Commercial Real Estate Pro Network

J Darrin Gross Podcasts

J Darrin Gross Podcasts

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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

Women Investing in Commercial Real Estate with Beth Azor – CREPN #231

Women investing in Commercial Real Estate are rare.  Why is that?

Beth Azor, “The Canvassing Queen”,principal at Azor Advisory Services, is a rare bird in commercial real estate.  She is a full time Commercial Real Estate Broker, Developer & Investor.  

Residential Real Estate

Beth grew up with two residential real estate agents for parents.  As soon as she turned 18, she got her real estate license and dabbled in real estate.  After college, she worked for a non profit that paid very little. To make additional income, she worked as a real estate agent on weekends.  

In two years her non profit salary doubled, but she still made more money working weekends in residential real estate, but real estate was so boring. 

The residential developer she worked for had Beth hold an open house in a luxury home development.  She spent most of her time reading People Magazine while waiting for prospects to show up for a tour of the model home.  

When a friend suggested she consider commercial real estate, she thought why?  How much more boring could raw land be than residential housing?

Then she learned about the possibilities in commercial real estate.  She could help developers and investors solve problems, create wealth and achieve the American Dream.

Commercial Real Estate 

Beth thrived in commercial real estate.  The commercial real estate firm she started with provided a rich environment where she could grow and become a commercial real estate professional.  In eighteen years, the firm grew from 11 to 125 people and she became the president of the firm.  

During her time with this firm, she found a passion, teaching agents how to lease vacant spaces.  She also invested in multiple commercial real estate properties as a passive investor with her partner.

At the end of run, she was a single mom of a 4 year old and recognized that the demands of running a large firm did not match her desire to be active in her kid’s lives.  

In  2004, Beth started Azor Advisory Services where she took the lead on investing in commercial real estate.  Also, because she was recognized as an expert in leasing, other commercial real estate firms reached out to her to teach their agents how to become experts in leasing.  

Retail Leasing

Beth is known by her fellow CRE professionals as the “Canvassing Queen”, referring to her constant canvassing for prospective tenants in her retail centers.  She regularly teaches courses on how to lease space, and has written two books on the subject. 

Don’t Say No for the Prospect – how-to manual on overcoming fear and negative self talk. 

The Retail Leasing Playbook – step-by-step guide book offers clear instructions that every aspiring retail leasing agent can adapt to jumpstart their own career.

Retail real estate has changed dramatically since the invention of the internet and Amazon.  

The Amazon effect has disrupted retail businesses and their need for a brick and mortar location.  The days of going to the mall to find your pair of shoes have mostly been replaced by shoppers scrolling their computer screen, 

Retail is Not Dead

Beth assures us that Retail is not dead.  Instead, shoppers are going to the mall for an experience, looking for something they cannot buy online.  Retail product sales has gone on line. Amazon’s biggest seller is shoes since they purchased Zappos. People are short on time and looking for a friction free solutions.  Retail is now made up of the five “F” words.

  • Food; restaurants.  For the first time in history, restaurant sales exceed grocery sales!  Beyond the eat in, carry out, Uber Eats, GrubHub, food delivery is dominate.  Many restaurants now have multiple parking spaces in front of their restaurant for delivery vehicles to pick up their order for delivery.
  • Fun: Competitive socializing.  Barcade; this is the combination of arcade with the bar, ie: ax throwing.  Kids gaming, ie: bounce houses, trampolines, escape games, i-Fly.
  • Fitness: Fitness boutique; gyms, martial arts studios, pilates studios, etc.
  • Physicians: Urgent care, Physical Therapy, Podiatrist, Chiropractor, Drug stores
  • Furniture: Specialty furniture sales.  

Women Investing in Commercial Real Estate

Where are women investing in commercial real estate?  Commercial real estate has provided Beth with substantial growth opportunities.  She invested passively in multiple properties while at the firm she started with.  When she started Azor Advisory Services she was the lead investor/ sponsor responsible for finding the deal and the investor capital. 

Over time, Beth has acquired a portfolio worth over $80 million of cash flow producing real estate.  When she talks with other women, she asks them, why are you not investing in real estate?

Sadly, she finds that women have numerous excuses for not investing in commercial real estate, from “I’m not smart enough” to “I’m not good with numbers”.  When she travels to conferences, she finds that less than 10 % of attendees are women, and that most female attendees are the spouse of an investor. Even in the deals that Beth raises money for, most investors tend to be male. 

To combat this, Beth has created The Commercial Real Estate Investment Symposium for Women.  There will be multiple successful women real estate investors speaking on topics including how they: 

  • Have invested
  • Found the deal
  • Raised the money
  • Overcame limiting beliefs

Tips for Women 

Women have to grab hold of the opportunity in real estate.  If they lack education, get educated. Are you are scared? Then find someone who has invested and get their help.  

Don’t follow the herd.  When Beth ask women how does the stock market work, they don’t know, yet they defer to investing in their 401k.  They do not understand that they will have to sell their stock in order to get their money.

Cash flowing real estate produces cash and appreciates in value.  So get educated and get in real estate.

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 lack of knowledge. And we luckily live in a world where we can mitigate that, but that does take time and effort and work to do so. So and you don’t know what you don’t know.

So when I was building my when I developed my first shopping center, which was about five years ago, I bought I bought a strip club and knocked it down and built a strip center. The municipality loved me. But I had never built anything before, and I was very nervous. I had one partner in that deal and I kept telling him, you know, I don’t know what I’m doing. He said, don’t worry, you’ll figure it out. 

Risk Management

But I hired people that didn’t know what they were doing to consult with me and teach me. And I read a lot of books. I listen to podcasts. So the biggest risk is the lack of education. But particularly you don’t know what you don’t know. And being wise and astute and I’m just a big believer in continually learning. I probably listened to three or four podcasts a day and I’m constantly reading. 

So that’s how I mitigate that potential lack of knowledge. And that helps. But there’s things, you know, our retail industry is going to be just lambasted by self-driving cars. I’m fascinated and I’m reading all about that because if I I’m fifty nine. So if in the next ten years the self-driving car thing happens, our industry is going to shift again. I’m trying to stay on top of it, but I don’t know what I don’t know. And so that’s how I mitigate it. So that’s the biggest risk, not knowing what you don’t know.

Market Cycle Opportunities in Real Estate with Lee Kearney – CREPN #230

Market cycles in real estate create opportunities for investors to recognize value and make a profit when you buy.

Lee Kearney has flipped over 7,000 homes in the past decade.  In the crash of 2008, he lost everything, but at the bottom of the market he recognized the opportunity, and was able to make up for his loss.

Market Cycle

The market cycle is easier to identify in the past.  It has lows and highs which reflect when money is not trading hands to when money is effortless.  When you look back in time, you can see the point where buyers are spooked and are no longer willing to buy.  This marks the high point and the start of a down market. It is the point where buyers believe there is no more upside left in the market.  When this happens, it causes sellers to lower the price to attract buyers.

If sellers are unable to attract buyers quickly with a minor price adjustment, the risk of a crash increases.  When this period of uncertainty lingers on, the belief that things are bad spreads, and further reduces the number of potential buyers who are willing to part with their cash.  

Sellers who are not property capitalized to hold their property through the slow market cycle, can potentially lose their property.  Only when buyers recognize the opportunity and start buying again does the momentum of the market cycle change from downward to upward.  

At this point, the market begins to build support as buyers re-enter the market.  Buyers are able to pick up deals from sellers who are desperate, or exhausted and fearful that they will not be able to sell their property.  As the market continues, sellers continue to raise their price. This will continue for as long as buyers believe there is potential for additional value to be recognized. When the buyers no longer believe there is value in the market, the cycle starts all over again.

Interest Rate Affects Real Estate Market Cycle

There are multiple real estate market cycle drivers.  In the single family residential market, interest rates are a primary driver of price, affordability, buyers and sellers behavior.  

Most residential buyers are payment sensitive.  They can afford a certain amount each month for their housing budget, which is determined by the lenders debt to income ratio.  

When you borrow money to buy a house, if interest rates are lower, their payment will buy a more expensive home.  The reverse is true when interest rates increase. Instead of a more expensive home, the same payment can only buy a less expensive home.    

To help stimulate or extend the market cycle, the Federal Reserve can raise and lower the interest rate charged to commercial banks.  This directly affects the interest rates individuals can get for a mortgage, which affects home prices, all the while the buyer payment never changes.  

However, as prices continue to increase, regardless of interest rate, eventually, the cost of housing becomes unaffordable.  This causes the flow of money to stop, and a potential for a crash increases. 

Warning Signs

The warning signs were everywhere, in 2005, but few took notice.  Money was easy to get. Rates were low, and if you could fog a mirror, you could qualify for a loan.  

The Federal Reserve kept interest rates low, which artificially increased drove home prices up.  As the prices continued to go up, and lending standards lessened, buyers were counting on the market to continue pushing the values upward.  

Because buyers were stretching to get into homes, they had nothing left to save for a rainy day.  They were paying all they could to stay in their homes. If anything broke or they had an emergency, 

Buyers had no savings.  They were living hand to mouth.  When the banks failed, money stopped moving.  Most of the loans were interest only, or had balloons that came due when no banks were lending.  The buyers had loans they could not afford, homes they could not sell and mortgages for more than their homes were worth.  

Wages vs Home Price

Wages versus Home Price.  In order for prices to continue to increase, wages have to catch up.  If wages fail to increase, the demand for home owners will eventually go down.  These potential home owners will become renters. More demand for rental units will continue to push rents up.

When demand outpaces supply, prices go up.  More renters will push rents up. If wages do not go up with rents, renters will no longer be able to afford their apartment.  When renters cannot rent, landlords end up with vacancies.  

A vacant property can ruin an investor.  When a landlord does not have the capital needed to pay their mortgage, the bank will foreclose.  The bank is not in business to be a landlord, so it will elect to sell the property quickly for as much as they can get.  

These distressed properties provide a good opportunity for a buyer because now they can buy low and have a  cushion between their potential income and their expenses. 

In order to extend the market, wages eventually will need to increase.  

Investing vs Speculation

Investing versus speculating, the difference is one is following the herd while the other is not.  Investing is when you buy at the bottom of the market. This is when others are afraid to invest. The market can only go one way, and that is up.  

Speculating is when you follow the herd.  You are buying when everyone else is buying, at the top, and you hope that the property will go up in value.  

Long Term Wealth

Long term wealth is not determined by the number of doors you own.  Many investors think the number of doors measures wealth.

Real wealth is measured by equity.  When you buy low, and the market rises like it has for the past ten years, you end up with a lot of equity.  If you buy at the high, and prices go down, you have negative equity and a mortgage you can not refinance out of.

In addition to equity, you want positive cash flow.  This allows you to maintain the property, service your mortgage, accumulate reserves and potentially distribute profits to investors.    

When you buy low and have positive cash flow, you are on your way to creating wealth.

BIGGEST RISK 

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

BIGGEST RISK: 

Darrin:I’ve been asking my guests on CREPN Radio if they could take a look at their, you know, investing strategies and how they basically see the market and if they can identify what they consider to be the BIGGEST RISK. 

Lee: Sure. 

Darrin: And with that, I’d like to ask you, Lee Kearney, what is the BIGGEST RISK? 

Lee: If you’re buying an asset today at market value, your BIGGEST RISK is the market risk. Is the risk of that asset going down in value? Now, if you’re buying it wholesale, you don’t bear the same risk. But if you’re buying at a market price today in any primary market, I would say your biggest risk is that that assets gonna go down in value. 

For more go to:

www.realadvisors.com

Credit is Key to Financial Freedom with Debbie Bloyd – CREPN #229

Credit is key to your financial freedom.

Debbie Bloyd is the principal at DLBmortgageservices.com where she provides mortgage and insurance service for her clients.  In order to qualify for the best lender rate or insurance product, good credit is key.

Your Credit

Your credit score is the measuring stick for all potential creditors to determine your ability to pay back your obligations.  Sadly, Debbie finds there are two types of borrowers. Those who are well educated about credit, with excellent credit, and those who are uneducated and have horrible credit.

Too many people do not understand the basics when it comes to personal finances.  While it is true, you have to use credit to establish credit, you have to use it wisely.  Maxing out all of your available credit cards negatively affects your credit rating. The algorithm used to determine your score will negatively reduce your score if you have no available credit.  So, to maintain a good credit score, don’t max out your credit.  

Additionally, many people suffer a trauma or event that they are unable to pay for.  If this happens to you, ignoring it and hoping it will go away is not a solution. When you don’t pay your debt, your creditor will report to the credit agencies that you have not paid your account as agreed, and your credit score will suffer badly.  If something happens to you, engage your creditors for a payment plan and make the payments as agreed. Or get help to rebuild your credit.

Building Your Credit

You have to use your credit in order to build it.  Where can you get credit? Student loans, car loans, credit cards, and professionally managed apartments will all report to the credit bureaus.  If you have too many open accounts, it will negatively affect your credit.  

Remember, buying stuff to impress people you do not know is not the way to build your credit.  

Decisions

Making good decisions is key to building your credit and creating financial freedom.   Debbie finds that many millennials make good income, but they are unwilling to make tough decisions that will provide long term financial freedom.  

Instead of renting a less expensive property and saving money for a down payment, they would rather rent the expensive new apartment and live the good life now.  Renting will not help them build equity.  

If you can’t afford a down payment, you have to make a decision.  You can either increase your income and lower your expenses. It is likely that it will be easier for you to lower your expenses right away.  Over time your savings will add up and provide you the nest egg needed to start building your financial freedom.  

Financial Freedom 

If you want financial freedom, you have to make the tough decisions that will provide you the path to ownership.  Leasing the newest most expensive car will not help you build your financial freedom. To build your financial freedom, you have to have ownership.  

Home loan interest rates are the lowest they have been.  There is not a better time to get in the ownership market.  Current rates are for owner occupied properties are in the low 3% and non owner occupied are in the low 4’s.

A great way to get started is to buy a fixer upper.  Buy low, improve the property and your sweat equity gives you the opportunity to grow wealth.  Now you have options. If you want to move into a larger property, you can use your equity for the down payment on a larger home and end up with an affordable mortgage.  Or if you want to add a rental property, you can borrow the equity from your primary home to buy a rental home.  

This is the path to your financial freedom.  

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 that we’re going to be running out of money and we’re growing too old. So what I see happening to families, either with money or without money, is they’re outliving their money. People say, how much do you need to have to retire? And I said, more than you think. And they’re like, well, how much is enough? I don’t know. It depends on how you want to live. 

And so I have most of my seniors either out living their money. And that’s a huge concern for them. And they don’t start worrying about that until it’s too late to do anything about it. You and I both know long term care policies. You can buy those at a young age. You can buy the middle aged. You can buy them when you’re 60. But after about 65, they become unaffordable. 

People are thinking too late because we don’t know how old you are. Fifty five. I feel like I’m 35. I probably look like more like I’m 45. But I still mentally, I don’t feel old at all. And so I think a lot of people that are baby boomers much older than us are in their 70s and they don’t feel old at all. 

But what happens is things are going to start going wrong with them and they’re not protected. They never thought they’d, number one, get to be this old or no to have anything happen to them. And they’re not prepared and wipes out entire families.

For more go to:

Website:http://www.moneystrategieswithdebbie.com

Facebook: Debbie Bloyd

Start Young Go Big in Real Estate with Angad Guglani – CREPN #228

Start young and go BIG in real estate is a rare investor story.

So many prospective real estate investors think about investing, yet so few actually pull the trigger and invest.  Angad Guglani is the rare exception. He has accumulated 84 doors by 25yrs of age. 

He got the bug for real estate when a classmate at NYU told him he earned $300,000 a year as a real estate broker.  

Fast Success

Find the solution for the problem.  Angad recognized his need for clients to be successful.  He also knew that his fellow students were always searching for apartments off campus in the city.  

Angad launched Off Campus Apartments NYC, an apartment leasing brokerage website and Facebook page, marketing himself as the students real estate broker.  The formula was simple; approach landlords with vacancies to list their apartments and market their listings to the NYC students looking to live off campus.  

His brand became recognized as the go to resource for students looking off campus housing.  In no time, Angad had more business than he could handle, so he started hiring his friends. During the summer, they would hustle to find listings from landlords.  

Apartments in New York, rent for $3,000 to $7,000 per month and the average commission paid to an apartment leasing agent is 1 to 1.8 times the monthly rent.  

Angad and his friends were able to help more than 300 students lease apartments in that first year of business.  Their reward was several hundred thousand dollars in real estate leasing commissions for working a summer job.  

Real Estate Investor

The money from leasing apartments was great, and it allowed Angad to save a lot of money.   More effort equals more income. But, after the lease is signed, you have to start all over.  Where will the next deal come from?  

Angad recognized that leasing was a treadmill.  How could he get a more stable, predictable source of income?  Become the investor.  

Investing provides a residual income.  It may be slow, but it builds wealth. So, before Angad graduated from NYU, he purchased his first rental house with his savings from his summer job.  

Benefits of Starting Young

When you start young investing in real estate, the benefits are many.  Namely, your stakes are low, you have nothing to lose.  After making a lot of money and saving most of it, he had the ability to invest his savings in his first rental home.  

It takes time to build equity in real estate, and because Angad started early, he now has substantial equity that is his.  Most of his real estate investing peers have gotten into real estate through syndication, where they have to give away most of the equity in order to do the deal. 

When you have no investors, you have complete control.  You do not have to answer to investors, nor share the cash flow nor equity. 

Real Estate Investment Challenges

There are numerous ways to lose money in real estate.  If you pick the wrong market, you can get stuck. The key to rapid success is picking a market on the fringe of a vibrant market that is in the process of gentrifying. 

You want to have a neighborhood where business and government are attracting jobs, which necessitate housing for the workers.  

When you buy property before the prices increase, you can create a lot of equity.  Angad incorporates the BRRRR method, buy low, rehab, rent, refinance and repeat. Because he got in early, he has accumulated multiple cash flowing properties in short amount of time.  

Investment Strategy

Angad’s investment strategy is go buy distressed single family and multifamily houses in Camden, NJ.  Sellers range from bank owned, short sales, estate sales, broker relationships and auction websites. The numbers on a typical deal look like this:

  • Purchase Price:   $30,000
  • Repairs budget: +$20,000
  • Total invested:   $50,000
  • Monthly rent:   $1,100
  • All expenses including mortgage: – $   850
  • Net monthly cash flow:   $   250/ month / property 

Long Term Goal

Cooper Square Acquisitions is Angad’s real estate acquisition firm.  Acquisition is the key to making money in real estate, you make your money on the buy.  

By focusing on a specific market, Angad has been able to nurture relations with real estate brokers.  The brokers recognize him as a closer, and bring him deals before taking them to market. Infact, Angad sees the real estate brokers as his client.  This is because they make him money. 

In 2019, Cooper Square acquired 65 new properties.  For 2020, they plan to do 200 additional properties.  The long term goal for Cooper Square is to replicate the model of scaling distressed single family properties in a market that is gentrifying.  If they can acquire hundreds of doors in a market, they can operate with additional efficiencies similar to a multifamily property. 

Exit Strategy

Single family properties provide multiple exit strategies.  They can be sold to investors or homeowners. This is not lost on Angad.  He recognizes that a strong market has good jobs, and eventually, his renters will want to own.  His hope is that he is able to create future buyers, and sell his portfolio to his current tenants. 

BIGGEST RISK 

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

BIGGEST RISK: 

I would say the biggest risk being very concentrated in one market and one to expand will be concentrated in the other markets. Right? Well, we’ll have heavy concentration in a handful of markets. Is something systemic like a major flood or ice storm like that was the example you gave. And something like that where, you know, I don’t frankly, I don’t read the policies as well as I should.

We have a master insurance policy, and I’m sure there’s some sort of cataclysmic event that might happen that probably voids the policies. And if that were to happen, that would be very dangerous. Number one.

Number two, or, you know, like you said, if you have a major, you know, act of God event and your policy doesn’t pay out and you have fixed expenses like mortgage and taxes and stuff and you fall behind on those, that’s another big expense. Big risk. So, yeah, basically anything that comes of concentration, I would say is this is the BIGGEST RISK. 

For more go to: 

Email: ag@cooperacq.com

Passive Income in Real Estate with Kathy Fetke – CREPN #227

Passive income through real estate is an attractive option for investors with a good job, or would rather rely on an experienced operator rather than take on the risk of investing on their own.

Kathy Fetke, Co-Founder of Real Wealth Network, and returning guest to CREPN Radio identifies the risk investors face when investing passively.  Real Wealth Network works to educate investors on the investment options available so they can prepare for a secure financial future.  In this episode, Kathy explains the steps you can take to protect investment to minimize your risk when investing.

Passive Income 

Passive Income Opportunities in Real Estate can be very lucrative.  Ideally, passive income is truly passive that does not require you the need to tend to the day to day operational concerns.  Instead, you place your investment with a deal sponsor, then receive handsome monthly or quarterly returns.  

In addition to the positive cash flow, you receive the multiple benefits real estate provides.  These include, depreciation, appreciation, and principal reduction. Together, these benefits combined with positive cash flow make real estate a tough investment to beat.

Sponsor Due Diligence

Sponsor due diligence is critical to save guarding your investment.  The recent recovery from the 2008 market crash has provided handsome returns for anyone who invested post crash.  Some deal sponsors have only experienced the upside of this recent market. If your only experience is from a once in a lifetime market, where everything increased in value, it’s doubtful you have a true understanding of the risk posed by real estate.  

Unfortunately, the recent profits that have been made in real estate have attracted interest, and some less that stand up characters who appeal to the unwise potential passive investor.  The digital, social media world makes it easy for anyone to market themselves as an expert.  

Real Wealth Network performs background screens on all of the deal sponsors they invest with.  Ideally, the sponsor or a member of the team will have more than 10 years experience, and has survived multiple market cycles.

Market Due Diligence

Market due diligence is critical to safeguard your investment.  It is easy to isolate any property and identify its upside. However, if you do not understand the market the property is located in, you can easily lose your investment principal or be stuck with a property that has no possibility to sell.

The real estate market is not singular.  Real estate is local. It requires that you understand the local state of  jobs, population growth, and the supply of housing. Is the housing affordability in the area?  

What is the local government’s attitude towards development and landlord laws.  Your understanding of the local market is fundamental to your success.

Market Cycle

The current market cycle has little room for error.  Prices are up, interest rates are down, and affordability is stretched in most primary and secondary markets.  This is a very different market than the last ten years where the market has risen from historic lows. 

Given this change, Kathy and her team have moved into single family starter home development.  Interest rates are low, and qualified buyers can get affordable rates. The demand for first time home buyer homes is significantly greater than the supply.  This is a great opportunity to invest with a developer for handsome returns.

BIGGEST RISK 

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

BIGGEST RISK: 

Darrin: Kathy Fetke, What is the BIGGEST RISK?

Kathy: There are so many, but I would say the BIGGEST RISK is not being educated, which is why it is my mission to help people. Like I said at the beginning, the show to raise the wealth consciousness of the average person and definitely of the average investor because there are so many landmines. Whether you’re investing in the stock market or in real estate or in Bitcoin or whatever you’re investing in. You’ve got to really take a deep dive and understand it. We’ve been sort of trained over the years to not really understand it, but hopefully our financial planner understands it and we hand over our money and hope they do well with it. So we haven’t really been taught that it was important for us to understand it. We don’t we’re not educated and in high school and probably not in college for most people. 

So first and foremost, the biggest risk is not understanding what you’re investing in. From there, I would say what I’m seeing is a lot of gurus. We’re at that stage in the market where people have maybe done fairly well, then maybe they did one deal and it went well because we’ve been in the market and now they are a guru. I’ve seen this. They can very easily start a podcast or it’s so easy to become sort of a well-known person. Thanks to all social media and the Internet and so forth. So these people now don’t have a lot of experience, but they’ve kind of become this guru, so to speak.

For more go to:

Real Wealth Network

Blockchain Provides Liquidity for Real Estate Syndication with Yael Tamar – CREPN #226

Blockchain is the technology disruptor that provides liquidity for real estate syndication deals.

Yael Tamar, Chief Marketing Officer with Solidblock, explains what blockchain is and how it can be used beyond Bitcoin and applied for real estate syndication. 

Blockchain Technology

Blockchain technology was introduced in a 2009 white paper written by the founders of Bitcoin.  Since that time, Bitcoin and blockchain have become synonymous.  However, the truth is that Bitcoin is one of many digital currencies that utilize blockchain technology.  

By definition, blockchain is a decentralized ledger that provides transparency to all its token users.  All transactions are viewable to the token holders. The ledger is immutable, meaning you cannot edit past transactions without certain permissions. 

You are able to trade amongst token holders.  Transfers between members are instant! Computers in the network approve transactions and adjust the participants balance.  

Blockchain Applications

The applications for blockchain are numerous beyond digital currencies.  Food suppliers are implementing blockchain to trace food from the raw product through processing to consumer.  The ability to trace every step allows you to pinpoint where contamination occurs. Banks are utilizing the technology for inter bank transfers.

The stock exchange is similar to blockchain.  In the marketplace, every day, multiple buyers and sellers are able to acquire and dispose of stocks for a market set price.   This is not the case in real estate. For this reason, real estate has always been considered illiquid.  

Blockchain can change that.

Liquidity for Real Estate Syndication

Real Estate syndication has characteristics that make it ideal for blockchain.  You have multiple owners who are tied to a single investment. In a traditional syndication, all investors must buy and sell at the same time.  This lack of mobility could be solved by the use of blockchain.  

Blockchain gives all investors the ability to instantly sell their interest, or buy additional shares from willing sellers.  Sponsors can sell shares to raise additional funds for renovation, or limited partners can sell some of their shares to raise cash, or get out of the investment. 

An example of Blockchain in Real Estate Syndication is the St Regis Hotel in Aspen, CO, which  utilized Solidblock to provide the blockchain platform for its offering.  

There is a cost to implement blockchain, and ideally, a syndication should raise over $3 million before considering the use of blockchain.  

Digital representation of the asset provided at the issuance of the property. 

Security

Blockchain has more security than traditional banking.  This is because there is no personally identifiable information stored on the network.  Your personal information is stored in your digital wallet.  

A digital wallet is a sequence of numbers.  For any trades you make, there will be a record of your transactions attached to your digital wallet.  

Smart contract is imbedded in the blockchain.  This governs who can invest in your offering and who can join the offer and who can trade.  Once you are invested, no one can take this away from you. If you find someone that is on the system, you are able to sell your interest direct without the involvement of any additional intermediaries nor cost.  You can sell a part of or your whole investment. This has never been available to real estate investors before. 

Traditional vs Digital Currency

Unlike traditional currency markets, digital can trace any action on the platform.  This includes actions from bad actors. If someone were to hack the system, and steal another members tokens, it would be easy to trace who received the money, and correct.  

Digital currencies are not country specific, and are independent from the currency of your country.  This allows investors from anywhere in the world to participate in the offering.  

BIGGEST RISK

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

BIGGEST RISK: There are many risks in real estate. I guess the top ones are market risk, then picking the wrong asset. And I would say liquidity risk because of the impending crisis or recession that’s going to happen. Now, on the asset level and the market level, you can mitigate these risks with information. 

Number one is your due diligence. How much do you know about the asset owners, asset managers, developers and so on? 

Number two is basically if they’re doing the right. If there is a right fit from the asset to the market.

The third type of risk is liquidity risk.  This is much more problematic because you have forces that are beyond your control.

For more go to:

Webpage: https://www.solidblock.co/

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

Multifamily Risk and Reward with Jorge Newbery – CREPN #225

Multifamily Risk and Reward balance most of the time, unless you are Jorge Newbery.

Jorge Newbery, is a high school dropout with more drive and focus than most successful real estate investors.  His drive for success has led him to create multiple successful companies and amazing success.  

Entrepreneur

Before the age of 25 and prior to investing in real estate, Jorge had several entrepreneurial endeavors.  

  • He purchased a refrigerated tricycle and pedaled through his neighborhood selling ice cream to the neighbors.  
  • He became a record producer for hardcore punk bands in the Los Angeles, CA.
  • Olympic Cyclist: He competed in an Olympic trials for a chance to go to the Olympics.  
  • Real Estate Mortgage Broker – worked to become the top representative in one company, then started a successful mortgage brokerage.

Multifamily Risk and Reward 

In 1992, Jorge recognized the opportunity in undervalued real estate based on all the loans he had been making to his clients.  So, he purchased his first investment property, a 4 plex. Like his prior entrepreneurial endeavors he did not stop with a 4 plex.  Subsequently, he purchased a 19, 50 and a 298 unit property all in Southern California.

The properties Jorge was purchasing were the most challenged properties available.  This was because he recognized he could most positively add value in these unwanted, undervalued properties.  

There were some hiccups along the way, like the time when he was sited for 32 housing code violations and the threat of jail.  Fortunately, his prior work and reputation was recognized by the authorities, and jail time was avoided.  

When he sold his Los Angeles multifamily properties, he had a proven value add system, over $1,000,000 in profit and a sense that he was unstoppable.  

More Risk More Reward

After his success in Los Angeles, Jorge turned his sites towards the Midwest in search of more risk and reward.  His search led him to Pickwick Plaza Apartments in Kansas City, MO. The 233 unit property was distressed, and for Jorge, this was another opportunity.  The purchase price was $1.6 M and he put another $1.5M into the value add rehab. Upon the renovation completion, the property appraised for $8M, which allowed Jorge to refinance, take some cash and find another property.  

When he traveled to these locations, rather than rent a hotel room when he visited his properties, Jorge would take up residency in one of the property’s vacant units.  Because he was buying such rough properties, this made him intimately aware of the living conditions residents were experiencing. Sometimes, the local press picked up on this and would publish stories about how the out of town owner was moving in with the residents of the roughest property in town. 

Success breeds confidence.  Jorge had successfully turned multiple rough properties into handsome profits.  His track record attracted bigger challenges and capital to do the next big challenge. 

BIGGEST Challenge

Looking for the next big challenge, Jorge was led to Columbus, OH.  There he found an 1,100 unit property named, Woodland Meadows, aka Uzi Alley due to the gang activity. 

He purchased the property at auction for $13.5 M and promptly moved in. 

The property had its own onsite armed security patrol with a jail.  The security patrol was all white and the residents were primarily minority.  When Jorge saw the jail with a tenant locked up, his first act was to release the tenant.  Soon after, he closed the jail, terminated the security force, and assembled his own unarmed Community Patrol made up of Jorge, his managers and paid volunteer residents.  

The Transformation 

Originally, the property was built as workforce housing.  When Jorge acquired the property, over 40% of residents received Section 8 vouchers.  Many unemployed residents with lots of time on their hands

On patrol, it was common to find a large group of intimidating teenagers gathered on a street corner.  Pizza delivery drivers refused to deliver in the community due to safety concerns. The Community Patrol would ask the group to leave.  Ultimately the kids would leave one corner and move to another corner. The frequent inner actions with the teenage residents let the teens to ask Jorge for jobs. 

Jobs for Residents

The continuous request for jobs made Jorge ask his contractors, if there a way to train the kids and put them to work?  He was spending millions of dollars to rehab the property, and the contractors had more than enough work. The contractors agreed to put a training course together for the residents. 

For residents wanting jobs, the contractors training course taught basic skills needed to work in construction.  The opportunity for the residents was this: If they showed up everyday on time and did not miss any of the training for two weeks, at the end of two weeks, they would get jobs.

The first class had three participants.  After the two weeks, the three trainees had jobs.  Word of the jobs for trainees quickly traveled through the community.  The next class had 40+ trainees. The transformation was incredible to see.  At first the trainees would show up dressed with their pants falling off. Within a few days, trainees started showing up dressed like they were going to church.  They really wanted to learn and wanted the jobs.  

Change from Residents

The residents wanted change.  Once they were employed in the community, they took pride in their work and community.  They self policed, the community, and if someone wanted to harm their community, employed resident would actively discourage the wouldbe trouble maker.  Community pride was contagious.  

Jorge was able to prove that by providing training and jobs to local residents, he created responsible citizens.  Instead of paying the outside contractors money that they took home to their neighborhood, the tenants received training and compensation for the work they did to improve their community.  The work gave the residents money so that they could pay their rent. Some of the trainee graduates went onto create their own businesses that are still in business today.

Pizza Delivery Drivers were no longer afraid to deliver pizza 

Now he had a value add formula on how to turn around the biggest challenge he could find.  Not only was he changing the property, but he was changing lives.  

By December 2004, the property renovation was complete and occupancy had increased to 80%.  

Disaster Strikes

Christmas Eve 2004 an ice storm struck Collumbus, Ohio.  Trees & power poles were knocked down, and power was out for all of Woodland Meadows.  With no power, the electric boilers were unable to generate heat. For four days, the temperature was below 0 degrees and the water in the pipes froze.  When the power came back on, it was clear that things were out of sorts. As the temperature rose, the frozen pipes thawed. Water started pouring through cracked pipes, into the apartments.

Insurance

Realizing the damage caused would need a lot of money to fix, Jorge called his insurance company to see what help his policy could provide.  The adjuster made a quick inspection of the property, and returned to his office. A couple of days later, the adjuster called to say, “you are not covered.  The damage was caused by your boilers. You do not have boiler coverage, and you are not covered.”

Jorge’s attorney explained that on large claims, insurance companies often will use a strategy of delaying payment in an effort to force the claimant to settle for a reduced amount of money rather than the amount provided by the insurance company. 

Jorge knew he had coverage and thought the insurance company would eventually pay the claim.  Rather than wait until they paid, he elected to borrow against the equity in his other properties for some cash to pay for the repairs needed at Woodland Meadows.  He figured that when he received the insurance settlement, he would pay off the loans. 

Suing Your Insurance Company

After a couple months of trying to work with the insurance company to resolve the claim and their refusal to pay, left Jorge with no option but to sue his insurance company.  By August 2005, Jorge was running out of money. He had over 200 people working everyday to repair the damage. To preserve cash, he reduced his labor body count from 200 to 20.  

Then the city representatives visited the property asking, “why progress is slowing down?”  

The City

The City, unbeknownst to Jorge, had decided that they wanted to acquire Woodland Meadows.  When the city visited in August, they sensed Jorge was at his breaking point, and they acted.  In an effort to acquire the property, they notify Jorge that he has 3 days to evacuate the property.  

The city claimed that a prior owner had made a construction shortcut and given that the buildings had filled with water, the buildings were imminent danger of collapse.  Jorge hired an engineer to inspect the buildings, and he found no such evidence of danger of collapse.  

The court awarded Jorge a temporary restraining order against the city of Columbus and 6 months to complete the repairs.  Jorge then authorized his attorney to make the best deal with the insurance company to collect money and get the repairs made.  

The damage was estimated at $45 million.  The insurance company settled for $32 million and work was back on schedule.  

HUD

When the city was unable to acquire the property under the false claim of imminent danger, they notified HUD of the conditions at the property.  Under HUD guidelines, property owners receiving Section 8 income are required to maintain properties to a certain standard. Due to the damage caused by the ice storm, Woodland Meadows was below the standard.

HUD notified Jorge that he had 30 days to complete the repairs, or lose the funding for his Section 8 tenants.  Jorge appealed to the local municipal court who requested HUD show up in court, but HUD refused stating that they are a Federal Agency and not bound by municipal courts.

Thirty days later, HUD returned to the property and terminated contracts worth $200,000 per month in rent.  The loss of rent forced Jorge to accept the gravity of the situation and surrender.

Six months later the property was evacuated by the City of Columbus.  Since then, all of the buildings have been demolished and a new high school has been built on the site.

Hindsight

Hindsight is always 20/20.  Had Jorge understood the city’s desire to acquire the property, he believes he would have acted differently.  In the city’s efforts to acquire the property, they had offered to help him acquire a different property. If he had accepted, he could have then taken a reduced settlement from the insurance company and moved on.  Could a, should a, would a, didn’t.  

Unfortunately, Jorge saw a problem that needed a solution.  He acted in the way he believed was best to fix the problem.

Out from Under the Loan

In order to get the money he needed to fix Woodlawn Meadows, Jorge got loans against his other properties and signed as a personal guarantor.  This had never been a concern in the past, because nothing had ever gone wrong. However, this time was different.  

Creditors pursued Jorge personally for the outstanding loans.  When he could not pay, the lenders pursued foreclosure on the properties.   At the foreclosure auction, the bank bought the Kansas City property for what was owed on the first position lean.   

Jorge’s experience as a mortgage broker made him realize that when the bank foreclosed on the property, the second position loans were extinguished.  This meant that the second loan against the Kansas City property which was used to purchase the Oklahoma City property meant that the OK property free and clear.    

Debt Cleanse

This foreclosure experience caused Jorge to review all of his loans, where he found multiple mistakes, from minimal to egregious.  These mistakes provided leverage for him to negotiate more favorable settlements with his lenders. In one case, the bank ended up paying him to settle the debt.

Shortly after this chapter in Jorge’s life, the Great Recession struck.  Jorge recognized that millions of Americans needed help negotiating settlements with their banks.  Jorge then started Debt Cleanse, to help others in need, find the errors in their loans in order to negotiate better settlements with their lender.   

BIGGEST RISK 

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

BIGGEST RISK:  To not learn from the past. And so that would be for me to look at my own past and the past of others and see what has happened, how they navigated it and, whether it makes sense to, or how that should influence my actions today.

And I’ll give you a real life example, is that you know the market. I’ve been through a couple of downturns in the real estate market and towards the end of every up cycle is like today. Today there are the lenders are, freely giving out money. It’s very easy to qualify. They have these, you know, kind of almost subprime loans called non QM loans, and things have gotten very easy and that happens every time.

History Repeats Itself

At the top of the market that the money is free flowing, the pricing gets expensive, everything gets really competitive. I’m trying to buy loans and other people coming up with money pay more than me, And they could be the winner of the bid. But really, time will tell whether they’re the winner, the loser.

So today, I think the biggest risk today is ignoring the past and the fact that we are probably in a very overheated real estate market and just overheated economy, which is likely to turn down very turn down in the near future. It’s hard to say exactly when it happens, but now would be the time to take some chips off the table and avoid or at least minimize that risk.

For more go to:

Website: DebtCleanse: https://debtcleanse.com/

Book: Burn Zones

Website: https://ahpservicing.com/

Capital Market Trends with Bryan Shaffer – CREPN #224

Capital Market trends are a barometer for where the commercial real estate market is headed.

Bryan Shaffer is the Principal Managing Director at George Smith Partners.  GSP is a boutique capital market resource providing owners & developers the structure capital needed to complete projects nationwide since 1979.

The value of utilizing a broker like George Smith Partners is that they are in the market every day, and know when it is more beneficial to utilize one option over the other.  This compares with a bank who has one model. The capital market is continuously changing. They work for the client in hope to create a relationship that continues to help the borrower get the money needed to grow their business. 

Commercial Real Estate Financing 

Large commercial real estate projects come with tremendous risk.  The borrower sees opportunity, while the lender sees the risk. If the lender does not feel comfortable with the borrower or the project, they will not finance the deal.  An experienced finance professional has the needed relations with the various lending products. They can help the borrower explain their project to a prospective lender that will assure the lender of the projects upside, and set them at ease with the potential downside.

Capital Source

Most new investors use their own capital and raise additional funds from family and friends.  A proven track record with successful, profitable projects will attract investors with capital who are looking for lower risk.    

Mistakes Borrowers Make

The most common mistake borrowers make is to not focus on one particular market.  If you are constantly chasing the next hot market, you will never develop the intimate local knowledge that puts makes investors confident you know the market.  

Sweet Spot

GSP is best suited to help the owner or developer who is focused on finding deals and needs help raising capital.  In these situations, they can partner with the project owner to locate the capital needed to finance the project. This allows the developer time to find more deals.

An ideal partner for GSP is someone who has done multiple smaller deals in a specific market and has intimate knowledge of the market.  They have the market knowledge, but need help with raising capital. This is the perfect opportunity to work with GSP.

Relationships

Commercial real estate is all about relationships.  For owners looking to grow their portfolio and needing help to solve the capital requirements, GSP can be the solution.  Their extensive network of capital sources include traditional sources such as commercial banks and insurance companies. Additionally, they have multiple new capital disruptors such as crowdsource funding and private equity funds like BlackRock and Blackstone, which are not available to all mortgage lenders.

A perfect borrower is one focused on growing their portfolio, like the client they helped grow from two apartment properties to over thirty properties.  GSP was able to help bridge the gap from $10 million properties to $50 million properties.  

Capital Stack

The capital stack needed for a deal is made up of debt and equity.  For both single operators and syndicators, the traditional sources of equity come from the individual developer, friends and family while debt has come from banks and institutional lenders.  

The recent disruption of the financial market has made crowdsource financing a viable source of capital.  Additional private equity funds like BlackRock and Blackstone are resources available to GSP, which may not be available to all mortgage lenders.  

Markets

The market is client specific.  If you are a proven developer in one market, that does not guarantee success in a different, new market for you.  Lenders look for the borrower who has knowledge of the market based on their experience in the market.  

A mistake many developers make is trying to follow the hot market.  Jumping from hot market to hot market is not the path to proven success.  Lenders want to know that you know what you are doing, and that you have success in the market.  

Lenders like larger markets that provide insulation from failure based on the large number of potential opportunities to guarantee your success.  

Deal Sponsor

Lenders want to know that the deal sponsor has experience and success in the market your project is located in.  The lender wants to make a safe bet that you will be successful. This is different than the borrowers perspective.  The borrower wants big returns, the lender wants small safe returns.  

Asset Class

Each asset class has its unique risk.  Lenders like to lend to a low risk opportunity where they know they their investment is protected and will get paid back.  The following are some examples of assets and situations where George Smith Partners were able to provide financing solutions to their clients. 

Hotels are considered one of the more risky asset classes.  They are susceptible to the winds of the economy. If there is a terrorist event, economic downturn or similar event, people will not travel as much nor rent hotel rooms.  

To make a hotel less risky, GSP was able to do some additional research and apply their experience in the market to recognize the upward trend and make the case to a lender and get they borrower their loan.  

Multifamily on the other hand, has more predictable demand and is less susceptible to down turns.  People need a place to live. When the economy slows down, people lose their homes and need a place to live, so they rent.  As long as you operate and keep the property full, the lenders will get paid, and they like that.

Office A recent office project where GSP was familiar with the marketplace gave the developer the help needed to complete the project.  Because GSP recognized the positive trend developing that other lenders had neglected to see, they were able to get the financing for the borrower to needed to complete the project.    

Rate and Terms

Most borrowers are excited to get a low rate for their loan.  However, too often, borrowers fail to think through their plan for the asset they are financing. Is there a yield maintenance penalty that prohibits the borrower from selling or  refinancing early? Failure to recognize this can on the front end can ruin your otherwise profitable deal. 

Cycle

The Real Estate market cycle goes up and down.  For the past 10 years the cycle has been on the increase, compressing CAP rates, and driving prices higher.  As the cycle continues, markets that have been hot are cooling as investors refuse to push prices higher, and instead they look to secondary markets for higher returns. 

BIGGEST RISK 

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

BIGGEST RISK: To me, I mean, you know, we are in the risk reward business. I mean, people get loans based on the level of risk. If it was a very risky loan, you pay twelve percent. If it’s not such a risky loan, you pay three or four percent. So we’re always looking at risk. 

But if I look at a more global risk to my business and really to the market as a whole, I think you’ve got to think about the economy and what causes a real estate downturn and what influences a market to go from being a very hot market to a very cold market. And really its activity. So when activity dries out, when people stop buying properties, people stop selling properties and people have fear when people are thin or they don’t move.

For more go to:

Website: https://www.gspartners.com/

Call: (310)867-2906

Passive Income for Wealth Creation with Lior Gantz – CREPN #223

Passive Income is the goal of all investors seeking wealth creation.

Lior Gantz is the founder and editor of the number one rated financial newsletter, Wealth Research Group. 

At 12 years of age, Lior had to go to work out of necessity.  His father’s business was struggling, and there was no money. He hustled, babysitting, teaching basketball, and delivering goods to others.  By the age of 16, he had saved $20,000.

His banker suggested he invest his money to earn greater returns.  In order to do so, Lior needed his parents to sign a waiver, which they gladly provided.  His grandfather gave him two books on investing, and Lior was hooked on passive income. 

In 2015 his friends urged Lior to publish his thoughts and ideas, which was the creation of Wealth Research Group.  This is where Lior publishes his thoughts and observations for readers who want to learn  about wealth creation.

Global Economy

Lior’s father’s business was furniture and upholstery.  It’s demise was due to the changing global economy that is full of new, cheaper goods from foreign countries.  His failure to adjust forced Lior to learn a new way early in life. The blessing to experience this at an young age helped Lior create an expectation based on global competition rather than tradition ready for disruption.  

Peak Open Borders

Western corporations have taken advantage of cheap labor overseas.  This cheap labor provided a greater profit spread for investors. The downside is loss of traditional jobs and trade in balance.  The ultimate question that needs to be answered: are cheaper goods more valuable than the loss of jobs? While cheap goods are good for consumers, the loss of jobs depletes the consumers needed to consume the cheap goods.

Transition

The price of progress is the pain of change.  Consumers like cheap goods. Within an economic system, wages only go up.  So, how does a system convert from a traditional economy to a nimble world economy? 

There are 48 countries that produce for less than China.  You cannot regress to compete against cheap labor. Change requires skills.  Workers need to be trained for the jobs in the new economy so that they can contribute to the new economy.

Competing in a Global Economy

Governments have a few tools available to change the course of the economy; lower interest rates or impose tariffs on foreign imports.  Historically, the US has preferred low cost foreign goods and chosen to lower interest rates rather than impose tariffs.  

The challenge with any governmental use of its tools, is whether or not the desired results will happen.  When the US lowers interest rates to make borrowing money less expensive, the hope is to make low cost capital available for companies to borrow.  This allows them to make additional purchases.  

Millennial Outlook

Millennials are gainfully employed and paying down their student debt.  As they progress professionally, they are inheriting higher paying positions vacated by retiring baby boomers.  Millennials income is projected to peak in 2030. At the same time, they are coupling up and looking for suburban housing to raise a family.  

This momentum will continue and will shift the demand for housing from the multifamily to the single family.  This will be the new wave of housing demand. 

Private Equity Funds 

Private Equity is flexible.  Where they see opportunity with a positive return, they go.  It is projected that these funds that acquired huge real estate portfolios in the crash will look to sell these as the millennials become buyers. 

If the cost to acquire a home is beyond the cost to rent, millennials may continue to rent.

Neighborhoods access to good schools, safe neighborhoods will continue to attract parents of small children. But, home ownership is no longer sacred.  

BIGGEST RISK 

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

BIGGEST RISK: You have to know what you are investing in and who you are investing with.  If you invest in large proven companies, you are investing in the culture more than the people.  You can trust that the culture will continue to drive profits. However, when you invest in small companies, this is speculative, because it is not proven.  In this case, it is important to know the who.  

For more go to:

Wealth Research Group