Profitable Niches – Investing Internationally

Is investing offshore right for you?

International investing can be both exciting and daunting. In our fourth installment of the Profitable Niches series, we hope to demystify the process for investors looking to cross some borders.

Every investment has a risk … you just have to learn how to evaluate the risk and the reward so you can choose wisely.

In this episode of The Real Estate Guys™ show you’ll hear from:

  • Your world-traveling host, Robert Helms
  • His petrified-of-planes co-host, Russell Gray
  • CEO of Mahogany Bay Village and international investor, Beth Clifford

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Expand your horizons with international investing

Our guest has made a name for herself in international investing.

The CEO of Mahogany Bay Village and a pro at international resort investing, Beth Clifford started expanding her own real estate business by moving into different states.

It wasn’t long before she got an itch to start looking outside the United States.

She’s a great example of someone who’s become a success by opening up her geographic horizons.

“It’s always convenient to live and invest in the same place, but real estate is about location,” Beth says. Investors have to look beyond what is outside their bedroom windows.

International investment also provides an opportunity to diversify and put your assets into different baskets.

Whether you’re an investor looking to expand beyond your state of residency or your country, Beth says the methodology is the same.

To invest smartly, you have to understand the market, laws, and culture of the place you’d like to invest in.

And just because there might be a learning curve doesn’t mean you should shy away from good opportunities.

Take what you’ve learned and expand it into another arena, whether that’s a new asset class in the same location or the same asset class in a new location.

Either way, you expand your world—and get the chance to become an expert all over again.

When you’ve learned one new market, it’s easier to get to know a second one, Beth notes.

And … “It’s all about teams,” she says. As someone who owns, invests, and develops in multiple countries, Beth has learned the value of a talented team.

Let’s talk about taxes

As soon as you cross a country border, you have to understand an entirely new tax system. That’s why Beth has separate development companies for properties inside and outside the U.S. … and why she enlists professional help when it comes to accounting.

Although taxes can be tricky, owning property and businesses outside of the United States can reap great tax benefits.

Despite that, some tax professionals still make a habit of creating fear, uncertainty, and doubt for investors who would like to make some money across country lines.

Beth recommends shopping around for an informed professional … because although the attorneys make it seem hard, there are really only three documents you need to complete each year.

She recommends professional assistance for at least your first two years, until you have a solid understanding of the basics.

One thing to be aware of? Currency arbitrage and exchange. If you’re unaware of currency issues, they could bite you. Make sure you understand whether you can easily exchange currency and whether the jurisdiction you’re investing in is neutral.

A relationship business

Real estate is a relationship business. And especially when investing beyond your familiar boundaries, building local relationships is key.

We asked Beth how to she expands her network across borders.

“I ask for help when I go into a market,” she says. Investors should have “an attitude of humility, not hubris.”

The first thing Beth does is look for the Class A players in a given market. Who are the top three law firms, employers, development companies?

Beth seeks out the movers and shakers … then picks their brains for advice.

“A players fly with A players,” she says. “It’s the rule.”

Networking doesn’t cost you money … and it gets you into the contact database of the best and brightest.

Once you’ve sought out the best, go in with the intention to learn. Ask these bright business people how they’ve obtained their success and where they see YOU going wrong or right.

The goal is to find team members who provide value to you … and are excited to do so.

And one business relationship can net literally millions of potential customers.

It’s all about leveraging yourself.

Is making connections any different in a foreign country? “People are the same everywhere,” says Beth.

Basic human connection is the key, no matter where you go. People want the same things … so connect on a common level.

Thinking about making the leap?

Wondering whether you’re cut out to be an international investor?

Beth recommends starting by test driving the market. Do a due diligence tour outside of the U.S. … like one of our discovery trips.

It’s a great way to get to know the area in which you might be investing, educate yourself on the culture and special considerations, get to know local movers and shakers … and have some fun.

Seeing how others put together international investments can be eye-opening, says Beth. Discovery trip attendees get a year of education … in four days.

So get there … and see what awaits you beyond the horizon.


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

8 Critical Steps to Practicing Safe Syndication

8 Critical Steps to Practicing Safe Syndication

 

You want to get into syndication … but you know securities law can be tricky. You want to get everything right, down to the details. Good news … you’re already on the right path!

 
Safe syndication starts with careful research and a series of specific steps that will help YOU safeguard your assets and your investors’ money.

In this detailed guide, Mauricio Rauld offers a set of eight important steps investors need to take to protect their investment.

Wondering where to start? Mauricio clearly lays out important legal steps like setting up your business, meeting with your advisor, and figuring out tricky securities exemptions. Dig into essential questions you need to ask to draft a complete business plan, and become acquainted with important legal requirements.

Plus, dive into special bonus information that covers how you can stay compliant in the digital world!

Serious about syndication? Then get serious about covering your legal bases.

Before you set up an appointment with a legal advisor, check out this helpful guide to the most common legal requirements in the world of syndicating and securities.

Simply fill out the form below to receive your complimentary copy of 8 Critical Steps to Practicing Safe Syndication! We wish you happy … and safe … syndicating!

Profitable Niches – Residential Assisted Living Homes

The Silver Tsunami is coming. That’s right. It’s no secret Baby Boomers are retiring and entering a new phase of life, and looking for an alternative to traditional assisted living facilities.  

In the third episode in our Profitable Niches series, we explore the world of residential assisted living homes.

We chat with leading national expert and President of Residential Assisted Living (RAL) Academy, Gene Guarino, about this compelling investment opportunity, and four of his students who are successfully investing in this space.    

In this episode of The Real Estate Guys™ show you’ll hear from:

  • Your happy-to-assist host, Robert Helms
  • His in-need-of-assistance co-host, Russell Gray
  • RAL Academy President Gene Guarino
  • A few of Gene’s star students, Sherry Ellingson and Rocky McKay, Loe Hornbuckle, and CJ Matthews

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An explosive demographic with specific needs

So much of real estate is about understanding specific demographics and their needs. All around the world, and especially in the United States, there is a massive population that has created business opportunities through every season of their lives … baby boomers.

Baby boomers are retiring in droves, and they aren’t too far away from not being able to live independently anymore. Unlike generations before them, boomers (in general) are adamant about not living in an institution or hospital. They want to live in a home and have a social life.

That’s what makes residential assisted living homes such a fascinating investment niche. This specific demographic and a unique financial model means more CASH FLOW than a typical single-family home investment.

Gene Guarino is the leading expert in this investment niche. As president of the Residential Assisted Living (RAL) Academy, he teaches investors everything they need to know to get started.

“It all starts with education. Get educated first. If you don’t, you’ll most likely go out, make mistakes, and bang your head against the wall,” Gene says.

We’re all about education for effective action. So, we sat down with a few of Gene’s star students to learn about their experiences and what advice they have for other investors.

Building your brand from the ground up

Sherry Ellingson and Rocky McKay are business partners who attended Gene’s class several years ago.

“We kept hearing about senior living,” Sherry says. “We both have parents who are going to be entering into this category before long, and after taking a look at some of the current options in our area we thought, ‘You know, we could do this a little bit better.’”

Rocky and Sherry first acquired an existing assisted living facility that needed some updating. The property is 10 beds with jack-and-jill baths and lots of places for residents to be able to visit with friends and family. The goal is to have residents feel at home and have a happy, safe place to make their own.

How do they attract tenants? Case workers from hospitals and rehab centers refer potential residents and their families to placement agents who find out what they are looking for in an assisted living facility.

Then, the agents take them on tours and show refer them to various home options. That’s why a good reputation is so important.

“The reputation of a home is attached to the owner, so your focus should really be on creating your own reputation and brand from the ground up,” Sherry says.

“The demand for a good home is extremely high, and as we provide such an essential service for our residents, it feels like we are doing the right thing,” Rocky adds.

For investors just starting in the niche, Sherry and Rocky recommend looking for an existing home and remodeling it into a residential assisted living home. They also suggest having a fixed rent rate with everything included so families can set their budget and not worry about hidden fees.

And don’t forget that there is benefit in adding more properties. More residents means the ability to buy supplies in bulk and save even more money on operation costs. Sherry and Rocky hope to have a couple hundred operating homes in the next several years.

Raising capital and expanding your network

After going through the RAL Academy course, Loe Hornbuckle found his passion. Since then, he has opened 40 beds in residential assisted living homes and is in the process of developing an 80-bed facility made up of five homes on six acres as a planned community.

“I look at residential assisted living as a tool to keep people out of nursing homes or institutional environments that may not be right for them,” Loe says. “There are a lot of people who are placed inappropriately in those settings.”

Even though he was passionate about the type of investment he was making, Loe says he still had a lot to learn when it came to raising capital.

“The first time I raised capital, I put out my business plan, and at the end of the first day my wife found me in the fetal position on the floor. It was harder than I thought it would be,” Loe says.

Proper education changed this for Loe. He learned you have to build a network to effectively raise capital. He suggests that RAL investors attend events and conferences so they can meet the many people out there who are willing to help them along the way.

“Your network is everything. When you build your network, you have the power to step into good business like residential assisted living,” Loe says.

Syndication and working smarter

As a self-proclaimed real estate addict, CJ Matthews was looking for an investment with good cash flow and without a huge amount of ongoing work. After hearing Gene speak on RAL homes, she knew she had found the perfect niche.

“With residential assisted living, you do the work to set everything up, and then you become the business owner. At that point, someone else can actually run the day-to-day business for you,” CJ says.

The biggest advice CJ offers to potential RAL investors is to learn about and apply effective syndication.

“Before learning to syndicate, going out and asking for money felt risky or scary to me, but after I attended the Secrets of Syndication seminar, I knew what I needed to do,” CJ says.

When it comes to working with partners, CJ recommends choosing people who have skill sets you don’t. That way you can work synergistically and accelerate your success. And don’t forget this particular investment niche requires a special touch.

“This space isn’t for everyone. You need to love real estate, love making money, love putting in work on the front end, and most importantly have a heart. If you aren’t willing to care about these people and making the last years of their lives happy, then this may not be the investment for you,” CJ says.

Interested in learning more about investing in residential assisted living? Listen in to the show to hear more from Gene and his students. You can also email us at ALF@realestateguysradio.com, and don’t forget that Gene will be cruising with us on our Investor Summit at Sea. We’d love to see you there!

Listen to other episodes in our Profitable Niches series (like Stacking up Profits with Self Storage or Making Money with Mobile Homes) to step off the beaten path and learn more about other lucrative, but as-yet unexploited asset classes.


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

2018 Apartment Market Forecast

2018 Apartment Market Forecast

 

Predict what U.S. Apartment Markets will look like in 2018 … Then position yourself for success!

Brad is a successful investor in his own right and the teacher of the popular Rat Race 2 Retirement program, a course that helps investors build wealth through apartment investing.  

In this webinar, Brad brings his characteristic optimism and extensive experience and knowledge to the topic of apartment investing.  His webinar shares:  

  • How you can leverage others’ time, money, and experience to create wealth 
  • Program results for Sumrok students in 2017 (they’re impressive) 
  • A recipe for double-digit returns … in just 16 years 
  • Brad’s formula for what makes a good market 
  • And, the piece de resistance … Brad’s 2018 Apartment Market Forecast  

Interested in what 2018 holds?  Simply fill out the form below to listen in for how the state of the U.S. economy will influence apartment markets in 2018 … and which markets are best for investors …

Profitable Niches – Making Money with Mobile Homes

Low-hassle affordable housing + land banking + triple-net leases = what? There’s only one answer to this real estate investing equation, and that’s mobile home parks.

In the second episode in our Profitable Niches series, we venture into the land of mobile home park investing.

We chat with super syndicator Andrew Lanoie about why he ventured into this niche and what benefits investors can find in the mobile home space.

In this episode of The Real Estate Guys™ show you’ll hear from:

  • Your mobile host, Robert Helms
  • His unmovable co-host, Russell Gray
  • Experienced syndicator, Andrew Lanoie

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An expert investor in a unique space

Do we know what’s going on in the mobile home space? We’ve got some general knowledge … enough to form some hypotheses.

But to test our hypotheses, we turned to Andrew Lanoie, principal partner at Park Place Communities. He’s been in the mobile home space for the last five years.

Why mobile homes? Two reasons:

  1. Increasing demand for affordable housing in the marketplace.
  2. Adequate supply of mobile home properties for sale, often by owners suffering from lazy landlord syndrome … which means many properties also have a value-add opportunity.

These two reasons are the main factors Andrew has made a place for himself in the mobile home space.

He started out in single-family homes but realized things weren’t penciling out after several years in the space. Andrew then tried multi-family properties … same problem.

Prices were escalating while returns were decreasing. So, Andrew started looking at different asset classes, eventually arriving on mobile home parks.

Today, he looks for distressed assets where he can buy low and add value.

Are mobile homes actually “mobile”? Not really. Ninety percent of mobile homes stay in place for the entire life of the home. Most residents sell their homes and buy new ones instead of paying pricy moving fees.

Why are mobile homes in demand? This class of affordable housing offers a lot of square footage for each resident’s dollar.

Think about it … the standard double-wide mobile home is equivalent to a 3-bedroom, 2-bath apartment. For $500-600 a month, that’s a lot of bang for a renter’s buck.

Plus, residents don’t have to share walls.

Pros of mobile home investing, and where to step cautiously

There are many benefits for investors, too. For example, Andrew says one big difference between a multi-family property and a mobile home community is the expense ratio.

“The expense ratio is reduced in mobile home communities because you only have to deal with below-the-ground issues.” That’s because generally, residents own the mobile home they live in, while investors only own the ground beneath their feet.

Owners’ biggest costs will be infrastructure costs, like sewers, water systems, roads, and electrical setups. Another cost is the cost of vacancies, although buyers can bring that down by renovating and reselling non-performing homes.

One area for upside is rent increases, although investors should be very careful in this space. In the affordable housing sphere, “You cannot just gauge rents up,” says Andrew.

However, investors can make slow and steady rent increases … as long as they are making other improvements to increase the value of the property to residents.

How does tenant-landlord law work? In most cases, residents are paying a pad rent plus an additional lease amount if they don’t own the mobile home outright. If a mobile home owner can’t pay their pad rent, operators can essentially put a lien on the mobile home.

“It’s usually a 90-day process to get someone out,” notes Andrew. In many cases, operators can make a deal with residents before it gets to that point. But if necessary, it is relatively easy to expel a non-paying and uncommunicative tenant.

While there are many benefits to buying a mobile home community, Andrew recommends caution as an overarching strategy when purchasing. Deferred maintenance and other issues crop up often in older properties, so buyers should do thorough due diligence before buying.

Another thing to consider is the path of progress. Some mobile home properties increase in value as cities grow around them. “I wouldn’t plan on that as an exit strategy, though,” warns Andrew.

One tough aspect of mobile home investing is that commercial lenders are almost always unwilling to offer loans for this investment class when occupancy rates are low. Investors interested in distressed assets will have to find alternate financing sources.

One option? Syndication. This is the model Andrew uses to buy and operate mobile home investments. Keep reading to learn about his strategy!

A peek at Andrew Lanoie’s prolific syndication portfolio

With his team at Park Place Communities (PPC), Andrew has almost 1100 operating units in 15 communities spread throughout 8 different states.

“We get the most traction in the Midwest and Southeast,” says Andrew.

Many of his investments aren’t in major metros … but towns can’t be one-trick ponies, either. He’s looking for markets with multiple employers and diverse, stable populations.

An essential part of running this kind of operation is building a stellar team. Andrew has people on the ground in every state to search for and buy new properties.

Because this asset class is often difficult to operate and there isn’t a property management company that could fill all PPC’s needs in every state, Andrew and his team have built out their own management team.

They’ve also formed a construction company to renovate homes at new sites. For Andrew, renovations are the “low-hanging fruit” when adding value.

PPC also works with manufacturers when a lot needs new mobile homes … the cost of which investors can potentially recoup when they sell to residents. These homes do not need to be paid for with cash, but can be mortgaged, freeing up money for the investor.

Once the construction crew is done and units are in place, the marketing department takes over to find residents. Once residents are found, they’re sent to PPC’s lender, who looks for a history of on-time rent payments and an ability to pay the rent going forward.

One other essential relationship is with brokers. Andrew and his team have built great relationships with brokers, which allow them to access off-market deals and pocket listings.

Andrew’s operation has a TON of moving pieces … which allows the PPC team to leverage efficiencies for maximum return.

For the average mom-and-pop real estate investor, running an operation like Andrew’s is out of the question. That’s why PPC syndicates deals … so investors can access a high-cap-rate investment passively.

Another pro to this investment class? It grows slowly and steadily … even during downturns.

We asked Andrew what potential investors need to know. His number-one piece of advice is to do your due diligence before jumping into a deal.

Interested in learning more about investing in the mobile home space? Listen in to the show to get access to Andrew’s curated report on mobile home park investing. He’s compiled a detailed overview of why he and his team are bullish on affordable housing and mobile home communities … and why you should be too.

We encourage you to do your own research and learn more … and keep listening to the Profitable Niches series to step off the beaten path and learn more about other lucrative, but as-yet unexploited asset classes.


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Profitable Niches – Stacking Up Profits with Self-Storage

Tenants, toilets, and termites … real estate investing isn’t always pleasant.

But we have good news for you … real estate is more than just single- and multi-family properties (although we’re big fans of those investment classes too).

In our new Profitable Niches series, we’ll explore a variety of niches in detail so you can find the asset class that best fits your investing needs.

This episode explores a fascinating niche … self-storage properties. We’ll dive into the reality and myths of this tenantless niche with a multi-talented investor, Dave Zook.

In this episode of The Real Estate Guys™ show you’ll hear from:

  • Your nice host, Robert Helms
  • His niche co-host, Russell Gray
  • Real estate investor and instructor Dave Zook

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How and why to invest in self-storage properties

Dave Zook doesn’t pigeonhole himself into one asset class. He started out with multifamily and single-family homes, but has since then expanded to resort community development and ATM investing.

He also runs The Real Asset Investor, where he finds and curates real asset investment opportunities for investors who want to build wealth.

Dave’s latest venture has been self-storage units, so we sat down to discuss some need-to-know characteristics for this asset class.

First, what should investors look for in a self-storage investment?

Investors need to make sure everything pencils out. Demand for self-storage units varies drastically depending on the market and its demographics … and demand and profitability also change over time.

Some markets are overbuilt. Investors need to do a comprehensive market analysis. Investors can look at population growth, strength of economy, and the local job market.

Dave Zook says his one go-to metric to figure out whether a market is over- or underbuilt is comparing the square footage of existing storage space to the square footage needed per person in the average market.

We asked Dave whether self-storage investing has gotten too hot for investors to get in. His answer is a definite “no.” “There’s still opportunity, especially in tertiary markets, to get in,” he says.

Like all real estate investing, there’s a smart and a not-so-smart way to go about investing in self-storage. Dave says that just like in multi-family investing, a key component of a profitable investment is purchasing a property with value-add opportunity.

For Dave, the best way to go is purchasing a property in a desirable location, whether unbuilt or with B- or C-class storage buildings, and then reviving the property and adding value and square footage.

How can investors choose what type of self-storage units to invest in? After all, there are a lot of options, including business/commercial storage and air-conditioned/climate-controlled storage.

A lot depends on the geographic area in which you’re investing, says Dave. For example, you’ll find far more climate-controlled storage facilities in Florida than elsewhere in the country.

We talked with Dave about what makes self-storage investing so great. There are several pros:

  1. Tenant/landlord laws don’t apply when your tenants are boxes. This changes your risk parameters immediately.
  2. Self-storage facilities are commercial spaces, not residential. It’s a lot easier to shut down a non-performing tenant under commercial rules.
  3. Self-storage renters tend to use spaces long term. Although the average self-storage tenant intends to stay 3 to 6 months, most stay between 28 and 30 months.

Another bonus? Self-storage investments are accessible to mom-and-pop investors who come in alongside a syndicator. In fact, Dave specializes in syndicating opportunities for smaller investors … read on for details about his syndication program.

Investing the Zook way

Dave follows the 10,000-hour rule. According to Malcolm Gladwell, it takes 10,000 hours of practice to be world-class in any given field.

How, you may ask, has Dave spent 10,000 hours learning the ropes of every asset class he invests in? The answer … he hasn’t.

Dave calls himself a generalist. He dabbles in many different areas, but when it comes to down-and-dirty details, Dave relies on a team of specialists to operate investment properties.

Dave says his “shortcut” to becoming a great investor is finding a team and rallying around them. “Doing business with a great team can turn your investment experience from a nightmare to something really enjoyable,” he says.

Currently, Dave partners with Reliant Real Estate Management to operate ongoing and future self-storage investment syndication deals. These experts have a proven track record of profitable management … a must-have for Dave and his investors.

Dave’s most recent self-storage deal is quite spacious … 70,000 feet. Dave is expanding the 526-unit property to add approximately 400 more units.

Dave purchased his latest property for approximately $8 million, with $4 million down. Once construction is completed, he and his team will be at about 75 percent loan to value.

Obviously, self-storage owners need to provide a mix of unit types and sizes. Although it can be a challenge to figure out exactly what you need, Dave says he relies on historical data … and expert analysis … to predict demand and occupancy.

Most investors aren’t going to buy a 70,000-square-foot property solo. So we asked Dave what is looks like when investors come alongside him in a syndication deal.

The timeline for Dave’s deals is typically 60 days from contract to close. The first 10-15 days are spent structuring the deal, and then investors typically have 45-60 days to join in.

Investors contribute a minimum of $100,000 and must be accredited.

It can be hard to find opportunities like those Dave offers, so connection is key. The best way to find deals is to connect with people entrenched in the space you’d like to invest in.

Looking for more information on investing with Dave? Listen in to the show to get access to a complimentary self-storage report from Dave Zook himself.

For a thriving portfolio, understand asset classes

There are a lot of ways to play the real estate game. For those just getting started, the wide array of options can be confusing.

And for established investors, it can be easy to choose an asset class and stick with it!

That’s why we created the Profitable Niches series … to break down the various types of asset classes in a detailed but understandable way so YOU can do the best deals.

Dave is a great example of someone who’s taken our motto, “Education for effective action,” and put it to work.

He’s also a great example of someone who knows he might not be the smartest person in the room when it comes to a particular asset class … and acknowledges the value of building a great team to fill in the details.

Want to be more like Dave … an experienced investor who has stayed out of the weeds and developed a diverse, thriving portfolio? Keep listening to the series!

Learning more about each asset class will allow you to do a thorough zero-based analysis of your current portfolio so you know whether you would do it again … and what you need to change to build wealth and satisfaction, your way.


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Fundamentals of Multi-Family Financing

Fundamentals of Multi-Family Financing

 

As an investor, you know figuring out funding can be tricky. Leap up the learning curve with this informative report on the fundamentals of multi-family financing!

Explore this one-stop shop for understanding how to finance your multi-family investments. Michael Becker and Paul Peebles at Old Capital Lending guide you each step of the way.

Understand why apartments are a resilient and proven asset class …  Then get into even more good stuff.  

Dig into how apartments get financed and discover who is doing the financing.  Michael and Paul have put together an extensive list of lending options.  Get a handle on lending vocabulary and take a look at helpful rules of thumb for each loan type.  

Access a checklist of what documents you need to compile when working with a commercial loan broker and learn tips about how to help your commercial mortgage broker help you. 

To get your complimentary copy of Fundamentals of Multi-Family Financing, simply fill out the form below … 

Clues In The News – Crisis and Growth Opportunities

Warren Buffet. Also known as the Oracle of Omaha, this investing heavyweight spends a lot of his time doing one particular thing.

It’s not scoping out new investments. Not chatting with folks in the investment industry. Not attending board meetings … although we bet he does spend a bit of time doing all of those things.

This investing genius spends 80 percent of his time reading.

From trade-specific journals to general financial news, reading and listening to the headlines is essential to staying informed. But just as important is reading between the lines.

That’s why we bring you Clues In The News … our take on how recent headlines affect real estate investors like YOU. In this edition, you’ll hear from:

  • Your media examiner host, Robert Helms
  • His (slightly OCD) news peruser co-host, Russell Gray

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Mortgage rates for single-family homes rising

Many articles are saying it … mortgage rates continue to climb and show no signs of stopping soon. Note, this information applies specifically to single-family homes.

This is important news … but before you react, stop and ask yourself the question, “If interest rates were guaranteed to rise, what would I do?”

The answer is probably buy a deal that makes sense today and lock in the interest rate so you get a competitive advantage.

Data from this Redfin survey shows less than 4 percent of potential homebuyers would cancel their decision to buy if interest rates increased … so people will keep buying even if it squeezes their bottom line.

But buying at a too-high interest rate means high cost inputs, higher rents, and potentially more vacancies. Getting in while the interest rate is lower is an important factor for success.

We also suggest you consider the advantages of adjustable-rate mortgages versus fixed-rate mortgages. Adjustable-rate mortgages may start lower depending on the market, but have no certainty of staying the same.

Fixed-rate mortgages, on the other hand, allow you to lock in a predictable rate that won’t rise or fall with the market. And when you’re locked into a rate for 10-15 years, having consistency is particularly important.

An equal concern is the strength of the dollar. If rents are sliding upwards faster than wages, your tenants are in trouble.

That’s why investing in A-class properties can be a poor strategy (more on that later).

Tighter guidelines plus higher mortgage rates can mean good things for landlords because fewer people are buying their own homes. So pay attention and think strategically … because a large part of success is getting in at the right time.

Is the multifamily sector overheated?

Multifamily properties have attracted a lot of money. We’re now hearing from many investors who wonder whether the sector is overheated.

Interest rates are rising, and since multifamily properties typically have 10-15 year loan periods, investors do need to be careful here.

If you’re a multifamily investor, you also need to keep in mind that rising interest rates not only affect you … they affect your tenants too.

According to a CNBC article, half of all renter households pay more than 30 percent of their income in rent. That means there’s no real wiggle room for inflation … and no real wiggle room if YOU need to raise rents.

One apartment developer interviewed in the article above says, “There is an acute crisis headed our way.” We can see this in the high numbers of luxury apartments being developed … and then standing empty.

At the same time, we’re seeing a shortage in B- and C-class housing.

Because of today’s costs, it’s difficult for developers to build new buildings for non-luxury buyers. And Wall Street investors see luxury as a safer investment … even though it typically brings 2-3 percent yields.

If you’re a syndicator, all of this information can help you understand the economic world you’re operating in. A development explosion in the high-end apartment space DOES NOT mean you should be investing in that space.

This information should be the start of your research. Read between the lines, look for the wise voices, and start following them … but mostly importantly, talk to the people who have boots on the ground.

And remember, just because the economy looks bad does not mean investment options are bad. In fact, a downturn can be the best time to buy.

What’s happening on Wall Street?

We like to read trade-specific news. But we also think it’s important to read and watch mainstream financial news because that’s what everyone else is seeing.

The difference, though, is that we always attempt to delve into what’s beneath the headlines.

An article published by Bloomberg notes that Wall Street investors are beginning to snap up cheaper single-family properties they had formerly ignored.

After focusing on a particular niche … “safer” luxury-class homes and apartments … Wall Street is now lowering expectations.

Realize that what Wall Street investors are essentially doing is speculation.

They’re trying to “buy low, sell high” without investing the time and effort to research their product and control outcomes the way real estate investors can do.

But Wall Street’s foray into single-family homes affects YOU … because sourcing inventory is harder when there are more hands in the game.

It is possible to get in front of Wall Street investors … in fact, Wall Street by nature is essentially following in the steps of smart real estate investors.

But now you know what the big players are doing … and you can think about where you can step in before the market becomes saturated.

All it takes to spot the right clues is a bit of attention.

How does the tech industry affect investors?

The retail apocalypse has caused a huge shift in the industrial and office space. Products are being sold online … instead of in buildings.

But the industry behind this shift can bring boons to real estate investors.

According to the National Real Estate Investor, tech firms continue to seek out new markets for expansion.

Expanding tech companies bring huge job numbers wherever they go … and with jobs comes a need for housing.

Other markets, like office and retail space, are also impacted directly and indirectly with population and industry shifts.

To get ahead of the game, look at what factors make a market appealing to tech CEOs. A great example is Amazon’s list of market criteria, although each company will seek out different qualities.

A tech hub creates critical mass. Tech companies not only create tech jobs, but attract and are attracted to various other industries, like airlines and shipping companies.

As you pay attention and understand where businesses are growing, your ability to align yourself strategically with market shifts and new hot spots will improve dramatically.

The headlines in this episode of Clues In The News bring both challenges and opportunities. Now it’s your turn … get out there, do some research, and start reading between the lines! It’s the only way to get ahead of the game.


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Going from Single to Multi-Family Investing

If the first property you bought as a real estate investor was a single-family home, you’re not alone.

This property type is a popular first choice for many … maybe even most … real estate investors.

But eventually, you’ll want to take your investing to the next level. If you’re at that point, this episode of The Real Estate Guys™ show is for you!

We’ll be chatting with our special guest about how investors can get started with multi-family properties … from duplexes to fourplexes.

Listen in! You’ll hear from:

  • Your next-level host, Robert Helms
  • His level-one co-host, Russell Gray
  • Consultant at Fourplex Investment Group, Steve Olson

Listen



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From house-flipper to investor

A bit about our guest … Steve Olson got his start in real estate at the tail end of his college career, when he flipped his first house.

He’s now an experienced investor who works to help other investors add value to multifamily investments.

We asked him for his thoughts on flipping now that he’s moved on.

“It’s not a bad thing to do,” he says, although he acknowledges flipping is not really real estate investing because you have to trade time for dollars.

“You have to know what you’re getting into,” he says. For many investors, flipping can be a great way to generate capital, but it’s not always sustainable.

Steve would recommend that new investors talk to someone who’s flipped houses before they consider that option seriously.

Taking the leap to multi-family properties

If you’ve started out in single-family housing … or even if you haven’t … multi-family properties are an excellent next step.

Steve specifically recommends two-, three-, and four-family apartments.

Why stop at fourplexes? For a good reason … Fannie Mae has loan options for investors that stop at four-family apartments.

These slightly bigger investments are the perfect next step up. And they allow you to fully maximize a Fannie Mae mortgage.

They also provide a more sustainable income source. Think about it … single-family properties are either 100 percent occupied or completely vacant.

But with a fourplex, even if you have one vacancy, you have a 75 percent occupancy rate.

There’s one problem with multi-family properties, though … and that’s demand. Because demand in the housing market is high right now, even for properties bought primarily by investors, cap rates are being pushed up.

Some investors resort to buying properties in bottom-of-the-barrel neighborhoods … but that’s a risky bet.

A return for a low-priced property might look great on paper, but a low return that actually happens is far better than a high return on paper that never happens.

Tenant quality is worth it for the peace of mind.

So how do investors find great properties … that aren’t in C-class neighborhoods? Steve has two options for investors.

Find lower cap rates with a value add

Cap-rate compression is driving prices up … but rents aren’t rising. Steve recommends that investors navigate today’s market by finding value-add opportunities.

Finding a respectable cap rate takes some maneuvering, he says.

He names two options:

  1. Buy a run-down apartment for a low price and add value after purchase.
  2. Buy land pre-construction and then add value by building new apartments.

With the Fourplex Investment Group (FIG), Steve helps investors navigate the second option.

He recruits investors before properties are even built—a win for investors, who can get a better cap rate, and for developers, who get risk removed from their plate.

So how do investments with FIG work?

  • FIG operates in four markets: Salt Lake City, Houston, Boise, and Phoenix. They are cautiously investigating new markets as well.
  • New projects start with a tract of land and a developer. Then FIG puts together a pro forma and releases the new project to investors four to six months before the build date.
  • Investors put down a deposit to reserve their spot, and FIG sets them up with construction financing.
  • Fourplexes (as well as some three-plexes and duplexes) are built in groups. Construction usually takes about 12 months. Investors get two to four brand-new townhomes … and one tax ID.
  • The average fourplex runs from 650k to 800k, depending on the market. Investors put 25 percent down and refinance when construction is complete.
  • FIG requires investors to use an in-house property manager, at least for the first two years of their investment. This provides stability and maintains the integrity of rents.
  • FIG sets up an HOA to preserve the appearance … and value … of the townhouse-style properties. Exterior maintenance of the properties is included.

“The fourplex model does well when the market isn’t doing well,” says Steve … and that’s the ultimate measure of whether your investment is a good choice.

Steve shared lots of details about how investors can get started in multi-family properties with FIG … but if you’re interested in more information about how YOU can make the jump to multi-family properties, please click here to request a report he compiled especially for listeners of The Real Estate Guys™ show.

Words of wisdom

We asked Steve what he wished new investors knew going in to a multi-family deal. He gave us a few words of wisdom:

  • “The pro forma is only as good as the neighborhood.”
  • “You’re not buying treasury bonds.” Steve says nothing … including a return … is guaranteed.
  • “When something goes wrong, that IS normal.” Investors have to accept there will be bumps in the road and …
  • View real estate investments through a long lens. A few months are not indicative of a long-term trend. Investors should be patient, Steve says.

We hope you gleaned some new perspectives from our conversation with Steve. We certainly did!

We believe in education for effective action … which is why we encourage you to seek out many different perspectives and relate them back to your personal investment philosophy.

The more ideas and perspectives you’re surrounded by, the more likely it is you’ll hit on something that perfectly aligns with your own goals as an investor.

So keep on listening!


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Amazon’s primed to ignite a real estate market …

You’ve probably heard Amazon has been shopping for a second home.

In typical corporate fashion, Amazon put out an RFP (Request for Proposal) and many North American cities have been falling all over themselves hoping to win the big prize.

And who can blame them?

After all, Amazon is projecting FIFTY-THOUSAND jobs … with an average annual salary of $100,000 … which is $5 BILLION per YEAR … PLUS another $5 BILLION in capital investment.

That’s a LOT of new economic activity to cram into one metro.

Think about it.  Fifty-thousand jobs is enough for every single man, woman, and child in the cities of Cerritos, CA; Harrisburg, PA; or Galveston TX.

Of course, none of those cities are in the running because they’re too tiny.  But the potential impact on whatever metro wins is substantial.

Amazon says they aren’t going to announce until 2018, so we’ll have to wait and see where they end up … and what kind of incentives they get out of the deal.

A quick perusal of the RFP outlines what Amazon is looking for.

Here are some highlights about what Amazon wants in a market …

  • A metro with more than 1 million people
  • A stable and business-friendly environment
  • Urban or suburban locations attractive to technical talent
  • An international airport within 45 minutes with direct flights to key cities
  • Close to freeways
  • High capacity connectivity (fiber optic and cellular)
  • Access to large, educated labor force
  • Attractive community and quality of life for employees

Here’s what Amazon wants in a deal …

  • Access to mass transit to the site
  • “Scale and creativity” in real estate options (it’ll be interesting to see what this looks like)

There’s more, but these are the biggies.

Of course, a business doesn’t have to be Amazon to want these things.  They just have enough clout to make a public spectacle of it.

Meanwhile, there are some things to think about as you watch this unfold.

Primary jobs create secondary and tertiary jobs.

Amazon boasts it’s “been a catalyst for development in downtown Seattle with an abundance of restaurants, services, coffee shops …”.

So it’s not just 50,000 Amazon jobs at stake … it’s billions in local commerce as Amazon’s employees spend big chunks of their salaries in the local community and create lots of non-Amazon jobs.

Amazon claims every dollar they invested in Seattle generates an additional $1.40 for the city’s overall economy.

So on a $5 billion investment, that’s ANOTHER $2 billion in economic juice for the winning geography.

And while local landlords may not rent directly to many of Amazon’s $100,000-per-year workers … Amazon employees’ spending will create lots of lower paying jobs for potential tenants.

It’s a safe bet Amazon’s presence will be good for landlords.

Other employers may follow the leader.

Most companies aren’t big enough to do the kind of research Amazon is doing.

We’re guessing more than a few employers looking to expand or relocate may just decide, “If it’s good enough for Amazon, it’s good enough for us.”

Some businesses may move to the area specifically to be near Amazon.  That’s even more primary, secondary and tertiary jobs.

Again, all very good for landlords.

Don’t end up paying for the farm the city gives away.

Sometimes in their zeal to notch political points or a marquee win, government officials can blow their budgets landing a big fish.

But the big fish … in this case Amazon … doesn’t pay the price.  They’re usually exempted through “incentives.”  Instead, the bill ends up with the locals.

We’re not saying that’s happening here.  We don’t know the terms of any deal.  But it’s something we’ll look at closely when the final deal’s announced.

It’s been reported San Antonio dropped out of the running because of concerns they “would not be highly competitive from a ‘real estate and incentives perspective.’”

San Antonio’s mayor is quoted as saying, “Blindly giving away the farm isn’t our style.”  It probably shouldn’t be yours either.

So pay attention to what the winner pledges … and whether it’s likely to affect property owners or small businesses.

If you’re not careful, you may end up moving in just in time to pick up your share of the tab for the incentives.

The real estate opportunity will develop slowly.

Even though all this is in the news, there’s no easy way for Wall Street hot money to front-run investors into Main Street real estate.  It’s too cumbersome.

So even though you’re watching the opportunity develop on the front page of mainstream financial news, you have a good chance to get in while the getting’s good.

As plans are announced, the impact on local housing, land, retail, and commercial space will become more apparent.

Once the market is announced, the FIRST thing to do is get boots-on-the-ground and build a team.  They’ll help you find the pockets of opportunity.

Our bet is Amazon will pick the best LONG-TERM deal.  They’ve been playing the long game for their entire existence, and Wall Street seems fine with it.

We’d be shocked if the final criteria for Amazon’s decision are primarily financial incentives, which are most important early.

We think the front runners are probably those cities with great infrastructure in terms of airport, freeways, mass transit, education, population, and connectivity.

Cities who don’t already have all this in place probably can’t make investments big enough fast enough to win … no matter how much tax savings and real estate they give away.

Another reason to think the winner will be a bigger metro is the burden of any incentives must be borne by the people and businesses already there.

Many hands make a light load.  If each voter’s slice of the burden is too big, the politicians and Amazon might have a big PR problem.

Amazon’s smart.  If they want big perks without upsetting the locals, they know they’ll need a bigger population to share the load.

But since you’ve read this far, we’ll go out on a limb and say if we had to place a bet (and we don’t), our money would be on Atlanta.

It’s huge, has great everything, and gives the new HQ proximity to both Latin America and Europe.

Of course, we could be dead wrong (and often are), but it’s fun to speculate.

Is Amazon a prime opportunity for real estate investors?

Time will tell, but it’s certainly a story worth watching.  The odds are good.

Any time this much economic activity is pointed at a single market, there’s certainly going to be a lot of opportunity.

The big question is when and where.  Stay tuned!

Until next time … good investing!


 More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.

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