We’re back … with an all-new episode of Ask The Guys!
In this series, we answer YOUR questions about all things real estate.
Before you click play, please remember that we are not tax advisors or legal professionals. We offer ideas, not advice … please run any investment ideas past a professional before putting them into action.
Now, listen in to The Real Estate Guys™ show! You’ll hear from:
- Your pondering host, Robert Helms
- His pesky co-host, Russell Gray
- Bob Helms, the godfather of real estate
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Syndication, securities, and accreditation
Susan, from New Hope, Pennsylvania, wants to know what real estate investment opportunities are open to non-accredited investors.
The short answer is A LOT. For the long answer, let’s start with a definition.
An accredited investor is someone who has a net worth of over $1 million excluding their primary residence OR someone who has had an annual income of $200,000 for at least two years ($300,000 for married couples).
These requirements allow the SEC to regulate the kinds of investors who get involved in securities investments.
They are a way to verify you’ve reached adequate financial aptitude and won’t run aground by investing in a big deal.
If you’re not at that level yet, that’s perfectly all right!
You have multiple options:
- Employ a tenant-in-common ownership to invest in a property as a group. Make sure you structure the deal so it stays within SEC regulations.
- Make friends with a syndicator. Deal makers can work with up to 35 non-accredited investors through the 506B exemption.
- Work with an accredited partner to complete your first few bigger deals.
- Invest in a publicly traded security in real estate.
- Use a crowdfunding site to invest limited funds into a larger project.
- Make a private loan to other investors.
HOWEVER … keep in mind that the average beginning investor is NOT accredited. Condos, single-family homes, and other smaller properties are ALL available to non-accredited investors.
In fact, the vast majority of real estate investment opportunities are available to non-accredited investors.
The fundamental piece of the equation is education. You have to know WHAT you’re buying and WHO you’re doing business with for every deal before you can move confidently into a deal that risks large amounts of your equity.
Michael, from Richardson, Texas, asks a related question … when does a deal become syndication?
Syndication simply means putting together money from a group of individuals.
Things start to get a little tricky when some of those individuals are passive investors, however … because then you have a security and have to make sure investors are accredited, like we talked about above.
When you’re working with a group of people to do a deal, make sure you hire a real estate or securities attorney to properly document your deal. We DO NOT recommend the do-it-yourself method here.
Repair first … or sell as-is?
Betty, from Littleton, Colorado, is wondering whether her in-laws should fix the broken foundation of their home before selling or sell it as-is.
Bob reminds us that as-is means as disclosed … it’s important to tell a potential buyer EVERYTHING that could be an issue, including any reports you’ve commissioned.
The best solution in this case might be to get a report on the damage to the foundation … and then decide whether to sell or fix.
There’s no automatic best answer here … in a strong market, you can probably get away with as-is, while in a buyer’s market, you may have to do more work.
To figure out the best option, sit down with your real estate professional.
Investing to learn
We got a question from Daniel, in Garden Grove, California. He is wondering how to invest in larger deals as a learning endeavor. He wants to expand beyond single-family investments. Like our first questioner, he is not accredited.
Let’s start with what you need to do to FIND deals as a passive investor.
Passive investors bet on both the jockey and the horse. In other words, you need to know the details of the deal … AND know who you’re doing business with.
That’s why networking events are so important. And the TYPE of events you go to are important too … we bet you’ll find more dedicated, passionate investors at professional development events than at events where syndicators get together to show off their deals.
If you want to learn, put yourself out there, get to know people, and pick out a few niches you find interesting. Then put a smaller amount of money into multiple deals … instead of putting all your eggs in one basket.
And make sure you’re working with a syndicator who is invested in your educational process. You want a syndicator who will let you be a fly on the wall.
Passive investment options for residential assisted living
Bill, in Northbrook, Illinois, asks whether it’s possible to invest passively in residential assisted living or AirBnb investment options.
If you’re interested in residential assisted living, we recommend looking into Gene Guarino. His educational events have taught many investors how to step into the assisted living field … and many of those investors become syndicators willing to work with investors like Bill.
AirBnb, on the other hand, is something we’re not 100 percent sure about yet. There’s some legal resistance and the whole industry can be a bit sketchy.
We just don’t know enough about AirBnb investing to recommend this option … and we haven’t yet found an expert who’s really crushing it in that field. For now, this option is just a wait-and-see niche for us.
Book releases and Belize trips
We answer three quick questions from curious listeners …
Ellie in Seattle wonders where she can find a copy of Bob Helm’s new book, Be The One Percent.
The book is meant to teach realtors about how to serve investors … and become investors themselves.
To get your hands on a copy, listen in to the show for special access.
John, from San Antonio, Texas, wants to know whether we hold a convention in Belize. While we don’t hold a convention … we do conduct Belize discovery trips three to four times a year!
These trips are a great way to get an in-depth perspective on the Belize market … and even if you’re not ultimately interested in offshore investing, you’ll learn a heck of a lot about market analysis.
Holly, from Pingrove, Illinois, wonders whether we have any Belize field trips scheduled in the near future. To check out upcoming field trip dates, check out the event page.
Finding the truth about private lending platforms
We were excited to hear from a former participant in our mentoring program. Domingo, who’s located in San Anselmo, California, wants to know what we think of a particular private lending platform.
He also wants to know what we think about his general economic theory … that there’s a strong possibility the market will come down, and that real estate will continue to be a viable investment option during a crash, even if liquidity dries up.
About the lending platform, we can’t really comment. There are several peer-to-peer lending platforms that specialize in crowdfunding loans, and these can be a great way to diversify loan types.
But lending is lending … so no matter the loan type, you have to understand the basic underwriting … what you get if a foreclosure happens.
Don’t get lost in the weeds. Instead, understand the basics … what are you giving, and what do you get? And if things go wrong, what happens?
As to the economic theory, we think Domingo is on the right track. ALL of our listeners should be thinking about how to position themselves so they can thrive when a downturn happens.
Land brokerage and multi-family investing
Our last question is from Troy, in Millcreek, Washington. Troy is looking to get better as a land acquisition agent … but he also wants to dip his toes into multi-family products.
We haven’t been in the land brokerage business, but we think there are a few things to take into consideration.
First, land is not land is not land.
By that, we mean every land bank could lead to a different outcome … so you need to look at where every piece of land will end up, whether that’s agriculture or retail development.
Second, every specialty brokerage follows the 80/20 rule … 80 percent of real estate is sold by 20 percent of agents. So, be the 20 percent.
That means you need to be really well educated, have outstanding product knowledge, and build excellent relationship.
To succeed, look for the big players in your field and try to get in a room with them. Pick their brains, learn the language, and build your business.
And ask yourself the most important question … who is my customer? Understand the needs of the person you’ll be selling to.
As to multi-family, our friend Brad Sumrock has a wealth of resources. He’s one of several multi-family investors on our Summit at Sea faculty … but he also holds a two-day training three times a year in Dallas, Texas.
It’s an invaluable learning opportunity, and one we can’t recommend enough.
Have a question of your own? Ask us here. Until next time, happy investing!
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