Archives for August 2020

Forever Cash Through Real Estate with Michelle Bosch – CREPN #263

Michelle Bosch 0:00

The flipping of the land is a J O B because if you don’t not send letters if you are not selling, you are not going to have income coming in unless you sold a chunk of those properties, you know, on notes, but even that income is going to come to an end. You know, when they pay off the note that passive cash flow comes to an end as well. So, so it’s, we call that you know, the land flips for cash, we call them one time cash, the notes we call them temporary cash. And you know, the single families and apartment buildings we call that forever cash that’s pretty much it can sit on that asset, you know, for as long as you want to. And you know, if you’re operating it at a good you know, in a good way it’s going to continue to spit out cash flow for you and I mean, hopefully for for many generations to come.

Intro 0:47

Welcome to CREPN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast. Whether you’re an investor broker lender, property manager, attorney or accountant We are here to learn from the experts.

J Darrin Gross 1:08

Welcome to Commercial Real Estate Pro Networks CREPN Radio. Thanks for joining us. My name is J Darrin Gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.

Today, my guest is Michelle Bosh. She and her husband are real estate investors, entrepreneurs. They have multiple businesses and they have taken businesses multiple businesses they’ve built from scratch to seven and eight figure income revenue streams. And their business platforms include land auctions, rental portfolios, they’ve all authored a an Amazon number one bestseller called Forever Cash. And also, they host together the podcast Forever Cash. And Michelle also hosts the podcast In Flow. And in just a minute we’re going to speak with Michelle about forever cash. But first a quick reminder, if you like our show CREPN Radio, there are a couple things you can do to help us grow and grow the audience. One you can subscribe, like and share. And also don’t forget, you can leave a comment we’d love to hear from our listeners. Also, if you want to see how attractive our guests are, be sure to check out our YouTube channel and that’s at Commercial Real Estate Pro Network on YouTube. Also when you do that if you would consider subscribing that also helps grow the reach of our program. With that I want to welcome my guest Michelle Welcome to CREPN Radio

Michelle Bosch 2:58

Thank you so much for having me, it’s such a pleasure to be here with you from coming from nice, sunny Phoenix, Arizona, which in a few days is going to turn into 109 degrees. So we’ll see. But thank you so much for having me.

J Darrin Gross 3:14

I’m delighted to have you and I’m looking forward to our talk. Before we get started, if you could share with the listeners a little bit about your background.

Michelle Bosch 3:23

Yeah, absolutely. So I am actually an immigrant from Honduras. I came here to the US in 1995. My husband is also an immigrant from Germany in 1997. We came here to study get our MBAs and we did pretty much what you know, you’re supposed to be doing good. We got jobs in corporate America that, you know, luckily, we’re sponsoring our green cards. But after a little bit of that, you know, two, three years of that we were deeply unfulfilled, we found ourselves with, you know, no fulfillment, no freedom. And definitely our paychecks did not match the level of energy and effort that we were putting into our jobs. But we can lead Go with those jobs because our permanent residency dependent on those.

So we started looking for something you know to do on the side a side hustle. um you know, my family back home owns commercial real estate and I thought well you know, perhaps this would be a thing to you know start with and we actually didn’t start with commercial we looked at a single family home that we wanted to basically rehab. It was a Junker here in Phoenix Arizona and being the immigrants that we are we found ourselves a little bit way over our heads in terms of we had no idea how to estimate repairs. You know on foundations on a kitchen on our roof. You know, no real expertise and managing a crew. It’s not that we had bad credit we just had no credit and and so there’s a series of things that you know, after having that very first Junker under contract we thought okay, you know, real estate it is, I know it’s worked for my family. My family has been able to create forever cash, you know, passive cash flow from it now. For years, but we probably need to start with something that, you know, is easier for us that we can wrap our minds around.

And we stumbled across something very interesting Darrin, and that is here in the US. There is such a thing as being able to lose your property to delinquent taxes. And I found about tax liens and tax deeds. And I remember going to a tax auction out in California. And needless to say, it was incredibly competitive. It was like being in a shark infested tank. But what I noticed was that a lot of the properties that were coming, you know, for, for sale, you know, there at the auction where vacant land was vacant, vacant pieces of land. And it occurred to me that if people had already, you know, checked out from these properties, because they have to be delinquent for five years in the state of California, in order to be able to be sold at tax deed auction, that people were probably checking out mentally and emotionally from these properties way, way earlier. And so we decided to go ahead and reach out to, you know, sellers or owners of vacant land we perfected a letter or you know, in a method where we could buy these properties for five to 25 cents on the dollars. Because we’re not looking for motivated sellers we’re looking really for non wanters. And we’re able to quickly turn around and sell those for 60 80 you know 100% of market value. We sell in one of two ways, we either sell for cash, you know, for a quick wholesale, that would be something you know, 60 70% of market value and if we sell for 100% of market value, we we sell them using seller financing, where we become the bank and therefore, we create a note and we have residual, you know, cash flow monthly cash flow from a property that for example, we bought for $1,000 that we sell for $10,000 and that where we can get you know, $9,000 being paid over a period of five years in monthly installments of 150 to 200. dollars, and one property doesn’t sound as, as attractive. But when you have two to 300 loans of those, you know what I mean? We were able, you know, over a course of, you know, several years, you know, once we perfected our methodology to really put the pedal to the metal do over 4000 flips, create $70,000 worth of passive cash flow. That became an eight figure business. And we’ve continued to do that to this day. However, you know, as as we have grown as investors in the US people, our, I would say, our sophistication when it comes to investing has also you know, grown.

So then we found ourselves in 2009, here in Phoenix with a ton of liquidity from cash profits from the land, from the passive cash flow from the notes on the land, and we could buy properties for $50,000 single family homes and rent them for 900 to $1,000. And so we started doing that here in Phoenix and we did it and you know, to other markets, and kind of been, you know, really wrap our hands around how to operate, you know, single family homes really, really well remotely because we’re doing it, you know, into other markets other than Phoenix. And, and we, you know, we came about to almost 50 rentals. And, and we thought well 2015 then came around and we thought, how can we start looking instead of one door at a time, you know, so that we can continue to build this passive cash flow this what we call forever cash. And instead of looking at one door at a time, how can we start looking at, you know, 100 doors at a time and that’s when we started, you know, looking into multifamily. We bought our first 90 units in Louisiana and, and then 94 units in North Carolina and then 147 units in Oklahoma City.

So those are the three markets we’re we’re in multifamily. And I think, you know, that’s pretty much you know, in essence What you know, my story is, which is very similar probably to many of your listeners who find themselves either in a corporate job or in some kind of lifestyle, where they’re not fulfilled where they have no freedom and where their paycheck does not equate, you know, the time and effort that you’re putting in that that was pretty much us It came out of, you know, I would say a cosmic four by four of pain and discomfort from being 100% traveling every single week of the year, you know, I mean, because we’re both consultants, and not seeing each other and not having so much to you know, show for it because we were living the American Dream by having payments on our cars on our house, on our laundromats on our sofa on our bed frame. I mean, I’m pretty much everything you know what I mean? And, and, and yeah, that’s real estate has been and specifically land has been the cornerstone of our wealth. We continue to do it to this day. And it’s it’s It’s a little bit of a sophisticated strategy I would say that we’ve been using now over the years and that is we create a lot of cash flow and cash profits for the land. And then we ask, you know, allocate that cash and park it into multifamily now. Because the benefit of multifamily is that all the active income that I generate on the land flips I’m able to feel that income with depreciation from the multifamily you know what I mean? So I feel like I get to you know, have a cake and eat it too. So it’s it’s, it’s like the best of both worlds. So yeah, that’s that’s that’s kind of a story.

That’s how we started it was I think, incredible. Like I said, dissatisfaction but having a little bit of immigrant disadvantage, but also immigrant advantage, zero fear hard work and seeing opportunities where others probably would have missed it, you know, specifically on the land side because now, you know, now we we teach others how to do that as well. And so the land has become something that has given You know, the four freedoms that I think every entrepreneur and investor is looking for, which is freedom of time, freedom, money, freedom of relationships, and freedom of purpose. Because now I’m, you know, on a mission to affect, you know, 1000 families in in a positive way, with a very simple method that we’ve been using now for almost 18 years, you know, to flip land. So, so yeah, so it’s, it’s, you know, as you grow you, your sophistication, basically, in terms of the asset class has grown for us. So, it’s,

J Darrin Gross 11:34

Yeah, that’s a very impressive story. I mean, come in here with, you know, essentially no relationships, no kind of a base. I always am impressed and I do I do find that I think somebody that’s willing to come to this country, or anything seeking opportunity is just really it’s kind of the the backbone of what you know the melting pot it was made America, America and So I love to hear that and appreciate you sharing that with us. I want to go back to you know, you mentioned when you guys first came here and you were working a corporate job and you had everything financed. I mean, I think that’s the the thing that I think is so easy to do in America is, you know, you can get everything on terms. To where, basically you can I forget what people say it’s something about renting the lifestyle to impress people you don’t know, or, you know, something.

Michelle Bosch 12:32

I’ve heard that expression. Yeah.

J Darrin Gross 12:34

You know, and and I’m kind of curious. So was there an awareness that that was that you were doing that or is that just basically kind of caught up in that because to break from that and to get to where you’re at now. I mean, obviously, there were a lot of steps and I want to talk with you a little bit more about the the marketing on your land, because you mentioned the systems that you put in there, but just the the mindset, I guess You know going from was it more of that you use recognized you What more did you realize where you were at? I think that’s kind of the thing. I don’t know that everybody realizes they’re in this, this pot and you know, they keep looking at one more finance contract or it’s just, you know, another contract and other payment, but that not understanding that the weight of those payments Did you did you guys understand the weight of those payments,

Michelle Bosch 13:25

I think we understood the weight of the of the payments, but at the same time, it’s what everyone else is doing. It’s what is expected. You go to college, you get a job and you you know, you get married, you buy a home and you start making payments on everything pretty much, you know, starting at the bottom of the food chain, I think what was incredibly, I think a pivotal moment for both Jack and I was, you know, I was I was I went to school here at Thunderbird and Robert Kiyosaki actually the author of the Rich Dad, Poor Dad. You know better selling book he lives here in town and back then, you know, when I was a graduate student there, he had a some kind of a relationship with the university where a group of students were helping him develop and market and brand and package his Cash Flow Game. And I remember you know, me being friends with one of those because I wasn’t part of that group, but I remember going to, you know, a friend’s home and he telling us all about it and you know, what he was working on and even giving us a copy of the book and us reading that book and realizing oh my gosh, we need to move you know, from you know, the, you know, the employee, you know, quadrant into ideally as fast as possible into a business and even from a business into the investor side, you know, as quickly as we can. And I knew it also from home you know, that that that was the way to go. That was a way to really create, you know, cash flow that is truly truly passive because Because when, when I was young, my father passed away, but two years prior to him passing away, um, he had made a an investment in a commercial property back home. And it wasn’t his hot, you know, hot shot, you know, lawyer profession, what kept my mother and I afloat to this day we own this property. It was that investment in that commercial property. And so how passive can it be that a person is not there physically, but continues to take care of you financially?

So I knew from my background, you know, from my family that I had experienced this firsthand that it was possible that would, you know, what he was describing on that book, that, that that was, you know, that that’s real, that it’s not just ink on a page. And, and I think it took my husband a little bit of a longer time, because he comes from Germany, from a society where, you know, government is there to take care of you, you know, I mean, you know, in a way and so on and so forth. And, and I come from Third World country where there’s nothing, you know, nothing that is gonna prevent you from going down the drain and circling the drain pretty much. And, and so I think it was it took him a little bit but once he got it, he understood it. And I think it hit home for him when 2001 came around, and we had already actually, you know, jumped on the green card process with his company because we were doing it in parallel. And then, you know, September 11 comes around and his company is going from, you know, 15,000 employees to 7000 in one day, and we’re hoping, oh my gosh, that he’s not one because our green card process depends on that job. You know what I mean? So I think for him, it really hit home, you know, within a short period of time. I you know, I was going to school in 1999 2000 is when we’re exposed to the book 2001 you know, It hits him. And we’re like, okay, we need to put the pedal to the metal You’re right, and let’s start doing something. And I think it was, again, it was it was a, you know, a rude awakening, but based on the circumstances where you’re like, you know, on the spot with your back against the wall, that you’re next, you know, we need to find a job within the next 60 days or we have to leave the country, you know what I mean? That is willing to sponsor that you know, that working visa and that green card you know, status and paperwork and so on and so forth.

So yeah, so it’s it’s a little bit of being with your back against the wall with a little bit of experience from you know, what I had, you know, had in my family happened to us, you know, firsthand that brought us to the point where like, okay, you know, we know that we need to break up the cycle that it is possible, because I’ve seen others possible in a much smaller scale, of course, and we have done right now, but still, you know what I mean? I’m my mother as an elementary teacher would have never been able to afford a private schooling for me, send me to the US. To study, you know what I mean? It’s, it’s all been the results of that one decision that he made, you know, two years prior to invest. So it’s been for me now, you know, I see it as like, wow, it’s a it was a legacy for the unborn because I wasn’t even born back then when he purchased it, and now I’m on that same mission to create that legacy of prosperity for others for families, you know, for generations to come for people on my never know, but for some reason, you know, run into us now. And, and if we can share a little bit about what we’ve learned and how we’ve done it, we, it would be, I would have said it would have been a life well lived.

J Darrin Gross 18:40

Yeah. Well, it’s amazing. You know, two things you said there one is the kind of serendipity of the fact that your father did make this investment and the the cash flow from that was able to provide, you know, your family existence and sounds like you’re able to live fairly well and that you’re able to you know, make your And do things.

Michelle Bosch 19:01

Yeah. I mean, even learning English right now to be talking to you, Darrin, because without going to a bilingual school or private school back home, I would have not even learned a second language. You know what I mean?

J Darrin Gross 19:10

Right. Right. Well, just the opportunities. I mean, again, and I don’t know that everybody. Well, I think so much of what I think people get without those kinds of experiences is kind of the here and now it’s all about money and how fast kind of spend the money kind of thing. But the fact that you had this, and then also that the Kiyosaki experience. I know I’ve read a couple of his books. I think my favorite that I’ve read was the I think it was The Cashflow Quadrant. Think that one really spoke to me talk about the box or an employee back, there it is. But to me, it just again, is that mindset shift from employee to an investor kind of thing and just that mentality thing there. So that’s it. That’s awesome. I appreciate you sharing that with us.

Michelle Bosch 20:02

You can’t You can’t start a business with an employee mindset, you know that that’s something different also, it’s probably, you know, a different discussion but that’s, you know, you’re, you’re gonna have to give it your all, you’re gonna have to, you know, say yes to everything at the beginning, you’re going to have to, you know, work 80 hour weeks, you know, now so that you can live later, like, others are not willing to right now and so on and so forth. But, um, but yeah, it was, um, we were doing it anyways, you know, working for someone else. So what was the difference? You know?

J Darrin Gross 20:38

Sure. Sure. So I want to ask you, so you, you’re in multiple asset classes. You started off you did your first single family flip and it sounds like that there were some challenges there. You you found your way

Michelle Bosch 20:52

We actually didn’t we actually didn’t go through with a Darrin. We chickend out because, you know, we had our inspection period and we thought oh my god. We’re way over our heads, we chickened out and backed out of that.

J Darrin Gross 21:03

Okay? But you didn’t stop.

But you didn’t stop there. So, so then Okay, so you find your way to land. And you you recognize it’s not about getting to the courthouse, it’s getting to the people before property shows up at the courthouse. I understood, you know, and you mentioned there that you you perfected a letter. And I’m just curious about if you can share with us a little bit about maybe the first iteration and what you know, how long it took you to kind of work the kinks out to where your response was higher to where you you actually had a business what what kind of timeline was that?

Michelle Bosch 21:43

Oh, it was about three years, but um, but it was, but we had small successes such that you know, there were the carrot but was big enough to continue exploring it and both jack and I are similar in that once we put our sights into something And we see that it is possible to have a little bit of success that you know that that small success can translate into bigger explosive growth. It’s about you know, we’re both very perseverant. We’re complete Bulldogs when we like, decide that we’re going to, you know, perfect and master something. It’s, it’s, uh, we’re complete diehards. So So that’s, that’s, that’s one thing i think that you know helped us figure out the land and and really, you know, go through many many iterations of that letter where we would change you know, split testing, where you change you know, the first sentence award in the first sentence and then you send you know what you had before and you go and test that and then you, you see which of those wins and then that winner one you change another sentence and you know what I mean? And it took a little bit at the letter plus the process in the background. You know how to buy it, how to sell it. We became students of online marketing, you know, to be able to sell our, you know, our land online. So it was a process and eventually, you know, we came across a model. That is not something that we invented, but we came across a big auction company that was auctioning houses back in, I would say 2002 or three here in Arizona, and we thought, wow, if they’re auctioning houses, we could probably auction our our properties because we had no problem buying the properties. To this day, you know, we’re able to buy for five to 25 cents on the dollar very easily for every 750 to 1000 letters that we send, we get anywhere between six and 15 callbacks. And it’s people that got just really don’t want their property at all anymore. It’s not they’re not just motivated and just don’t want it. And for many reasons, maybe, you know, maybe we’re dealing with the heirs and the heirs live someplace else. Maybe they decided to buy two pieces of property at some point. where they were going to retire and they bought one here in Arizona and one in Florida. And they decided to, you know, retire here in Arizona. But now the Florida one is, you know, they don’t have their kids don’t want it, or divorce or time circumstances, you know, they need money for some reason. And they’re willing to, you know, lead gold property for very, very little money. So, so yeah, I took it, you know, between the buying and the selling, it took us a little bit. And on the selling side, like I said, we became, you know, students of online marketing. And then we came across this other model where we could flush 200 properties, properties pretty much in one day, I were buying, you know, having one a quarter buying about 80 properties a month. And with a team of 20 30 people at that point, you know, it was it was a business it is it continues to be a business right now. It’s just that now we have so much more technology, so much more automation that goes into that I’m able to do what I was able to do back then was a much smaller team. And I In Yeah, the investments in technology and in, I would say in, in mentorship in order to us be able to grow as business owners, you know, and get out of that employee mindset. Because it’s not just hard work, you know, the mindset, it’s also working on strategy for your business, for growth and so on and so forth. And building and recruiting amazing team that is there, you know, to really make decisions like you would, if they are aligning with your vision, and they’re aligning with your core values. I mean, a lot of those things I didn’t understand when I started, you know what I mean, but I understand now, and, and we’re able to continue to do it with a lot of ease and grace, you know, and, and not have a J O B, even though the flipping of the land is a J O B because if you don’t not send letters, if you are not selling, you are not going to have income coming in unless you sold a chunk of those properties. You know, But even that income is going to come to an end, you know, when they pay off the note that passive cash flow comes to an end as well.

So, so it’s, we call that, you know, the land flips for cash, we call them one time cash, the notes, we call them temporary cash. And, you know, the single families and apartment buildings, we call that forever cash, that’s pretty much you can sit on that asset, you know, for as long as you want to. And, you know, if you’re operating it at a good, you know, in a good way, it’s going to continue to spit out cash flow for you. And I mean, hopefully for for many generations to come because that’s what we want, you know, for Sophia, you know, I’m able to stand on the shoulders of my father, and I want her to stand on, you know, jack and my shoulders and, you know, grow this and continue building upon that for many generations to come.

J Darrin Gross 26:49

No, I love that. That’s, that to me, really is the power of real estate. Yeah. What I just ask you real quick, the, you know, the So you said you perfect system in a particular asset class, raw land, right? Yeah. So many people get content or just they they kind of keep the blinders on and they stay in their lane, if you will. And there I find it kind of the rare few that are able to recognize opportunities in multiple asset classes or be able to shift gears or recognize the opportunity. Can you speak a little bit to what it was that allowed you to say, Okay, we’ve got this going on. Let’s see what else we can do. Because you mentioned that you went to single family local, and then subsequently the multifamily.

Michelle Bosch 27:39

Yeah, I think in part, it’s the entrepreneurial bug, in that entrepreneurs by nature are incredibly curious. And, and that if you add that to, you know, a desire for always a bigger future check in our eternal optimists and, you know, we’re always of the belief that our Future is gonna be better than our past. And so in part was, I think it was it’s that in and also, like I said recognizing that one, that one asset class doesn’t entirely do the job for your long term vision, you know what I mean? And, and that you will have to, you know, start looking elsewhere at some point but it is incredibly important to, you know, when you’re starting because there’s so many ways to skin this cat in real estate to really focus otherwise, you do suffer, you know, the risk of shiny Penny syndrome, and completely diverting your your energy and having movement a lot, a lot, a lot of busy movement that doesn’t bring you forward. So I would say for a period of almost six years, we really focus exclusively on mastery for the land, you know. And what I mean by my mastery is like 4000 flips Like iteration after iteration after iteration because that repetition you know the scale allowed us repetition we you know that is an asset class because we’re able to you know buy so many and sell so many quickly that it that scale gives you the benefit of repetition and with repetition comes what I call mastery you know, I mean you cannot master something you can’t repeat like you know you can do I don’t know how many homes a year and if you’re doing I don’t know five or six because it’s a side hustle because you have a main you know, your main job I don’t know if that’s you’re gonna get a lot of mastery from it you’re gonna definitely learn but if you have thousands and thousands of transactions you know what that skill allows us repetition mastery. And once you have mastery in that one lane like you call it, you know, it’s like having a PhD and making money. And you can have you know, you can find a head to the horse that lane, because that lane is perfected, you know what I mean? And you can start, you know, focusing on Okay, where else can I innovate? Or where else can I accelerate my growth or my cash? Now my passive cash flow. And for us, you know, we, we kind of lifted our heads in 2009 after the 2008 recession, and everyone around us was losing their shirt and we’re like, oh my gosh, we continue flipping land. And, you know, let’s go now it makes sense to buy $50,000 homes put in there, you know, 5 10 thousand repairs, and go rent them before you know, prices here in Phoenix, where are wages it really didn’t make sense. So, um, we just, you know, kept discipline to what we knew how to do best, you know, and we specialize only in three types of properties even in the land, you know, we don’t look at all kinds of land, either it’s got to be infill lots, or path of growth lots or recreational property that is no more than two hours away from a major city that is experiencing growth of some sort. You know I mean?

So you know in either way I would say for the first two types of property for the land my exit my buyer is a builder is a financial model you know buyer, you know, that has a financial mindset. And the third one is much more of a retail customer someone that wants to go and you know, hike, be able to go fishing here in the White Mountain Lakes area up in northern Arizona or wherever it is, you know, because we don’t do it just in Arizona. We now you do it across 17 states and very little competition, because the last thing people think about when you think about real estate is a piece of land, but we don’t specialize and you know, the million dollar you know, infill lot here in downtown Phoenix, you know, I’m talking there’s a residential subdivision, and there’s houses everywhere and there’s one infill lot. You know, I mean, that has been sitting there forever, or path of growth, you know, between here Phoenix and Tucson. These two cities will eventually You know, merge, you know, anything between here and there here in Las Vegas. And it’s not just in Phoenix, like, you can find that same dynamic in Texas, in North Carolina, and Florida. You know what I mean? You you find that same dynamic and many of the southern states, which we like to actually focus from the, you know, middle of the US south, so that we can market year round because it’s hard to market a piece of land. Um, when it’s under, you know, a few feet of snow. Right, right. Yeah.

J Darrin Gross 32:30

Yeah, I can appreciate that.

Michelle Bosch 32:33

So, yeah.

J Darrin Gross 32:35

So and I guess the thing that I love that you shared there is just the kind of the mastering the one that was actually a cash flow vehicle. I mean, kind of like that, that that really was kind of the vehicle that gave you the opportunity

Michelle Bosch 32:47

That’s how we got out of the rat race with the land, you know,

J Darrin Gross 32:50

Right. And it wasn’t like you went from there and then you said, we’re going to go do Amazon stores or some but you stayed in real estate recognize that the real estate That there was a another and that you’re buying below the market. You mean you were aware of what was going on in the market, which I think a lot of awareness is really what you know, creates opportunity. I think that so often people are attracted to something with all the press and that’s at the height of the market, which is not necessarily the time to create an opportunity. Or, you know, it’s an opportunity for the seller, but maybe not necessarily for the buyer to create instant equity. I want to ask you, given the in Today is May 27 to 2020. We’re somewhere in the middle of this COVID crisis. States are reopening but the economy is taking a major hit. Before we we pressed record, we were talking a little bit and I’d like if you can kind of speak to how the different asset classes are performing in this time of economic uncertainty.

Michelle Bosch 34:03

So in the land space, like I was sharing with you, we cannot, that’s the land is selling like hotcakes. We cannot keep it long enough. And I think it’s partly possibly because people want to get out of their home in the city and have something to go and look forward to for a weekend without wearing a mask. And without, you know, any risk of infection. You know, we’re also seeing a lot of you know, financial buyers right now a lot of builders that were looking probably four times like now to go out there and buy so there’s an influx of also people looking for bargains out there. Um, and in, in so on the land. I continue seeing basically no difference in any if anything, there’s an improvement right now and even over the long term. What was our, you know, experience back in 2008 was that, you know, landed type of land that we specialize on is maybe lagging six months behind, you know, commercial and single family. And that we, if we see the effects, we’re going to probably see the effects that we saw back then. Which is we’re going to have to buy for lower, you know, and sell for lower, you know? But if you can buy for lower, you can sell for lower and still make, you know, 10, 20 $30,000 profits, you know, spreads because our typical spread is between 10 and $20,000 on a piece of land. And so we’re, we’re going to continue to be able to generate those on just perhaps, you know, instead of 10 to 20, maybe they become, you know, seven to $15,000. But it’s still I mean, it’s still a good deal. You know, from my perspective, and in on the on the single family homes. What we have seen so far is 100% collections, you know, on all three markets. We’re here in Phoenix, we’re in Cleveland, and we’re in Omaha, Nebraska and our single family home. 100% collection.

Um, and, you know, we, we anticipate that to remain that way if anything, maybe, you know, a slight decrease, but, I mean, we we are, if anything here the, you know, City of Phoenix is the only one where I could say, well, maybe some of you know, I’m gonna see some of my values drop, you know, in terms of you know, the, the properties, but we are not necessarily an investor is looking for appreciation when it comes to the single family when we started investing a single family in 2009. You know, we were looking at 1960s homes that are brick built that are not made out of the drywall, you know, or and, and that that, you know, there were brick built that we thought it families need to, you know, come together and live together in order to come out of an economic you know, situation that it needs to be strong walls a strong home. And so on and so forth. And so it was never with a mindset of like, Oh my gosh, you’re going to appreciate which they did, you know, four or five times of what we paid for them. And in some of the, you know, real estate that we bought here in Phoenix, we actually when we hit that, you know, I would say three, four years ago, we started selling some of that and you know, in selling a home that I bought for 50,000 I sold it for 200 and then when again and started buying the same home and Cleveland for 50 and in Omaha, Nebraska for 50 again, you know, I mean, sort of one sale of one home I was able to buy for and in other markets were basically there were at a different you know, cycle at a different part in the market. Yeah. And and so I predict that that will continue to happen. Like I said, I’m we had the appreciation and we would love it, but that’s not what we’re going for. We’re going for the cash flow. And on the multifamily side on the multifamily side, I have seen right now. You know, our property in Louisiana, North Carolina and Oklahoma City, what we have is anywhere between 90 and 96% collection rate. And it’s kind of normal to what we’ve experienced in the past without a pandemic without an economic downturn. And we’re pretty much in line where we’re at.

And I think the reason why is that in all, you know, in two of those three markets, at least in two of those three markets, we have a, what we call a cone of prosperity from the government in that I’m very close to in North Carolina to Fort Bragg. And I’m very close to Tinker Air Force Base and in Oklahoma City. And a lot of the tenant base basically is either military or retired military. And if I do have, you know, a percentage of people that is workforce, people that might lose their jobs. It’s It’s, it’s, it’s much smaller than if you weren’t in in other areas. You know what I mean? Because of that, we’ve been able to mitigate and we purchased those assets. With that in mind that if something was to happen in the economy that we would want to have a, a, we call it a, you know, a artificial cone of prosperity with a government agency with a government as an employer or a big employer like an Amazon or whatever, you know what I mean? I always look for such a, an economic cone of prosperity close by to the property where we’re going to be buying.

So um, but but it’s still you know, there I know that we’re probably getting out you know, gearing up to you know, the, your your risk mitigation and I you know, I can already start talking about that on all three, you know, asset classes, but specifically on their apartment side, you know, the BIGGEST RISK that we have right now is that for the percentage of the tenant base that is unemployed, or that has lost their job because it is worked for housing, we buy c properties and B neighborhoods you know, that that if they’ve lost their job and unemployment you know, kept gets cut down, that they might not be able to To make their rent payments, so though, that’s a big risk right there. Another risk is that you know, the economic recovery is longer than expected. And that therefore, you know, we are seeing having to carry, you know, a delinquency or a vacancy, you know, well right now not even a vacancy because we cannot evict So, so you know, that we’re carrying a delinquency for longer than we want to, you know, what I mean? And some of the measures that we’ve taken it, you know, in order to preserve cash is in the beginning we are funded in order to be able to have you know, well capitalized asset number one, but now we’ve we’ve pretty much you know, cancel any big CAP X project for all three properties. We stopped already immediately because we were coming to the point where we were going to have to make payments you know, cuz on two of those three properties, we we’ve syndicated the asset and it’s So we we stopped, you know, payments to our investors just out of precaution. And the properties have had amazing collection rates that I could have paid them. But I continue to hold on to that cash, because I want to have a little bit more time and visibility into what happens right now come July, August, you know what I mean, in terms of where we’re at, you know, with the economy where we’re at with unemployment and, and yeah, so those those are some of the things that we’re doing but we hope that by being a from an asset management perspective, a first in class community because that’s what we strive for, you know, when we come across a sea, you know, class acid in the neighborhood, we want to become the best. C there is such that there is a if there is an economic pressure, you know, that even people that are in a B property right now, that might be slightly nicer that when they have to downgrade that they’re going to downgrade into the next nicest C which would be us, you know what I mean? Um, so.

So that’s kind of how we’re going about doing that is just making sure that we’re well capitalized. I’m not excited about forbearance at all, I believe in making pay if I can pay my bills, pay my bills. And, and yeah, so now our conversation is starting to shift actually with, you know, our investors and into opportunities, because we know that there, there are owners and operators, large multifamily that bought in the last year, even within the, you know, last quarter of, you know, to 2019 that we’re expecting, you know, in forecasting in their models, rent increases, you know, 3 5 7 percent and now, those increases are not materializing. I mean, they are gonna leave and there’ll be opportunities out there for us to go and Again, just like we bought here in Phoenix back in 2008. This time we’re going to be buying large multifamily. So kind of positioning ourselves for that, you know, having that, you know, that conversation and opening that mindset to the investor that, you know, that wants to invest with us that, that this is the right time to buy, you know, when this happens, and even though everyone else is trying to sell and trying to get out that it’s okay to be a contrarian, but it’s okay to, you know, you have to stomach and go against the grain of what everyone else is doing, because we’ve done it before and it’s, it’s paid off tremendously. So, um, so that’s kind of where we’re at right now. Yeah.

J Darrin Gross 43:41

No, I appreciate you sharing that with us. The other risk, like I do like to ask people, you know, what they consider to be the BIGGEST RISK. Clearly, the, the, you know, the economic uncertainty we’re in, you know, is is it’s going to create some opportunities. I mean, I think that’s the one thing that’s always and I think your story is illustrated at well, is that, you know, when when, when there is a situation it’s not only a I mean it’s trouble for some but it’s opportunity for others that are well prepared. Yeah, it sounds like you’ve been able to take advantage of that. So I appreciate you sharing that. Well, you knocked out the the BIGGEST RISK question and I appreciate you doing that. Michelle, Where can the listeners go if they would like to learn more or connect with you?

Michelle Bosch 44:34

If you’re at all interested in learning about land, you can go to LandProfitFun.com because it’s fun to make money with land. And so land profit fun calm. You can also go to Michelle calm MichelleBosh.com. I’m sorry, MichelleBosh Bosch. And, yeah, from there, you can connect with me on Facebook. I’m on Facebook as Michelle Bosh, Instagram Michelle Bosh, official. And our podcasts, you know, Forever Cash, podcasts and the Inflow podcast.

J Darrin Gross 45:06

Got it. Well Michelle, I have enjoyed this immensely, and I can’t say thanks enough for taking the time to talk. I learned a lot, and I hope we can do it again soon.

Michelle Bosch 45:18

Absolutely. It was my pleasure. Thank you so much for having me.

J Darrin Gross 45:21

All right. For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow? That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CREPN Radio.

Intro 45:39

You’re listening to CREPN Radio for influential commercial real estate professionals. For more information on this or any of our guests like us on Facebook, CREPN Radio

Lease Purchase Real Estate Deals with Zachary Beach – CREPN #262

Zachary Beach 0:00

As in real estate in general, it’s all comes down to the motivation. Or really it comes down to if you can provide that seller with the right solution like meaning, if. So, selling their property on a lease purchase or selling an owner financing is going to solve their problem then they have a deal. Most sellers are going to say we have a script, it says 99% of the people that we buy for one a traditional sale. So, of course, most people you talk to are going to want to sell traditionally, they’re going to want to sell traditionally, they’re gonna want to close fast, you’re gonna want all cash and make it as easy as possible. But the truth is, it’s it’s not always possible. So that’s when our solutions come into play, or our types of options that we buy from.

Intro 0:44

Welcome to CREPN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast. Whether you’re an investor broker, lender, property manager, attorney or accountant, we’re here to learn from the experts.

J Darrin Gross 1:04

Welcome to Commercial Real Estate Pro Networks, CREPN Radio. Thanks for joining us. My name is J. Darrin Gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio. Today, my guest is Zachary Beach. Zachary is an Amazon best selling author and of the book The New Rules of Real Estate Investing. And he’s also the co host of the Smart Real Estate Coach Podcast. And he’s also a partner and COO and coach at Smart Real Estate Coach. And in just a minute, we’re going to talk with Zachary about working in real estate during these chaotic times and also buying and selling real estate on terms But first a quick reminder, if you like our show CREPN Radio, there are a couple things you can do. You can like, share and subscribe. And leave, please consider leaving a comment we’d love to hear from our listeners. Also, if you want to check out how handsome our guests are, be sure to check out our YouTube channel. And that’s at Commercial Real Estate Pro Network. And also if you go there, please consider subscribing. I’d love to drive that count up as much as we can. And with that, I want to welcome my guest, Zack, welcome to CREPN Radio.

Zachary Beach 2:40

Darrin, thanks for having me on. I’m excited tp bring your audience some value and have a good conversation.

J Darrin Gross 2:46

I’m looking forward to our conversation and I’m certain the audience will enjoy this as well. But before we get started, if you could take just a minute and share with the listeners a little bit about your background

Zachary Beach 2:59

So about five years ago, I left being a bartender and personal trainer. I was about 24 or 25. At the time at that, at that exact time, I had zero real estate experience. Clearly I was a bartender and personal trainer. And what I did was I right reached out to my father in law who’s been in real estate for over 25 years, and actually partnered up with him and my brother in law, Nick, who also was a real estate agent for about eight years. So they’re the ones that provided some good guidance for me into the real estate world. And at that time, hopped in about two and a half to three years later, had roughly 100 deals underneath my belt buying and selling real estate. And now fast forward another two years, so I’m about to turn 30. I’ve been 5 years in the business and we have an amazing investment portfolio because we’re definitely still in the trenches doing deals for ourself. And then we’ve created basically a guinea pig version, we’re the guinea pig and then we teach students around the country or we call associates real estate investors that are looking to be able to buy and sell in terms and and grow out a real estate business like like we did.

J Darrin Gross 4:19

Got it, and I didn’t catch it Where are you based?

Zachary Beach 4:23

Newport Rhode Island

J Darrin Gross 4:24

Okay. And as far as the your activity, so, you do both your own inventory your own portfolio and then are you also acting as a broker or are you then doing the the coaching or or do you do I know you do the coaching in the inventory? Do you do any brokering yourself?

Zachary Beach 4:49

So good questions. So we have our own portfolio which we buy and sell exactly the way we teach people how to do it. But then we also have separate we have our own coaching program. We’re not brokers, we just teach you have a very specific model. And what we do is provide real estate investors or want to be real estate investors, we have plenty of people that are doing their first deal with us. And then we have plenty of people that are doing their 100th or 200th deals with us. We basically lock arms with them and help them through every aspect of the business. So that could be working with sellers and getting properties under contract to selling the property and working with buyers or very specific buyer pool and then managing those properties and getting them to the finish line.

J Darrin Gross 5:38

So given the the turn of events here, let’s see today we’re recording and it’s May 6. So by my calendar, we’re a little over two months into this depending on you know, when you were affected when it was Rhode Island did they are you guys in a shutdown mode are great,

Zachary Beach 6:01

Yeah, we’re in shutdown. But we’re in a release mode. Basically, starting May 8, we have steps going towards letting us at least go back out into public Rhode Island, you know, handled everything actually rather well. But we’re actually, although I’m based in Rhode Island, we buy property in Massachusetts and Connecticut for our own portfolio. But then we have students around the country and 90 plus markets. So everybody, we’ve been able to kind of coordinate this Mass Effect, depending on whatever market they’re in.

J Darrin Gross 6:35

Let’s just talk about that a little bit. So the, the, if you can give us kind of an idea of what what, you know, your your model look like as far as how you guys were operating pre COVID-19. And then tell us a little bit about how things have changed, given what you’re what we’re dealing with right now.

Zachary Beach 6:54

Yeah, so the only major change that has happened which I’m sure it makes a lot of sense is we’re doing more buying and selling things virtually than face to face meetings. I can tell you our original mindset and thought process was, if somebody is going to sell you a property with little to no money down, not signing personally, and not going to get a bank loan, then and for a long period of time, we’re talking 3, 5, 10 plus years, they’re gonna want to meet you in person. And what we’ve come to discover is that’s not necessarily the case. You could actually do these types of deals virtually from your house. The only time that we typically will go see a property is for two reasons. One is If, for some reason that seller definitely needs a face to face meeting, which some people still do, of course, we do it from a social distance. Or we’re go or we already have the property signed and we either have one of our teammates or an inspector or somebody goes to the property and do a full evaluation of it just to make sure because all of our contract At this time would be contingent upon that.

J Darrin Gross 8:04

So previously though like I think I understand is that you were you were physically going out and seeing the properties doing the inspections meeting everybody face to face. Was that the

Zachary Beach 8:14

Yeah. So let me walk you through like a typical process. So we have multiple calls in which we, we access or require our acquire our properties, or leads through through phone, phone or internet. And then typically after the first call or two, we would set an appointment and go to the house. What has changed now is now we’ve gone from that process to now we’re in we’re buying virtually so instead of going to see the house will either do like a zoom walkthrough where you can have a seller, have a phone either do FaceTime video walkthrough via internet, if we want to just get our eyes on it or instead of even doing that what we’re doing is we’re putting together different offers, or what we consider options, which are different based upon the length of time. So when we talk about buying and selling on terms, there’s three main terms, it’s typically; length of time which the contract needs to be fulfilled, the purchase price or the equity locked in. And if the property is free and clear how much you’re going to establish as a monthly payment. When I say free and clear me no mortgage. So we’ve actually now decided to put together options or offers ahead of time. And then once somebody selected an offer, and we put together the correct contract, we’re doing the contract signing before we see the property and we’re just making it contingent upon seeing the house or doing a proper walkthrough. That way, the only people we’re actually meeting and coming in contact with are those that we already have a contract on. You know, there could be slight variances based on the seller Yeah, based on how much rapport that needs to be built, but if you’re looking at a strict change in our sequencing process, it’s, you know, we’re we’re putting contracts first for for appointments now.

J Darrin Gross 10:11

Gotcha. It is kind of a funny thing they assuming that you probably thought it had to work in the order that you were doing it before. I realized I’m like, you know, everybody, it I’ve run into that myself as like the assumption of this is the way we do it and in realizing that didn’t need to be. So given that, that more of the virtual or you have you opened up your territory beyond the the footprint, you said, Massachusetts and Connecticut are kind of your, your territory, is that right?

Zachary Beach 10:50

It’s Connecticut and Rhode Island, so primarily southern New England. Okay. Us personally, we haven’t really opened up our footprint that much further. That’s plenty of territory to be able to do the amount of deals that we want to accomplish. Plus, we already have our attorney established and our dream team established each one of those states. But some of our associates, as I said, live in bigger states, we’ve, we’ve had them open up their territory, because now buying a property three hours away is just the same as buying a property, you know, within 45 minutes. And, of course, there comes some research and things associated with if you want to enter in a certain market. But you know, a lot of our associates now are expanding their market because it doesn’t necessarily matter as much. Even if you have to see the property once. It’s one hour, you know, one trip compared to five others and we typically only see our properties once or twice because of the way we sell, which the buyer would have full responsibility of the property.

J Darrin Gross 11:51

Got it? Have you seen any increase or decrease in the flow of opportunities since the onset of of COVID-19

Zachary Beach 12:02

Yeah, actually, we’ve seen a huge influx in activity for an opportunities for us to be able to help out both the buyers and sellers that we work with. And in particular, so right now, obviously, there’s a couple, there’s a couple pockets up in the commercial space or your audience knowing a lot more about commercial space. jumbo loans are few and far between right now. So any single family home that needs a jumbo loan is extremely hard for a buyer to be able to purchase right now. Now, it doesn’t mean that you can’t find them. It just means that the criteria from the banks are significantly harder. I’ve seen chase presented that you had to have a 750 credit score, like six to 12 months in reserves. You know, so it’s it’s extreme and plus 20 to 25% down so you’re just taking a significant amount of buyers that originally could qualify for a loan, not able to. So huge opportunities in the jumbo loan space right now for single family homes buying and selling on terms. Because the way we’re buying it, we’re either going to buy it on owner financing, meaning the seller is going to finance the property to us, which means we don’t have to go to a bank, or buying it on a lease purchase, which again, is a contract between the buyer, the seller and our company. And we don’t have to go to a bank or the end buyer, the tenant buyers, which we call them. So that’s somebody who’s just outside of finance ability and just needs a rent to own program in order to buy a house. They’re not going to call, they’re not going to have to go get their mortgage until, you know 24 months from now, which I’m sure the banks will be a completely different state. Nobody knows what’s gonna happen next. But that’s just one example of the huge opportunity that’s happening right now.

J Darrin Gross 13:51

So you’re seeing a big increase in the the jumbo loans?

Zachary Beach 13:55

Meaning like, yeah, so sellers that originally could sell their properties that depends on the state that you’re in. But anyway, anything from like you know, 600,000 to a million plus are now just sitting on the market because there’s very few buyers that can actually purchase the properties at this time. The other thing that we see as well as far as opportunity because this once you kind of affect what you affect a traditional buyer, so somebody that’s gonna go get a loan effect basically the seller market because now the sellers there’s gonna be overabundance of inventory and no buyers to be able to qualify for them. And right now there’s an extreme tightening of qualifications. Thanks. So now, the now all the sellers are sitting on the market and are expiring from their traditional listings. So now sellers are looking for new opportunities in order to sell their property. So as that buyer pool continues to build, meaning the ones that we work in the ones that are outside of finance ability right now. We’re going to be able to make a see significant, we are able to provide a significant solution to sellers that are now expiring for the market. And those who are, you know, selling their property on their own that can no longer find these buyers to sell the property to.

J Darrin Gross 15:13

Got it, and are you as far as your marketing efforts? Do you you market to the seller or do you market to the buyer or to both?

Zachary Beach 15:24

So the way our typical process is, it’s the opposite of like a wholesale method which is wholesale. It’s like build your buyers list and then go get houses to sell to. What we do is we work with and we have a small team, typically, virtual assistants and a CRM that has some automation set up with it and we market directly to sellers once we acquire properties, or buy properties from the seller, we would then present it in market to our pool of buyers. I mean across the country, this is even before is pre COVID. It’s roughly 70 80% of buyers could not qualify for traditional loan in general. So now that COVID is hitting that that number is growing. So finding buyers typically is never the issue it right now with the need for additional solutions and additional options as the seller opportunity is significant as well. I mean, that’s why we’ve seen a giant uptick in the amount of properties that our associates are taking under contract. And buying.

J Darrin Gross 16:29

You mentioned that 70 to 80%. were not able to qualify, is that for the jumbo? Or is that for just buying in general?

Zachary Beach 16:38

That was just for a traditional loan, like when I haven’t talked to jumbo?

J Darrin Gross 16:43

Wow,

Zachary Beach 16:44

It’s gonna depend on your market. But if you’re looking at the criteria based upon somebody that had a credit ding, which we’re just starting to see some of our buyers come out of 2008, I mean I know it’s 12 years later, but some people were affected that much Now what we’re going to see, at least my expectation, what we’re going to see, I mean, I don’t have a crystal ball is that this is that COVID is going to affect people for the next 12, 18, 24 plus months. So although a lot of things are continue to stay, as is two months in, people that have been lost their jobs and things like that are now going to need, especially from a buying standpoint, I tape a program that we offer, like our red zone in order to qualify for a loan, especially if they plan on buying in the next couple years.

J Darrin Gross 17:35

Right, right. It’s interesting, I hadn’t realized the percentage to be so high. I mean, I knew there’s always a marketplace for the non conventional. But you know, based on what you see on TV and stuff, I wouldn’t, you know, I’d say I guess I didn’t really think through it that much as as far as the the buyers here.

Zachary Beach 17:55

Let’s look at just to give you a little more context, self employed Right, there’s a large group of people that need roughly 24 months of seasoning, what banks called seasoning to be able to show, they make that type of money. That’s actually I bought, I’m sitting in my guest room, but I actually bought my house through a lease purchase as well or through a rent to own program. Because I’m self employed myself, and in order to acquire the property that I wanted to at the price I wanted to, I was able to buy it through a lease purchase. So even if you take these types of techniques and and go buy your own house, I’d have to go to a bank for 36 months, I was able to build up some great equity in the property.

J Darrin Gross 18:37

Got it? And tell me about the the sellers mindset. You know, if they had you said you’re calling on these expired listings or or, you know, they were trying, I’m assuming they tried a conventional sale before. Can you talk a little bit about their mindset and how they, how receptive they are to this.

Zachary Beach 19:01

Yes, it’s all as in real estate in general, it’s all comes down to the motivation. Or really it comes down to if you can provide that seller with the right solution like meeting, if. So, selling their property on a lease purchase or selling an owner financing is going to solve their problem, then they have a deal. Most sellers are going to say we have a script, it says 99% of the people that we buy for one a traditional sale. So, of course, most people you talk to are going to want to sell traditionally, they’re going to want to sell traditionally, they’re going to want to close fast, they’re going to want all cash and make it as easy as possible. But the truth is, it’s it’s, it’s not always possible. So that’s when our solutions come into play, or our types of options that we buy from. So it’s all about meeting a seller where they are and if you’re able to provide the solution to that motivation, or to their actual need. We went over what wants are but what is their actual need? Is there need that they have two mortgages and they just moved out of state now, you know, is there need that they need some mortgage relief? Is there need that, you know, they want to push off some of their capital gains. So it’s all about discovering what their actual need is, and can you provide that solution? So it takes a little bit of time in order to say, hone in on your skills in order to figure out if you could actually help somebody. But where, right now across the country, we purchased over 20 properties last month, with a small group of people. So the need is there.

J Darrin Gross 20:37

No, that’s, that’s interesting. Do you have any kind of sense? Or how did that 20 last month compared to a month prior? or?

Zachary Beach 20:48

Yeah, good question. So we’ve seen a steady increase. It’s the last last three months so it was like 10, 15, 20ish, I’ll just given you round numbers, but it is moving in, in that S curve, because we started to see a slight effect from it, meaning are a lot of our harvesting comes from and when I say harvesting, I mean like we buy a lot of properties in like September, October. Because the truth is, we tend to be a large group of people’s Plan B, right? If they can’t sell their property, then then they’re open to doing something on terms. So we did we typically do really well and fall. And then what happened was over the winter, we continue to take on more properties. But then as soon as COVID hit the traditional seller, mindset had to change because this was not a typical spring, like a typical spring as a seller has been waiting to list their property with the real estate agent that they chose back in January. And right now, there was there was no sense of that, because they needed an alternative route. So those that were motivated became extremely motivated and those who are semi motivated became a little bit higher motivated. So that’s why we’ve seen that steady increase. And the surprising thing was because we weren’t sure about what it was going to do for our buyers because we weren’t sure if people are going to hoard money instead of going to buy a new house, you know, kind of come out of the renters mind saying go buy a home, but because of the clamp down of the banks and requirements, they actually opened up our pool of buyers that originally were going to buy anyways to now move into our program in order to buy through a rent to own because they couldn’t no longer qualify for a loan. So by the tightening of the banks actually opened up a pool of buyers, which we would have thought would have been hoarding money. So pretty interesting results. We couldn’t have predicted that.

J Darrin Gross 22:56

No, that’s that’s interesting. The you know, We’re just being positioned properly can can, you know you’re positioned to take advantage of and obviously take advantage of, but to be the solution that was not available to people through traditional means. So that’s interesting, great. I hadn’t thought of that.

Zachary Beach 23:18

The great thing was or take the great thing. But we, we Luckily, as a family, learn from our lessons, my father in law, Chris back in 2008, got crushed. So that’s why we built the business. So that’s why he originally started the business to buy and sell on terms because you’re not using your own cash, you’re not signing things personally, you know, you’re not going to banks for these. So we actually positioned ourselves outside of the traditional means of the traditional way of buying and selling and once COVID came, people could no longer do traditional so they had to start looking for alternative solutions. So we just, we just happened. But I just say we got lucky in a way but you just we positioned ourselves. In a place that we could provide solutions with alternative or creative financing, and just the need for that is now increased. And I would expect it to increase for the next three to five years.

J Darrin Gross 24:13

So you mentioned you, you you, first you position yourself where you guys do you do you purchase the property and then lease it to the buyer. So are you the are you cut in the middle there? And, you know, from the seller to the buyer? How’s that?

Zachary Beach 24:32

Yeah, so let’s just walk through one of our options. So a sandwich lease, it’s called so you’re actually talking perfect right in the middle. Sandwich lease means that you’re going to agree upon a price with a seller, you’re gonna agree upon a definitive end date with the seller or what we call like a length of time or a term. And you’re also going to be taking over let’s just use this example. They have a mortgage, they’re going to be taking over any responsibilities of the property, including the mortgage Taxes insurance. And you know, future repairs ain’t no responsibilities. The really cool nugget that I just want to throw in here is you’re actually not necessarily agreeing upon a purchase price. But you’re actually agreeing upon a locked in amount of equity in the house. So actually every month that you are collecting from your buyer and making a payment, you’re benefiting from the principal pay down, which is a fantastic way to build equity and build wealth in this business. And then once you have all that tied up with your seller, you’re then going to set you have control an equity interest in the home, you’re going to sell the property for an increased price, a shorter term and a higher monthly payment. And you’re going to be positioned in the middle to be collecting from your tenant buyer, and then paying off paying the expenses on the other property. So easy way to kind of look at it is like almost like Uber it with a lease purchase. You control everything But you don’t necessarily own it.

J Darrin Gross 25:58

No, it’s entertaining. You know, a little bit familiar with the concept. You know, it’s it’s something that is clearly an option and it’s I think the again the the percentage thing you mentioned 70 to 80% and even recognizing the self employed, how much of the self employed are affected by that number it’s you know, you can’t necessarily go and qualify for a traditional financing I know some of my wealthiest clients have conveyed me that Yeah, they don’t qualify for conventional financing based on just the way their source of income it’s, you know, they’re not getting a W two from a recognizable name, you know, household name that the underwriter can feel comfortable with, you know, expecting

Zachary Beach 26:45

it’s pretty crazy. Well, plus being self employed, right? When you’re not trying to qualify for something you pay, you always want to make as much money and pay at least my taxes. I mean, it’s just, that’s why you’re a business owner. But once that You have to like change your entire way of operating once you go try to qualify for a loan, which means you’re going to show as much money as possible that way, then the bank can recognize and qualify you for that traditional loan. So and that takes roughly 24 months to be able to prove that and show that. So what we’re doing is we’re giving something people the opportunity to agree upon a price lock in the price today live in the house that they want to buy, while they’re going through that process.

J Darrin Gross 27:27

Gotcha and, you in the middle, you negotiate the the purchase price, and then you’re building equity. And do you also get a little bit on the the differences between the mortgage and the right here collecting? Is that

Zachary Beach 27:40

correct? Yeah. So that’s a good introduction to so we get paid three ways on each one of these deals. You get paid from the non refundable deposit that we collect from our buyer. Because our buyers are locking in a price. We’re typically going to raise the price for a premium because we’re selling it to them and then say 24 36 months down the road, we collect a non refundable deposit that typically sits between five and 10% upfront. And then over time, what we’ll do is we’ll help them increase that deposit as well. So when they go to a bank, they won’t, they’ll be able to qualify for the best loans, not just any loan. So that’s one way we get paid. The second way we get paid is called paid number two, which is a spread, which is the difference between what you have to pay either the homeowner or the mortgage company and what you’re collecting from your buyer. And then payday number three would be the increased equity in the property because as I mentioned earlier, you get you’re benefiting from the principal pay down. So 500 bucks, a principal coming off your mortgage every single month, that’s six grand a year. I mean, that’s some significant over 36, you know, 18 grand that you’re building up, plus, if there’s any additional premium left on the back end, you’ll get That as well. So that’s our three paydays. If you’re, if you’re mine, I would include one of our YouTube links, just go to our SmartRealEstateCoach.com/youtube, our youtube.com/smartrealestatecoach and we have over 100 plus deals on there that we’ve structured with either ourselves are with students, so you’ll be able to see the nuances and kind of see how we’ve created these deals in order to create those three paydays.

J Darrin Gross 29:26

Got it. Hey question for you doing the least since you guys are you’re taking possession. Are you getting any depreciation on the property?

Zachary Beach 29:36

No, not on those. Because the depreciation well of course follow the title. So

J Darrin Gross 29:41

Okay,

Zachary Beach 29:41

We’re not what we’re doing is we’re going to be paying everything for the seller. We’re contractually obligated to make their mortgage payments, make the taxes, make those tax payments and all that as well. Seller actually still benefits from depreciation. That’s why of course buying on our other two options with I don’t know if we have time for today, but the other two options which are owner financing, and by subject to the existing loan, you’re getting depreciation because you’re gonna hold title.

J Darrin Gross 30:09

If you don’t mind, if we do have just a minute if you want to go through just kind of give us the, the, the distinguishable difference between the what we’ve been talking about and those two other two options.

Zachary Beach 30:22

Yeah, so with a easy way to think about with a lease purchase title transfers before the end of the term, owner financing the title transfer at the beginning of the term. So what you’re going to be doing is you’re going to be agreeing upon a price with a seller, you’re then going to be closing on the property. And I’m just going to assume in this example, that the property is free and clear, debt free. So then the seller is actually going to finance and hold the mortgage and you’re going to be paying the seller. Typically the way we structure those, if it’s like five years or less, it’s usually principal only payments. Of course if we can structure out means zero percent interest of anything typically longer than that we continue to try to get zero percent interest but if we’re doing 10 2030 years typically a seller wants interest on the property. So that’s why we structure it so you hold title seller holds the mortgage. On the subject two option that I was alluding to what you’re doing is you’re actually closing on the property subject to the existing loan. So you’re acknowledging that there’s already a mortgage on the property you’re taking title your contracts the obligated to continue to make that mortgage payment, which stays in the seller’s name.

J Darrin Gross 31:42

But it actually records your you’re on the title then. So you can I mean, if there’s a buyer,

Zachary Beach 31:49

Yeah, so our company, because we don’t ever tell you to personally sign anything but your company will, the company will hold or you know, if you hold an a trust there, wherever else you and your attorney to say That you should structure it best.

J Darrin Gross 32:03

Gotcha. Gotcha.

Zach, if we could, like I mentioned to you a little before we started recording by day, I’m an insurance broker. And I work with clients to assess risk and determine what to do with the risk. We typically consider one of three different strategies. The first is can we avoid the risk? If we can’t avoid it, then we look to see if there’s a way we can minimize the risk. And if those two are not options, then we look to see as a way we could transfer the risk. And that’s what an insurance policy is. I like to ask my guests if they can identify what they consider to be the BIGGEST RISK. And just to be clear, I’m not necessarily looking for an insurance related answer. If that’s if that is what you believe to be the BIGGEST RISK so be it but If you’re willing, I’d like to ask you, Zachary Beach. What is the BIGGEST RISK?

Zachary Beach 33:09

Yeah, it’s a fantastic question. The truth is we’ve we’ve transferred a lot based on your description, we’ve actually transferred or deferred a lot of the risk based on how we actually buy and sell real estate because the sellers still typically on title, and we have the ability to renegotiate based on our contracts. You know, we’re collecting a non refundable deposit from our buyer. So that’s limiting the risk. But if I’m just looking at it from like, purely what’s going on right now, today’s because we actually just came off one of our offsites that’s our BIGGEST RISK would be if like there’s a fear crisis that happens, meaning that people decide to no longer buy real estate, hoard money and stay where they are right? Or no longer want to sell property because there’s so fear driven that they want to stay where they are. Yeah, I don’t of course, I don’t see that happening. But I don’t have a crystal ball. But as I was alluding to earlier, it was we originally thought that people are going to start hoarding money. But then because of the tightening of the banks, it actually released some buyers that were ready to buy. So that kind of continues the cycle. So I would say that’d be the BIGGEST RISK other than, of course, if there’s a complete market crash. Now, I want to say it’s a risk to our current business model. It’s not risk to being in real estate, because the truth is right now if you have the ability to buy on terms, but also continue to take your profits and put them away, because if the market crashes, then you’re going to be able to buy property at a significant discount. So I would, I would say it’s just the risk to our current business model. But we’ve kind of evaluated some of these things and we’re working our best to set up for if the market prices again or crashes so it’s just important to look at it from all the Different standpoints. But any real estate market in general, does matter if it’s up or down, there’s always opportunities available.

J Darrin Gross 35:07

Yeah, no, that’s that’s definitely something to remember. I was talking with a commercial broker the other day and, and he was saying, you know, we can make money when the markets going up or the markets coming down. It’s when it’s at the top or the bottom, we have a bro. So I mean, that’s kind of an interesting take on it. But

Zachary Beach 35:28

Well most millionaires were especially real estate where they made their millions during the recession. So you see, like the new new age people that are coming out, they made their money when it was back, like you know, further away because they’re buying property a significant discount, and now the appreciation is significant. So if you can create long enough terms, meaning like a long enough timeframe, like a lot of our deals now like 10 plus years, we were going to go through a cycle or two before at least one One more cycle before our contracts would be up. So that’s how we mitigate a lot of our risk.

J Darrin Gross 36:06

Gotcha. Zach, where can listeners go if they would like to learn more and or connect with you?

Zachary Beach 36:15

So it’d be two things I would do. To learn more about how we operate in like a very efficient period of time, I would just go to smartrealestatecoach.com/webinar. My father in law, he does a 45 minute webinar that breaks down like, where we acquire leads, how we do deals, you know, gives you the basics that we can kind of wrap your head around it and start diving in. If you want a call with one of us, we’d be happy to chat with you just go to smartrealestatecoach.com/action. There’s just a quick six steps, which are just a couple questions in order to set up what we call a strategy call, which we can, you know, answer evaluate what you’re looking to do and pointing the right direction give you a nugget or two

J Darrin Gross 36:58

Got it. Zach, I can’t say thanks enough for taking the time. I’ve enjoyed our talk today. learned a lot and I hope we can do it again soon.

Zachary Beach 37:10

Darrin pleasures all mine.

J Darrin Gross 37:12

All right. For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow. That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CREPN Radio.

Intro 37:31

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Multifamily Real Estate Investing in USA with Hamza Ali – CREPN #261

Hamza Ali 0:00

And then decided, you know what I don’t think building ground up is the way to go for me just because I was so new, I needed cash on a monthly basis, I needed cash flow, and I needed it to be positive and at that time, I think you could have just pointed at any multifamily project purchased it and you’d be in pretty good shape today. So that’s what I did. I decided to go into multifamily, it was easy. It was easy to digest for the investors as well, which made it just easier for me to work around it was it was more easy for me to explain how the multifamily how a multifamily syndication was gonna work rather than you know, a ground up development that had so much risk and even I didn’t know all the rules and regulations.

Announcer 0:42

Welcome to CREPN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast whether you’re an investor broker, lender, property manager, attorney or accountant, we are here to learn from the experts

J Darrin Gross 1:02

Welcome to Commercial Real Estate Pro Networks CREPN Radio, Episode Number 261. Thanks for joining us. My name is J. Darrin Gross. This is the podcast focused on commercial real estate investments, and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio. Let’s get into the show.

Today my guest is Hamza Ali. Hamza moved to the United States five years ago, and founded Gray Spear Capital, which focuses on bringing investors together and investing in real estate projects in the Texas area. And in just a minute we’re going to speak with Hamza about what it’s like to move from a foreign country to the US and start a small business and what the real estate investment landscape looks like right now. But first a quick reminder, if you like our show, CREPN Radio, there are a couple things you can do. You can subscribe, you can like and share. And also you can leave a comment we’d love to hear from our listeners. Also, if you would like to see how handsome our guests are, be sure to check out our YouTube channel. And you can find this at Commercial Real Estate Pro Network. And also if you would, please consider subscribing there as well. And with that, I want to welcome my guest, Hamza, welcome to CREPN Radio.

Hamza Ali 2:39

Hey, Darrin. Yeah, thanks for having me. Good to be here.

J Darrin Gross 2:43

Well, I’m looking forward to our chance to talk today. But before we get started, if you could take just a minute and share with the listeners a little about your background.

Hamza Ali 2:55

Sure. So my background I think is quite interesting because English is not my first language. I had to learn this a few years ago when I moved here. And that in itself has been a struggle. But my background is basically I moved to the US about five years ago. And I moved from the Middle East. I thought that it was a good time to move to the US. I had always been in real estate. I had just sold a small business that I owned back home. And so I thought with a little bit of cash, I could come here and make my dreams come true. And it’s been working very well, I’d say the US has been a very good place for me to call home and it’s been working out great since I moved here.

J Darrin Gross 3:40

And I mean to cut you off there Who did you who’s something else?

Hamza Ali 3:44

Yeah, so I mean, you know, got to start a small business, got to watch that business grow over five years. And you know, just like I said, Texas has been great. And, you know, the US in general has been a great place to, I guess call home

J Darrin Gross 3:59

And We’re in the Middle East. Where are you from?

Hamza Ali 4:02

I’m originally from Yemen. But I moved here from Dubai.

J Darrin Gross 4:06

Okay. Yeah. Got it. Well, I’m kind of curious. How do you How does Houston I heard Are you in Houston now or I can’t remember where you said in? Where are you based? Currently?

Hamza Ali 4:19

Yeah. So currently I’m based out of Houston, Texas.

J Darrin Gross 4:21

Okay. And how does the Houston landscape compare to that what you were in in Dubai and Yemen?

Hamza Ali 4:31

Well, I mean, the Houston The good thing about Houston is it is a melting pot. And it’s a very diverse, very easy for someone like me to kind of get introduced to the market. Also the weather, the climate here is a little warmer. It reminds us of the climate back home so it’s fairly easy for a lot of Middle Easterners just to come and you know, call Houston home.

J Darrin Gross 4:52

Right, right. No, it’s interesting, I think a lot of Americans if you’ve you know, you consider traveling worldwide, you forget how big the US is and how diverse the the different corners of the country are. You know, just with the different weather patterns and, and all that. So, but Well, that’s great. So you you mentioned you had a business in was in Yemen or Dubai, what was the business?

Hamza Ali 5:22

Yeah, it wasn’t Dubai. Okay. So I had a small industrial construction company. And basically what I did is I did the on ground work, meaning I was kind of like if you want to just like a site supervisor. So I ran the business, I had a crew and I was a site supervisor, and I worked for mainly petrochemical companies and the government as well. So they did fairly larger projects, and I was one of their subcontractors, very interesting times. Lots of projects, but I felt like the opportunity here would have been a little different

J Darrin Gross 6:02

Gotcha. And did I hear you say you did own real estate in in Dubai?

Hamza Ali 6:08

I did. Yes, I did. I worked in real estate. I started off actually my career in 2007. So we all know that was a, I graduated 2007. And I started my career there as a realtor and we all know, probably not the best time. But you know what, I think that taught me a lot of lessons early on, and I got to see a lot of things firsthand. That really helped me with my business here.

J Darrin Gross 6:37

And in Dubai, as a realtor, were you was it residential or commercial? What was your focus?

Hamza Ali 6:44

In Dubai, I was mainly a residential. I was in residential real estate but the way Dubai operates is a little different to where you have investors who are interested in purchasing entire floors. Because Dubai is a very international city and it’s a very it’s a very Big transit hub for people and for their money and for their wealth. So anytime you have economic or geopolitical tension in the neighboring countries, in the Middle East or around us, a lot of money tends to flow into Dubai. And as a residential real estate agent, sometimes you get to sell entire structures and or entire floors like I’m talking about, for example, if you know the Burj Khalifa, the word year, the tallest tower in the world that stands into why, at one point in time, you could only buy an entire floor. So you wouldn’t be able to transact at an apartment level. They hadn’t opened that up quite yet. So the way that building initially got sold is people came in and bought a couple of floors. And then they broke those down into Okay, I have five floors, I’m willing to trade you one or sell one right so there are fairly large transactions in the residential space. And and that was around the time that that city was getting built up as well. There was a lot of high rise in that in that city at right around that time, the 2007 to 2011 timeframe. So as a residential realtor, you really got to see a lot of different people and you know, just lots of different types of money flowing into the city and acquiring large amounts of residential real estate.

J Darrin Gross 8:25

Got it? So you were a, how do we say, we say you were a site supervisor. And we are realtor at the same time or was there a a one before the other kind of thing?

Hamza Ali 8:39

Well, no. So I so I started off as a residential realtor. I transacted I would say, in fairly large real estate properties. brokerage was still fairly new, as they had just opened a real estate for expatriates. Expatriates, meaning foreigners in that Countries prior to 2007. You would have to be a local from Dubai in order to buy real estate and the government at that time went on a growth spurt and they realized that they needed foreign investments and for that, and for that theydecided that real estate was going to be one of the things that foreigners or expats could own. And that’s why we saw all this influx of money.

Now after, after working in real estate for a while I had the opportunity of starting my own business. It was a construction company and the contracts that I was awarded with would have been from the government. And they would be fairly large in size. And so I decided to take that opportunity. Of course, it didn’t pan out as as well as I thought it would because Dubai really didn’t recover. Post 2008 I mean, there was a recovery in two. So people who got in probably 2010 and 11 recovered, were very Well, but beyond that really, real estate in Dubai right now, not many people know this was trading at about a 50% discount.

J Darrin Gross 10:09

Really? Is that due to oversupply? Or is the easy economy? I mean, is it working? Or is it just a matter? Can you explain? Why

Hamza Ali 10:21

Yeah, sure. So I mean, you know, Dubai in 2008, nine and 10 went through a massive recession to where you could get where you could purchase or pick up real estate probably for 30 cents on the dollar. That means you’d be getting a 70% discount on real estate. Now, that did pick up a little bit, but it never picked up to pre 2008 crisis. There’s and and the problem is, is that Dubai is a cash market so 90% of transactions that happen in that city are cash. So the the concept of leverage or debt is fairly new. The concept of selling to foreigners still fairly new, because they only it only opened up in, like I said about just over 10 years ago. So they’re still working on a couple of things to incentivize people to, you know, purchase them to buy. But it’s just they keep building, you know, they have so much supply right now that there’s just not enough demand. And, and people like me if I were to have purchased something in 2000, and, you know, 15, which is not that far back, they are building so many new projects and incentivizing. So the developers are directly incentivizing the buyers to go and buy the new projects that the old projects are not, there is no demand really, for the older projects, or there is no secondary transactional demand in Dubai right now. Everything is being incentivized from the developers. And what these guys are doing is they’re giving you bank like payment plans from the developer. So people are just going and buying those, you know, and it’s interesting, it’s interesting times, it’s interesting to See developer developers come up with bank like strategies to sell their product.

J Darrin Gross 12:04

Yeah, that is interesting. I know of Dubai, I’ve never been there. But the the amount of growth that’s that’s occurred there, is it? When did it really start becoming this this major place? Or has it always been a major, major Middle Eastern place?

Hamza Ali 12:25

Well, I mean, I think I think Dubai really exploded in 2006. 2006, I think was the first time when they opened up real estate to foreign investors. And that is that really attracted a lot of foreign investment locally first, before before we were popular in the eyes of the rest of the world. So I mean, the region around us there was a lot of cash, there was an influx of cash that came in, and those projects that sold out early on did fairly well and they were government subsidized. So the government actually did invest in those companies and and so I think that is what helped them get started.

And you know, just, they just took it from there was one project after the other and the way they did it is they masterplan the entire city then beyond that. So everything is placed almost perfectly to where you know people can access it. And it builds a sense of a sense of community in that area. So I saw Dubai being built from shifting sands to the beautiful city it is today and it is in fact a very beautiful city. I think the government and the ruler have done a phenomenal job in the way they designed it.

J Darrin Gross 13:45

Yeah, I know I’ve seen the aerial photographs kind of the Google Earth stuff and it’s amazing how they basically, you know, made all those waterways and kind of really, you know, created all this basically form the land there. And then when vertical it’s it’s, it’s actually it’s fascinating. But that’s interesting. So So you started off in, in real estate in Dubai, then you got into the construction supervising. And so what when you when you came to the US here, what what what did you start to do or what what was your? What was your plan?

Hamza Ali 14:25

Well, it’s interesting. Um, so Dubai, as you as you may or may not know, it’s a tax free city. And so we don’t have an IRS. And we don’t have CPAs and liabilities relatively low when starting a business. So there’s not much you know, there’s not much at risk. So what when I say that, of course, there’s a lot at risk from a business standpoint, but just things to educate myself when I came here, so I’m just going to get into that really quickly. When I when I left Dubai, I had the opportunity of selling my business to one of my partners. And I basically sold my business I think it was like half a million dollars is what I came with. And, and I and at that point, I was 29 years old, just sold the business. And I thought that I had all the money in the world. And this is what you know, this is what it takes. And I’m gonna, you know, become this. This this person, you know, at 29 years old, I guess I just didn’t know any better. And I moved to Irvine, California, because Dubai was a big city. And I said, you know what better place to move than California and I had an uncle who lived there. And he told me, You know what, if you need a place to stay, you can come and stay here for as long as you want. He was kind enough to open that door for me. And so I went there I took him up on it and I went and I stayed there for a little bit. And then I realized that you know what? The money that I have is nowhere close to what I need to start a business here and I don’t be risking a lot if I decided to stay in California because as you know, the land price and the real estate price and the development price there is just astronomical. Right? And, of course, coming from a foreign country, I’m not I wasn’t allowed to secure any debt. That means I couldn’t get any leverage. I couldn’t get a construction loan. I didn’t have two years of tax returns, right? I didn’t, I didn’t have a bank account, a valid Us Bank Account. And everything that I did internationally, because Dubai is a tax free city. That means there was no way to to really, for anyone to monitor my performance or my income over time, right.

So when I went to the banks, in the beginning, I was like, Hey, you know, this is me, I want to buy real estate and I have this little bit of money and you know, I want leverage and of course they’re like, that’s not how the system works Hamza. You know, if this is what you thought when you came here, you’re gonna have to adjust. So I very quickly realized that maybe California is not the right place for me. And I had an aunt, who was a school teacher. Katy, Texas, Katy, Texas is about about an hour away from Houston, one of the suburbs of Houston and growing very growing and, you know, very much growing. And she called me up one day and she said, You know what? Why don’t you come here? There’s a lot of like construction. And I think it’s what you do? I’m not sure. So why don’t you come take a look at Katy, Texas. And I was like, You know what, I’m not gonna make it in Irvine, California, that’s for sure. So I packed my bags, took a flight to Katy, Texas and landed there and felt like I was probably in Dubai in the early 90s. A very small neighborhood. At the time, I could tell there was a lot of growth, you know, all the larger residential developers have had moved there. And so there was definitely a lot of construction, a lot of homes being built a lot of subdivisions being built. It was definitely something that piqued my interest. And I decided to stick around and I lived in her attic for about eight months, till I figured out what I was going to do with my life and start my business. And lo and behold, I bought a piece of land in Katy, Texas, and that land today I still I still own that land and I think that land is probably worth 10 times what I paid for it

J Darrin Gross 18:18

Really?

Hamza Ali 18:20

Really.

J Darrin Gross 18:20

Thats. Great.

Hamza Ali 18:21

Yep.

J Darrin Gross 18:23

So what did you end up doing the construction work then is that what you?

Hamza Ali 18:27

So, um, I, I bought a piece of land. I developed that piece of land. And the way I developed it is I quickly realized that if I was not going to be able to get that there has to be somebody else who was going to be able to get it for me. Um, so I partnered up with this friend who I was introduced to by my banker and and we did one project, sold that project successfully, and then just hung around and then what happened is during this time of me holding on to this project and building it and developing it, I generated a lot of interest through my family through my network here of investors, people who want to invest in real estate and we’re just looking at me as a vehicle to where they could invest. And that is really how I jumped into the multifamily space. So I did my first office warehouse project, sold that and then decided, you know what, I don’t think building ground up is the way to go for me, just because I was so new, I needed cash on a monthly basis, I needed cash flow, and I needed it to be positive and at that time, I think you could have just pointed at any multifamily project purchased it and you’d be in pretty good shape today. So that’s what I did. I decided to go into multifamily was easy, it was easy to digest for the investors as well, which made it just easier for me to work around it was it was more easy for me to explain how the multifamily how a multifamily syndication was gonna work rather than, you know, a ground up development that had So much risk and even I didn’t know all the rules and regulations. And so I dove in, bought my first 24 unit community in I think it was 2015 2016 is probably when I bought it. I sold that off a while ago. And that one has its own story is good and bad. More bad than good. But I learned a lot since then. I think we are we’re at about 860 doors today with all the investors.

J Darrin Gross 20:31

Wow. Well, let’s let’s dig into that a little bit. So you get down to Texas. You end up with a you said you still have this first property is it still bare ground or did you develop the first piece that’s gone up 10 times?

Hamza Ali 20:47

I’m currently developing it right now. Okay. It’s gonna supposed to be completed end of this year. I think it’s that’s probably going to be pushed back.

J Darrin Gross 20:54

And is it multifamily or what’s the what’s the occupancy?

Hamza Ali 20:57

No, this is this is still in a office warehouse business park.

J Darrin Gross 21:00

Gotcha. And then you said you you picked up a 24 unit property that you’ve since sold. Can you describe just a little bit about that? It sounded like there was some lessons to be learned there based on the more bad than good description.

Hamza Ali 21:16

Absolutely. So, um, you know, when I came here to Katy, I was networking a lot. I joined a couple of real estate groups. And one of the brokers approached me from one of the real estate groups and said, Hey, Hamza, I have this amazing deal. It’s not listed. Why don’t you come take a look at it. And so we went took a took a look at it, it was 24 units. It was basically, I would say, in a very rough neighborhood. But of course, coming from a foreign country, I didn’t really have my bearings. I didn’t understand that neighborhoods could differ, you know, so drastically within a couple of blocks of each other. And I just didn’t understand enough to kind of make an educated decision. So obviously my due diligence process was basically just looking at it walking, maybe 10 units out of the 24. So I didn’t even walk the entire 24 units. And, and then deciding if this makes sense. I had a friend at that time. And I had him come and walk the units with me. And he said, you know what Hamza, I think it’s a good deal. And so I went ahead and purchase that deal. And then I got to learn a lot of things.

Because of course, it was such a small deal. It didn’t make sense to hire a property manager, so I had to become the property manager as well. And there was there was a lot of education in that. Being a property manager is difficult, stressful, you know, you don’t get much sleep, even on 24 units. And it’s just, it was an interesting time. I drove. I was on that property probably once a day every day, which is way too much for a 24 unit deal. It’s just that I guess I didn’t know any better. And I was putting the wrong tenants in there without without conducting the you know, there was no process to my to my placing tenants in apartments if I had an apartment vacant and I was on the property and someone came in and said, Hey, you know, here’s a check, can I live here? I’ll be like, absolutely Why not? I didn’t understand the need for a background check or a need for verifying their income or you know, anything. I just put them in and obviously I made a lot of bad decisions and I probably turned that property for the worse by the time I realized that okay, this is you know, I put myself I dug myself in this hole now I need to get out and as I learned, of course, fixed all the issues and then sold the property.

J Darrin Gross 23:50

So you, you did learn all the the quote issues where you’re able then to sell it at a gain? Were you able to, you know, improve the occupancy?

Hamza Ali 24:01

I think luckily, just the fact that I bought it in 2015 and sold it in 2018. There was a, a natural gain to all the real estate and I just got lucky to where I found somebody who was very interested in this piece of property and wanted to pay basically higher than what anybody else did. And yes, so I did. I did walk out with a gain, I want to say I bought that property for 38 a door so I think I paid like 800 and $850,000 for that property. I sold it for 1.4 million.

J Darrin Gross 24:36

That works.

Hamza Ali 24:37

Yeah, so that worked very well for me. Um,

J Darrin Gross 24:41

On the the lessons you learned, I’m guessing you won’t forget those anytime. Sorry. So

Hamza Ali 24:47

Yeah, the lessons for sure. And of course, when I say 1.4 million, there’s a there was all it was all investor funded. So I was very lucky to be able to capture that and fulfill my promise to a lot of my investors.

J Darrin Gross 25:00

Right Right now, I mean, that’s that’s really the Proving Ground to be able to demonstrate that you did it. So you’ve got some willing investors for the next round. So you mentioned I wrote down, 860 doors currently. So tell us from that first one, you learned some lessons. Were where, where are you investing now? How big is your network of investors? And what is your strategy on the properties you’re acquiring?

Hamza Ali 25:31

Yep. So I mean, interesting times right now. Things are getting things are getting a little more. I think things are changing every day. And we are having to do things that we’ve never done before. But let’s talk strategy. So where we’re investing we’re interested in landlord friendly states. No, no, you know, sunbelt area mainly is our primary focus. We’ve been looking at properties and we have We have we have come up, we have developed some key metrics now that we look at before we go into certain markets. And and we basically follow single family home trends.

So we what what I’ve come to learn is that I think the multifamily space is lagged right behind the single family space. Anything that’s trending today in the single family space, geographically, will be trending in the multifamily space around 18 months from now. It’s so we have an 18 month buffer is what I believe. So, and that’s kind of what we track just to be ahead of the curve. So more recently, we’ve been looking in as you know, we invest mainly in Texas. So we’re, we’re focusing mainly on San Antonio right now. So Houston was very hot on our radar. Over the past few years. San Antonio is looking to be a really good market, lots of government jobs, lots of military contracts awarded to that city, and it’s very close to Austin, Texas. Austin, Texas, is Dean Number one apartment growth city in all of America and has been for the past few years. I think that’s going to cool down a little bit, as we have other cities that are now trending a little stronger than Austin was. But I think San Antonio has been left behind. And there’s a lot of growth in that area. So we are looking geographically in a corridor That’s right, between Austin and San Antonio. And I think that’s going to be a very powerful play for us as a company. Now 862 doors or 867 doors, I can’t exactly remember. But it’s been an interesting journey, of course, as we’ve grown so as a company, so I find myself doing less the more doors we have, the more doors we get, as you know, we have we have a few key players in the company. And I think they’re, they’re doing a phenomenal job right now. at keeping everybody in, check safe. You know, maybe sure that we, you know, just just have the correct protocol. You know, what do I know? I’m just a guy who moved here five years ago.

J Darrin Gross 28:06

All right? Well, tell me the strategy for acquisition, what class of property are you acquiring? Are you doing value add? What’s the, what’s

Hamza Ali 28:18

The reason we were able to gain so much investor interest is because primarily, we were in the value add space. And we got out of deals, we traded out of deals fairly quickly. So historically, we’ve traded out of deals, 18 to 24 months, and we’re out, which means the value add component of that is really significant. It’s a lot of heavy lifting. But the returns are phenomenal. And so generating investor interest for those type of deals has been fairly easy. I see us as we grow, I see us less in the value add space, less in the C type proxy to be conversions, and more in the B to B+, type product in fact, as well Last year, we acquired our first what I would call our B product where we acquired it as a B. And we plan to operate it as a B for a longer period of time. So we would like to see this property being held for at least five to seven years. And I think that’s a, that’s a more stable type of product, just and it’s in better look, and they are generally in better locations as well. So that that I think, has really worked well, for us also, as far as collections, because, you know, in the multifamily space, everybody has been worried about collections and things are changing on a daily basis. I think everybody in the business has had a very strong collections for April, and everybody’s very proud of that. I’d be interested in seeing moving forward what that collections is going to look like.

J Darrin Gross 29:50

Yeah, no, I think may is going to be the real test of just, you know, what is the what is the situation and how dramatic you know, How bad is it? Or are we on you know, on the way out but I agree with you. So you mentioned the the C’s now kind of the B’s, knowing that you you you learned the lessons the hard way on kind of the tenant profile and all that. Are you finding uh, you know, you’ve got a better property a better better tenant mix. You mentioned collections, not not including the right now situation but just comparing the two your prior experience and, and your your B type properties. Can you speak to that as far as just the ability to collect in them and late pay and all that kind of stuff?

Hamza Ali 30:44

Um, so us personally, what we’ve done is we we address this issue fairly early on to where I thought it was going to be. It was going to be an issue right and and collecting rent. Going to be a challenge because you genuinely have people who are not going to be able to pay just because of the fact that they’re out of a job or you know, or both people in, in the family are just out of a job, which means, naturally, naturally, the expectancy of us not to collect rent is going to be low. And so what we’ve done is we’ve, we’ve incentivized our tenants to pay and I don’t know, I don’t know what exactly everybody else has done, but we rolled out our plan fairly early and we communicated it with our tenants. We have a lot of landlords today that are not communicating information to their tenants, just in the hopes that okay, everybody’s gonna pay. And I think we’ve had so far we’ve had a good response. And the incentives that we’ve given are just basically um, if anybody renews their we’re not, we’re not increasing rent, so we’re in the bottom rent. We’re in the bottom collections of the markets, our rents generally Start at like $700 and go up to about 1200 dollars. So that’s the range kind of that we’re in. So there’s not much room for us to go below that.

But what we’ve done is we’ve offered incentives for people who are renewing, and what we’re doing is we’re giving them hundred dollar gift cards towards grow a local grocery store, like a local supermarket, where they can go and buy their essentials, if needed. We are also helping them with the stimulus package. So we have a lot of people who own businesses, but are unaware or just, you know, just don’t know about the different types of stimulus packages that we have, or some of them think they’re not eligible, which is absolutely not true. And so we are in hopes to gain and earn their loyalty towards us. We have set up a number and we have somebody in the office that is constantly calling them calling someone in our office and and we can walk them through either the PPP or any other packages that are available right now as part of the stimulus plan. And I will tell you this. So we put out flyers as well, other than the line. And the flyers are both in English and Spanish and they’ve been working out well. I mean, so far the tenants seem to be interested, they seem to be engaged, you know. And it’s, it’s just something that we, you know, think that we should be doing as our part. Also, we’ve waived all late fees. And of course, as you know, there’s no evictions on at least for the month of April, but we’ve extended that to the month of May already. So we’ve gone ahead and told all our tenants that there are going to be no evictions for the month of May. And generally, you know, the thing is, is that we have great tenants, we have good tenants. I mean, you know, there’s always the odd one here and there, but generally, if people have the ability to pay, they will pay the rent, you know, over other things. So, I think we’ve had good experience so far.

J Darrin Gross 34:00

That’s good. I hope that that continues to be the case for you and and everybody else, you know, time will tell on that. As far as your network is it been basically your your family was that where you started as far as kind of getting your, your investors or how have you built your investor network?

Hamza Ali 34:25

Yeah, so um, I have I have, I have family in Katy, Texas. And they were kind enough to be my first investors. I think we have, we have about over 130 investors total invested in all the properties and we have a network of about 415 investors. A lot of these people have shown interest over the past two years. So 2012 2019 and 2020. We have actually not acquired that many properties just because we have found it very difficult to source deals. So What we’ve done is we’ve created this list of networks. And what we’re doing is we’re, we’re adding on more investors, just so that when we have a product that’s ready, you know, the idea is because you know, I mean, as a syndicator, you have basically about 45 days to close out around, no matter how big or small that round is, whether it’s you’re raising 1 million or 10 million, you have about 45 days to close it out. And so what we’ve been doing is we’ve just been creating that lead list, making sure we have investors on board, communicating with them, nurturing them, you know, so we put that we put them all, we put all their emails on a list and we communicate with them regularly. I personally communicate with them regularly. And just to make sure that they’re still engaged, I’m still interested, right. And of course, I can tell you that me personally for the next 90 days, I don’t plan on rolling up any new investments or any new ventures. I’m just going to hold on and see I don’t anticipate there to be any fire sales in the multifamily space. But you never know.

J Darrin Gross 36:05

And I think this is a, an appropriate time to stay in touch with your investors and your tenants like you’re doing and, and communicate and, you know, be prepared. So it makes a lot of sounds. And Hamza, if we could like to shift gears. Before we started recording, I mentioned to you I’m an insurance broker by day. And one of the things we do is we do risk management with our clients. And we typically consider one of three strategies. The first is we ask, can we avoid the risk? If we can’t avoid it, then we look is there a way we can minimize the risk? And if we can’t minimize it or avoid it, we ask is there a way we can transfer the risk and that’s what an insurance policy is. It’s a risk transfer vehicle and I like to ask my guests If they can identify, or we’ll take a look at what they’re doing and take a look at the environment, and identify what they consider to be the BIGGEST RISK. And just to clarify, I’m not necessarily looking for an insurance related answer. But if you’re willing, I’d like to ask you, Hamza Ali. What is the BIGGEST RISK?

Hamza Ali 37:26

Well, it’s funny, you bring that up, then I know this is not supposed to be an insurance related answer, but I do have a little bit of a story here that I’d like to share. So very recently, I was I was under contract to buy this property, great deal, great location, you know, just I mean, it checked all the boxes. And, and I put it on a contract. So I, you know, sign the contract, we put on a contract and the next day I get a call from the guy and he’s like, I need to talk to you right away and I’m like, okay, and this is the seller directly. So it’s buyer and seller. Usually there’s a there’s a broker in between. But this seller was so panicked that he called me. And he’s like, I want to meet you at the property and Okay, I was like, okay, sure, let’s go at the property. And then so we walk the property and one building has been completely burned down. And I’m talking completely like it’s gone. And it was 114 unit deal when it became 100 unit deal. And he was like, What do I do? I’m like, What do you mean what do you do you know, this is a, this is exactly what you what you carry the right insurance for. And so to answer your question, insurance is the biggest component that will save save us in the time when we need to save you just need to have the right coverage. So talking about risk, this gentleman did not have the right coverage did not have the right dollar amount covered towards this fire damage and I will tell you he lost close to a million dollars because of that.

J Darrin Gross 39:03

Wow. I hate to hear that. And I appreciate you sharing that. Only from a standpoint of it’s something I try and and talk with people about is, is making sure you’re insured to the right value. Because there are penalties that policies have built into them if you under insure. And, you know, a lot of times it’s kind of, it’s out of sight out of mind. People. Insurance is a weird thing. You don’t use it on regular basis. If you did use them on a regular basis. You couldn’t afford it. You know, and it wouldn’t work overall. So but it is stories like that, and in the hope is that you learn from somebody else’s story rather than having to be the one telling the story about something like that. So I appreciate you sharing that.

Hamza Ali 39:56

Absolutely. And as you know, we’re we’re syndicators so we have investors in our deal. So we can never have an insurance so usually you will see people who under insure their properties but they’ll probably be their mom and pop operators or individual owners, people who generally have investors in their deal will tend to go with the best policy.

J Darrin Gross 40:16

Right? Right Nope, it definitely makes sense I mean if you’re have a fiduciary responsibility with your investors money and and you don’t want to put that at risk, so it’s good. Hamza, where can the listeners go if they would like to connect with you or learn more?

Hamza Ali 40:36

Um, they can they can contact me directly on through my YouTube channel. So I have a YouTube channel it’s called H Town Hamza.

J Darrin Gross 40:45

H Town, Hamza. Hamza?

Hamza Ali 40:49

Yes. And that’s my email as well. htownhamza@gmail.com.

J Darrin Gross 40:55

Got it. Well, Hamza, I want to say thanks for taking got the time to talk. I’ve enjoyed it learned a lot. And I hope we can do it again soon.

Hamza Ali 41:06

Absolutely. Thank you Darrin. I appreciate your time.

J Darrin Gross 41:08

All right. For our listeners, if you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow. That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CREPN Radio.

Announcer 41:27

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Ultra Wealthy Investment Solutions with Richard Wilson – CREPN # 260

Richard Wilson 0:00

But very specifically to real estate, families who can understand the strategy and trust the team is most important and they’re much more likely to do the deal. They’re local to the team or local to the asset. Of course they can get to know and build the trust in them faster.

Announcer 0:14

Welcome to CREPN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast. Whether you’re an investor, broker, lender, property manager, attorney or accountant We are here to learn from the experts.

J Darrin Gross 0:33

Welcome to Commercial Real Estate Pro Networks CREPN Radio, Episode Number 260. Thanks for joining us. My name is J. Darrin Gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your Real estate portfolio. Let’s get into the show.

Today my guest is Richard C. Wilson. Richard is a third generation Eagle Scout. He’s also the founder of the Family Office Club, which has over 2000 registered investors. And his team offers a digital investor platform and sources direct investment opportunities for his 58 investor clients. And in just a minute, we’re going to speak with Richard about what the ultra wealthy are seeking most often. But first, a quick reminder, if you like our show, CREPN Radio, there are a couple things you can do to help us out. One you can like, share or subscribe. And as always, you can leave a comment we’d love to hear from our listeners. Also, if you’d like to see how handsome our guests are, be sure to check out our YouTube channel and that’s Commercial Real Estate Pro Network. With that I want to welcome my Guest Richard, welcome back to CREPN Radio.

Richard Wilson 2:04

Thank you Darrin.

J Darrin Gross 2:06

Well, I’m looking forward to our talk today. And before we get going if you could share just a little bit about your background with listeners.

Richard Wilson 2:16

Sure. So for the last 13 years, I’ve started and grown the family office club, we have 16 full time professionals on our team, we’re usually when there’s not a virus crisis, locking down the world, hosting 30 live events a year. Now instead, we interview at least one investor per day and upload their mandate to our portal and do virtual discussion panels each week and webinars etc. You know, we got about 2000 registered investors as part of our investor club and so we’re not a conference company. We do host a lot of events, but we don’t just do conferences we don’t do consulting. We’re really a helpful resource to anyone starting a family office running one or anyone is looking to raise capital from ultra wealthy investors or core private investors.

J Darrin Gross 3:01

And just for clarification, can you define what is a family office?

Richard Wilson 3:07

Sure, it’s just an ultra wealthy investment solution. So if you’re worth $50,000, and you make a mistake, you know, it’s not going to cost you that much, probably. Hopefully, if you’re worth 500,000 or 5 million or 50 million, you can just imagine that not only is each mistake that much more expensive when you’re worth $5 million, you’re also much more likely to make those mistakes because you have maybe multiple businesses. On top of being on a board. More people are asking for your money and your time you have more employees. So one little selling an asset early or late. It gives you an extra five or 10% tax, you know, hit might have cost you so much might cost you $50,000 at one mistake, you could have hired a full time person just to help you play defense. So family office is just playing better defense, managing chaos for you doing things more holistically, so you can be more proactive on tax planning on writing your operating Businesses on investing in a smart way.

J Darrin Gross 4:03

Got it? Now, you said you’ve been working with family offices for the last 13 years?

Richard Wilson 4:09

Yes.

J Darrin Gross 4:10

Okay. How long have they been a recognized formation for business?

Richard Wilson 4:17

You know, really the term started being used more in the 70s and 80s on a small scale, but still in the 90s. nobody really knew what the term meant even in finance. And when I started in 2007, most people I talked to even in the investment industry had not heard of them before. And if you had now if you fast forward 13 years, just about everybody in finance and investments has heard about a family offices, but still most of the ultra wealthy globally, I’ve never heard the word family office. They have no idea what it means once they learn about it, they want to have a virtual family office or a single family office for themselves. And they want the benefits of one once they hear about it. So we’re really at like the third or fourth inning of this industry really growing and becoming In industry in itself

J Darrin Gross 5:02

So the the the concept is basically Is it is it not creating some sort of like a corporate structure to your you’re managing your wealth is that kind of a

Richard Wilson 5:14

Yeah, that could be one way of thinking about it, I think that no simple way, it’s just a 360 degree management of your balance sheet. Anything that touches your balance sheet should be coordinated at the center. Because what happens if you don’t have a family office, if there’s an investor listening to this and you’re worth 3, 10, $20 million, or much more, you have to remember what your insurance agent said. Remember what your CPA told you remember, you heard on some webinar about tax planning, you know, talk to your wealth advisor, you know, talk to your spouse and next generation, charitable giving, you might just do by yourself and not coordinated and you might do a direct investment into an angel investment or a real estate property. Well, if you knew what percentage of that investment should come from what trust or you had good estate planning in place or you have pride of tax planning, you should have that all central Because the busier you get, the less likely it is you’re going to remember what your CPA told you to do eight months later, when you meet with your insurance agent, or you invest in that deal. You’re just going to make mistakes, the busier you get, it just gets too complex to keep all in your head.

J Darrin Gross 6:14

Got it. So it allows you to just kind of stay on the course or your get a plan and, and actually work the plan as opposed to a bunch of fragmented ideas that don’t have some sort of central coordination there.

Richard Wilson 6:29

Right.

J Darrin Gross 6:30

Seems like a lot of businesses could probably use that.

Richard Wilson 6:34

Right,

J Darrin Gross 6:34

You know, but and then as far as your, your business model, you mentioned the the events and stuff 30 events normally over the year. What are you you mentioned I guess you’re doing daily daily interviews with with

Richard Wilson 6:49

Yes, so the normal events are workshops on Investor Relations and raising capital. Or investor summits, which feature 30 live investors on stage answering questions, discussion panels and giving talks on stage. And the combination gives those who are raising capital A chance to get 35 different capital reasons, strategies in a single day at the workshops, but then go to an investor summit and hear from 30 investors in a day and hear all their opinions, their preferred structures, their preferred feed preferences, strategies, etc. And so a lot of people who come into raising capital, meet with investors when I only meet with 30 investors a month or 50 a month and by hearing from 30 in a day, they can kind of grow their, their capacity to work with investors and be more effective working with them. So that’s what the family office club is all about. And during this virus crisis, we just are pointing people to the 450 investors we’ve recorded on video and we have inside the member portal, and then every day we do a zoom interview for seven minutes with an investor and go into exactly what they’re doing. In an overall, what they’re invested in more than anything else right now, what strategies they want to share with other investors or people raising capital, they’re listening. And we upload that to the portal every day. And we share a lot of that, you know, on our YouTube channel and on the family office podcast from time to time as well. But we do you know, that constant refreshing of investor content to the portal is really the main the main family office club offering.

J Darrin Gross 8:24

Got it? And just to be clear, the people you’re interviewing, are they the ones raising the capital? Are they the ones, the members of the family offices that are looking for opportunities,

Richard Wilson 8:34

So we have both types of members. So if you’re an investor who strictly allocates and you’re an LP investor or family officers looking for deals to invest in, then membership in the family office club does not cost anything. If you sometimes syndicate deals or you’re looking for other families to co invest in your deals, you’re raising capital for a real estate deal or real estate development company. Even if you are ultra wealthy as well. If you’re also raising capital, you need to pay for a membership And the membership options are at family offices calm if anyone wants to check that out, but we have 800 and some paying subscribers on a monthly basis. And then we’ve got 2000 registered family offices and investors on the other side.

J Darrin Gross 9:17

So you are kind of the conduit between the two groups, the people with capital and those that are looking to raise capital.

Richard Wilson 9:28

Right. Right, right. And we’re more powerful to each side because of doing both. So some people say, well, Which side are you helping, and importantly, we don’t take any fees from people raising capital, there’s no success fees we take from them. We are just helping the investors get access to the best quality investments and the investors pay us a performance fee when they invest in something that I helped them find through our community. On the other side, that people raising capital. We help them through we have family office databases, familyofficedatabases.com with a free book on capital raising. At capitalraising.com, we have our workshops, we review the pitch text and all the marking materials of our members once every three months. So the 800 number is usually 25 to 40 months submit their materials and we give them 20 bullet points of feedback on what they could change in the materials to be more effective working with investors. So we really try to make our program holistic, and that if someone joins and they consume that content for 18 months, they’re part of the community, we’re going to really transform. You know how they work with investors, because we’re texting and emailing and calling our investors every day. And we represent 81 investors under contract that are more close managed investors out of those 2000, there’s 81 that we’re working with every day to help access deals and get access to you know, opportunities in our club.

J Darrin Gross 10:48

Got it, got it. So let me ask you, so in 2007, and I’m trying to remember exactly when everything blew up, but it seemed Like 2008 2009 was really kind of more of the recognized, implosion. Can you see any kind of similarities in what was going on when you started to these recent times and just characterize as to how the ultra wealthy viewed the situation or perhaps some of your conversations with what they’re, what are they saying right now?

Richard Wilson 11:33

Sure. Well, is it good time to invest when things are going bad? So you know, many of them are taking positions in the stock market and putting, you know, the time we’re recording this on the first of April, they might be putting, I don’t know, it depends on the family. It’s not a recommendation to anyone listening, but some of them some of them putting 10, 15, 20% in the market. And then throughout April and May they plan to be building up their position. Maybe we have 50 to 60% you know, allocated over the next month or two expecting that by Q1 next year, there’ll be a nice recovery for them, you really don’t know what’s going to happen. But also, we sent an email out last Friday looking for three types of investments for our investors right now. One is that they’re looking for subscriptions at $20 a month and lower that we’re not hurt by the virus, or maybe they’ve grown slightly. So that’s something they’re looking for, if it’s a steady investment, and reoccurring revenue is always of interest. They’re looking for companies that are doing better than ever right now, because their services in need. And then they’re also you know, willing to be a lifeline to someone who’s going to lose their business and maybe the CARES Act and any other stimulus isn’t enough to save their team or save an asset. And they need a lifeline to kind of stay in business or stay afloat. Then there’s some investors who want to get access to those types of investments as well. So those are three areas that are of interest, but very specifically to real estate, families who can understand the strategy and trust the team is most important and they’re much more likely to do the deal. They’re local to them. To our locals the asset, of course, they get to know how to build the trust in them faster

J Darrin Gross 13:06

Got it. And in real estate investments, do they? Are they usually looking to take an equity position? Or is it Are they also perhaps open to lending? Or where is it?

Richard Wilson 13:21

Yeah, they’re open to both I think a lot of people like income they like to income a lot near the end of the cycle and I think they still like it but they’re more questionable about quality of collateral right now and they get an income you know, opportunity and they’re a little bit hesitant right now until we see the worst of what comes out here in April I think, but it’s still a great time to be planting seeds getting to know someone show that you still have a strong team so have your head above water in this type of situation. And getting building relationships right now without the travel that most of us you know typically do each week. There’s more time to be doing videos, zoom calls like this and you know, seeing how you could add value and connect people and and also update your messaging and positioning so that you’re truly unique in the industry, and that you’ll attract more investors. Just like you creating this podcast, you know, creating content. That’s kind of, you know, part of your question was about similarities between 2007 and eight to now, because that’s when we started our business was 2007. And when I started, we it was all built off of thought leadership, sharing best practices, and that’s how we attracted business. We didn’t have a budget to do advertising. So we’re going back to that now. You know, we’re publishing things every day, multiple times a day, where before we were maybe doing one or two new pieces of content per week, and calling it good on our doing, you know, two to five, sometimes seven pieces of new content in a day for our member portal for our public website for social media, etc.

J Darrin Gross 14:46

Got it. And when you say, publishing content, is there any strategy that you’re employing as far as is it basically, just information is it is it direction is it? Is there any kind of an overarching strategy with that?

Richard Wilson 15:08

Yeah, I think the most important strategy is something I got from Gary Vaynerchuk. Just on, don’t worry on the quality being perfect. I’ve got like $40 vistaprint thing on the wall behind me. I’ve got you now I’ve got $180 microphone that looks exactly like yours in black. And I’ve got this $40 ring light that makes us I don’t have this weird dark shadow on the side of my face or my window over here I learned and there’s a little clip on life or $15 I don’t not use it today. But you know, for $250 you can get the setup. But for years, I didn’t have any of that. It was just my laptop with a white background behind me. Just my iPhone and I’m walking down the street recording something and I think that thing I got from Gary was that he just documents his journey so authentically, you can see hey, I’m just at this asset. We’re walking away from this deals. Because it’s not good. Or when I was doing due diligence on a property recently I walked through to record the video of what have been done on the properties, my investors could see that yes, I was there and pointing to the things that they had done. And it’s not about the production being perfect. It’s just about documenting your authentic journey. And also, Gary often says, you know, who cares that I’m in the back of an Uber, like, who cares that you can hear a car outside, if you’re so worried about the production value, then maybe your content sucks, because the whole point is that your target audience will see the genuine, authentic content and you’re hitting them between the eyes of value that’s just for them, and no one else in the world is doing that. And so if you’re worried about the environment as your chief concern, you’re missing the whole point. The whole point is just focus on adding that value. And your members would rather hear value and not hear from you because there was a car noise in the background. You know, and so that really resonated with me as well.

J Darrin Gross 16:50

Yeah, no, I always enjoyed your I can’t remember how it’s been a couple years, but I remember you’d be like in some foreign land and be All sudden down the street and walk along with your iPhone there. And I’ve been like, Wow, cool. I mean, but it was exactly that it’s just kind of like an update kind of a, here’s what I’m doing, here’s what I’m talking about, here’s some of the questions. Right and kind of short, but it was it was topical. And there is there is value in that this is probably something that other people are thinking about. Or I mean, if you’re seeing this in an event, it’s likely that other people are having the same kind of questions and be able to relay that kind of real time as opposed to some sort of a big thought out production and, and, and all that.

Richard Wilson 17:33

Right. Yeah, and I couldn’t agree more. I think that um, the thing is, it’s more interesting when you’re on location somewhere it’s more tangible. You can show someone your oil and gas rig you can show them walking through a before self storage unit and after renovated self storage unit or walk the ground where you’re going to be developing your piece of real estate, show them the lines on the property and the surrounding traffic that’s going by, and I think that that makes it more real and I stole the strategy from a German banker I used to watch his videos on YouTube. And he’d be on the balcony of a hotel in Berlin, they’d be on the balcony of a hotel in Paris, they just watch this guy’s video saying like, Man, that guy, you know, must be a pretty successful guy who’s speaking all over the world in these different places. And I realized that not only makes the video more interesting, but it’s like a positioning strategy of authority or you know, they must know some things and be very well connected is kind of like an underlying message of it. And so I think that when I started recording videos, I just realized that even if I’m somewhat monotone in a video if there’s something really cool behind me plus as some authority positioning it takes the pressure off of me to be like Tony Robbins, Mr. Excited voice person, you know, cuz I that’s not really me.

J Darrin Gross 17:33

Right, right. Right, right. No, that’s, that’s it’s good kind of a storytelling, quality there. I used to watch there was a way still around Casey Neistat on YouTube and the guy was just constantly skateboarding through New York City and holding this camera in front of them there. And just like seemed like a, you know, a crash waiting to happen kind of thing. But it was just there was just this, you know, something was more interesting. Right? So, you mentioned you’re talking about about content and strategy. Do you have like a core message that you’re trying to get to? Or is it more about just trying to speak to what you think your your identified audience is interested in? and expecting to hear from you? Or does that make sense? I mean,

Richard Wilson 18:41

Right? Yeah, no, it makes total sense. So it’s also tricky In my case, because I am trying to be helpful to those raising capital as well as investors. But what I realized is that if I’m helpful to the investors, the more investors that have come into me, then the more that people raising capital are always going to come to me. So I always have to be serving the investors first. That’s why I take the success fees from the investors and not people raising capital to keep that alignment in place. And I’m always trying to think about what are the headaches of my investors? What are the complaints, so They call me, you know, they say something like, I feel like I’m driving through fog. I don’t know what to do strategy wise, I’m not sure who to trust. Or I’ll talk about some frustrations that a lot of my clients have, or how a lot of them have lost money, I could easily be avoided if I could just share that story. And also talk about just frustrations in the industry and inefficiencies. I see if all of my family offices are doing something and it makes no sense at all. That’s interesting. And if 100 family offices will help set up if none of them have their core values and their mission and their wealth story documented, you know, that’s kind of backwards. It doesn’t cost anything to do those things. So I like pointing out like golden threads of like, what nobody should be doing. And everyone learns not to do those things over time, or what everyone does after the patent family office for seven years, or whatever really painful, expensive mistakes are what are some go to models. So I have these ideas in my head and I write them down as a video idea within my project management software. So that when I go and I travel and get on an airplane, my goal every For three videos, every time I go to a city, I’m usually traveling every week when there’s not a virus. And, you know, so that way if I knock out three videos when I travel back in before the virus that was enough content to keep things, keep things updated. So the other I’m sure we could do like a whole hour podcast on it that just that question you asked me, so I’ll stop talking now. But it’s a really good question that nobody’s nobody ever asked me.

J Darrin Gross 21:22

Well, and I think it actually, it goes to the point and I’ve heard others speak to this, especially in these times when there’s uncertainty. And there are probably some, some people that are I don’t think some people think most people are looking for ways to cut costs because of the uncertainty. And right, one of one of the things I think people would would probably lean to cut is those things that can’t measure the benefit of. Marketing is always one of those challenging things is, if you unless you put out a coupon or something in somebody’s direct response comes right in says I’m, you know, I want to buy because of this or I want to invest with you or whatever that is because they have that one piece and you can do the one to one correlation. Now, as is more of a time to not abandon any kind of marketing message, it’s more a matter of time to stay in front of whoever you’re trying to work with, whether it be investors or, or capital raisers, for whatever that that message is. So I appreciate you just kind of sharing a little bit about what you’re, what you’re doing and, and how you’re thinking and how you kind of go back to the basics, like you were back in the beginning. Is is ramping up the messaging not not, you know, hiding or not, you know, not getting in front of people right now. So,

Richard Wilson 22:45

Yeah, we’re just tripling down on that. And, you know, it’s what our company was built on, and it’s what has been attracting people to us. I just was always so busy traveling. Yeah, one day, I’ll get to the point where we could update social media every business day, at least one time and sometimes students Or one day, we’ll interview one investor per day. And then with a virus head, we said, Wow, what are we going to do? We converted our platform into a digital platform with added, you know, 40 new members in the last, you know, three weeks since the virus hit with that new digital offering and just realize that we really have no other choice, but just add more value. And then, you know, even if everyone else keeps on doing their plan, we’ll be providing two or three times the value to potential and current members than we were before through that content.

J Darrin Gross 23:31

Do you find the family offices are more receptive to messages? Are they getting more presented to them now?

Richard Wilson 23:42

I think that they’re more receptive to things which they’ve gotten to know the founder and the principles very well and it, it’s, um, it has to fit one of those categories of, they have a real deep relationship and now makes it so if something is repriced, they’re gonna Be very smart by reinvesting right now. Otherwise, it has to be something that’s doing even better than ever because of the virus or has not been effective because it’s a small subscription or at some reoccurring critical surface, you know, something like phone lines that people are going to drop their phone lines for a month or two, just to cut costs type thing. So it depends. I think that things which are now steady and haven’t gotten hurt out, of course, are of more interest. Real estate deals, lenders, in some cases have pulled lending in the last minute and didn’t come to the closing table. Some people have renegotiated a lot of investors have balked to it committed to ambassador, they’re saying, Oh, well now, you know, I refuse to I don’t want to and so it’s an opportunity for investors who like the investment manager to come in and say, Okay, well, I’ll fill your gap, but I only want to pay performance fees on that extra amount that we’re going to invest to help you out. So there’s an opportunity there for people to negotiate a bit more right now, in some cases to get a deal closed that was at the 11th hour already.

J Darrin Gross 24:57

Gotcha. And as far as the the size of opportunity that a family office might be looking to entertain? Can you speak to kind of the range of size that you’ve seen or that some of your clients regularly entertain?

Richard Wilson 25:16

Sure, yeah, I think that um, some investors like the minimum investment size of just 25,000 or 50,000 because it’s almost an extension of their due diligence it’s not super risky they can get to know someone see how that deal goes and invest more. A really common starting places $100,000 investment minimum, I think a common mistake is thinking, Oh, I want to go to family office world. So now I’m gonna set my minimums in 250 or 500, or even a million dollars because now we’re just gonna raise capital from family offices, but many family offices will look at that and say, well forget that, you know, even if we would invest 5 million, we usually start at 300,000 it start at 700,000. So I would just be careful. You know, you can always set up a more sophisticated rule saying first time investors 25 thousand dollars second time you invest a minimum of 100. And then if you need to, you could always say by the third or fourth time, there’s a higher minimum if you’re doing things deal ideal, but I haven’t seen anyone do that. Honestly, I looked at 350 pitch decks from our members, we review those every quarter for them. And no one has that type of a minimum schedule. They’re all either at 100k, or 500 or 1 million. And I’ve seen one at 25,000. That’s well established, they manage 400 million. And everyone tells them they’re crazy to accept 25,000 per investor, but they say we don’t care what they say, because we’re raising 100 million a year right now. And they have a one investor at 150 million. And they have many investors who have one to 2 million with them. And they started them at any of them at 25,000. But they’re doing several deals a year so they’re able to test them out. Okay, yeah, we like you guys. Then they put in a quarter million then they put in half a million so I always like doing you know, like Dan Kennedy is famous for saying if you’re not sure what to do is do the opposite of everyone else. And will everyone else try to go into the family office? Well, high minimums, thinking that’s the way to go. I like that, you know, do the opposite when possible.

J Darrin Gross 27:06

That’s that’s really some great insight there. I think that you know, the the average capital raiser sees you know, the family offices like the golden goose and thinks that they can just get the audience that that’s the chance to land the other big, big fish kind of thing. And what you’re saying is that just as an opportunity to kind of create and nurture that relationship if you let them in at a smaller price and like even said, like, it’s kind of the cost of doing due diligence almost. That’s me that that’s that’s, that’s great. I mean, I’ve just I hadn’t heard that before and I am so appreciative of you sharing it because it you know, it’s funny how, you know, I go back to what was the The Millionaire Next Door book The perception of wealth and what people think the person is and you know, what they’ve got and who they are versus the real underlying core beliefs or, or who they really are the fabric that they come from kind of thing. So that’s great. That’s great.

Richard, if we could for a minute, I’d like to shift gears here. As I mentioned, I’m an insurance broker by day. And we we do risk management, there’s a couple of different strategies we look to. The first is can we avoid the risk? The second is can we minimize the risk? And if we can’t do either of those, can we transfer the risk and that’s, that’s what an insurance policy is. And I like to ask my my guests if they could consider what the BIGGEST RISK is. And, you know, just for clarification, we’re not necessarily looking for a an insurance related answer. But if you would, I’d like to ask you, Richard Wilson, what is the BIGGEST RISK?

Richard Wilson 29:09

For my company, even though we have good managing directors, I think the BIGGEST RISK is myself, you know, I’m driving forward a ton of the new content. You know, when I when I hang up here, we’re doing a 1000 person webinar. And I’ve got someone on my team that could do a webinar on many different topics, but not the same topics I could, you know, fluidly and so it’s kind of like a key man risk. And our business, you know, would have to go down to, you know, a skeleton crew if I got hit by a truck this afternoon, and move forward as much smaller business. So I think it’s just like many entrepreneurs, getting yourself out of your own way and making sure you’re not the bottleneck to growth and making sure that you’ve got kind of a C level team being groomed and built is part of that but also just thinking through things you know, that are insurance related, honestly related to caveman or life insurance, or just You know, if you’re disabled and can’t work for a while, because think that you know, like most businesses that are like mine with 15 employees, you know, you’re trying to grow into a medium sized business from a small business you’re in that in between world where, you know, you’re constantly trying to push stuff down to the team and get a better quality team.

J Darrin Gross 30:20

That’s, that’s insightful and i think it’s it’s true for most businesses is that this reminder of, if you don’t let people do grow, become more in the business you know, and kind of own that position. It is easy to become that bottleneck or kind of, you know, restrict the growth kind of thing so appreciate you sharing that. Sure. Richard, where can the listeners go if they would like to learn more connect with you?

Richard Wilson 30:52

Sure, pretty simple. Familyoffices.com is where there is details on the charter membership and The Family Office Club. We also have links to a lot of resources like our free book on family offices, etc. And in addition to Familyoffices.com if you’re strictly an investor, not selling raising capital by just someone looking to allocate to deals we serve 81 clients that are all investors. And it takes about five minutes to become an investor client by registering on privateequity.com. So if there’s an investor listening, privateequity.com would be the right portal that for anybody Familyoffices.com is kind of the central hub with all the resources there and options get involved.

J Darrin Gross 31:37

Richard, this has been an absolute pleasure. I can’t say thanks so much for taking the time to talk again today. And I hope we can do it again soon.

Richard Wilson 31:47

Yeah, I hope so too, Darrin, thank you so much.

J Darrin Gross 31:49

All right. For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you grow? Excuse me, the more you know, the more you grow. That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks CREPN Radio.

Intro 32:09

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