Archives for September 2020

Automate Capital Raising for Commercial Real Estate with Jake Marmulstein – CREPN #267

Jake Marmulstein 0:00

I would say that the big aha moment for groups is when they can put a deal out to investors. And each person has their own account, or they can log in. And you’ll see that the deal fills up pretty quickly with offers. And it’s something that happens automatically, because the people that invest can go in themselves see the deal and make an investment and choose the account that they want to use. But the traditional way would be that you’d have to sit by the phone or email and you’d be spending hours with your investors one on one, having calls and getting them in or out, figuring out the amounts that they would invest and booking that in your Excel spreadsheet.

Announcer 0:46

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 1:05

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 Jake Mermulstein. Before grant before founding his company Groundbreaker, Jake held a number of roles involving real estate and technology, supporting the growth of early stage digital technology ventures, while working with the government on foreign direct investment by Fortune 500 companies. In 2011, he started his career in real estate underwriting hotel investments for Watermark Capital Partners. He graduated from Cornell University with a major In Hospitality Management and minor in Real Estate. And at Groundbreaker Jake owns the company strategic vision and execution. He is responsible for sales, management of the departments and people leading them. And Jake also manages the company finances and capitalization as well as the board. And in just a minute, we’re going to speak with Jake about software automation, for real estate, fundraising, fundraising, and how it can be an asset to you. But first, a quick reminder, if you like our show, CREPN Radio, there are a couple things you can do to help us. You can like, share and subscribe. And as always, we encourage you to leave a comment we’d love to hear from our listeners. And also if you’d like to see our handsome our guests are, be sure to check out our YouTube channel. And you can find this on the YouTube at Commercial Real Estate Pro Network. And again, we we would love to have you consider subscribing to the channel. With that I want to welcome my guest, Jake, welcome to CREPN Radio.

Jake Marmulstein 3:13

Thanks so much, Darrin.

J Darrin Gross 3:15

Well, Jake, I am looking forward to our conversation today. But before we get started, if you could take just a minute and share a little bit more with your of your background with the listeners.

Jake Marmulstein 3:28

Yeah, absolutely. So I started really growing up in a restaurant family, went to school to learn Hospitality Management. And I got very interested in real estate investment and spent some time going and working in a few different countries and getting exposure to what’s out there in the world. And real estate was very fascinating to me. I got involved in investing in hotels. And when I was working in that, that field, I also had some experience in technology and was pretty pretty tech savvy just from being the default de facto nerd in the house to fix everything that was broken as I was growing up, so I looked at this problem the same way. You know, raising money and managing investors, using the current systems that we have available as investment management professionals, is is very manual and time consuming. And so I just thought there had to be a better way to do it. And then that seated the idea to form groundbreaker and we’ve been going six years in this business.

J Darrin Gross 4:52

Awesome. You mentioned your your background, or kind of, were you you saw or you were recognized the hurdles that real estate investors face when trying to raise capital. Can you elaborate a little bit on what it was that you saw that that the cumbersome challenges that you saw that there was a better way?

Jake Marmulstein 5:20

Sure. So I spent a lot of my time formatting PowerPoint presentations and printing them out and making sure that everything looked good. When you’re pitching to investors. You can’t have anything really stand out as an error formatting error, grammar, punctuation issue, or just the way that the information looks. It says a lot about your reputation and how well you’re going to possibly manage an asset, how detail oriented you are. So everything really reflects on on what you present to your investors. And so I wanted to find a better way to be able to package materials and present to investors, and I didn’t find any solutions that really could do that everyone relies on, you know, one to one email communication and phone calls.

But what we ended up doing was creating an online system so people can log in, see your deal. Its format into a beautiful looking online page where you have all the photos and documents and information you typically see in an offering memorandum. And then we take the friction out of the investment process so that it’s easier on the investor to be able to subscribe to a deal. And the solution that I run and groundbreaker automates a lot of the process that goes above and beyond why I was initially frustrated. But as you continue in real estate investing, the more investors you got, the more people you have to answer to and report to. And so on the servicing side, it gets cumbersome and quite complicated when it’s being managed an email and excel there’s A lot of ways to lose data and just have to resend things again. And that’s kind of just a high level overview, but I could definitely get into more details and specifics.

J Darrin Gross 7:16

Yeah, before we, before we go forward, I’d love to just go back a little bit. Now, were you directly involved with raising capital? You mentioned you’d invested in hotels, and I wasn’t exactly clear. Can you share a little bit about what was what your experience or your exposure was there?

Jake Marmulstein 7:36

Yeah, so we would get, we would get offer offerings from brokerage firms and different sources of deals that might meet our investment thesis. And then I would do all the underwriting and research to package the materials up for that deal. If it’s something that meant the back of the envelope calculations, which would hit our threshold for the returns. And then we would assess the risk and decide if we wanted to put something together. And I would be putting all the materials that would go in front of the Investment Committee. So I would sit on the Investment Committee calls, and, you know, get feedback from people. But before I even got on those calls, there was a long process of the due diligence, and the review of all the materials to make sure that it was appropriate to be able to share with Investment Committee. At in the actual capital raising, I was more administrative support and handling the stuff that we needed to do to get people subscribed. But I didn’t necessarily have to call investors directly during those times and, you know, get them to invest that was more than managing partner of the firm.

J Darrin Gross 8:40

Gotcha. And so you mentioned you were doing some administrative as far as the fundraising. So were you in charge of basically the tech that was facing the investors or was it primarily phone calls, emails or?

Jake Marmulstein 8:55

Yeah, a lot of it was just doing emails and sending information out and then using Excel to track that we had sent things. And we were waiting to get information back.

J Darrin Gross 9:09

Gotcha. Yeah. No, it’s amazing. And I’m really frustrated when I when I say this, but my dad was a banker and for years and years and years, I avoided online banking. Just because like it was something that was, you know, foolish kind of thing you needed to grind through, you know, the, balancing your checkbook as I was taught kind of thing. I mean, it was like, Holy moly, just to see that there was this it was effective. I mean, I could, I could balance my checkbook, but it was painful and I hated it. I put it off kind of thing, but just that, that recognizing there was an easier way and now switching to the online banking and it just all, you know, downloads and just to is your describing to, you know, the process that you were engaged in, because it kind of reminds me of the banking scenario of just, you know, you being tech savvy and and seeing whatever he’s going through with the emails and trying to track them in a spreadsheet and and i’m assuming that that you get a couple of iterations going and and possibly you can’t you know, distinguish one from the other kind of thing and, and maybe some redundancy kind of stuff when a lot of frustration that that compounds The situation was that my is any of that true or is that just me and the systems I create and recreate?

Jake Marmulstein 10:36

Now you’re you’re right, there’s a ton of redundancy. I mean, if you had to get access to what each investor invested across all of your deals, it would be really hard to find that because it’s logged in different spreadsheets in different folders. So just finding the deals is takes you time and then opening the store. spreadsheets. And then you’ve got to have one spreadsheet that links across all the different spreadsheets and gives you the data. And it just becomes very cumbersome. having to manually update things and know all the locations of all of your data as well. As you grow it, it just becomes more work and instead of the tool actually providing you efficiency, you’re kind of working for the tool to maintain it.

J Darrin Gross 11:29

Yeah, you are the tool, right?

Jake Marmulstein 11:30

Yes.

J Darrin Gross 11:34

So let me ask you when when you set out to start Groundbreaker, it sounds like there’s obviously record keeping, you know, is kind of a broad, broad topic as far as all of the different moving parts, but is there any one of the many tasks that groundbreaker takes care of that you identified as the the primary, or was it all kind of like this a global, more of like, there’s got to be a better way?

Jake Marmulstein 12:02

The different workflows that we have feed into each other. But I would say that the big aha moment for groups is when they can put a deal out to investors. And each person has their own account where they can log in. And you’ll see that the deal fills up pretty quickly with offers. And it’s something that happens automatically, because the people that invest can go in themselves see the deal and make an investment and choose the account that they want to use. But the traditional way would be that you’d have to sit by the phone or email and you’d be spending hours with your investors one on one, having calls and getting them in or out, figuring out the amounts that they would invest and booking that in your Excel spreadsheet. And when somebody can just put a deal out say at you know 6:30 at the end of the day, and then they wake up the next morning have dinner with their family wake up the next morning it’s fully subscribed and waiting for wires to hit. That’s an amazing feeling.

J Darrin Gross 13:14

Yeah, certainly wouldn’t make somebody miss the, the anxiety producing waiting by the phone and, and or outbound calls, knowing you’re missing calls. All that kind of thing. That’s, that’s, that’s pretty cool. So, let’s, let’s, I guess, give some I don’t know some right word I’m saying but can you describe kind of what Groundbreaker what all it does, I mean, we’ve talked a little bit about the, the the ability to track deals and investors and stuff but, but if you were saying Darrin, here’s, here’s, here’s what it here’s who it’s for, and here’s how it works. This is what Give me your your, your kind of description there if you would.

Jake Marmulstein 14:05

Yeah, sure, Darrin. So, if you’re investing in real estate as a deal sponsor, and you need to raise outside equity. Then using Groundbreaker automates and streamlines many of the processes you’ll have to go through putting your deal together, getting it out to investors, and then raising the money and service. Our clientele are mainly small to medium sized real estate investment firms that have a core team of five to 10 people and, or they could just be one guy, you know, on his own doing deals and growing the business. And the common denominator is they all raise capital from investors and they usually have a handful of investors in each deal. like five to 10 investors in each deal, sometimes hundreds of investors in each deal. And the more investors you have, the more work you have to do for each individual. So looking at groundbreaker using our tools, you increase your capacity, from a one to one relationship to a one to many relationship among all of the workflows; fundraising, collecting subscription agreements, processing them, keeping the data organized, being able to upload reports and disseminate information to investors, writing emails, and being able to pay your investors. So previously, each of those tasks you’d have to do. With you doing one task for one investor? Now you can do the one task but you can affect all of your investors in that deal at the same time.

J Darrin Gross 15:57

Nope, sounds pretty compelling. Especially if anybody’s had any experience with just the manual task of doing all these things and trying to keep it straight and a lot of excitement when you’re raising capital and trying to get a deal closed. But if you are pulling your hair out, you know trying to keep up with it all and I’m assuming frustrating investors. You know, if somebody is excited to invest with you and they can’t get get hold of you are missing opportunities that probably doesn’t speak well. Or probably turns them off too. You know, like you mentioned earlier about your, your style or your ability to manage the the project or the investment. You mentioned in the beginning that that your primary task when you were working with the hotel investment company that doing a lot of the PowerPoint presentations does the Does the groundbreaker platform does it? Does it have basically some formatted presentations? Whether it be raising capital or the deal or the you know, when the investors log in? Are there certain things that are formatted to make it a whole lot easier for the user?

Jake Marmulstein 17:22

Yeah, it looks really professional. When you go to the login page, it has your brand and photo of your assets and the investor can log in. So there’s a nice place where they can go to from your website, kind of seamlessly bolts on. And then once they’re in, there’s a dashboard that they can see and it shows how much capital they’ve contributed and how much capital they’ve just gotten, gotten back in terms of distributions and their return multiple.

And then there’s a place in there where they can track their investments, and they see a photo of the investment, what they have in it and their ownership and they can see any distributions that they’ve gotten out. And for new deals, they could see the deal cards summarized on a page that just gives high level information on the minimum investment amount, the return structure and the amount that they’re raising. And there’s photos, so looks visually appealing, it’s organized and clean and the way that it looks. And then you can click on a deal and look at the detail and, you know, specifically evaluate the information on that deal. And it is formatted in a way that makes it easy for the deal sponsor to put together a presentation quickly in the same consistent format. They’re sections that they can use to personalize it in whatever way they want for their specific offering. And it’s going to come out the same every single time and it’s going to look look the same. So there’s a lot less work that has to be done on creating those deals and formatting them to look good. We’re we’re not necessarily a offering memorandum builder. You still need to know what you’re going to put in there. But we make the process easier by providing somewhat of a template and a structure that’s consistent every time.

J Darrin Gross 19:07

So you do have that branding look and feel so it’s people see it, they’ve seen it before they know it you. Let’s talk a little bit about security online and and as an insurance broker, I know that that’s, that’s a big, big issue. How do you address the online security issues?

Jake Marmulstein 19:32

Well, we take security very seriously because our solution handles personally identifiable information and we have to store that in order to provide service to our clients. There’s investor account information and Groundbreaker that is reused to be able to invest in deals, and we want to make sure that it’s secure from the outside and the inside. So we use sock One, two and three compliant data centers for storing all the information There’s passwords for investors. And there’s a backup two factor authentication where your phone gets a text message to determine it’s really you in order to get access, and that’s available for both sponsors and investors. And then there’s encryption practices when data is stored and when it’s sent. So it’s encrypted end to end. And then internally, we have certain processes to make sure that only certain people are accessing the data in our client base, and we can isolate isolate problems. So

J Darrin Gross 20:37

Nope, sounds like you’ve you stay on top of that. It’s crazy similar schemes that I’ve I’ve heard you know, and had clients fall prey to and they seem crazy. But yet, you know, there’s a there’s a way a lot of people have You know, gotten uber creative on the digital with the digital capabilities to where they can make something look and and you know people think it’s something they know and they click on and all of a sudden they’ve got problems so I’m sure that your investors and your deal sponsors can appreciate your commitment to security.

Jake Marmulstein 21:25

Yeah, I wanted to say that with that there’s a lot of wire fraud in the real estate investment space. So we have all of the instructions in the portal you have to be logged in to get access to them. There’s creative ways that sponsors have come up with to be able to verify an investor is looking at the right instructions, such as sending them a text message and making sure that you know when they’re about to wire they have the right instructions and verifying they are indeed you know, the person Looking at it, but our software actually takes all that out of the equation because you have the login and you have the two factor authentication and it’s not like it’s in an email that can easily be spoofed and changed where a lot of wire fraud does occur.

J Darrin Gross 22:18

Yeah, that’s exactly where I’ve seen it and heard and talked to people about it. You know, the the email spoof you know, somebody you get an email and in even, it used to be that it was like an email that looked like us from somebody, but if you held your mouse over the, the address, you’d see that it was, you know, some crazy email address. But even now, I think they’re, they’re hacking into your email, waiting for a communication that they recognize as an opportunity and then sending instructions from you or to you or you know, that that are Actually from your, your email, but the the instructions are, you know, bogus and people there’s a link and and, you know, people lost. I mean, I know one account was over a million bucks and you know somebody they had worked with regularly they knew them and they did the instructions because if a million was not like an you know, it was an ordinary amount for what they do and but it’s it’s crazy. S`o it’s yeah i think that’s that’s something that I would think that users whether it be the deal sponsor or the investors would be of most interest in just the security of it because it’s one thing to have all the marketing pretty stuff but the you know when you’re putting in your social security number in your accounts and dates of birth and and all that identifiable information You’re basically given the keys for somebody that has some, you know, bad, bad ideas to create a lot of havoc. So that’s good.

Jake Marmulstein 24:11

Yeah, that security aspect is really important to people. That’s one of the main reasons they come to us.

J Darrin Gross 24:18

Got it. So in the field of this, that you that Groundbreaker, is it? Are there a lot of competitors? Or is this kind of are you like one of the few?

Jake Marmulstein 24:32

There’s a handful of solutions that compete and some of them are not specific to real estate. Some are pretty legacy and kind of have adapted or were not over the years to offer solutions for real estate. But it’s it’s a fairly new space. I think the reason why is because real estate people aren’t really that tech savvy and they’re not equipped to shift their business. So There’s not a lot of people who know the real estate space well enough to build a strong, powerful platform to mirror the workflows the way that they should be done. But I don’t know, there’s probably a lot of competitors that are gonna be chasing after and joining. As soon as something gets hot and has traction, you usually see a lot of folks come in so.

J Darrin Gross 25:27

Well, I mean, that’s, that’s kind of the nature of the business. If it’s if it’s an opportunity, there will be competitors, which just kind of reinforces the fact that it is an opportunity, if there’s no competitors might not be an opportunity. So

Jake Marmulstein 25:39

Yeah,

J Darrin Gross 25:40

That’s good. Talk about some of the feedback you’ve received from users.

Jake Marmulstein 25:48

So on the on the feedback I’ll give like, positive and and constructive feedback, because I can’t say everything is always on You know, rainbows and pots of gold. So Groundbreaker does a good job at making things professional, adding that level of security and peace of mind. And giving sponsors the ability to automate their transfers, their ACH transfers, that’s one of the features they really love. It’s fast, it’s reliable, it’s intuitive, I got those comments the other day from somebody looking at the software, who’s gonna sign on, and, and that’s all great, like our basis really be easy to use, and easy to understand, and also to be affordable.

On the constructive feedback, we really in order for us to accomplish more, we need to keep building into the solution. And some people want to be able to automate statement generation. So we’re we don’t currently offer that if you’re reporting and you want to give personalized reports to investors. Something that people have to do manually if they want to add that personal touch above what’s in our investor portal and what’s, you know, already being reported on for very complex distributions. We’re not at that point where we can fully automate end to end, a waterfall calculation. But we’re working on it. So there’s definitely things that people want us to be able to do when they store all their data with us. And just because software takes so long to build it, it’s just a work in progress. But yeah, but I think we’re doing pretty well as it is just with some of the functionality that we have.

J Darrin Gross 27:43

Yeah, I would think that that’s a challenge that any software developer faces, I know their platforms that I’m utilizing, and, you know, you run into a situation where like, this would be nice if it just would, you know, let me do this. And, you know, you raise your hand, but depending on their, their queue of problems that are on fire or things that they really want to solve may not happen for a while, but you know, I guess that’s the good news is is that, you know, people have have some ideas that are, you know, potentially helpful and could potentially help you develop the product, I guess, to make it more user friendly, or, or even that much more, you know, better than then potentially, you know, competitors for, or however that is that’s, that’s, you know, part of the, I think that’s part of your process and part of what you what you have to stay attuned to as a software developer just to make sure that you stay they’ve, you know, viable and, you know, you are the solution as opposed to not the solution kinda thing.

Jake Marmulstein 28:59

Yeah. It’s hard to just keep up with all the things that we could do. I mean, priorities are, the hardest part is picking the right thing to focus on at the right time.

J Darrin Gross 29:10

Got it? I want to touch real quick. I looked on the website a little bit. And I saw the pricing in that you, you do it, I believe it’s under assets under management. I’m just kind of curious how you chose that as opposed to like number of, of records, user Records, which is what I’ve seen on not not in this type of software, but other software, CRM that I’ve dealt with, it’s priced on the number of of users or do the to kind of be equate if you’ve got more assets under management, you’ve presumably got more users?

Jake Marmulstein 29:50

Yeah, that’s a good question. It took us a while to figure out what pricing would be both fair for the market and also fair for us. We’ve tinkered with many different models throughout the years. So one thing is we want people to be able to come on board and really grow with us wherever they start. If they’re just starting on their first deal, or if they’re managing a portfolio of, you know, 20 deals, we want to be able to fit with them. And it’s very hard to do that. There are weaknesses in this pricing model. But it does cover more bases than most other pricing that we tried to come up with. We like to be able to offer people the all you can eat option, which is you can do as many deals as you want. You can have as many investors as you want, and there’s no limits to your usage. So you can really adopt the solution fully and completely into your business without being concerned about cutoff points. Our pricing goes up as more equity is raised, so that as the company grows, they’re doing bigger size deals. with larger average investment amounts with more investors, they’re growing and we should be growing too. So it’s an easier way to see how well somebody is growing and what impact the solution might be having on their ability to scale to do it based on the equity under management, and also the way that it is, is done.

We only increase the price when capital is really contributed. So if you’re a fund and you’re raising $20 million to start the fund, you’re only going to be paying for the equity that’s actually contributed not committed in a signed agreement, but not in a bank account, collecting interest. And we just determined that in the software, so there’s tools that you know, show you how much capital is contributed and we’re using the same information to base the pricing off of

J Darrin Gross 31:59

Got it. Well I just see It when I saw that, uh huh. That’s kind of interesting, just the way that you you came up with that. But I would assume that, you know, if if, you know, you meet all the criteria and it helps investors really grow, it’s not limiting their growth because they’re no longer doing the spreadsheets and the emails and all that stuff that they’re used to doing that the tool is there’s value in the tool and that, you know, it’s helping them grow their assets under management, which would be a win for everybody. So I would assume that’s your, I’m assuming you don’t get any pushback on.

Jake Marmulstein 32:37

We we don’t right now, the pricing is really, at the very low, reasonable point for people who are just starting out because it, it goes all the way down to zero to 1 million in equity.

J Darrin Gross 32:51

Right, right. Hey, I want to ask you real quick about COVID-19 it’s it’s kind of shuffled most of our sense of work with time and space, has this affected Groundbreaker at all? Have you guys is it? How’s it affected you guys?

Jake Marmulstein 33:14

Well, as a company, we had to make swift moves to adjust our expectations on business and internal processes. And we address those very early in March. So we were, we were ahead of many companies that dealt with this, but it ended up being, I think, a net positive for us, because we’re working remotely and people are working remotely having more time to be able to focus on how to improve their business. And they’ve reached out to us and we’ve gotten a lot of interest in our solution. While people have been figuring out the deals that they were working on, whether they’re going to move forward or not. And having to deal with with Property Management situations, I think, you know, that was initially what people were occupied with. And so we saw a dip in an activity then. But then as soon as deals started to continue going, people were very interested in using this time to focus on how they can make their business more streamlined.

J Darrin Gross 34:21

Gotcha. Jake, I’d like to shift gears here for a minute. So I mentioned to you before we started recording by day, I’m an insurance broker. And I work with real estate investor clients. And we assess risk and determine what to do with the risk. And there’s three different strategies we typically consider. We we look and ask, can we avoid the risk? If we can’t avoid it and we look to see can we minimize the risk and if we cannot minimize or avoid the risk, we look to transfer risk. And that’s what an insurance policy is. And I like to ask my CREPN Radio guests, if they can take a look at their business and their clients to identify what they consider to be the BIGGEST RISK. And again, for clarity, I’m not necessarily looking for an insurance related answer to risk is far and wide. But if you’re willing, I’d like to ask you, Jake Marmulstein, what is the BIGGEST RISK?

Jake Marmulstein 35:38

So Darrin, the BIGGEST RISK for Groundbreaker in as I as I look at our business, and what we’re doing is really managing expectations with people. Software is a living, breathing thing. And it is very challenging for people to evaluate. who aren’t typically Software buyers and a lot of people in real estate aren’t. So our job is to be good stewards of the, you know, good stewards to other people, treat them with respect and give them the most transparent access to what’s really going on and what really our product provides when they’re evaluating it, and trying to understand how they can improve their business. And that’s how we mitigate that risk of mismanaged expectations and somebody getting something that they think does “x” when it really does “y”. And so it’s about just education, mainly.

J Darrin Gross 36:41

No, it’s that’s a it’s a risk that I think everybody faces daily. Managing expectations you know, and, and how much easier it is if you can, you know, start and stay on the on the straight and narrow as opposed to letting somebody their expectations get ahead of them or, or, you know, fall from reality is that’s good. Jake, before we wrap up, where can listeners go if they would like to learn more or connect with you?

Jake Marmulstein 37:13

Yeah, everyone, feel free to connect with me on LinkedIn if you want and also go to Groundbreaker. co. And if you’re interested in finding out more about our solution, you can go to the instant demo button, fill out a form and there’s ways to get in touch from there.

J Darrin Gross 37:33

Jake, I can’t say thanks enough for taking the time to talk. I’ve enjoyed talking with you and learned a lot. And I hope we can do it again soon.

Jake Marmulstein 37:45

Same here Darrin, thank you for having me.

J Darrin Gross 37:47

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 38:08

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Attract & Connect With Commercial Real Estate Investors on Linkedin with Yakov Smart – CREPN #266

Yakov Smart 0:00

It’s funny because LinkedIn has changed a lot which we can talk about the changes as well. But it’s funny because you know a lot of people in real estate a lot of real estate entrepreneurs, especially entrepreneurs, that commercial real estate may still see LinkedIn as a resume platform where people go to update their resumes and what we’re going to talk about today is a new way in a very prolific and powerful way of attracting high net worth individuals.

Announcer 0:24

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 0:44

Welcome to Commercial Real Estate Pro Networks CREPN Radio. Thanks for joining us. My name is J. Darrin Gross. This is a 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 Yakov Smart. Yakov is considered to be the leading expert when it comes to attracting A list investors and raising capital using LinkedIn. He is the author of Disrupting LinkedIn and a sought after authority by top business owners and sales leaders worldwide. Yakov has shared the stage with Samantha DeBianchi of Bravo’s hit TV show Million Dollar Listing. And he’s been a guest on numerous media outlets. As a resident of Scottsdale, Arizona, today, Yakov is a proud leader of LinkedIn Enterprises, where his webinars on demand training programs and strategic consulting accelerators give people proven tools and techniques for transforming their LinkedIn profiles into priceless relationship building assets. And in just a minute, we’re going to speak with jack off about how To raise capital and attract high net worth investors using LinkedIn. But first a quick reminder, if you like our show CREPN Radio, there are a couple things you can do to help us. You can like you can share and you can subscribe. And as always, we would love to hear from you. Please leave a comment. Also, if you’d like to see how handsome our guests are, be sure to check out our YouTube channel. And you’ll find this at Commercial Real Estate Pro Network on YouTube. And also don’t forget, please subscribe. With that, I want to welcome my guest. Yakov, welcome to CREPN Radio.

Yakov Smart 2:42

Good to be here. Thank you for having me.

J Darrin Gross 2:45

Well, I’m excited to talk with you in this digital age about marketing and leveraging LinkedIn. But before we get started, if you could take just a moment and share a little bit more about your background with the listeners,

Yakov Smart 3:01

Certainly. So I’ll give you some some brief insight into my background here. I started on social media and started you mentioned digital marketing and marketing online. I always you know what I tell people, the story I always start in a bit of an unusual place because I’ve been on social media since about the eighth grade. So I started back in My Space, and I think a lot of your listeners will remember My Space. That’s where I started my journey on digital marketing. And back then I wasn’t using it for business and successfully, I was using it to hit on girls. That’s when I got my start on social media.

The way I got started on LinkedIn was a bit more intentional and a bit different. I was selling software for a startup software firm. And I was having a lot of trouble and frustration from making cold calls. Basically, the only way that I had a prospecting and lead generation was smiling and dialing, it was driving me crazy. So out of necessity, I turned to LinkedIn as a different way and I inadvertently stumbled upon a new way of using LinkedIn for growing businesses. And you know, I live in Vegas at the time and started taking on private clients and turning it into a business. And you mentioned, Disrupting LinkedIn, I authored that book a little while ago and since then became known as one of the top authorities when it comes to using LinkedIn to generate leads, and attract A list clients. And the way that I got into working with people in the real estate space, especially when it comes to raising capital and attracting investors, which I know is the focus of our conversation today.

I was at a forum for entrepreneurs and a couple of gentlemen approached me and they were intrigued by the concept of using LinkedIn to connect angel investors. So people who are high net worth individuals and founders of companies, and they were putting together these deal clubs and they had a vision for running these deal clubs in major markets across the world. And they asked me if I thought it was possible to approach extremely high net worth individuals, people who were in venture capital, angel investors, people worth, sometimes hundreds of millions, if not billions of dollars and get them interested in this concept using LinkedIn. And I said that I thought it did. And I took them on as clients. And it was fascinating to see just the caliber of people who we could find on LinkedIn. And using the strategies and the methodologies that you and I are going to talk about today, getting them interested in, in their case, attending the deal clubs, and investing in these types of startups.

So those are some of the hardest to reach decision makers out there. And that was sort of a starting point. And my entry into the world of raising capital where, you know, at around the same time, I had a lot of influencers in the real estate syndication, real estate investment space, reach out to me and, you know, we worked on a couple different projects that at this point, my primary focus of the students I work with and the mentees that I have inside of our various programs is around a new way of using LinkedIn to attract high net worth investors and raise capital. It’s funny because LinkedIn has changed a lot which we can talk about the changes as well. But it’s funny because I know a lot of people in real estate, a lot of real estate entrepreneurs, especially entrepreneurs, that commercial real estate may still see LinkedIn as a resume platform where people go to update their resumes. And what we’re going to talk about today is a new way in a very prolific and powerful way of attracting high net worth individuals using LinkedIn.

J Darrin Gross 6:27

Well, I mean, everything you said there from the beginning of eighth grade and MySpace to you know, now you’re attracting high caliber angel investors. That’s, that’s, I mean, that’s a journey that I think everybody likes to have the fast track the the shortcut on. I’m assuming on on MySpace, you were kind of nurturing the, your perspective leads in order to attract the dates. Is that kind of the the that nurturing thing? Is that kind of a key to your, your approach? I mean, we can get into more detail, but I’m just kind of curious. I think a lot of times people think of sales as being like a, almost like a shopping cart mentality as opposed to more of the nurturing kind of thing.

Yakov Smart 7:21

So, you know, it’s funny, I don’t think anybody’s ever asked the question quite like that, comparing MySpace and LinkedIn and I would say that I wasn’t very successful using MySpace to hit on girls. So I think those strategies could sort of be be left behind us, but I see what you mean like because my space was a platform for at least making those connections in that context, right versus LinkedIn. And when people work with us and they want to accomplish this, the big thing is, yes, nurturing leads and there is a lot of value in nurturing and you know, getting in front of people and having that consistency in relevancy and it’s a big, LinkedIn has a lot of different tools and features for accomplishing that. But the biggest thing is, I don’t want people to put unnecessary hurdles between them and investors.

I’m a big proponent of direct response as well. And so I’ll give you the methodology. And we can go into, you know, any, any of the different nuances of it. But the first piece is finding being able to build a list of investors. So I call it magnetizing, to your list. And what that comes down to is using the various searches inside of LinkedIn, there’s several ways you can build lists of high net worth individuals on LinkedIn, and there’s different angles for building lists as well. And when I say magnetizing, your list I mean, finding a list of the people who are going to be perfect potential investors for you, right. So you know, I have people who want to attract institutional investors, I have people who want investors from family offices, I have people who want local dentist or attorneys or military personnel, these are all different angles, all people you can potentially find on LinkedIn because there’s 675 million users.

So it starts with magnetizing. And building that list and getting really specific. The next piece, and this is really if there’s a secret sauce here, or if there’s something that really makes this thing go, it’s the messaging, right? So I call it accelerating trust, using messaging, because what your listeners need to understand, and this is really key because of you know, the world has changed recently, building a relationship with an investor online outside of your current sphere of influence is significantly different than it would be in person, right? And the big difference is the level of trust or lack thereof, because let’s say you go to a local, you know, REI club meeting or a networking event or you know, whatever the case may be an in person event, and you meet someone as a prospective investor and you start to have a conversation. Unless they’re just completely rude and inconsiderate. They’re not going to walk away as you’re in mid sentence, they’re not just going to turn their shoulder walk away and go talk to someone else. Because that would just be really impolite and most people wouldn’t do that. Well online, if you don’t immediately grab their attention and start building curiosity and trust, they can say next, and they probably have five other windows open on their phone or on their computer. So there’s a lot more distraction. And it’s about getting them to care first and having them understand what’s in it for them.

So on LinkedIn, there’s three important places for your messaging. There is your LinkedIn content. So what you can be posting on to LinkedIn. There’s your LinkedIn profile, which you can make very attractive to those ideal investors, which is a big topic of conversation. And then there’s the actual messaging, the direct type of messages you can send to people where you can reach your potential investors directly. So that messaging tailoring it the right way to build trust, is of utmost importance. We can make the world of a difference between you getting somebody interested in responding and wanting to take that conversation beyond LinkedIn, versus somebody just not even giving you the time of day. So that mess accelerating trust is a big thing. And then the next part of the methodology, once you’ve got a system for doing that, you want to be able to delegate it, okay? Because it’s my contention that real estate entrepreneurs shouldn’t be doing the day to day management once they’ve got a system that’s reliable for generating investor leads on LinkedIn. So we want to look at how do we reverse engineer a system that you can then delegate to an assistant, intern, family member, you know, whatever the case may be, and get and make it very much so that they can follow along and just still for them make it a matter of what buttons to push.

And then the final piece is actually enrolling investors, okay. The transitions to getting a conversation offline, okay. And then what happens when they’re interested? How do you nurture that lead further, that when you have a project or a deal, you’re staying in front of them and top of mind. So there’s a lot of nuances, there’s a lot of different parts here, but it is no the best approach Darrin, and and you you mentioned you mentioned a really good point is yes, you want to nurture but you also want that direct type of lead generation as well for accelerating trust. So there’s there’s both facets to it.

J Darrin Gross 12:17

Well, and you know, everything you you mentioned there I’m familiar with the terms I think that there’s a kind of a thought process with online marketing that there’s a lot of sites have like a shopping cart, you know, and it’s a matter of somebody see something or Amazon’s think of amazon prime example you know, you you see the object you click it you buy now, and in a couple days it shows up on your doorstep unless you’ve got your your prime membership, some like that. And but I think the reality is, especially in higher ticket items, is that then the nurturing part of it I think sometimes people forget Get that just like if you were calling on somebody, you know, in, in person, you know, the first time you meet them, you might just kind of introduce yourself, get to know them and maybe send them a “It was nice to Nice to meet you” kind of know, then maybe follow up with something. You know, but just that that process kind of thing, understanding that the full cycle, you know of a, for something from sombody, from an unknown, maybe a suspect to a client kind of thing. And so, you mentioned three things are the the content, the profile and the messaging. And my guess I’m kind of curious, is there any one of those you find to be more important, or one that could more easily jeopardize a go forward.

Yakov Smart 13:56

So here’s the order of importance. And this is true in most cases when it comes to attracting investors. That profile. I mean, the LinkedIn profiles have gotten to be so important other than your website, for on for attracting investors online, it’s your most important marketing asset. It’s by far more important than any other social media profile. And it’s so much more than just a resume, right? I mean, there is a few big mistakes that I see real estate entrepreneurs making their LinkedIn profiles. There’s three big ones actually, besides not having one.

The first one is going the whole corporate resume approach, right. So it’s having something that sounds stuffy and professional, your LinkedIn profile, if you want to truly attract the high net worth investors and raise capital, it shouldn’t be an executive buyer. That’s not what we’re talking about here. Right. The next mistake that I see is what we call the wide eyed squirrel where someone looks like they’re doing five different businesses scattered all over the place. And again, that very quickly diminishes trust. And the third key mistake that I that I often see is what I call the 90s marketing brochure. It’s when somebody is trying really hard and it’s coming in, they’re talking all features and benefits, and it’s coming across as Super contrived and salesy, right so I don’t recommend any of those three approaches.

The approach that I recommend for your profile is what if you could get somebody when they look at your profile to instantly understand this is for them and start building intrigue and trust Okay, that’s what your profile needs to be accomplish the accomplishing no matter how long you’ve been in the business if somebody feels seen and understood, you can cut through the noise and that’s often the key to doing that. So the profile is a good foundational piece in getting people to decide whether or not they’re going to give you the time today whether or not you’re an authority I’m it’s funny, you mentioned Amazon and shopping cards because those things are all know for the most part product businesses are commodities. You know, you buy something 2030 bucks, okay, it’s a commodity A lot of us don’t think twice about it versus, you know, if you’re asking somebody To write you a check for 250 grand, that’s you know, there’s a little more thought and trust that goes into that, obviously. So you want to get past commoditization. And the best way to do that is to become an authority and your LinkedIn profile is certainly a great asset for doing that.

Now, other than your profile, your messaging, the direct messages dear able to send us someone on LinkedIn can be much more powerful and important than posting content. I mean, I tell people this all the time, you don’t necessarily even need to post content to generate significant leads on LinkedIn, its content as a way to supplement and nurture. But for the direct lead generation, you can distribute your concept through direct messages, right? You know, I never know the big mistake that I see with direct messaging people go for that sort of one shot killer, right where they, you know, try to come up with the perfect sales pitch and I call it the mama messenger. It’s like, they just like, you know, vomit vomit their entire life story and pitch and all the features and benefits there. And it’s just, it’s a complete turnoff, you know, to be on the receiving end of that. So It’s having multiple steps nurturing that lead. And the very first thing you have to do is that person needs to raise their hand and say yes, I’m interested in learning more. Yes, I’ve got questions. Yes. That sounds like it might be interesting.

J Darrin Gross 17:14

Yeah, I think we’re all you know, or at least speak for myself just the fatigue of, of, you know, your inbox with with messages that are the the full offer, when I’ve never met the person have no idea what they do. And it’s, you know, it’s not just a Hey, nice to meet you. It’s, it’s got the full meal deal with links and, you know, kind of thing and I’m, I’ve always been wondering, like, do they work I mean, cuz I just like kind of just, you know, a little overload there. So, what, let’s talk about the strategy, the direct messaging strategy that you you utilize it Is there a? Is there a formula to that? Is it kind of a an intro warm up? Do you have any kind of, you know, an approach that you recommend?

Yakov Smart 18:12

It what’s not a one size fits all? Okay? So a lot of this is gonna be just like your profile, just like content just like anything you do. That’s why we talk about magnetizing, you would talk to a college professor, for example, very differently than you would talk to a tech CEO. Probably different value systems, different ways of communicating, right? So there’s not like some magic, you three step formula that works every time guarantee that just gets people you know, to not be able to control themselves, right? That’s just not not really something that exists. However, as sort of a general rule of thumb. The very first piece is you’ve got to connect with that person, right? Because when you connect with that person, you have the ability to now message them directly. Okay, you have there now in your sort of LinkedIn database And when you are posting content, they’re going to be much more likely to see it, they’re gonna start to see you as much more relevant.

Next piece is rather than pitching anything or making an offer right out of the gate, I recommend having at least one piece of educational content that you share with them in your message. Okay, something and now without asking for anything either dislike, you can you can share something that maybe you found on a third party source like Forbes magazine or entrepreneur, for example, let’s say you’re doing apartment investing, right? And you found, you know, a Forbes article talking about the three surprising ways apartment investing is going to be one of the best alternative investments for the next 10 years, something like that. I just made that up. But it’s something that’s educational in favor of your type of investment. And you so you leave it at that and then the follow up can be rather than again, if you’re, if you’re ready to test the waters, ask them a question. Instead of laying the whole you know, me on them, like you talked about. So asking them and inside LinkedIn capital raising accelerator when I work with people we talk about, you know, magic question. So I’ll give you a couple of examples. They it’s all about how you start with a magic question. So have you ever could it be possible? Would you Would you ever consider what are your thoughts on right? These are type of open ended questions that you want to gauge somebody’s temperature, because if they’re, if they’re not aware, and if they’re not interested, you’ve got to get them to raise their hand first. Otherwise, it becomes you did the one big mistake that I see is you know, people talk to the wrong people, right? There’s no need to and the great thing about this too is you can automate a lot of the legwork about 90% of this can be automated without looking automated. But the big thing is, you know, if you if they’re not interested yet, if they’re not aware, then you have no business talking to them. about the specifics of a deal, or you know, even scheduling a call, it’s a big waste of your time in theirs. So the messaging, you know, this real strategic way to think about it is, what are all the different angles that they care about that’s relevant to make your messaging relevant to them? And can you get them to raise their hand and ask you a question or respond or say that they’re interested.

J Darrin Gross 21:35

So you mentioned kind of the different angles and kind of qualifying I’m kind of curious because, you know, a lot of times I think digital marketing, a lot of times it’s thought of as more of like a masses, kind of a thing as opposed to more of a select, you know, I guess I’m, I tend to think of it more of like the it’s in the numbers. kind of thing. Do you find that by being more selective? Like, first of all, I guess, do you identify your What do you call it? The there’s a there’s an acronym or there’s some sort of word for but if you don’t identify your specific type of you’re your best possible client by character trait. And then you identify that, you know, Yakov has these characteristics, he’d be a good prospect. And then do you, does that, do you find that the, I guess what I’m trying to ask is a percentage chance of getting into a conversation. I mean, I assume there’s still a numbers aspect to this from a standpoint of not everybody’s going to say, Oh, my God, does the I’ve been waiting for you to call. I mean, I’ve been looking for somebody on LinkedIn to talk to and finally you’ve you’ve, you know, you’ve answered the bell. Can you speak a little bit to the percentage success you find when when people are more more selective about this and do this more of like in a personal way as opposed to, you know, we’ve already talked about all the ways that can annoy people with you know, the full meal deal out of the chute with never not even introducing yourself.

Yakov Smart 23:16

So this is all about quality, right? This is about being specific and finding that quality investor you are there is strengthen numbers, especially as you’re building this up. But what’s great for a lot of people is if you find just one or two good high net worth relevant investors on LinkedIn, you build those relationships and they invest with you and they receive a return and they have a good experience. There’s a certain psychology where they’re likely to tell other people who are just like them so it tends to snowball into referrals. That’s why you know, it’s this isn’t digital marketing where you need 10s of thousands of leads, right? I think those days especially for attracting investors are in the past. This is about you know, for for a lot of people listening maybe To your pool of potential investors on LinkedIn is 500, or 2000, or 3000 or 5000 people, right? And so not huge numbers, quality, though, being really specific. And you can do that when you build a list on LinkedIn. What’s great though, is I’m big on automating the initial piece, right? So there’s different software’s available where you can automate the legwork of the initial outreach and you know, the way that I always described it’s like good plastic surgery, right? When you have good plastic surgery, people shouldn’t be able to tell like it’s and when you see bad plastic surgery, you can almost always tell right we have a lot of plastic surgery in Arizona so I’m sort of become well versed in that in that regard, but my point is, with plastic surgery, right, it’s like you there is a you know, there is a natural element to it right? Where you know, even though the message is short, concise, you’re you’re not manually reaching out to people. But it’s feels manual, it feels personalized, it feels specific based on the messaging. And then when they raise their hand or in fact interested in the right person, that’s when you can transition that conversation, that’s when you could ask additional questions and move that relationship off of LinkedIn. So it’s, you know, not being in that there’s, there’s two sides of the coin, right? I don’t want anyone being in that scarcity mindset of Oh, no, there’s only, you know, x finite amount of people who have money, it’s just not true. It’s never been true. It’s not true now. However, at the same time, you know, if you’ve got a very specific criteria, and there’s only a couple hundred people that you know, would match really well. It’s going deep with that group and really, you know, creating this big fish small pond phenomenon, which works really, really well on LinkedIn.

J Darrin Gross 25:56

I think when when you’re you know, Talking about that it kind of reminded me that, you know, the goal, keep in mind, what is the goal, the goal is first to get the connection so you can have that conversation. And then two, the goal is to get the conversation offline, is it not? I mean that you’re not meant to stay online and it just be a click, click Yes. for, you know, I’ve got, I’ve got millions, I’ll give you that. That’s not an option on the, you know, on the landing page. Right. Right. So it I think that’s, those are, I think two things that I think get lost. And again, I like your your sentiment about automating because I think there’s the initial stuff if you if you can automate it, but I’d be kind of curious on your experience when when starting out, I’m assuming that people are still manually doing the messaging, trying to find what works for the process. Do you do you advise that people kind of keep track of You know the process from from those that work versus those that didn’t work to try and then to be able to then, you know, I guess turn over that to some sort of an automated process? Or what are your thoughts on that?

Yakov Smart 27:14

I think to have something and have metrics and everything, it needs to be metric based. You need to it’s all about the numbers, right? where we want to be as scientific as humanly possible. And you’re absolutely right with reverse engineering that out, right. So I don’t, is for someone who’s an entrepreneur, I don’t recommend that they manually sit there and manually send messages at first. It’s just not the highest and best use of your time I recommend, once you have the messaging down, automating out of the gate, the software actually tells you the metrics, it keeps track of that for you all in one place. It saves you a ton of time, and then you have some numbers, right because if you only have if you’re without getting too, you know, scientific and analytical here, but if you only have 30 people that you’ve tested a message with, you know, I mean, you don’t really, you don’t know much no matter you know how many people have responded, you don’t know much. But what you’re going to, you’re going to notice are some common patterns you’re going to notice. I call them the eight buckets of different responses. And you’re going to notice what some of those are, as you start reaching hundreds of people, and then you’re going to be able to course correct or double down on what’s working. So I recommend automating right out of the gate. Now, there’s best practices for automation, right? If you don’t have any connections yet, not a good idea. But once you’re past, like, let’s say that 500 plus connections mark and you have a bit of a foundation to start testing different messages and different approaches, absolutely automated because what automation allows you to do is let’s say you’ve got a list of 1000 prospective investors, for example, on LinkedIn, you build that list. You can get really specific.

I think LinkedIn is the best list building tool in the world for getting accurate, real time. data, the old way to do it was you had to go pay a list broker a few thousand bucks. For a list of accredited investors. By the time you got the list, half the list was outdated. This is they’re really online, you can reach them on their mobile devices. Now. So let’s say you have a list of 1000 potential investors, you plug them into the software, you’ve got your messaging, you press that button. Every day, there’s 100 connection requests going out from you, there’s gonna be a percentage of those people that accept and the follow up the and I call it a messenger funnel, it’s all automated. And as soon as they respond, that’s when the automation stops. So it never looks canned. It never looks robotic when you’ve got the right messaging, and then that’s when it’s worth manually following up and transitioning that relationship and moving it outside of LinkedIn. So they’re actually getting to know you and getting into the process of investing in your projects.

J Darrin Gross 29:55

But you’re at least you’re initiating the conversation, and you’re kind of trying to get them to kind of the fish to bite without being the, you know, manually doing all that that makes a lot of sense. So, for real estate investors are there any, you know, I guess, must do best kept secrets, ways that you’re seeing the people have have really had success. I mean is is basically like what we’re talking about is make sure you’ve got your, your criteria, you’ve got your profile setup and then start the messaging.

Yakov Smart 30:42

Well, it’s all about messaging, right? I mean, the best kept secret is that this is a lot of people don’t even know what they don’t know that this is possible. And that you can attract investors from anywhere in the world using this strategy. But the biggest thing is you need to build trust using your messaging. I cannot emphasize Is that enough? I mean, it’s if you don’t have that trust your, your shoot, you’re shooting yourself in the foot really. So it’s having concise messaging, having messaging that gets people to raise their hand first and not talking to people like you would offline, right? Because it’s online is really, really different. And it’s to have a methodology to write it’s to be intentional about it. The the other big thing, and I’m gonna get on a soapbox for a second is there’s a lot of quote unquote, digital marketers and gurus out there who talk about posting, right, you’ve got to post five times a day, like that’s BS man. I mean, it’s, it’s nothing to do with posting frequency just because you put more time into something doesn’t mean it’s going to pay off more that’s like the whole work hard but not work smart deal. It’s just not really what generates the results that you want. So instead of doing that, have a methodology where you can actually generate real leads. And if you’re going to post something, use it to supplement that and make yourself more relevant that That’s, that’s another big thing.

J Darrin Gross 32:03

No, I love that because I think there is this notion that if you’re not posting, you know, five times a day and you know, staying up all night or I mean, I don’t know how people do it other than that that’s basically become their job is posting online especially if they’re doing it themselves. And I don’t know I, I tend to think there’s so much I mean, there’s so many people that are trying to compete for your attention. After a while it almost like it feels like there’s a lot of noise whereas if you have a specific it’s almost like getting a handwritten letter anymore. In a really stands out just like what you’re saying is if there is a message that’s specific to you, and you open it up, and it’s not some lengthy, blah, kind of a message. I mean, I know I’ve had success in reaching out to people on LinkedIn and basically doing like you’re saying just kind of a small not an ask for a, you know, buy or something like that. But hey, I saw you on this. Just wanted to say I really appreciate it. You know, like if I heard somebody on a podcast or if I read something where they were mentioned or you know, congratulate them on something I saw I’ve been pleasantly surprised by the positive, you know, response as opposed to some of the, the overwhelming dread I get when I see my inbox and it’s just full of these, you know, complete offers just sign here. kind of thing. So, that’s good. And just looking down here, as far as the ideal, you know, who would you say is an ideal candidate for implementing LinkedIn is a strategy to, you know, is there anybody that this doesn’t work for?

Yakov Smart 34:09

Um, who this doesn’t work for. So today’s conversation is specifically around a strategy for attracting investors and raising capital. So, but overall, I mean, there’s I work with people in some different niches and industries. This doesn’t work for someone, for example, who wants to sell trinkets online or do e commerce. I mean, it’s not, not what we’re talking about here. Right? So it’s about high quality lead generation. With a methodology we’re talking about today specifically, is for real estate entrepreneurs or people who you know are building up syndications or maybe wanting to reinvent themselves or maybe they’ve been in the business for a while and, you know, they want to raise more capital or now that they’re not networking with people in person, they want a way to create those key contacts. So that’s who this is really designed. For and it’s designed, the way that I look at it always is big picture is that it’s designed for a system that you can rely on. Because the biggest thing I think, you know, if you sliced it down to one thing, this is a way for you if you’re listening right now to put yourself back in control of you to lead generation to not have to sporadically scramble to raise capital or only rely on people in your sphere of influence. This completely gets rid of those limits for you and puts you back in control. And that’s who this is really for.

J Darrin Gross 35:34

Another question that occurred to me. You you’ve not mentioned once paid advertising on LinkedIn. You’ve spoken pretty much about the profile, which last I checked free account will give you a profile. And I believe you can message people you’re connected to unless you have a paid account. Is that still the case? I don’t know.

Yakov Smart 35:59

You can do it with a free account. So LinkedIn advertising for most people right now doesn’t make sense. I mean, it’s it’s an expensive place to advertise and all of these strategies that we’re talking about the direct messaging profile, you can do that organically without spending any money on digital advertising. The different things that I recommend, you know, spending money on what I personally spend money on when it comes to LinkedIn marketing is on the premium account, Sales Navigator because that’s its own type of CRM, and it’s, it gives you much better and more specific searches. So it’s well worth it. And then you know, the different automation software and then obviously, you know, whatever people’s back end and CRM so we’ll do things a little differently there. So there’s no need for paid LinkedIn advertising is just not not a good investment right now. And, and even if it was paid advertising is a whole different conversation because that requires a whole different marketing and advertising skill set that the good news is isn’t really necessary on LinkedIn. attract investors.

J Darrin Gross 37:02

Gotcha. One of the things I know that on all the platforms is there’s constantly changes occurring. Are there any recent changes are coming changes to LinkedIn that people should be aware of?

Yakov Smart 37:22

Well, the big change, is that just the caliber of audience, right? I mean, it’s, it’s been evolving. I think that the thing that really triggered a lot of these changes it was a few years ago, Microsoft purchased LinkedIn, they bought it for 26.2 billion. And since buying LinkedIn, they’ve completely revamped the platform. It’s much easier to use than it’s ever been. You don’t have to be a tech whiz. And you know, just to give you some stats at LinkedIn has about 675 million users right now that number has grown significantly in the past few years. Fastest Growing age group on LinkedIn 25 35 year olds, so you have people who are actually younger and successful. And they’re there for very different reasons than other social media. And a lot of people are getting tired of Facebook because of politics and different things. And the only social media that they’re spending any significant amount of time on has become LinkedIn.

Same thing with C level executives, high level business professionals, LinkedIn has become their social media of choice. I mean, so much so that the average household income on LinkedIn is 115,000. And that’s an average household income. So you know, you think about all those things. And you also think about their vision they want because the reason LinkedIn makes money is when people invest in premium accounts and paid ads and businesses and all those different things. Um, but the big thing is they want people to spend more time there. So they’ve made it more user friendly. They have a bigger sense of community than ever before. And so people are spending more time their vision as a company, they want to get to 2.2 2 billion users by the end of 2022. So they’re actively expanding, they’re growing in other countries as well. So that audience, right, no matter who your ideal investor is, you can either reach them directly on LinkedIn or you can reach somebody who’s a trusted adviser to that ideal audience. So you there is that direct opportunity for you on LinkedIn? The other big change? And this also is a good way to answer your question is video and content. Personality driven content has really come onto the scene. Okay, because it used to be stuffy and professional and boring. People are tired of that, especially now they want to feel connected. They want some personality. So personality driven content is a great thing to include video is getting more exposure. LinkedIn live is coming onto the scene. LinkedIn stories are coming out of the scene. So it’s just becoming more of a personality driven platform and it’s becoming a place where people are paying more attention. They’re everywhere. Looking for something refreshing, especially right now everyone’s you know, people who wouldn’t have otherwise been open to, let’s say alternative investment opportunities or new ideas. There’s a different openness right now, when a message is delivered the right way.

J Darrin Gross 40:17

That’s good. I know. It’s changed a lot in the time I’ve used and I remember when I first got on, I didn’t know what it was or how to use it. Talked to some friends, they didn’t quite understand it either. But I know it’s been a great opportunity to connect with professionals and make some business connections and stuff and, and this is all these are all good, good ideas and good points.

If we could, I’d like to shift gears for a second. As I mentioned you before we started by day, I’m an insurance broker. And I work with my clients to assess risk. and determine what to do with risk. And we typically consider one of three different strategies. The first is we look to see, can we avoid the risk if we can’t avoid the risk and we consider as our way to minimize the risk? And if neither are an option, and we look to see if there’s a way to transfer the risk, and that’s what an insurance policy is. And so, what I like to do is I like to ask my guests if they can identify what they consider to be the BIGGEST RISK. And for clarity sake, I’m not necessarily looking for an insurance related answer. But if you’re willing, I’d like to ask you Yakov Smart, What is the BIGGEST RISK?

Yakov Smart 41:51

Right and it’s a it’s a great question. It’s not something that I you know, honestly think about on a daily basis. I guess I’m you’re a little more. You know, you see, you see A lot more different scenarios as being an insurance than I probably do when it comes to risk. But I’m gonna I’m gonna give a bit of what might be a bit of a surprising answer here. I think the BIGGEST RISK is a combination of plagiarism and misinformation because in the space, let’s call it mentorship or online programs or coaching, consulting. There’s a lot of knockoffs. There’s a lot of people who are trying who here’s something, it’s good, they claim it as their own, or they put a slightly different flavor on it and they go and they completely knock off content ideas, intellectual property. And they you know, sometimes do it without repercussions sometimes do it for a while. So, you know, it has a lot of people in the space that I met and also, you know, a lot of coaches in the real estate space as well specifically, a lot of us understand that the bigger we get, especially if we And scalability reach or impact that’s just a risk that naturally comes up. So you know to mitigate that risk and what puts me at ease around it is somebody could duplicate content okay? I mean and plagiarize and and do whatever but you know what I know at the end of the day is the unique way that I have delivering it and also with working with people, that’s just not duplicatable because that’s personally my unique perspective, my insight, my approach my methodology. So and the other side of that is misinformation. Someone you know, can play the blame game and say, well, you they can do something stupid, for example, on LinkedIn and post their deal and, you know, not be compliant with the SEC not something that I would tell them to do first of all, but then they could say, well that that guy said I can mark it on LinkedIn. So I can’t I post my deal and say invest now on it just to the public. Like it’s, you know, obviously something that I wouldn’t recommend anybody does. But sometimes there’s misinformation or people misconstrue things and human error. So it’s always a risk to I mean, humans are humans.

J Darrin Gross 44:11

Yeah, that’s, that’s something you don’t want to get sideways with the SEC or, or any of the authorities on that. But I think that that’s a risk that I don’t know that everybody fully understands, I think, you know, in the age of Twitter, and all these other things where people are, like, so compelled to, you know, get a reaction or or, you know, get their voice out there, you do run the risk of, you know, having regret for something you put out there or maybe, you know, not having all the facts. That’s, that’s good.

Yakov Smart 44:44

Yeah. And the key thing I want to add to that real quick, right, because, and I want people to understand this, because it’s really important. Nothing that we talked about today was a you’ve got to deal just put it out to the public. Ah, that’s not we’re talking about we’re talking about building a relationship. And then what’s the relationship is built with that investor talking about specific deals and numbers. That’s that’s really, really important.

J Darrin Gross 45:07

Right. And and even I think the thing that I take away from this morning, I think the goal is to get offline.

Yakov Smart 45:13

Absolutely.

J Darrin Gross 45:14

You know, I mean, it’s that’s as much as we become, you know, kind of used to the online relationship. The goal really to have a relationship is to get an offline so that’s, that’s a good reminder. Yakov, where can listeners go if they’d like to learn more or connect with you?

Yakov Smart 45:37

So there’s a couple things the easiest way is if they go to linkedleads.us/ forward slash I’m sure we can include this in the notes as well the link to leads that us not LinkedIn leads linkedleads.us/raising capitalwebinar. If you like this stuff, if it appeals to you, if you listen to this, and you want to know more about free training, you can go and uh, we usually run a couple of these a week, you can sign up for the free training. And it’s a webinar where I’ll cover this methodology in greater detail on how to raise more capital and make you real estate contacts using LinkedIn. And then of course, anyone who would like you can send me a connection request on LinkedIn. Yakov Smart, let me know you heard about me on the show. We’ll be glad to get connected with each and every one of you on LinkedIn as well.

J Darrin Gross 46:28

Awesome. Yakov, I’ve really enjoyed our talk. And I’ve learned a lot. And I can’t say thanks enough for taking the time and I hope we can do it again soon.

Yakov Smart 46:40

You’re welcome. It was a pleasure.

J Darrin Gross 46:42

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 47:02

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Commercial Real Estate Investing With a Self Directed IRA with Jason DeBono – CREPN #265

Jason DeBono 0:00

You can take $150,000 IRA and go buy $150,000 rental property and for the average kind of, I won’t say lay investor but but novice investor that’s a pretty, pretty easy entry point. Obviously, you know, rental real estate is is a big piece of the market because of its its ability to generate cash and appreciation. We see a lot of that moving up into syndicated deals. So we see a lot of multifamily, some syndicated some not, small apartment complexes, duplexes, triplexes quads and then we see full blown multifamily and then we and a lot of that is syndicated. So we see a lot of investors that own bits and pieces of apartment complexes all under syndication.

Announcer 0:06

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 you Experts!

J Darrin Gross 0:56

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 Jason De Bono. Jason is the NuView Trust Company, Vice President and in a little bit he’s going to share with us the benefits of using a self directed IRA. And but first I want to remind you if you like our show, Commercial Real Estate Pro Networks, CREPN Radio, there are a couple things you can do. You can like you can share and you can subscribe. As always, we encourage you to leave a comment, we love to hear from our listeners. Also if you’d like to see it handsome our guests are, be sure to check out our YouTube channel. And you’ll find us at Commercial Real Estate Pro Network on the YouTube. And also please consider subscribing there as well. With that, I want to welcome my guest, Jason, welcome to CREPN Radio.

Jason DeBono 2:10

Darrin, Good day. Good to be here. Thanks for having me.

J Darrin Gross 2:12

Well, thank you for joining us. I’m looking forward to talking with you about self directed IRAs. But before we jump into that, if you could take just a second and share a little bit about your background.

Jason DeBono 2:35

Sure. So I started I started in this industry 15 years ago, I was a a senior in college and looking for something to sink my teeth in and I stumbled across a company that helped people use retirement money to buy real estate. And it was complete, probably opposite of what I thought I would be doing when I got out of school. It wasn’t as sexy or glamorous sounding as some of the other kind of finance and sales jobs, but it was really my dad’s reaction when I talked to him about the interview that caused me to take the job. And he, you know, I remember him saying, wow, you know, I didn’t know you could do that. I asked my broker about buying real estate about five years ago, and he told me it was illegal. And so dad said, No, obviously it got me even more intrigued. And here we are 15 years later, but it’s been a fun ride and certainly an interesting one, as I’ve watched the really the industry of people using their IRAs for non traditional investments grow from a you can’t do it, it’s illegal. What is that to? Wow, that’s a powerful tool. How do I access it?

J Darrin Gross 3:39

Well, that’s actually probably a pretty good transition here into you know, kind of the the topic here. I mean, your dad’s reaction, because I think that you know, a lot of people if you have a W2 job, you’re conditioned to recognize a 401k or possibly if you’re self employed to an IRA, but, you know, I think there is a lot of unknown and there’s a lot of misinformation or just, you know, you haven’t really pursued, or people haven’t really pursued the question to understand what the options are available to them. And so I was wondering if we could start with just, you know, what is a self directed IRA? And if you can compare that to, like a 401k, and just kind of who, who’s eligible for this kind of thing?

Jason DeBono 4:36

Yeah, great, great question. And I’ll break it into two. The first part and kind of, you know, as far as what is the plan itself, an IRA is an IRA. So there’s a few different types based on how you earn money, and how you want to pay the taxes. So you have your traditional Roth, right one is pre tax, meaning you pay tax at the end, what the Roth is tax free growth. So you paid the tax at the beginning, you have a simple IRA, which is a a an IRA for small businesses. And then you have a SEP IRA, which is a an IRA for people that are self employed. A 401k works nearly identical from a tax standpoint, to those accounts, there’s a Roth component, just like there isn’t an IRA. But a 401k is really designed to be an employer plan, right? It’s not an individual account, it’s set up by an employer. So if you work for a company that offers it, and many do, and in today’s day and age, then you’re participating in their plan.

Jason DeBono 5:33

While you’re under their plan, you got to live by their rules. So most 401k plans, you know, from a planning standpoint, or great from an investment standpoint, are very limited. So if you work at AT&T and you’re covered under their 401k plan, they may only offer you eight or 10 or 12 mutual fund investment options, and it’s because they want it’s their plan and they want to reduce the risk for the plan itself so they don’t want to give you a large amount of choices. Most people when they leave Employers they move their 401k to an IRA. So you don’t have to most people with IRA money don’t necessarily contribute through an IRA they contributed through their 401k and rolled it over when they left their employment. The plan works the same way from a tax perspective. So whether it stays in a 401k or sits in an IRA is really irrelevant. The reason people do it is an IRA gives you the full breadth and scope of investment choices. So if you have an IRA account, you really have two places that you can get it custody. One is that your traditional break bank and brokerage so you can go to a Schwab or Fidelity, Bank of America, they will hold custody the account, and they’ll give you unlimited choices, so long as they’re publicly available securities. So you can buy any publicly traded stock bond or mutual fund.

Where a company like new view comes in. And the other option for individuals is we don’t make your IRA any different. So we don’t change the tax code. We don’t do any of that we still provide the same level of custody, that a Charles Schwab would. But what we do and what is self directed does that’s unique is it gives you two things, it gives you more choices and more control. So the more choices part means that as a custodian new view doesn’t have investment limitations like Schwab does. So we don’t care if you buy a publicly traded security or you buy a rental house or you buy a, a, you know, a commercial building where you invest into an industrial complex. And we’ll talk a little bit more about how those deals are structured here in a bit. The second thing it gives you is more control. So self directed account gives you the ability to pick your own investments. In fact, NuView will not help you with the investment selection process. That’s the self and self directed. So, you know, kind of two key things to take away is his plans or plans, right? They all work a little bit different based on how you earn your money. But investments are really the key difference of a self directed account, because you get to make your own investment choices and you get an investment menu that’s not limited to public securities.

J Darrin Gross 7:56

Gotcha. That’s a great, great breakdown of the differences there. On on the the IRA thing, when I asked you if you are employed by a, you know, normal or traditional employer and you’ve got a 401 K, are you eligible to then create a separate IRA account?

Jason DeBono 8:22

You so the the short answer to that is yes. I think like everything in the tax code, there’s always a little caveat based on how much income you earn, you know, that may cause some exclusions or may limit tax deductibility. So, you know, take this answer is as a generality, and certainly, you know, talk to a, you know, your own tax professional as it relates to, you know, any limitations you may personally run into, but, but yes, I mean, an IRA is separate from a 401k. So, if I have a 401k and I make my contributions, I as an individual can choose to contribute to an IRA as long as I have eligible earned income to do so which obviously my W2 job provides me Um, what what you cannot do while you’re gainfully employed is move the 401k money into the IRA. So they’re separate accounts. And while you’re and this is a general rule, but while you’re employed with the company in which you have a 401k plan, it’s their plan their rules, and so you have to keep the money under the auspice of the plan. But yeah, we see a lot of clients that have 401k plans, and then in addition make IRA contributions as well.

J Darrin Gross 9:26

And along those lines, is it is there a limitation on the number you can have? So if somebody has a W2, but they’ve got a couple of side hustles or whatever, is there a I mean, are they limited to any one number? Could they create one for each or or does it matter?

Jason DeBono 9:48

Well, it does matter as it relates to total contribution amount. So when it comes to IRAs, the depends on the structure, what type of IRA is I mentioned that the traditional IRA Law really have nothing to do with any with how you earn your money. As long as you earn it, they don’t care, you don’t have to be self employed to qualify. Something like a SEP IRA, you know, if you were using your side hustle, self employment income to qualify you for the SEP, you could do that you could make contributions to it, you probably wouldn’t set up a set for each of your businesses, I can’t see a scenario in which you would, but it’s possible. I mean, there’s some, maybe some underlying reason why someone would do it. But no matter what you’re going to be capped on the overall contribution limit, regardless of the number of planes you contribute to. So that’s really the thing you got to be more aware of and more concerned with is the contribution cap, there is no necessary limit. In theory, if you have a $7,000 contribution limit, if you’re over the age of 50. Let’s just say to a Roth IRA, you could go set up 10 Roth accounts, and you could put a $700 contribution into each one. Right. So as long as your overall

J Darrin Gross 10:58

Your overall contributions capped there.

Jason DeBono 11:00

You got it. And there’s not a lot of benefit to have a bunch, but maybe to create some increased eligibility in a self employed retirement account like a SEP it’s possible there may be some scenarios where that’s applicable.

J Darrin Gross 11:12

Gotcha. So, a self directed IRA, you mentioned that gives you basically the control and choice. Is is the primary way that you see people funding this. Is it a rollover from a 401k? Or do you find that it’s more of self employed? People are, are creating these?

Jason DeBono 11:37

Well, it’s it’s all of the above. There’s no doubt the the biggest contributor is 401 K’s, right? I mean, people with 401k plans have payroll deduction. You know, they may work a long period of time it’s getting taken out of their paycheck. They don’t really realize it, and over time it accumulates. So yeah, the vast majority of IRA money does rollover from 401 K’s. We do have a lot of self employed individuals because a SEP IRA has a contribution limit and don’t quote me on the exact number, but I think it’s 56,000 is the cap, you know, you start getting into much more significant amounts of money. So, yeah, we have a good portion of people that are self employed that do, in fact, set up a SEP IRA with us. And there is a plan called a Solo 401k. For those out there that are self employed, that that I would strongly encourage you to talk to our team about, because it’s, it’s a SEP IRA on steroids. It’s basically a 401k without having a third party employer. So you’re You are the employer and you get to you get to wear the hat of the employee and the employer in the plan and really double dip on contributions. So it’s a it’s a fantastic plan. At any rate, back to your kind of question. When you have a a, a set that has a higher contribution limit. Yeah, we do see a lot more clients utilizing that. It’s pretty hard to get a lot of value out of self directing an account if you’re putting $6,000 you know, a year into a traditional IRA. So most of our clients Even though they are contributing, they’re starting their account with us with money that existed somewhere else.

J Darrin Gross 13:05

Gotcha, gotcha. So you mentioned I guess the difference is if you are self employed, or for a self directed IRA, I think it’s somewhere in the mid 50s. As opposed to you know, as a, I guess, a traditional employee. For an employer that has a sponsored plan you’d be limited to the to the amount you can contribute. That seems pretty dramatic. It seems like anybody that’s that self employed would be all in on this kind of thing. If you’re obviously I guess if your business is successful, and you’re making enough money to do you know, investing in stuff, but it seems like that would be a just almost like a no brainer. Do you find that people know about this or they have they never heard of this. What’s your experience talking to people?

Jason DeBono 14:03

You know, the hardest? First of all, you’re absolutely right. I mean, at face value, it is a no brainer, right? If you’re self employed, why wouldn’t you want to take advantage of your ability to contribute much higher amounts. It doesn’t mean you have to it just means you can and so in, in good years put more in and in, you know, in years that aren’t as good or more lean than put less than that. It’s really two issues, Darrin that we see out in the marketplace. The first issue is plan, type and saving as a whole, right? Because if you think about it, who cares what you invest into, right, that’s really secondary, you can invest if you don’t save the money to invest. So what we see with a lot of self employed individuals, and obviously, you know, a lot of real estate professionals fall into this camp and, unfortunately, self employed individuals while they have lots of great tools available to them, they’re not very good Savers, just generally. And and some of that is is excusable meaning, you know, they’re they’re in a business by They’re trying to grow a business. They’re reinvesting in the business. And, you know, they’re not, they’re not saying that they don’t want to save. They’re just their view is if I don’t contribute to a retirement account, and I put the money back in the company, I’m building wealth, you know, in the same manner. So, from that perspective, it makes sense, and I understand it.

Jason DeBono 15:17

Unfortunately, a lot of people, they have very successful years and they don’t change their saving patterns, because they don’t have an employer taking it out of their paycheck, right? They have to be proactive. And that’s a tough thing for a lot of people to do when it comes to saving and especially saving for retirement because it’s, you know, it’s it’s one thing to move money out of your checking account into your savings account where it’s, it’s there, if you want to go take a trip or buy something or whatever it may be that you spend your money on. You pump it into a retirement account and you’re making a commitment not to touch it for some time and that’s that’s a hard decision for a lot of people to make. It’s the right decision and one they should make but for a lot of self employed individuals, they’re just not making it.

J Darrin Gross 15:55

Yeah, it’s unfortunate that that is the case. I know just the kind of mental tality of delayed gratification or, you know, some future date as opposed to, you know, and like you mentioned, if you’re in business and you’re trying to make the business successful, I mean, there’s, there’s probably some immediate needs that a lot of businesses face, but still, just to have the discipline to, you know, create, create something. So you’ve got something regardless if the, or what happens to the economy or your business or whatever that’s, that’s seems like, you know, a missing piece for a lot of people and that’s, that’s unfortunate. So, we talked about or you’ve kind of mentioned and distinguished between the IRA and the 401k. We’ve kind of talked a little bit about what you you can put in there. Let’s talk about the investment options, because like you mentioned, you you save the money now you’ve got the money to invest. What what are the investment options?

Jason DeBono 17:02

Yeah, so the the investment options really are anything except, and when I say except it’s because the IRS has guidance around around the the permissible investments in an IRA are actually built the other way. There’s no listing of permissible investments, there’s no word in code that says you can buy a stock or bond or mutual fund in an IRA. The code is designed to tell you what you can’t do, because that’s a much shorter list right? Then then what you can do so so if you really think about it, the the IRA regulation is really telling us, you know, stay away from this, this and this, and whatever else is available is available to your IRA. There’s really only two major asset or two two rules that we have to follow. And I think the key thing to understand and we haven’t talked too much about this, and it may well be worth taking five minutes to talk a little bit about the tax benefits to a retirement account. Because what what people tend to overlook is saving money is one thing, saving it in the right vehicle is a much bigger decision. And I’ll talk about that here in a second and illustrate how valuable it is from an IRA standpoint and tax advantaged growth.

Jason DeBono 18:09

But putting that aside for a minute, the rules are really around protecting the tax integrity inside the IRA. So they’re not concerned so much about the investment integrity, as long as you’re, you’re using that as an investment vehicle that’s passive. What they don’t want is people to funnel money into an IRA for all the tax breaks and then use it for investments that benefit themselves or, you know, funnel money in or out and really created as a tool for tax evasion.

So the only two rules that really play into an account as to whether or not you can make an investment is number one, no life insurance or collectible. So you’ve got to steer clear of, you know, anything, any life insurance, you know, you cannot own in an IRA, and then collectibles and they define that as works of art rugs, metal and gems, stamps, coins, alcoholic beverages. There is an exception to the metal standpoint. You can buy gold, silver, platinum and palladium as long as it’s bought for its intrinsic value or weight value. So if you bought a, you know, two ounce gold coin, and you paid what, you know, spot price on gold, and it was a pure gold coin, right? That would be permissible. If you wanted to buy a gold coin that that was, you know, found in the Titanic, that would be impermissible because it’s really, it’s numismatic value that you’re buying, you’re not buying its intrinsic value. So one little caveat there.

Rule number two really is and that’s it. That’s the list of prohibited investments. I mean, it’s it’s it’s negligible, right? I mean, there’s really no issues there. Their bigger issue is, is what are the relationships and the parties of the transaction. So for those in commercial real estate, I mean, you probably are familiar with the term self dealing, you know, or, you know, this would be the equivalent of if somebody was was losing their property to a short sale and you know, the bank’s not going to allow them to short sale it, you know, to their wife, right? Because they understand, hey, that’s not arm’s length, right. And obviously, we want the integrity of the transaction to be intact. Same set of rules in an IRA. They defined the people that an IRA cannot do business with in any way, shape, or form, as you and your spouse, your parents and grandparents, your children and grandchildren, and the spouses and businesses of those parties. So my IRA, because it’s a tax advantaged vehicle cannot loan my wife money, right? Because obviously, I’d loaned it to her at a discount, which would get money out of my IRA tax free, or I’d loaned it to her at a premium right, which would allow us to make big payments back to the IRA, which would be tax free growth, and allow us to sock money away maybe even higher than the contribution limits. So for that reason, the IRS has no life insurance, no collectibles, and no doing business with family members, you know, that we believe are too close to the flame to really be done in an arm’s length, outside of that, whatever you want to do, by sell etc is all permissible.

J Darrin Gross 21:01

Gotcha. So like, with that family thing, if I understand right, the the UP DOWN is the the issue. But if I had like a nephew or something further out is that is that permissible or is that? Are we still too close?

Jason DeBono 21:19

No, it’s absolutely permissible. There is a little caveat all hit on But yeah, I mean brothers, sisters, aunts, uncles, cousins, nieces, nephews. They’re not defined in IRS code. They don’t the IRS doesn’t have any issues. But they do require they have a little kind of statement or declaration that they’d be arm’s length. So if you’re going to loan money to your nephew, for example, just because it’s kind of easiest example. If you loaned it to them at 30%, the IRS would have an issue with that, right? They’re going to say, hey, look, that’s not a market rate loan. The relationship of the parties obviously dictated that or if you loaned it to them at 2%, right, the other end, the IRS could take issue, so What I want to make sure everyone takes away from this is, is the people that are not disqualified are truly fair game. But you always want to act within market rates. Otherwise the IRS could come in and say, Hey, this is an issue because you did business with your nephew. This is an issue because this is an arm’s length transaction. Right? The relationship of the parties is dictating the terms. And one of the things that I usually ask customers when I do talk to them about, you know, a specific deal, and I’ll get questions like, you know, I’m going to do this deal, and this is why it’s so awesome. It’ll give me all the details. And you can tell they’re trying to kind of convince me which you know, is not I’m not the one that should be convinced in this case, right. But I’ll ask him the question, if you were buying this investment, you know, or, or if this investment is available, but you weren’t going to buy it and instead I was going to buy it. Would they offer me the same terms that you’re getting? And if the answer is yes, right unequivocably, then then sure that’s probably an arm’s length transaction. If the answer starts with Well, you know, then I usually let them know, then yeah, then the deal is being dictated by the relationship of the parties. And while it’s not disqualified directly, it could clearly be a violation of the arm’s length provision. And that’s something that you want to make sure. So as long as you’re buying at arm’s length selling at arm’s length and and, you know, not buying life insurance, not buying collectibles, the world is your oyster in terms of what you invest into, literally.

J Darrin Gross 23:27

Gotcha. So, tell me the are the kind of the real estate side of things. We talked about the relationship. But let’s talk a little bit about the investing in and the types of real estate. I mean, we’ve kind of talked about loans a little bit here, but what about investing in a specific property? And can we talk a little bit about that as far as what our options are or how that governed?

Jason DeBono 24:02

Of course, real estate, you know, obviously comes in many different shapes and sizes. I thought when I started this in this business 15 years ago, I thought I knew what real estate was. And it didn’t take but a couple of hours here for me to realize I didn’t know a whole lot about how many, you know, ways groups are making money in real estate and how many different ways you can plug into the market. But really any type of real estate I mean, obviously, going down to its most simplistic state, right, we’re all in you know, raw land is some we have clients that own everything you could ever imagine. So, you know, things like raw land. We have clients that own citrus farms and dairy farms, you know, the land underneath citrus and dairy. They can lease that out. We have clients who don’t hunting leases and lease it out. We have clients that own land, and they have billboards on it, right. We have clients that own raw land that’s in the tractor, you know, the they’re hopeful in future progress, and they do nothing with it. They just simply pay the tax bill you know, try to get an ag exemption and hold it for the long term till like you need to be rezoned or or developed into something bigger. Moving up into, you know, single family obviously that’s a big piece of our business because it’s a very easy thing for people to access with an IRA right? You can take $150,000 IRA and go buy $150,000 rental property and for the average kind of, I won’t say lay investor but but novice investor that’s a pretty entry pretty easy entry point. Obviously, you know, rental real estate is is a big piece of of the market because of its its ability to generate cash and appreciation. We see a lot of that moving up into syndicated deals. So we see a lot of multifamily, some syndicated some not small apartment complexes, duplexes, triplexes quads, and then we see full blown multifamily and we and a lot of that is syndicated so we see a lot of investors that own bits and pieces of apartment complexes all under a syndication. We see that in all forms of commercial real estate, lots of syndicated deals for assisted living facilities and grocery, you know, stores and industrial properties and, you know, triple net type properties. All of which can be be held wholly in an IRA or fractionally through some sort of syndication, office industrial, it really doesn’t matter. At the end of the day, you can either own a piece or all of that particular asset, as you know, from a real estate standpoint,

J Darrin Gross 26:29

Gotcha. Now, are there any issues with buying a property that has any debt against it?

Jason DeBono 26:38

There’s no limitations on your ability to do it other than the fact that the debt must be non recourse right now in the commercial world, obviously, that’s a very common term. But But for those that may not know what that is, non recourse means that that the debt is not tied to the individual. It’s simply tied to the asset. So if you think about how most people buy single family homes, right Especially the the owner occupied stuff, it’s all bought on recourse debt, the the bank is doesn’t really care much about the property other than its appraised value. They care about your ability to repay it. So if there’s an $1,800 mortgage, they want to know that you’re going to make enough money and have a high likelihood through the life of the mortgage of making enough money to support that 1$,800 payment. In a non recourse loan, they don’t care about you, they care about the underlying asset. So they want income producing real estate, that instead of looking to you to pay the $1,800, they can look to the asset, so they’re gonna look at that mortgage, you know, payment, and then they’re gonna look at what can that asset deliver. And if they believe that we’ll deliver more so using a single family example, obviously, easiest calculation, right? If you’ve got an $1,800 mortgage on that house, you’ve got to be able to prove that the comps will support it writing for $1,800 bucks. If the comps support it writing for 1500 bucks, they’re gonna have you put more money down until they get under the threshold. So it’s an asset based loan. It’s non recourse by nature to you as an individual. Even if it’s an IRA loan, it’s still non recourse to you as an individual. It’s only the underlying asset that that, that they’re looking at. So pretty straightforward. We see tons of non recourse stuff in the commercial side, we see a decent amount of it in the residential side but there’s very few banks that will do non recourse loans to single family we we can provide clients a list if they’re interested in most banks that do commercial lending are very familiar with non recourse loan, they’re going to require 20 to 30% down obviously, they want to make sure there’s some skin in the game for the the the operators and owners of that asset. But yeah, it’s it’s a great way to leverage.

Jason DeBono 28:44

One thing that’s worth, you know, maybe maybe stepping aside and chatting about here and I’ll just hit on is as a normal course of action, any cash investment in an IRA is not taxable. So, if you go out and buy a house and sell a house, you know, and you make a million dollars, there’s no tax if you go Buy, you know, an office building and sell the office building. If you paid cash for it, you pay no tax on the growth whether you made $1 or a billion dollars. In a leveraged scenario, the IRS is going to levy a little tax called Unrelated Debt Financed Income. And they’re going to levy a tax not on the entire profit like they would if you bought it personally. They’re simply going to levy a tax on the the borrowed portion. So if you’ve got a an investment you make with 70% debt, then you can expect to pay tax on 70% of your profit. Not a bad thing because it’s going back to the IRA income tax free, but they’re going to levy a little tax to ensure that the money you’re using to grow your IRA that really is outside the IRA money, they want to clip a little off the top and while I you’ll rarely hear me say it’s a fair tax, but it’s application is very fair.

J Darrin Gross 29:50

Gotcha. I was unrelated debt financed UDFI is a

Jason DeBono 29:56

UDFI

J Darrin Gross 29:58

Gotcha, gotcha. So, I mean, real estate, you’re like said you’re pretty wide open as far as the opportunities. It sounds like you mentioned land and that it? Is that a pretty common one that you find people going to or if you had to, like, I guess, look across the spectrum of the opportunities what’s what do you find to be the most common? One or is there a most common one?

Jason DeBono 30:29

Um, you know, it’s a tough question to answer because this custodian we aren’t really involved. We’re involved in the closing and we’re sending the money to the closing and the clients providing us the paperwork, but we’re not really looking through appraisals and you know, looking to see if it’s undeveloped land or develop, you know, or approved property. If I had to guess just kind of throw in lawn darts here. I would say probably, you know, without a doubt, asset real estate assets that have income, you know, income producing is A higher bit of our business than non income producing. But that said, there’s a lot of raw land type investments that our clients make. So our portion certainly going to be lower than then some of the income producing stuff but but a good portion nonetheless.

J Darrin Gross 31:16

It just occurred to me I talked with somebody else here recently and we were talking about flipping land, you know, and and seems as though there’s there are those that have figured out how to do that on kind of a volume basis where you can you can buy a piece of land and remarketed and and then either liquidated in total or put it on some sort of a payment plan or something like that. I was caught like, this would be a pretty good vehicle for getting involved in that if I’m understanding right one because if you if you’re able to purchase the land outright and have no loan against it, you can then create loan against it, which would then I would assume would would that income would go into your, your self directed IRA. But it would seem like a pretty clean way. Because you’re not talking about buying from family you’re not lending to family and you would be outside of the UDFI if I understand things properly.

Announcer 32:26

Yeah, that’s, that’s certainly a strategy we see deployed. We see we see it in a few different formats. You know, obviously there’s speculative land investing, right, you know, which is if we all look back and in our respective communities, there was definitely areas that we you know, that we we look back and go man that was cow patties 20 years ago, and boy, I wish I bought it when it was cow patties because what you know, the the amount of money that that you know, an acre is selling for now is you know, the 200 300 x you know what I could have bought it for not too long ago. So we do we see that we see a lot of people speculate in path of progress type investments. But we also see a lot of people that deploy that strategy on in a variety of formats we do. I’ve seen groups they do, it’s not land banking, if you will, but it’s kind of under that. They’ll go into areas where they can buy up a good portion of lots or they may go to a master community where it’s being developed and they may buy up 20% of the lots and negotiate a discount and and it alleviates the marketing concern for that developer to have to go sell them and then it also gives them the ability to do contract for deed and finance the lots for the individual. So you know if I go out to a you know in a town and doesn’t really matter where it is and I buy up 10 or 20 lots I can now advertise it I’ve got you know, raw land with with cheap financing available, and because financing raw lands a pain, but if I can take a lot I paid $8,000 for and sell them for $10,000 but I can offer very fast terms where you can pay me cat, you know, pay me back, you know, over a three or five year period to pay that loan off. Now it’s a very attractive option. So I made the $2,000 on the land deal, right, which the quicker I sold it, the higher my return. And then I got a $10,000 debt, you know, note, if you will, that I’m getting payments on and so I can finance it at six or 7% over a three year period and allow someone to go own land that maybe otherwise couldn’t have done it. So yeah, you’re you’re you absolutely are hitting on a strategy and something that we I won’t say we see all the time, but we certainly see that and it’s a great option.

J Darrin Gross 34:37

No. I guess just the your clean from all these other potential issues kind of thing is kind of what what triggered that thought for me. Sure. So on as far as the the tax strategies you’re still in a tax deferral mode, correct. I mean, this is there’s I mean, there’s no secret when you pull the money out of this investment or this vehicle, that’s when the tax is due. Is that is that right?

Jason DeBono 35:09

Mostly right. Most IRAs are taxed at the end, they’re they’re considered tax deferred programs, you get a tax benefit to put the money in and you pay tax when you take it out. But there is a Roth IRA and a Roth IRA and there’s a Roth component to a 401k as well. But the Roth basically says I don’t want to pay tax at the end, I’ll pay it as I put it in. So you’re, you’re likely paying at a higher tax rate because you’re paying during your peak earnings years, but you’re paying at a much lower amount. So I use the example of paying on the seed versus paying on the crop and when people ask me which one is better, I asked him how good a farmer are you? Right? I mean, if if you’re going to put money into a CD and just put it in a conservative investments and hope to get three to 5% for the next 15 years, I would tell you take the deferral right. But if you’re going to go out and Our clients have a much higher proportion of Roth accounts than most custodians because our clients are taking their investments more seriously. And they’re making double digit returns, not everybody and not to say that we have clients that lose money and that there’s no risk. But we see clients do very well at a lot of deals. And if you know the deal is a slam dunk. The beauty is that at any point, you can move money to a Roth. So if you’ve got a you know, using yourself as an example, and you know, let’s just assume you’ve worked in industry for 15 years, you got a couple hundred thousand dollars in an IRA that you’ve rolled over from your old 401k and you go out and you see a deal, maybe it’s a syndication on a on an industrial park, right. And so you’re going to put 50 grand into that deal. If you believe that man, this is the perfect timing this deal is going to be incredible. You know, I know the market I understand that the developers I know what they’re doing. And there’s just such a strong need for this. I’m going to see two or three x return on my money over five years. You could declare right before you make the investment by simply filling out a form for NuView, a $50,000 Roth conversion. So you’re going to move 50,000 from that couple hundred thousand dollar account into a Roth, you’re going to pay tax in that tax year, whatever your tax rate is on that 50 grand. But if that 50 grand grows to 200 grand, five years later, it’s 100% tax free. And the beauty is it’s not just tax free on that transaction, you can take that 200 grand and go put it into a deal and turn it into 300. And that’s tax free and turn into 400 and 500. And if it grows to a billion dollars, right, it’s completely tax free forever. So the Roth is a very attractive tool and one that you don’t have to pre plan for you can plan as you go.

J Darrin Gross 37:45

I love the Roth. Just the concept there. I mean, it takes all that you know, at the end when you need the money, you’re not having to do the calculation on you know, your whatever your tax rate rate is a percentage that you end up with your you know, it’s it is what it is based on what the Yeah, what your account value is. That’s great. So, I asked you about kind of the typical type of deal. Can you describe the typical investor who takes advantage of a self directed IRA?

Jason DeBono 38:21

Yeah, our our, you know, it’s really hard to pinpoint exactly what makes a self directed IRA, a self directed IRA, you know, investor, but I’ll give you kind of what we see. So the first thing that that I can tell you is, most not all, but most of our clients are engaging in the types of investments they would hold in their IRA outside their IRA currently. So most people don’t on a whim decide I’m going to go by become a real estate investor, and I’m gonna use my self directed IRA to do it. There’s some that do and they’re, you know, they they they run the ideas parallel to getting into the investment market and using their IRA. But most of the people, if for everyone that’s listening to us today, you know, if you got to ask yourself, are am I interested in the opportunities that a self directed account provides me that a traditional account of Charles Schwab doesn’t?

If the answer is yes, then you are the profile of our customer. So the reason that that’s so important and I’m gonna just step aside for a second and talk about kind of the the opportunity. So most people that buy and sell real estate do it for a variety of reasons, right? I mean, they buy it because they like the asset class, they understand it, it’s much easier to understand then stocks and bonds, you can use leverage a lot easier than you can in the stock market and you have a lot more control than you do in the stock market all great reasons to own real estate of any kind, residential or commercial or anything in between. But what people don’t realize is the opportunity from a tax standpoint that an IRA can provide. So if you’re an investor today and you buy and sell real estate, again, residential commercial doesn’t matter while you’re getting some tax benefits, Right depreciation and write offs and other things. It’s still a taxable activity. So as you generate income, you got to follow it on your tax return. And what people are realizing is they can make the same investments. But if they do it inside their IRA, they’re not subject to having to add it to their tax return. So while they give up depreciation, right, which gets recaptured anyways, and while they give up some write offs, they’re giving it up because they’re, they’re eliminating a tax bill from the get go. And I’ll illustrate how powerful this is.

If you take $1 and you double it for 20 years, so $1 becomes $2 and $2 becomes $4. Four becomes eight becomes 16. If you double it for 20 years, and you do it in a taxable account, meaning you got a 25% annual tax rate so you do it in your personal bank account. If you start with $1 at the end of 20 years, you will have 75 ish thousand dollars. Right now obviously that’s great, right? We turned $1 into 75,000 bucks. I mean, who would was would be upset about that. But if you take that same dollar and before making the investment, you put it into an IRA, and then you invest it every year, doubling it for 20 years, instead of $75,000, you end up with over a million dollars. Wow. So the numbers are staggering. So So for those that are listening today, if you’re taking you’re looking at your real estate portfolio, and it may be fantastic. I’m not telling you that you made a bad choice. And I’m not telling you shouldn’t use your personal money to buy real estate, I think it’s a fantastic option. But if you want to use you’re going to gain two things with a self directed account, you’re going to gain one the ability to cherry pick the investments before you make them that you think may have the biggest gains and those belong in your IRA because they’re going to have the least amount of taxes at zero. The second thing that you do is you get to mirror the likely what you’re doing and using to build your personal wealth already right. And you’re simply doing it in your IRA and if you go look at the numbers, you know, it doesn’t take long If you look at the millionaire list or the billionaire list, the vast majority of the investments for all of the people on that list are you guessed it, real estate, right? So it’s a great asset class. And so we don’t, we’re not here to tell you that the asset class only belongs in an IRA. We’re here to tell you it belongs in an IRA and your personal account. And it gives you the ability to invest in what you know and understand without putting that money into the stock market, which I think we’d all agree is is a real tough place to even make sense of let alone you can make money but making money without knowing what you did is kind of like going to Vegas, right? It’s hard to repeat and it involves a lot of luck making money in real estate. While it involves some luck, we all need it. Right? Right timing right property, etc. Most people in real estate 80% of their success is not luck based.

J Darrin Gross 42:48

No, no, it makes a lot of sense. And I appreciate you sharing that example of the, you know, one with tax and one without credit tax. It’s It is incredible when you look at it over time how the money really adds up.

Jason DeBono 43:05

Yeah, you’re not kidding.

J Darrin Gross 43:08

So, Jason, if we could, I’d like to shift gears here for a second. As I mentioned to you before we started by day, I’m an insurance broker. And I work with my clients to assess risk and determine what we can do with the risk risk management. And there’s three strategies we typically look at. The first is can we avoid the risk? If we cannot avoid it, we look to see if we can minimize the risk. And if that’s not an option, then we look to see if we can transfer the risk. And that’s what a an insurance policy is. And so, I like to ask my my guests, if they can take a look at their you know, profession, what are the clients are doing? Let you define, you know, the the who or the how you want to apply this question, but if you You can take a look at and describe what you see is the BIGGEST RISK. And just again, for clarity, I’m not necessarily looking for an insurance related answer. So, with that, I’d like to ask you, Jason de Bono. What is the BIGGEST RISK?

Jason DeBono 44:22

I think the BIGGEST RISK for a self directed account is that you take responsibility for all the investments, and it’s a risk of personal accountability, right? If you keep your IRA in the stock market, one really nice benefit is that when it goes up and goes down, you know, you can kind of finger point your way around around it. Risking in a self directed account means you’re taking on all the risk. There is no broker, there’s no third party, you know that that’s making your investments on your behalf. Now, in a self directed account, you can certainly rely on professionals right. Commercial brokers that can give you guidance and Advice insurance agents that can help you walk through the process. So you can get professional opinions, but at the end of the day, you’re the one saying I want to buy that. And so that is your risk that you’re inheriting. Obviously, you know, I love your, your example of kind of the three approaches, right? Which is to, to, you know, to look at risk, and understand whether or not we can avoid it, minimize it or transfer it. And I think excuse me, in a self directed account. From an investment standpoint, you can do all three of those things, you know, you can certainly, you know, avoid the risk by buying investments that have less risk, right? You can minimizing it, minimize it by educating yourself, right? So many people look at investing and wonder what went wrong and you know, there’s a good saying I rely on all the time and that is the cheapest lesson that you’ll ever learn is somebody else’s. And you know, we we all learned lots of lessons the hard way and some of those can be very costly in terms of time, energy and money. So when it comes to Investing seeking advice and counsel and knowledge and expertise is is a wise thing to do, literally and figuratively. So you can minimize your risk by investing into what you know and understand it. And then transferring risk, you know, make no mistake, if you move money from stocks and bonds into the real estate market, you’re transferring risk, right? you’re transferring the risk and exposure in the stock market to the risk and exposure in the real estate market. And that’s a personal decision that each and every person that makes that, you know, choice has to look at. And for a lot of our clients, they’re reducing risk by moving it right. They’re transferring risk from one asset class that they don’t know a whole lot about to an asset class that they in most cases know a good deal about. So all of those kind of long answer to a short question. But But without a doubt, if you’re going to self direct your account, the risk you’re taking on is that you are 100% responsible, NuView will not offer you an investment put you in an investment recommended endorse it, approve it. It’s 100% self directed

J Darrin Gross 47:01

No, I appreciate you sharing that, you know, risk reward there if you know and I guess the flip side of that is when you’re participating in the other defined vehicles the rewards probably more limited based on the risk tolerance that the people who have defined those investment vehicles have your setup so that’s good. Jason before we wrap up, where can listeners go if they would like to learn more or connect with you?

Jason DeBono 47:31

Sure, the easiest way to to at least get some more information and find us is our website. That’s NuViewtrust.com and it’s new view with a u, NuViewtrust.com. Obviously, it’s chock full of information there. Our contact info and everything is there as well. And or you can email me personally at Jay for Jason de Bono D Eb o at new view, trust jdebono@nuviewtrust.com.

J Darrin Gross 48:00

Jason I can’t say thanks enough for taking the time. I learned a lot. And I hope we can do it again soon.

Jason DeBono 48:08

Oh, Darrin, thanks so much for having me. It was fantastic. I really enjoyed being here.

J Darrin Gross 48:12

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 48:32

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.

Cash Flowing Short Term Rentals with Jon Bell _ CREPN #264

Jon Bell 0:00

It is straight cash generated monthly literally reason why the program that we created is vacation rental machine is because this is a machine. It’s an engine that just spits out cash. And yes it is very lightweight on the maintenance and the kind of oversight that you would have versus owning the property, having to renovate it. Really the downpayment right? If you were to take $40,000 and put down on the home, technically that’s four units for me four units can generate me around 1500 dollars a month. So for I mean per unit.

Announcer 0:37

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 0:56

Welcome 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 to provide their experience and insight to help you grow your real estate portfolio. Today, my guest is Jon Bell. Jon is an IT professional turned real estate investor. He’s a he specializes in vacation rentals, and today we’re going to speak with him about Airbnb. He’s also got a podcast he hosts the podcast Vacation Rental Machine Podcast. And he’s also the co founder of the Vacation Rental Machine Formula an online training. And before we speak with Jon about this, or about Airbnb’s and all that, I want to remind you That if you like our show CREPN Radio, there are a couple of things you can do. You can subscribe, like and share the program. And please consider leaving a comment We always 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 you’ll find this at Commercial Real Estate Pro Network on YouTube. And also, please consider subscribing. With that, I want to welcome my guest, Jon, welcome to CREPN Radio.

Jon Bell 2:36

Thank you, Darrin, thank you for having me on. It is a pleasure to speak with you and your audience.

J Darrin Gross 2:42

Well, I’m so glad we were able to make this work. And looking forward to our talk. Before we get started, if you could share just a little bit about your background with the listeners.

Jon Bell 2:55

Gotcha. As you said, I started out as an IT professional, I still do that by day. That’s my full time job. However, I stumbled upon short term rentals just as a pet project to just find some extra money and it turned into this monster of a thing to where right now I have over 40 apartments or homes that I manage. And I’m actually just excited to bring that to a bunch of different people and also to try to grow my portfolio. So one day, when I’m stressed out enough, I can go ahead and just switch over and do this full time. But I’m all about systems and standards and that makes this business easy and I’m really in this whole thing just to tell people how easy it could be and how they can create a nest egg on the side.

J Darrin Gross 3:43

Awesome. Well, the side hustle as they call it. Sounds like you’ve you’ve definitely got a little more than a side hustle. In as far as the the short term rentals I was wondering if you could first kind of define what defines a short term rental.

Jon Bell 4:04

Gotcha.

J Darrin Gross 4:05

And then maybe talk a little bit about how you got into it.

Jon Bell 4:08

Alright, so short term rentals are really classified as any rental that happens within 28 days or less. So anything that within the month of February shorter than that, that’s a short term rental. Anything longer, that means six months to 12 months is technically outside of that range. But then you have your yearly rentals which are really what people think are long term. So there’s short term mid term and long term.

J Darrin Gross 4:35

Gotcha. All right. And then as far as the how you got started, what what I think typically people well, Airbnb is a fairly recent phenomena. Can you tell us a little bit about how you got in into it?

Jon Bell 4:54

Yep. I was a home investor franchisee which basically made I was one of the We buy ugly homes people. That’s the national brand that that’s out there. I was visiting another franchisee who was having like some great success out in California who was also in my class when I went to study. So I’m out there visiting him and it’s I think it was Long Beach or somewhere around the beach. I can’t remember the exact location but it was a it was either stay at an Airbnb for the first time, or stay at the Ritz. There were really only the two options. Because I was going to be there for like 15 days or so I said, Well, I really don’t want the hotel feel. Let me stay at this Airbnb. I got there. And I discovered it was in a regular REIT. And I was like, wait, this is just a regular apartment building. I can tell nobody lives here. I can tell that it’s set up just for guests. And I already know how much they pay because it’s marketed right they pay. I want to say it was like $2,700 for this one bedroom apartment. I’m paying $170 a night; did the math, and I was like, wow, this is this is unique. I mean, I really know the cost. I mean, what are the utilities cost on top. So this guy has to be raking in 1000 $2,000 a month, just by renting this place out. That stayed with me for two years. Before I really acted on it.

One day, I just happened just to flip a home and I sold it and I got my money. And I was just thinking, that was a lot of work for this amount of money. What can I do with it now and like, you know, you’re running from capital gains, and you got to find the next deal. And I just said, Okay, you know what, remember that idea I had a couple years ago about trying to pursue this. I just started going out trying to find apartments buying them or renting them in a business name. And I finally got an apartment or two in that group of four and the money just started coming In and that was really the start of this monster. That is technically my rental arbitrage portfolio slash co hosted portfolio.

J Darrin Gross 7:11

So just to make sure I’m on the same page here, so you’re not these are not properties you own their properties that you’re leasing that you’re then releasing or subletting on a on a short term basis.

Jon Bell 7:23

Yep. So there’s a couple different strategies. And the first strategy that you might hear a lot of people talk about is rental arbitrage. The best way to think of it is I rent from somebody to re rent or sublet. Of course, with their permission, that is key. You want to make sure you’re doing it with that. The next way of doing things is to co host a property. That technically means you’re the owner of the property. And you allow me to manage just like you would a long term rental manager, manage the home for short term rentals and you see a big jump in the revenue that you generate for month in and month out. Outside of that, there’s the bur method, which we all should be familiar with, with right? That’s when you buy your renovate you refinance. You get it all right going now your exit is Airbnb or short term rentals.

J Darrin Gross 8:16

So you, I mean, this is kind of an interesting twist on this because A, you’ve stepped out of all of the maintenance, kind of headache of a landlord. You also don’t have the investment needed for the acquisition, the financing, you don’t have the equity, kind of a gain or any kind of 1031 or any, you know, what are you going to do with any? It’s just straight up income, right passive income is that.

Jon Bell 8:46

it is straight cash generated monthly, literally, reason why the program that we created is Vacation Rental Machine is because this is a machine it’s an engine that just spits out cash. And yes, it is very lightweight on the maintenance and the kind of oversight that you would have versus owning the property, having to renovate it. Really the downpayment, right? If you were to take $40,000 and put down on the home, technically that’s four units for me four units can generate me around 1500 dollars a month. So for I mean, per unit. So now we see how the cash kind of just starts flowing in versus a regular rental, which I might make on a good day. $500 a month in profit. So it’s like three times with the less amount of money okay, yes, you can say I don’t have the equity. I don’t have the actual physical asset. But what I do have is a nice revenue. And if we listen to Rich Dad, Poor Dad, he says invest for revenue or cash flow.

J Darrin Gross 9:55

Oh, absolutely. And then also, you know, If things do get tough, if the market dries up or whatever, all you’ve got is at least that’s, it comes in, you’re done. You don’t have the weight of a mortgage. Yeah. That’s, that’s fascinating. I hadn’t I guess the way it’s always been laid out or presented to me has been more on the ownership rent model and then the rent being more of a, just a just a way to accelerate your income stream as opposed to the the traditional long term rental, where you make the little spread and it’s kind of more of the equity play I guess, long term even though that you know, Rich Dad, Poor Dad promotes the revenue stream. I think that for most, there’s it’s more of some sort of an equity thing in the in the end, unless you’re flipping and you’re doing a lot of the BRRRR kind of stuff, but interesting. Well, so tell me about how you go about selecting a market that you get in. And then as we go through this I where I’d like to get to is kind of understanding the way things were operating and pre COVID to, you know, the the situation that we’re in where we’re in right now.

Jon Bell 11:15

Alright, so really, the first thing that you want to do is before you go and look at a place, you really want to figure out who’s going to come stay. And that really could be based on the location that you’re at. So let’s just say you’re in Orlando, Florida. You automatically know you need to house families, because that’s the draw. That’s the type of people that kind of come in and out of there. Let’s just say we’re going to Chicago. Okay, well, Chicago, it’s got a big business presence, so you probably just need a single bedroom place. So once you identify the type of person that you’re actually going to have come in and stay with you, that helps you know what you need to go out and look for. I would highly just say don’t go get a three bedroom place. Chicago because there’s probably not going to be enough people that travel with that many people to come there. Versus I wouldn’t say just get a one bedroom place in Florida, because what are you going to do about all the kids? The kids need a place to go? I don’t want them jumping on the bed with me all night, and we’re going to Disney.

J Darrin Gross 12:16

Right, right. That’s funny. So, so more of just kind of like, think through. I mean, you’re not worried about schools, you’re not worried about, you know, employment, I guess would be maybe a sense if you’re looking for people that might be traveling to or from like, you mentioned Chicago with professional kind of downtown stuff. But I guess more just understanding the the attraction, as opposed to the long term. You know, fundamentals that, that somebody’s looking for a neighborhood would look for.

Jon Bell 12:56

Correct. There, there’s a thing called Walk Score. You know, that is one thing to really kind of look at the higher the Walk Score typically the, the better the rental is in general. But really what that means is you’re in a metropolitan area, so you have the most opportunity to grab people. But that doesn’t mean if you’re in a rural area that you can’t listed on any type of short term rental anything site like Airbnb, VRBO, whatever. That really just means you need to play up on the experience that the guest is going to have. So for instance, if you got like a little pet farm or something like that, you can have those attractions where people come, they can stay, they can play with the animals, or maybe they can come plant some crops for free. Just give people an experience that they won’t have a lot of city goers will go out and just Hey, I want to go get dirty. I want to go do this. I can’t do it anywhere else. Right. So that’s one of the advantages of short term rentals. That’s one of the things that Airbnb started out with. Doing great. They really built experience based travel.

J Darrin Gross 14:04

And I think who can’t remember who started that? Airbnb? Who who is the founder of?

Jon Bell 14:12

Brian Chesky?

J Darrin Gross 14:13

Okay, I think there was an interview I heard on some podcasts and they’re talking about the experience and about from the beginning. And in the beginning, I guess they were going out and taking pictures of the properties themselves and getting the, you know, the learning from their, their hosts on how to do this kind of thing. And, and, but, but again, it kind of that experience model is really what remember resonated from the interview there. So that’s great. So what Tell me what market you’re in, you said you’ve got 40 of these right now.

Jon Bell 14:48

I’m heavily based in Virginia and DC, also in New Orleans, and we manage a couple down in Florida.

J Darrin Gross 14:59

Gotcha. And so let’s talk about your marketing. Being an IT guy, I’m assuming, correct me if I’m wrong but you you might be prone to systems and and you know not doing everything you know handcrafted solutions every time but you have more of kind of a steady like auto autoplay. Can you tell us a little bit about that and start with, I guess the marketing tool if you could,

Jon Bell 15:26

Gotcha. So so marketing in the business really, if we really think about all the booking channels, you should use them as all of your available marketing channels. Why? Because they pay for ad spend to actually grab new people. So Airbnb will pay for people like commercials and stuff and we’ll get it put on TV that’s more draw that you have Booking.com, TripAdvisor all the places that you would go and book your own travel, you can post your listing on those platforms and have it as a potential option for them to book. So that’s the easy part of marketing is you just put it on there for them. They take a commission from the actual reservation, but you also can direct book or have your own website and drive people or repeat customers to your website. I do a lot of pounding the pavement. So when I’m looking for my business travelers, I’m really going to go to the businesses that are around the unit and just let them know, Hey, I’m here, do you have anybody that ever comes and stays, and that has been one of those methods that kind of helps sustainability across the year, because, hey, you know, this place is going to have at least four conferences a year and they’re going to need at least every place that you have available in this one particular location, whether it’s two, four or eight. They’re just needed because they they have all these people coming. So when you start to, like reach out to them and they start booking your place, that’s easy marketing, because; one, they’re gonna get it booked for you. Two, the people that come and stay, if they have a good experience, they’re going to tell other people. And most of the time what I find in DC is those people will come outside of their business trip with their families to come explore the museums and everything else around. So it’s always a good thing to kind of go out and just let people know, hey, I’m here, I’m here and available for you, I have a great service. And once they figure it out, they actually stay that actually if you do do a good job, they will come back repeatedly over and over again.

J Darrin Gross 17:31

So you do have kind of the the long tail word of mouth kind of thing, if you’re marketing to the local attractions as far as opportunities. When you you do that, is it again, primarily attraction based? I mean, is it are you looking at you mentioned conferences? That makes sense I presume like conference centers are you do you have what would be somebody? What would be something to thing to look for when you’re out, kind of checking out the area?

Jon Bell 18:04

Literally I just go to a map. And I just look within maybe a mile radius, sometimes a half mile if it’s really dense, and I’ll just go and I’ll just send something either to the business by email, I might give a phone call, depending on the type of business, most of your consulting firms, they, they have people that come in and out. And hospitals are great, right? They have guests, they have outpatient treatments, where people might get, you know, go in for surgery, but they are not able or not comfortable flying back home just yet. So they need a place to kind of stay close. They don’t want to go upstairs, stuff like that. Those are great ways to just have some, some people come and stay without taking on the extra spend of, “Hey, I’m going to go do some SEO. generation” and you know, that’s just the bucket that you continually just throw in. And I think when people start out, they might think that it’s a good idea to just go ahead and start but remember, the travel industry is very, very, very populated. There’s so many places, people, companies that do all of this stuff, you can never really compete as a sole owner of whatever, to grab somebody. So you have to leverage what you can.

J Darrin Gross 19:22

No, that’s a great point. I mean, especially if you’re local and somebody coming in from out and they’re looking for a place to stay and they mentioned Where’s a good place to stay? And you know, especially if they’re you know if it means like renting a car and traveling, you know, great distance or I can walk there as opposed to not having to mess with that. That makes a lot of sense to me. So that’s awesome. So is that been primarily one of your best lead sources as far as it goes?

Jon Bell 19:52

That is the best! Now of course, I will have to say I did go out and I did try to do some SEO stuff, some blog, things and stuff. It just wasn’t fruitful. And that’s one of your lessons learned is, hey, if I go out and I spend $400 a month and I don’t make a single dollar from it, I need to stop spending it. I rather just send this email to this directive person.

J Darrin Gross 20:16

Right, right. It’s so true. It’s the the internet’s are willing. You know, they’re they’re glad to take all the money you want to spend.

Jon Bell 20:27

Yeah, worse than casinos.

J Darrin Gross 20:29

Yeah. It’s it’s definitely true. So, in normal times, conferences, I would guess would be a great opportunity mentioned hospitals, for procedures and stuff would be a great opportunity. Given that we’re in a, you know, pandemic, I guess we’re we’re coming out of it. Although I see cases increasing, I don’t know. I don’t know what that’s going to impact look like in a week or two. I you know, who knows? What that’ll look like but I guess my question, how, how has business been? Since March was March 13 ish, kind of, kind of a day on our calendar here.

Jon Bell 21:15

So, um, March, March is the start of our high season here in Virginia and DC. It’s starting to warm up, spring break, and then the museums are open, everybody wants to come in visit. So, right when all of this hit, there were so many bookings that I had on the calendar. From the 15th on, they pretty much all canceled. So it was a little depressing at that time, just because, hey, I had all this money on the books. Now. It’s never going to be realized to go on and going through and doing what we call now the pivot right, that is the pivot from short term bookings to mid term bookings and even long term. So because we have Have a furnished apartment, we technically can market ourselves in any one of those fashions, it’s just you have to accept the differences in revenue when you do that. So when we do short term, it’s higher revenue mid term, it’s pretty good. Long term. ahh, it’s the same as somewhat the landlord’s would get, but you kind of got to think that we’re overtop of the landlord. So you know where the landlord might make $500. Well, maybe you can only squeeze an extra $200 on top of it, just because it’s already got the profit built in and you got a furnished place. So there’s some value in a furnished apartment.

There was a lot of people in this area that needed a place to stay because they got sent back to the US via State Department or whatever. So having some of those alliances has definitely helped, because now I have mid to long term bookings, at a decent monthly rate. Now it’s not like I’m making 1500 dollars a month on each apartment. However, I am being able to to scrape by I’ll say, jokingly with $400 a month on those people that are coming to stay. Really, this was a big lesson in seasonality and how to manage cash flow. So, for me, generally, what I would end up doing is have just enough to get through the low season and then get right to the high season. So right around March, I’m like, Okay, great. I can spend all the cash that I got, because I got plenty of cash coming back. Well, that wasn’t the case this time. Luckily, I didn’t spend it. I did get some forewarning about this. So that that was good. Either way, just knowing and managing cash flow. That was that was key. Also, some of the SBA stuff did help out. We were included in on some of that relief. So all of the other hosts and I believe the gig economy, we’re all included. So that was a good thing that the government did for us? So that’s how we got through it. Now, this answer as far as the recovery keeps changing, technically daily, because as of the last three weeks, bookings have started to increase, people are back out traveling. And that is a good thing. But just like you just alluded to, I am fearful of a double lockdown. I know cases are going up. And I don’t know. It’s it’s possible. But is that when 200,000 deaths or is the news just going to stop covering it? And we just won’t know.

J Darrin Gross 24:39

Yeah, I mean, I’ve come to the conclusion that nobody knows. Anybody that’s trying to explain this is grasping at what we went through last time, trying to to, you know, find where we are on the line from last time that this time kind of thing and I’ve just I’ve concluded That is so different. The economy was doing fine for most. I mean, there was plenty of concern that we were at the top and it was overdue for a correction. But the banks were fine. And employment was good. There was no overbuilding of, you know, units kind of thing. So this is kind of a unique animal and I’ve given up on. I mean, I’m listening to it all, but I’ve given up on saying, Oh, that’s what it is. I think that’s interesting. Because I, you know, I just everybody I talked to is got either an opinion or you know, we share ideas and stuff and, you know, kind of think of where things are at, but I honestly I mean that, you know, the stock market is almost back to where it was. Today is what we had June 10 10th. Yep. As we record this who knows what the next Several months of Play, play on some but to the point about the the, you know whether or not we have an infection. I have a question for you about turnovers. You know, when you when you have a long term rental, it’s a pretty big deal somebody is announcing they’re going hopefully, they don’t just leave in the middle of night. They take all their stuff with them. Hopefully you don’t have place leftover stuff. And then you you basically may have to repaint free carpet, whatever you might have to do in this situation. You’re basically similar to a hotel. You’ve got nightly guests, they’ve left, sheets, linens, clean, how do you how do you do that in a normal situation? And then tell us what you’re doing now given the the concern of COVID.

Jon Bell 26:56

All right, so yes, just like a hotel. We have turns, which is what we call them. Pretty much before COVID-19, we would go in strip the linens, you know, mop, similar to you calling a maid over to the house, we would do all of those things, but because our places are cleaned pretty frequently, it’s not like a deep clean every time, right? We’re not we don’t have to wipe windows or anything like that. If somebody comes in stays for a week, and then they check out. We do do that on a periodic rotation, where we go ahead and just do all the baseboards and all that stuff. But for the most part turns for us for a one bedroom apartment takes about 45 minutes. And that’s really stripping linens, setting the beds, vacuuming, mopping dishes, stuff like that. Post COVID 19 we have a lot of extra steps. And these are actually steps that we’re going to continue on no matter what. Just because we’ve incorporated it in. It’s not too much of a heavy lift. It’s just more of a check. Like hey, did that Did I wipe down the door handles with something that is definitely going to kill the virus within 10 seconds or 15 seconds. So we do stuff like that we also ozone each room before somebody actually touches the linens because we want to make sure that one our crew is safe. Even though CDC has recently kind of come out and loosened up some of the transmission from surfaces, we still want to play it extra safe. Of course my personal team is where I want to keep. I want to keep them whole, right? They all are healthy, they all have families. I don’t want anybody catching anything from just working and then taking it back home. So we ozone, we make sure we get all the certain CDC guidelines stuff and we go back through and we just check everything. We also We ask our guests before they check out if they feel sick if they have been diagnosed and if they have we will block that apartment for the next three days. And then go in and clean And we won’t let anybody stay. So we definitely don’t want anybody to catch it by coming and staying with us. So we we approach it in two different ways.

J Darrin Gross 29:11

It’s interesting. How have your guests responded to these? I guess the communication from from you about this before and after?

Jon Bell 29:23

Well, everybody accepts the message. I just send it a couple days before checkout. They just let us know. I mean, I feel like this is just now the normal thing, right? Hey, how are you feeling? Are you feeling sick or anything? Have you had a fever? If so, would you let us know? Have you tested okay? No, I haven’t. But I had a great stay. That’s normally the response that I get back. Some people do say hey, but if I said yes, I mean, you still should be cleaning it. You know, whatever. We still let them know that. Hey, this is our cleaning process. If you were to say yes, we would just reserve the unit for three days. Make sure that it nobody enters or whatever. And then we Go in and still do the CDC guidelines. So we just want to make sure that everybody knows that we are actually being safe. And travelers I think are liking that more than a hotel at this point.

J Darrin Gross 30:14

It’s interesting, because I think that’s one of the other that well, the travel industry was the one that was kind of hit right, right between the eyes with this. From hotels to travel, you know, airlines to restaurants, all that hospitality was really kind of hit hard. You mentioned that traffic is picking back up. bookings are picking back up, how are they tracking compared to what you would have expected or experienced in prior years?

Jon Bell 30:45

I would say maybe at a 27% drop from what it would have been this time last year, as far as occupancy goes and really how I’m measuring that is how far out things are getting kind of booked up. I’m booked up Immediate. But as time goes on, there’s more gaps in the calendar than it would be if things just didn’t happen.

J Darrin Gross 31:09

Gotcha. And as far as the the types of bookings are they more of the mid term, long term? Are you Are they kind of trending back to the short term,

Jon Bell 31:19

We are definitely trending back to the short term. So some of our mid and long term guests are either being called back to the country that they came from, or they are just ending that reservation or it’s just ending in general and new shorter term bookings are coming in. Still about five days or so. So that’s still very good.

J Darrin Gross 31:44

Got it. Tell us a little bit about your systems. You mentioned kind of the cleaning and the turning kind of thing but but isn’t it guy I’d love to hear a little bit about how you have this set up. I mean, we talked about the different booking sites. If I go on one, I like your place I click Yes, it’s reserved, to me have some sort of a calendar on it.

Jon Bell 32:09

So So behind all of that is a unified calendar that we call a PMS or management system, everything funnels to there. And that’s how you keep double bookings from happening. Pricing is pushed out from there, that is really the lifeblood of just being on multiple channels. Without it, it’s very hard to kind of manage from one to the other. It also does help when you have something that integrates automated messaging. So like all the check in messages, and just that general check that we just talked about for COVID that goes out in an automated fashion. So most of the standard communication is just sent via a system questions outside of what the system can do. That has to be answered by person and right now it’s just me. I don’t have any VA’s or anything else because I don’t see a need, or I don’t have enough pain to actually just get somebody to go out and do it. The system that I use for messaging has an AI built in, so it can identify, hey, this questions about Wi Fi. Let me just send this Wi Fi information and I typed a response that is generic enough to reply back to anything you almost think I sent it.

J Darrin Gross 33:26

Right. That’s fascinating. You know, how much of that can be unless you have some sort of a real urgent problem, but I would think that as long as people can get in and out you know, you’d be in pretty good shape. This is fascinating. Again, just starting from the premise of you’re leasing a property and then subletting it as opposed to you know, having to do all the purchasing and then then leasing it. Have you It sounds like you. You mentioned the You’ve you’ve cleared all this with each one of the landlords Have you run into any kind of zoning restrictions or cities or others that have had, you know, rules or laws that have been created to?

Jon Bell 34:13

Absolutely. So, of course, there are state regulations, there’s local and then there’s also sometimes like an HOA in place that says, hey, although the state allows it, this HOA says you cannot do it. So you really have to look at each different layer of any type of governance to make sure you’re okay. And you should do that before you go out and look for a place. But most states and cities are somewhat coming around to the idea. Mainly the metropolitan areas. I have a lot of units in Old Town Alexandria, here in Old Town, Alexandria, if you’ve ever come here. It’s just one of those like towns where people just like to walk and find the local shops. So without The tourists technically, who’s really going to be buying from the shops on a repeated basis? So they openly welcome short term rentals and just any type of lodging.

J Darrin Gross 35:12

Yeah, that’s, that’s great. Yeah, it’s funny. I know. here locally, in Portland, I know, there’s been some resistance and stuff. And a lot of it’s been by I guess, you know, probably the people that invested in hotels in the first place, you know, that are like, Hey, you know, we’ve got this over here, what are you doing? kind of thing. But, you know, I think the great disruption of the economy continues. Thank you internet. Right. So we, we have the right to go with Is there any other you know, keys to, you know, successfully navigating the the pandemic that you’ve that you’ve uncovered?

Jon Bell 35:58

Yeah, I mean, Literally the pivot. And I’ll just keep calling it the pivot because we all had to do it. And the pivot was was something that we didn’t expect. But it is something that we’ve learned and it will always be a part of business, I never knew that I can book a place for eight months at a great rate. It just lets me know that, hey, I don’t always have to play the short term game, I can play a little longer play and still be satisfied. Of course, you would do it for the winter months here or the slow season, but then you’d want to kind of kick those people out so you can get back to some higher profits. Well, okay, maybe I don’t, I won’t be so much in a rush to kind of kick those people out. I’ll continue them until they can’t stay anymore. And then I’ll just go ahead and backfill some other stuff. It really just helps the overall portfolio in a sense. So before I was looking to create a portfolio that manage seasonality, so for me that meant in December, it Had a high occupancy maybe like in Vegas. But now I’m looking for Hey, let’s just try to keep some of this sustainability keep the cash flow the same year round. How could I do that?

J Darrin Gross 37:12

No, that makes good sense. Have you are you actively looking to grow your your unit count or?

Jon Bell 37:23

Absolutely.

J Darrin Gross 37:24

Okay,

Jon Bell 37:24

Absolutely. Literally I challenged myself to figure out when it’s too much for me to actually just quit my day job right right now because I’m doing all the messaging for the 44 units. It’s still not enough, right? There’s my phone isn’t like just bothering me. It’s not messing up relationships or anything like that. So there’s really no pain there. And that’s really all that I would need to just say, Hey, I’m just going to jump into it. Now. I do have a small team that do run the day to day I just meet with them in the morning. And that’s it. So, for me, I am looking to grow. I think, right around 500 units or so I’ll probably say Okay, enough is enough.

J Darrin Gross 38:10

Gotcha. Well, this is a, this is a very interesting you know, like you said, your model from a basically, you know, leasing and and releasing and marketing and turns and having to pivot. I think that’s a, that’s a, you know, definitely an experience that you can use in any business. Things are going to change and there’s nothing that’s guaranteed to life, that’s for sure. So I appreciate you sharing it.

Jon, if we could, I’d like to shift gears here for a second. As I mentioned you before we started recording by day I’m an insurance broker. And I work with clients to assess risk and determine whtat what we can do with the risk? There’s a couple of strategies we look at. Typically we consider, can we avoid the risk? If we can’t avoid the risk? And we look to see, can we minimize the risk? And if that’s not possible, then we look to see if we could transfer the risk. And that’s what an insurance policy is. And I like to ask my guests if they can identify, you know, what they consider to be a or the BIGGEST RISK. And just for clarity, I’m not necessarily looking for an insurance related answer. Risk is everywhere. But if you’re willing, I like to ask you, Jon Bell, what is the BIGGEST RISK?

Jon Bell 39:50

I’ll answer it and maybe the most common risk that people assume when they think of short term rentals or specifically Airbnb s and that is major parties. People messing up your your place. With my experience, it’s not the major risk, it is something you can hedge off. And this is how you do it. You pretty much need to make sure that you have proper systems in place and technology. And that really looks like you need to have some type of external camera and a noise monitor or a noise monitor, in general in every place if you cannot put a camera that lets you know before anybody else is pissed off enough to contact anybody else or call the police that something is going on that you need to pay attention to. And you can back that up with evidence and you can evict the guests and keep the revenue without creating a major problem.

J Darrin Gross 40:48

Got it, got it. So let me ask you with that. You mentioned you’ve got some that are in varying states not all of them sound like they’re local near you, do you have people on the ground that you could deploy if, if something like this happened in one of your distant locations?

Jon Bell 41:07

If needed, there is somebody that can go. But really, we got it down to a science we can really just communicate with the guests get it tamed down. If not, we just go ahead and just call the police and they can technically just handle it for us without us being there.

J Darrin Gross 41:28

Well, Jon, this has been just very entertaining and very educational. Where can listeners go if they’d like to learn more or connect with you?

Jon Bell 41:39

Definitely. You can find all of our resources that we offer, through Shorttermsage.com, you can connect with us within our Facebook group, which is The Host Nation. And yeah, we’re always in the group. You can always just ask a question for free to answer if you’re looking for management, you can also find that through Short Term Sage or CoHostit .com.

J Darrin Gross 42:06

Got it. Jon, again, I can’t say thanks enough for taking the time to talk. I’ve enjoyed it. And like I said, learned a lot. And I hope we can do it again soon.

Jon Bell 42:18

All right.

J Darrin Gross 42:20

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 42:39

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