with others looking for the same thing he sought; a secure financial future.   

Remember, it takes time, so don’t wait to start.  The sooner you start sharing with others what you are learning about real estate investing, the quicker you will be able to find the financial freedom you seek from real estate investing.

BIGGEST RISK 

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

BIGGEST RISK: Not taking action.  If you live in fear, and never take action, you will never grow.  Life is about the journey, take the risk. There will always be reasons to not move forward.  Find the reason to go forward.

For more go to:

Email: jens@opendoorscapital.com

Website: https://opendoorscapital.com

Schedule a call: https://opendoorscapital.com/call/

Ruthless to Win in Commercial Real Estate with Jonathan Keyser – CREPN #215

You must be Ruthless to win in Commercial Real Estate, or so Jonathan Keyser thought.   

Jonathan Keyser, founder of Keyser, and author of You Don’t Have to be Ruthless to Win is changing the way commercial real estate business is done in Arizona and beyond.  

Raised by missionaries, Jonathan was shocked into reality when he entered the commercial real estate brokerage business.  He learned how others played the game, and because he wanted to be successful, he abandoned the lessons learned as a child, to look out for number one, regardless of the cost.   

Service Makes You Poor

Jonathan knew early in life that he did not want to be poor.  As a child of missionaries, his life was about service. He was surrounded by people without means, and therefore, having little did not bother Jonathan. 

Upon returning to the states, he realized he was poor, and he equated serving others as the source of his being poor. Therefore, if he did not want to be poor, he thought, he had to look out for himself only.  If he looked out for number one and could be ruthless, he would win and he would make a lot of money.  

Ruthless to Win

It worked.  He worked for a large CRE brokerage, and was quickly recognized as an elite performer who was destined to climb the corporate ladder.  He admits that his success came at a cost. Determined to be successful, he was willing to be ruthless to win. He did whatever it took to make the sale that benefited him the most.  While he enjoyed the success, he was conflicted with who he had become. 

Then he heard about a different way of doing business.  He learned that if he returned to serving others, that eventually people would want to do business with him, because they knew he could be trusted. If he committed to service, the mentor assured him, the money would take care of itself.  

This new philosophy fit with the morals from his youth, and that made him feel good.  Jonathan liked what he heard, but asked the mentor, why others do not follow this method?  The answer was simple, people were not willing to invest the time it takes.

The Long View Towards Success

Sales has always been a numbers game.  To make more sales, talk to more prospects.  When the results driven culture manifest itself, the numbers emphasize sales, not service.  This lack of service rarely leaves the customer with a good experience.  

In order to change the experience for the customer, you have to give without expectation.  Why don’t companies do this? The answer is simple, cost.  

To create a better experience that allows a relationship to develop between the salesperson and the client takes time.  Time that produces no immediate results.  

The Keyser Way

Jonathan made the decision to become a person of service.  No longer was he worried about making the sale. He wanted to truly help all those who he came into contact with.  For five years, he focused on service, convinced that things would work out. He admits that before things started to role, he was tempted to go back to what he knew worked, but he resisted.  

At the end of five years, he realized the abundance his mentor promised.  So much so that he and his group of like minded entrepreneurs who experienced the fruits from their service, made the leap and formed Keyser.

Today, Keyser is more than a commercial real estate firm.  It is an organization committed to doing what is right for the customer, its motto: “Relentless client champion.   

BIGGEST RISK 

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

BIGGEST RISK:  For me the biggest risk is cultural dilution. 

It’s something that I’m very actively aware of daily. There are so many times that I’m tempted to choose revenue over culture. Whether it’s because I have to let somebody go which are some of the biggest lessons I’ve learned in the past. Somebody talks a good game. You think there’s somebody that’s wired for service. Then they get in and you realize that that was just it was just a really good sales job they used to get in the door.

And making sure that people are living it right it’s easy for people to get busy and forget that we are committed to these 15 cooperating principles and that’s what makes us special so cultural dilution as we scale I think is the biggest risk. Because if we if we dilute our culture then we’re just another real estate firm and ruthlessness springs up and everything that I set out to change goes away.

And that’s part of why this book is so important to me right. It’s like in it we describe the three levels of reinvention which is an inside out reinvention. It’s start with yourself and you reinvent your company culture around service and then you reinvent your relationship with your stakeholders. And it has to be that inside out thing.

For more go to:

Website: keyserco.com

Book: https://ruthlessbook.com/

How Virtual Assistants make Real Estate Business Truly Passive with ccmyadmin – CREPN #214

Virtual Assistants can make your real estate real estate business truly passive.  

There are only so many hours in the day.  If you want to grow your real estate business beyond a casual side hustle, you need to work it.  You can either work every working hour, or hire help. Where do you go to find the help you need?

Nicole Grinnell and Liz Goddard are the daughters of entrepreneurs.  Growing up, they were regularly called on to work in their family business.  

The two met in Atlanta, GA where they became friends.  With their common past, they recognized the growing entrepreneur culture that struggled to grow to the next level.  These entrepreneurs needed help from someone they could trust like a family member. While they recognized the entrepreneurs needed help, Nicole & Liz also saw that there was a whole network of people like the two of them, who had skills but did not want to do the corporate 9-5 while raising a family.  

This recognition of two groups, entrepreneurs with a need, and part time professionals help who wanted flexible work looked like a match, and this was the start of ccmyadmin.    

Real Estate Entrepreneur 

Real Estate investors and professionals are entrepreneurs.  Most start out small with one property in addition to their full time W2 work.  Most of these real estate entrepreneurs share the dream of somehow growing their portfolio to a point where it will provide true financial freedom.  What holds them back from growing to this dream of financial freedom?  

It’s usually a combination of money and time.  The money can be raised from others, but the only way to get more time is to add help.    

Hiring Direct vs Virtual Assistant

You recognize you need help.  Do you hire direct or work with a virtual assistant?  

You need help in all areas; marketing, sales, bookkeeping, management, the list is never ending.   If you decide to hire someone to work directly for you, where do you turn? The following are questions you must answer:

  • What is the task you need help with?
  • How much time do you need help for?
  • What skill set do you need to help you get the job done?
  • Do you fully understand the task you need help with?    
  • What are the laws around hiring an employee?
  • Do you have enough space to bring an employee in house?
  • Where will you find this employee?
  • Who is going to train the employee?
  • Who will manage the employee to make certain the work is getting done?
  • What if you get the person all trained only to realize the person is not going to work out?
  • What happens when the employee needs time off?

If these questions are overwhelming, you have a second option: Virtual Assistant.  .

Virtual Assistants

Virtual Assistants can be the solution to your growing business and the needs for help.  The benefits of using virtual assistants through ccmyadmin are many including:

  • Recruiting: one call is all it takes to get the help you need.  No more placing an add and waiting for people to call, interview and eventually hire.  Ccmyadmin has a list of qualified candidates ready to take on your work.
  • Screening; the VA you work with has been screened for their skills, and ability.  You don’t have to hire an employee only to realize they are a better interviewer than actual employee.
  • Training; Liz & Nicole work with you to determine the exact steps needed to accomplish the work you need completed.  You pay one fee and the training is taken care of.   
  • No additional space needed.  The VA will work remotely and thus require no additional space in your facility. 
  • Employment laws are not your problem.  The VA is under contract with ccmyadmin, and you contract with ccmyadmin direct.  
  • Pay only for what you need.  Unlike a direct hire where you pay for full time, but only have part time need, using a VA, you only pay for what you need to get your job done.  

Virtual Assistant Skill Sets

What are the type of tasks a virtual assistant can perform?  Here is a short list of the types of tasks provided by ccmyadmin  VA’s:

  • Bookkeeping
  • Answering inbound calls
  • Making outbound cold call /prospect calls
  • Marketing
  • Podcast transcripts
  • Training
  • Operational
  • Administrative
  • Schedule appointments
  • Manage your calendar
  • Write and send correspondence
  • Process orders 
  • Communicate with tenants, property managers and service providers

It is clear there are significant associated with hiring direct that can be avoided or minimized by utilizing the talent provided through a virtual assistant.  

BIGGEST RISK 

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

BIGGEST RISK:  There’s a lot of risk that comes with employment. If you are not prepared to hire somebody or don’t understand everything you need to be doing as an employer in the state that you are working in, there’s risk. The risk is great, especially with all the employment laws. There’s a lot of little things that you just have to know if you’re going to employ people. If you do not know the laws, you need to find somebody that does, or you to hire a company like ours, who can help you stay legal. So there is a lot of risk that comes with employment. And all that risk comes with working with contractors as well. And you really need to know those very clear cut and defined lines because it is an expensive mistake to make.

For more go to: www.ccmyadmin.com

Delaware Statutory Trust Option for 1031 Exchange with Robert Zink – CREPN # 213

Delaware Statutory Trust is an option for real estate investors looking to utilize a 1031 Exchange rather than pay capital gains and depreciation recapture taxes. .  

Robert Zink is a commercial real estate broker with a securities license.  The securities license allows him to offer Delaware Statutory Trust as an option.  It can provide a solution to real estate investors wanting to sell out of their current property, but are not willing to surrender a significant portion of their gain through paying taxes.  They would like to do a 1031 exchange, but not continue with the issues of owning real estate, tenants, toilets and termites.

Delaware Statutory Trust

A Delaware Statutory Trust provides the opportunity for investors to own a fractional interest in an institutional grade property; multifamily, office, medical, warehouse, etc.  The tenants in these properties are high caliber, typically national companies with strong balance sheets and long term leases.  

The investment in a Delaware Statutory Trust is passive.  You have no involvement with the day to day operation, property management, or lender.  The typical life expectancy of an investment is 6 to 8 years. At the end of the investment, the investor can either cash out, or 1031 Exchange into the next opportunity, while preserving their original 1031 Exchange. 

Rate of Return

The rate of return will vary from property to property, however the sponsor carefully selects properties in growing markets with less possible downside.  Investing in growing markets with strong employment, and demand for the type of property invested in provide a lower risk and solid return. Cash flow expectation is between 5 – 6 average return on the investment .   The investor receives a K1 for their taxes with the income and their percentage of the depreciation.  

Planning Your 1031 Exchange

In order to execute your 1031 Exchange properly, you must designate a qualified intermediary.  The duty of the QA is to hold the funds from your sale and then deliver to closing on your new property.  You have 45 days from the sale of property #1 to identify its replacement, of which you can identify 3 potential options.  In total from the date of sale, you have 180 days from the date of sale to close the purchase of the replacement property identified in the first 45 days. 

A Delaware Statutory Trust property can be identified in part or whole for the proceeds from your sale.  Many use this as a way to “balance” a trade. If you find a replacement property of lesser value than property #1, you can invest the balance of the sale proceeds into a separate property to balance the trade.  

This is also an excellent tool for estate planning.  If you have multiple beneficiaries you want to benefit upon your death, you can select multiple separate fractional investment.  This assures each beneficiary will receive their designated property investment.  

BIGGEST RISK 

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

BIGGEST RISK:  As you get older and have less time to recover from exposure to a risk that actually comes to pass you need to minimize your risk. The value of real estate goes up and down, so I would say the BIGGEST RISK is investing in a “C” property in a bad market. Recently I saw a sponsor with a large apartment complex in one of the oil patch towns with a lot of fracking. I wouldn’t invest nor encourage an investor to invest there because, what if fracking goes away?  What if we decide we don’t want to frack anymore? If that happens, the apartment house doesn’t have a high value if fracking goes away. So buying that apartment house in Florida, California or Dallas proper would be completely different. I think avoiding properties in markets that have exposure to down markets. Additionally, I think investing with new sponsors that don’t have a track record is risky. 

So the BIGGEST RISK would be going into bad market or weaker markets or with a sponsor that doesn’t have the ability or track record to solve the problem.

For more: 

Call: (503)880-6968

Email: robert.zink@coloradofsc.com