Commercial Real Estate Pro Network

J Darrin Gross Podcasts

J Darrin Gross Podcasts

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CREPN # 157 – How to Attract Capital and Communicate with Real Estate Investors with Vinney Chopra

To accelerate the growth of your multifamily portfolio, you need to know how to attract capital and communicate with real estate investors.

Vinney Chopra has raised millions of dollars and syndicated over 26 multifamily properties.  Today, he shares the key to scaling up quickly; attract capital and communicate with real estate investors.  

Your Potential Real Estate Investors

To attract captial is not easy.  To be successful, you need to always be looking for capital.  If you are syndicating, you are looking for passive investors to invest as Limited partners in your LLC.

The easiest money usually comes from those you are closest to, your family.  These people know you and are most likely to support you if they believe in the opportunity you present.

The next closest group of eligible investors will be your acquaintances.  Again, these people know you and are likely to support you if they are able.

Now that you have introduced your investment opportunity to your closest circles of influence, it’s time to check with your business associates.  These are the professionals you know that have a retirement account. They are likely looking for ways to make a better return than what they are currently receiving.

The Opportunity for Real Estate Investors

The key to attract capital is communicating the opportunity to your potential investors.  You can easily do this with a “credibility kit”. This is where you share with potential investors the knowledge you have gained. Introduce your investment team, and the criteria you will use for selecting a property.    The goal is to convey to the investors that they will not lose their investment.

Educate the investors on why investing in an emerging market is a sound decision.  Explain what you know about the growing demand for multifamily, job growth and the opportunity to increase rents.

When to Attract Capital

You can never start too soon.  Raising money if full of rejection.  Investors pull out at the last minute all the time.  So, you need to have a long list of potential investors that can fill a capital needs at any time.  A deal is not a deal if you don’t have the funds to close.

Vinney has overcome the issue of investors backing out or not having enough money to close.  He does this by offering investors 2% on their funds from the day the deposit until the asset is acquired.  This guarantees closing, and the provides the lenders assurance the down payment is available.

Keep records.  Vinney recommends a spreadsheet where you identify the goals and dreams of the investor and keep records of the dates and what you discussed.  This allows you to easily reach out when you have a deal.

Your ability to close deals will raise your stature with the real estate brokers in the market.  The more deals you close, the more deals you will be presented.

Communicating with Investors

Vinney recommends regular, constant communication with investors.  He leverages technology with voip calls, webinars, videos, emails, etc.  He does such a good job that in 12 years only 5 investors have actually visited a property.  

When you communicate regularly with investors, they will feel comfortable and tell their friends about the good job you are doing and will want to invest with you.

 

For more go to:

Text “Syndication” to 474747

FREE Deal Analyzer: http://deal.multifamilyacademy.com/

Call / text (925)766-3518

 

CREPN #156 – How to Choose a Multifamily Property Manager with Andrew Kroger

A good multifamily property manager is invaluable to real estate investors.

Andrew Kroger is the owner of Peak Property Management and shared with me the characteristics of a good relationship between a property manager and the investor.

Relationship

Your relationship with the property manager is key to your success.  The more common ground between you and your manager, the better your results will be.  

The goal when interviewing prospective managers, is to learn who they are and how they communicate.  How much communication do you want and how do you want to communicate.

Are you looking for a manager to do it all, or do you want to be more hands on?  

Think about your preference, and look someone that fits your communication needs.

It’s important that the manager is on the same page with you.  If they understand your goals and objectives they can help you reach them.   

Get referrals from other owners.  Find out what other property have to say about their experience working with the manager.   

If your goal is to sell in the near future, does the manager recognize this?  What does that mean to them?

Find out what property management software they use?  What level of reporting should you expect and how often?  Does it include rent increases, rent roles, balance sheet, profit & loss statement?  This is your scoresheet for how well you property is performing.

Acquisition

Once you find a property manager to work with, invite them for a tour of your next acquisition.  The manager can develop both operating and rehab budgets if necessary. An experienced manager can give you a clear understanding of the property’s potential to ensure your success.

Operation

Operating the property efficiently is key to cash flow.  Questions you want to get answered from your prospective property manager include:

  • Leasing; What are the requirements for residents; application, income, rent history, criminal background, etc.  Understanding the managers resident selection criteria up front will provide you with realistic performance goals.   
  • Maintenance; What is the process for a resident to make a repair request.  Does the property manager have its own maintenance staff or do they use subcontractors?
  • On site or off site management?  What is the need for your property?  How often do they physically inspect the property?  You need boots on the ground to keep an eye on your property for any maintenance needed.  A small problem can be fixed for a few dollars, but when neglected, the small problem can grow into a big problem and become more expensive.
  • Vendor relations; Does the manager have relations with multiple vendors?  Good vendor relations will provide the manager the ability to get your property fixed and or turned quickly.  You can’t make money from an empty unit.
  • Turn process; ask the manager what is their process for turning a unit?  When do they start and how long will it to take to get the unit re-rented?  Ask for both a light turn and a complete remodel.

For the best outcome of your multifamily property, find a property manager that meets your communication needs.  Take the time to make certain you are on the same page. This relationship is paramount to your multifamily real estate investing success.

For more go to: www.peakpropertymgt.com

CREPN #155 – Commercial Real Estate Investment Lessons with Paul Moore

Commercial Real Estate Investment lessons can be costly.  

An expensive lesson can ruin you.  If you are lucky, you learn something and you still have enough time to recover and make your fortune back.  

Paul Moore, co-host of the podcast, How to Lose Money, talked with me about some of the lessons he has learned from real estate investing and how they have helped to form the real estate investment strategy he employs today.

Are You a Real Estate Investor or a Speculator?

When the market is going up, it’s hard to tell the difference between investors and speculators.  But, when the market corrects, speculators are more susceptible to losing. Paul summed up the difference between an investor and a speculator:

  • An investors capital is safe from risk with the chance to get a return.
  • The speculators capital is not safe with a chance to get a return.

If you are investing for cashflow, you are an investor.  If you are investing for appreciation, you are a speculator.  

Real Estate Investment Strategy Lessons

Paul has tried multiple investment strategies; single family residential flipping, ground up commercial development, multifamily and self storage.  He has gone from riches to rags and back to riches. Through each asset class, he has learned from his losses, and has changed.

He no longer invest on a haunch, ie: speculates.  

Today he is looking to create generational wealth in commercial real estate.  Unlike some investors who commit to a single asset class, Paul has become a student of the market.  Now he looks for a safe place to invest his capital with the possibility of a return.

He has studied the market and found justifiable reasons to invest.  He knows the client profile, what the projections are for this demographic and what type of owner/ seller qualifies a good prospect to purchase.  This market knowledge helps confirm any haunch he may have.

Using the lessons he has learned, Paul is now syndicating self storage facilities.  

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

http://howtolosemoney.com/

CREPN #154 – Limited Partner in a Multifamily Real Estate Syndication with Lane Kawaoka

A Limited Partner is a passive investor in Multifamily Real Estate syndication.  By definition, the limited partner is basically responsible for bringing capital to the deal.  

My conversation with Lane Kawaoka, host of the podcast Simple Passive Cash Flow , takes an honest look at multifamily real estate investing from the limited partner view.

Lane started in single family real estate and quickly realized that in order to grow enough cash flow to replace his W2 job he needed to scale.  He recognized that Multifamily real estate was the answer, but did not know how.

In Multifamily, you can go it alone, partner, joint venture, or syndication.  Syndication is a group of investors that pool their money to purchase a larger property that is likely out of reach if they tried to purchase alone.  

A syndication has two level of partners,: General Partner and Limited Partner.

General Partner vs Limited Partner

The General Partner (GP) is the quarterback.  They are responsible for qualifying the market, connecting with local brokers, finding the property, coordinating the prospectus, attracting investors, operating the property.  For this work, the General Partner is compensated for operation and performance of the deal.

The LImited Partner (LP) supplies the capital needed for the down payment and capital expenses.  They have no duties regarding the acquisition nor operation of the property other than providing the capital.  This is truly a passive investment for the LP.

When you are an LP, it’s your job to find an opportunity and a GP, operator, that you feel will do a good job and provide solid returns on your investment.  So, what are you looking for in a General Partner?

How to Qualify a General Partner

A qualified General Partner, individually or his team, will posses a proven track record.  “Past performance does not necessarily predict future results”, however, it does give you a chance to judge if the GP and team are qualified.  

Things to look for in a General Partner:

  • The numbers; are they conservative or overly optimistic?
  • What do past investors have to say about their experience of working with the GP?
  • Does the GP communicate well?
  • Are brokers responding favorably to your GP?
  • Is the GP a proven closer?
  • You are going to be together for a few years, does the GP think like you?

For more go to:

Simplepassivecashflow.com

Prior CREPN episode:

CREPN #108 – W2 Employee Employee Real Estate Investment Strategy with Lane Kawaoka

CREPN #153 – Building Your Multifamily Syndication Team with Vinney Chopra

Multifamily Syndication is a team sport.  You will multiply your success when you create a winning team.

Vinney Chopra has successfully purchased over 26 multifamily properties through syndication.  In this interview he describes the members you need on your multifamily syndication team for success.

Relations at all levels are key to your success in all real estate investing.  For newer syndicators, you can overcome a lot when you have experienced professionals on your team.

Once you have selected an emerging market to invest in, you need to find the following members for your team.

Partner: this is the person you identify with that shares your vision and can share in doing the work that needs to get done.  Someone with a different skill set that compliments you tends to work best. There are numerous jobs that need to be taken care of and together you can divide the work and conquer.  One thing to consider is a partner with strong financials. Chose your partner wisely because you will likely be working together for multiple years.

 

Multifamily Acquisition Team

Commercial Real Estate Brokers are essential to success.  Due to the nature of commercial real estate, having relationships with multiple brokers can pay dividends.  Brokers have the relations with the local property owners, know the market, the properties, owners and who is a potential seller.  You will do best if you present your specific buying criteria so they know exactly what you are looking for.

Loan Broker is your source of funding.  The amount you will qualify is dictated by the networth of your general partners.  An experienced loan broker will know the various programs available and be able to find you the best funding.

Attorneys are critical to the legal structure needed for your success. The attorneys will form the LLC entity for the property and your operating company.  You also need a securities attorney to prepare the private placement memorandum, operating agreement and subscription agreement. Each of these are critical your ability to raise money and stay out of trouble.

 

Multifamily Due Diligence Team

Property Manager has the critical needed experience managing multifamily properties.  The property manager will also help recognize issues during your inspection that need to be addressed with the seller.  An experienced property manager has will convey confidence to lenders and your investors. A good property manager has relations with contractors, knows the laws and has systems to deal with most situations.  Their experience is key to the profitable operation of your property.

Investors: Start talking to everyone as soon as you decide you will be investing using syndication model.  You must have a prior relationship with your investors who invest in your syndication. Without investors, you will never buy a property.

CPA: Your CPA will prepare the annual financials you need to communicate the property’s performance to your investors.  Your investors will expect your numbers to be presented in a standard accounting format.

Contractors of all types.  The good news is that with multiple units, you have the chance to achieve economies of scale.  When you find a quality contractor that provides the best service and price, add them to your “preferred vendors” list.  These are your go to solutions when a problem arises. Let the contractors know that there will be additional work in the future and see if they can recognize this future work in their pricing.

For more go to:

www.vinneychopra.com

 

For your FREE Multifamily Syndication Underwriting tool

TEXT “Syndication” to 4747

 

Prior episodes with Vinney Chopra

CREPN #152 – Multifamily Due Diligence with Nathan Tabor

Multifamily due diligence can be a black hole for real estate investors.  

Nathan Tabor has learned expensive lessons from flipping multifamily properties.  He shares some lessons and what you can do during due diligence to avoid learning the hard way.

Remember, the object is to learn all you can before you close so that you have no surprises.  Here is a short list that every real estate investor can use.

Local Knowledge

Before you spend any money on physical inspections, contact the local authorities.  When possible, go to the building permit authority in person and confirm that the property is zoned for the current usage, and future usage if you have construction plans.  

Find the local Housing Authority. It may be the city or county, but usually there is an advocate for tenants to complain to.  Look for complaints against the property. Google the property to see what comes up. If the property is not well taken care of, tenants will likely complain.  Find out if any complaints have been filed before you close. They will be your responsibility after the property is yours.

Look for the eviction court record.  How many evictions have been filed against the tenants at the property.  If there are a lot of evictions, you have a very unstable property.

Crime records; how many times have the police been called to the property and for what.  You can renovate a property, but it is really hard to renovate a neighborhood.

If the above issues check out, it’s time to move to the physical property due diligence.

The Physical Property

Older properties can be an endless opportunity for unplanned cost.  Some things Nathan has learned to check for.

Know the entire Electrical system.  Check every plug to make certain there is power.  Ask questions about the wiring. Is there any aluminum wiring?  Are there fuses or circuit breakers. If circuit breakers, what brand of electrical box?  All of these can significantly affect the insurance you will be able to get for the property and the cost.

Trip and fall hazards.  Inspect the parking lot, walkways and stairs for cracks and uneven surfaces.  If there are issues, you need to identify them now and the cost to fix. If you don’t and the insurance company inspection is unfavorable, you could lose your insurance.

The plumbing system.  Sit on every toilet to see if the sub flooring is solid.  Scope all of the waste lines for any blockage or failures.  Turn on the water in multiple fixtures at the same time and see what happens.  Is there a fire hydrant on the property, if so is it yours or the city’s? Find out the answers and get estimates for needed repairs.

Due Diligence Numbers Don’t Lie

If you pay to much, you can lose you can mess up your future opportunities to invest in real estate.  Your offer price cannot be more than the property can support. A good way to avoid paying too much is to back into your offer price.  How much you want to make? What are the estimated repair cost, carrying cost, etc? Add all of these together and you will know the maximum amount you can offer.  Leave no stone unturned.

When you get your loan offer, be sure to read the requirements for insurance.  If the loan allows for a maximum deductible of $5,000 and your insurance quote has a $25,000 deductible, it will cost you to buy the lower deductible.

Verify the Sellers numbers.  Verify the Rent Roll with the bank statements to see if the rent deposits match the rent roll.  You can also ask for tax returns. The seller may inflate the rent roll, but will likely not inflate rent collected on his taxes.

For more go to: nathantabor.com

CREPN #151 – Value Add Quick Calc Rent Roll Triangle with John Wilhoit

The Rent Roll Triangle is a simple underwriting calculation to determine if the property has potential for a value add strategy.     

John Wilhoit is an experienced asset manager.  He takes us through how you can utilize the rent roll triangle so you can determine how the current income of a property compares to its potential.

What is the Rent Roll Triangle?

The rent roll triangle compares the collected rent to the gross potential rent to determine how the property is currently performing against its potential.  Once calculated, you will know if there is an opportunity to increase the rents. If you are looking in a particular market, you can look at multiple properties to determine which property to submit a letter of intent on.  

Numbers needed to calculate the Rent Roll Triangle:

  • Gross Potential Rent
  • Stated Leases
  • Collected Rent
  • Average Term of Lease

 

How to calculate the Rent Roll Triangle:

Divide:    Annual Collected Rent / Annual Gross Potential Rent

Ie:

Annual Collected Rent: $80,000

Annual Gross Potential Rent: $100,000

 

$80,000/$100,000 = 80%

 

The property is rented to 80% of its gross potential, or

there is a chance to increase rents by 20%.

 

From here, you will need to determine how significant of a value add is needed to raise the rent.  Is it a simple matter of increasing the rents, paint, or do you need significant capital improvements?  How long will it take to earn back the cost of the upgrades?

There is an endless number of calculations real estate investors can use when evaluating an investment property.  I have found that experienced investors focus on a couple of measurements when investing.

Use the Rent Triangle to quickly determine the income potential of your next value add real estate purchase.  Regardless if you are buying a duplex, apartment building or office building, this easy to use calculation will show you a property’s potential upside.   

So, if you are looking for an easy calculation to determine if there is more underwriting needed, consider using the Rent Triangle.

For more go to:

http://johnwilhoit.com/

CREPN #150 – Joint Ventures: The Cheapest, Easiest, Fastest and Safest Way to Do Deals with OPM with Jeff Lerman

Joint ventures are an option every real estate investor should know.  

Growing your real estate portfolio is capital intensive.  Eventually you will run out of your own money. When real estate investors reach this point, you have to look for other people’s money, OPM in order to keep growing.

Jeff Lerman, the Real Estate Investors Lawyer, works with real estate investors.  He takes us through the benefits of joint ventures compared to syndication.

What is a Joint Venture

A joint venture is the coming together of two or more parties to achieve a goal.   It is the cheapest, easiest, fastest and safest way to do real estate deals with other people’s money.  

The members of the joint venture must take an active role in the work to meet the goal.  Investors cannot be passive. Roles must be defined, and records must be kept in order to satisfy any legal challenge of the legitimacy of the joint venture.    

Main advantages of a Joint Venture:

  • Risk diversification, is the primary benefit of a joint venture.  You are able to spread your risk from an all or nothing position. Your potential loss can be lessened when you invest across multiple deals.
  • Risk mitigation,  You gain the input from an experienced investor to test and confirm your conclusions on the opportunity, will it work, or should you pass.   
  • Not a security.  A joint venture does not require the extensive legal paperwork which is required in a syndication.   
  • Potential for future deal flow.  When you join forces with an experienced investor, you are likely to be invited to participate in future opportunities provided the original deal goes well.
  • Simple to set up.  Unlike a syndication, a Joint Venture is not a security and does not require the extensive legal expense associated with a syndication.  There is no private placement memorandum, etc when establishing a security.

In all cases, joint venture or syndication, pick your partners wisely.  Set it up right. The last thing you want is to get tied up in some lengthy, costly litigation that tears apart the wealth you have worked so hard to build.  

For more go to:

http://www.realestateinvestorlaw.com

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

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

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

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

What is a Syndication?

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

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

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

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

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

Rule 506 B or C

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

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

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

Click the link for a FREE EBook about multifamily syndication.

www.vinneychopra.com

Call / text (925)766-3518

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

How will Blockchain Technology disrupt your real estate investing business?

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

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

What is blockchain?

The simplest description of a blockchain is:

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

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

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

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

How Technology Applies to Real Estate Investing?

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

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

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

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

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

For more go to:

https://www.lannisterholdings.com/

https://www.lannisterdevelopment.com/

https://twitter.com/lannisterceo