Ep #447 – Jacob Blackett – Multifamily Serial Entrepreneur
From Fix & Flips to Over $200 Million in Multifamily Real Estate with Jacob Blackett
Holdfolio Featured in Best Real Estate Crowdfunding Sites
Entrepreneurs hope to build residential real estate empire through crowdfunding – IBJ
Jun 14, 2017
How and where can real estate investors network to find private capital? Private capital continues to be a crucial part of real estate and investing today. Private money can be far more desirable than conventional bank financing in many ways, and sometimes easier to obtain if you can make the right connections. So, where can you meet and network with potential private investors? Social Events Networking with those that have the capital to invest, doesn’t have to be limited to stuffy organized networking arenas. It’s really about getting out and putting yourself in the right place, at the right time. So, where might these individuals hang out near you? The golf club? Charity fundraisers? Antique and luxury car shows? Get out there, mingle, and have fun at the same time. Meetups Meetup.com has become an incredible hub for connecting with targeted groups of people. You can attend local meetups on just about any subject. Or host your own, and cultivate a group of private investors yourself. Local Real Estate Investor Association (REIA) Local real estate investment associations and clubs are an easy way to get right to meeting active investors. No matter where you are in the country you are bound to have a few of these types of networking gatherings each month. You can also expand to Realtor, mortgage broker, and Chamber of Commerce networking nights. Live Industry Events Live events can put you right in the middle of hundreds or thousands of potential private money lenders. Your city or region probably has regular mortgage and real estate industry tradeshows and home related expos. Then there are investor pitch nights and seminars. Or check out national events which focus on bringing together financiers, private investors, and entrepreneurs like the Midwest Multifamily Conference. Investors from across the nation will be in attendance at that event. Online Groups Joining groups online can connect you with active investors across the country too. This might include BiggerPockets, Angel List, and the Angel Capital Association. Or you can hone in right to platforms where investors are taking action, and invest alongside them, like you’ll find at Holdfolio. Summary Private capital is very valuable and needed today to fund deals. It is also plentiful. Fortunately, it doesn’t have to be that difficult to connect with investors and potential capital partners. No matter where you are, and whether you like meeting people in person, online, at professional networking events, or more casual affairs, you have a whole menu of choices. Always remember, it is wise to make sure and not lose your money partners capital or it will be difficult to obtain it a second time around. If you make people money they will invest and reinvest.
Jun 13, 2017
How can you find real estate comps in your area to determine the potential appraised value of a property? Knowing your property value is essential to making smart and profitable investment choices. Investors can get a better handle on this by knowing their ‘comps’. Those are comparable property sales. So, where do you find them? 3rd Party Online estimators Zillow is one of the most commonly used online home value tools. It is fast and easy to use. It is also one of the most flawed. In fact, Zillow has finally been hit with a major class action lawsuit over its faulty Zestimate tool. Online home value estimators can help to give a fast, rough estimate of value, but are frequently wrong. Zillow or other sourcing websites can be a good first step in qualifying a potential property, but should not be relied on when actually putting your money on the line. Realtors Real estate agents can be a great source of comparable information. They can save investors a lot of time, by pulling quality comps. Some brokers will provide ‘BPOs’ (Broker Price Opinion) for a few hundred dollars, or less. Agents will typically help by providing free CMAs (Comparative Market Analysis). Just note that they do this often in hopes of winning your business, and aren’t going to work for free forever. Their findings can also be biased. The MLS Another option is to go right to the Realtors’ MLS (Multiple Listing Service) yourself. This can provide a lot of data on listed, sold, expired, and pending real estate comps. If you don’t have a real estate license and MLS membership, you can also use consumer-facing versions like Realtor.com. Title Companies One of the most important things to remember in finding comps is that asking prices are almost irrelevant. Sellers and agents aggressively overprice properties for sale every day. What you want are actual sold comps. County public records can provide this data, and often online. Title companies will also have details on comps that have actually sold, and what concessions or special terms may be artificially influencing prices. They also know what transactions are in the pipeline to close soon. Appraisers Professional real estate appraisers are go-to if you really want a solid figure you can bank on. You won’t typically want to splurge on the cost of a full appraisal for a property unless you are 100% sure you are buying it. However, appraisers and other data providers can also provide drive-by appraisals or an Automated Valuation Model (AVM). AVM’s usually include tax assessor's, sales history of a property and how other properties in the area are stacking up. Drive By Whenever you can, you want to drive through the neighborhood for yourself. See what properties are for sale, and especially FSBOs (For Sale By Owner) which may not be on the MLS. This will also help in assessing rent comps as you can see how many properties are up for rent, and call on signs. Summary Remember it is best not to rely on just one source for figuring comparables. Pooling many of these sources together can assist you in coming up with the best comps for your properties.
Jun 12, 2017
Check out these six ways to increase the cash flow and returns from your rental property… Decrease Expenses To make more money you either have to increase your income, or decrease your expenses. Thankfully, there are a variety of ways to drive down costs. This can include renegotiating contracts with service providers like landscapers. It could be challenging your property tax bill, or separating services like internet. Utilities are one of the biggest areas of waste for landlords too. Can you pass those on and have tenants pay directly, install energy saving appliances and windows, or even convert to more energy efficient options like solar panels? Refinance Mortgage interest rates are still low, and debt service is one of the biggest drains on cash flow. This could be time to refinance or structure financing. Drive down those costs with a better loan, or bring in equity partners, which can provide an even more secure position at the same time. Increase Longevity of Tenants Vacancy and tenant turnover costs are two of the costs often overlooked by landlords. Seek long term tenants and work to retain them. That will eliminate losing money from vacancies, and avoid the cash out of pocket needed to cleanup and market for new tenants. Raise the Rents Landlords should be routinely raising the rents. There can be sizable opportunities to raise rent on the takeover of a new building. Tenants should expect annual increases as well. While there may be times to offer move-in specials, keeping the rent up can also help raise your asset’s value. Upsells Income doesn’t just have to come from the rent. Rental property owners can offer additional services that can generate income as well. This may include cable and internet service, laundry facilities or washer and dryer leasing and even parking spaces. Reduce Vacancy & Turn Times When you have tenants who are exiting, the shorter the time your rental property is empty, the higher your overall cash flow and returns. So, keep tuned into tenants’ plans when renewals are coming up, create systems for fast turnover of units. Consistently build and maintain a waiting list of qualified renters, so that you can have cash coming back in within hours of a tenant leaving. Summary Cash flow is so important to landlords. Your properties need to provide you income and not be a drain. Fortunately, there are many ways to increase income, and drive down expenses, to increase cash flow spreads, and elevate total returns. Use this as a checklist the next time you acquire a property, or need to improve your numbers.
Jun 5, 2017
There are a variety real estate investment niches to choose from. Which is the right one for you? One of the key questions to ask yourself when it comes to investing in real estate is, which type of property is best for your individual portfolio growth? There are many to choose from. Some investors diversify themselves across multiple niches. Others are adamant fans of just one type of property and strategy. Here are some of the pros and cons of each, so you can decide for yourself… Single Family Housing Single family housing is one of the most popular ways to invest in real estate today. It is easier to acquire and sometimes it is easier to purchase without the need for financing. It used to be primarily the domain of small individual investors, but has grown to be a top choice for some of the largest funds too. The Pros: Largest amount of inventory Largest number of resale buyers Easiest for individual investors to tackle by themselves Most understood type of property The Cons: Large amounts of competition Vacancy can hit hard if you only own a couple units Property management High cost of improvements per unit Multifamily Housing Multifamily housing includes quads, and any type of property that includes more than one unit. There can by a wide divide in size and cost. It can range from a small 15 unit single apartment building to a 1000 unit apartment complex and everything in between. The Pros: Large demand for rental housing Efficiency in property management Lower cost per unit Higher ROI on improvements made The Cons: Competition from capital-rich investors Requires daily property management May require more money or financing to buy and manage Smaller resale market than single family homes Commercial Real Estate Commercial real estate encompasses a variety of sub-sectors and niches including; office, retail, medical, hospitality, industrial, and mixed-use. The Pros: Control over asset value through repositioning Ability to obtain non-recourse financing Prestige and pride of ownership Benefits for personal use for your own business The Cons: Limited resale market High level of professional management required Least understood by most investors Most likely to be impacted by economic changes and industry disruption Summary When you stack up and compare real estate investment niches like this, each has its pros and cons. Each also has a variety of deeper niches possible. In single family, you can focus on individual homes or condos, and in specific areas. Multi Family properties can range from local rentals to specialized lofts or apartments for vacation rentals or hi-tech professionals. Commercial property could include warehouses, local strip malls, or boutique hotels. What is important is that investors understand the differences. By selecting the optimal type based on your current circumstances and goals, you have a greater opportunity for success. Later you can add in other niches and diversify. Finally, recognize that there are various strategies for engaging in each of these niches too. You could go it alone, find a partner, be a private lender, flip them, or hold them for long term cash flow and capital gains. What will you invest in?
Jun 1, 2017
Which is better; investing in real estate with debt or equity? Is it better to invest in properties with all cash, to use as much mortgage financing as you can, or to loan your money to investors with a debt investment? This is frequently a hotly debated question. On one side, you have the Dave Ramsey fans who shun virtually any type of lending or borrowing. Then you have the polar opposite real estate gurus recommending extreme leverage, and never using a dollar of your own. So, which strategy is best? How do they stack up against each other? Take a look at some of the pros and cons of equity vs. debt investing, and you decide… The Pros & Cons of Debt Investing Investing with debt can either mean using debt and borrowing to fund investments. Or it can mean using your capital to make loans and provide debt financing to others. Loaning your money for a return is a popular strategy with banks and venture capital firms, as well as affluent private lenders. On the upside, it can mean less management and overhead. You don’t own the property, so you normally don’t expect to pay taxes or insurance, or have to worry about repairs or tenants. That is unless the borrower stops paying. The downside is that you are only getting a percentage of the cash flow and return potential, and usually don’t get any share in rising equity. Others don’t have a ton of cash, and may be considering borrowing money to fund investments with debt. This can be through mortgages, lines of credit, loans from retirement accounts, or pooling together money from friends and family. There are great advantages in this, including lowering your risk in any one investment, while being able to diversify and grow your investments fast. It can also bring extra risk from lender fraud, and ending up underwater if property values take a temporary nose dive. While many would prefer not to borrow, it can seem like a necessity for many who need a way to get ahead, and who just can’t save fast enough. The Pros & Cons of Equity Investing Equity investing can have its advantages and disadvantages too. First and foremost, it has traditionally meant limiting the ability to invest and diversify. Most people can’t save $180,000 a year to buy an average home all cash to turn into a rental. Putting your entire nest egg into just one property can be risky. One major hurricane or earthquake, and you could have a nightmare situation on your hands. On the bright side, equity investing is often seen as less risky because you don’t owe the bank anything. You don’t have to worry about monthly mortgage payments, or banks faking foreclosure documents, or fraud like force placed insurance. You’ll also have more flexibility and liquidity if you ever need to sell. Plus, equity investors can enjoy superior net returns as they avoid all those bank and borrowing fees, extra closing costs, and interest. Summary As we can see; there are benefits of both types of investing. However, there are also hybrid options. For example; you could team up with your friends and family to invest equity into an opportunity. It’s not all your cash, but you don’t have to worry about a bank loan. Or you could partner up with peers like you and invest a small amount of cash into a small pool of rental properties. This again gives you equity advantages, but retaining the ability to break through the traditional limits and risks of going it all alone. How will you invest?
May 31, 2017
The sizzling hot summer rental market is kicking in. How can rental property owners be ready for it? Summer is traditionally the busiest time of the year in the real estate industry. The rental market can be flooded with renters who are motivated to secure new places before school starts again. This makes it a busy time for landlords, with a lot of additional competition. How can rental property owners get prepared and make the most of it? Market Research The first step is to do some fresh market research. Do your homework on the market. What is your competition offering? What deals are being offered to potential renters out there? What are market trends? Is it a landlord or tenants’ market? Visibility You can’t expect to capture your share of renter leads unless they can see you. Be ramping up advertising, and reaching out to your connections and referral network to be sure they know you have units available. Provide the Right Info In your ads and rental listings make sure you provide enough detail for prospective tenants to make the decision to take action. This can include photos, video, property information, leasing details, and more. At this time of the year, many are specifically concerned with school districts, and the ability to move in fast. Offer Attractive Deals Know what your competition is offering, so you can make sure you are offering competitive deals. Make sure the value is there. Know what is going to connect with tenants in terms of deposit, monthly rent, application process, and move-in money requirements. Infrastructure By this point, you should already have scaled up your infrastructure to handle the surge in business and communications. You’ve got to be able to respond to inquiries instantly and deliver consistently good service. Be sure to have a good team and systems in place to make this happen. Don’t Neglect Current Tenants All of the above is in addition to keeping your current tenants happy. With all the moving activity and the potential for attractive incentives being offered by other landlords and apartment owners, you want to take stock of your own inventory. Approach tenants early and find out if they plan to renew. Get those leases signed. Find out what you can do to keep good tenants. Or at least be aware of upcoming vacancies so that you can get marketing units early.
May 30, 2017
The best investments have traditionally been reserved only for accredited investors. How do you get ahead, and get into profitable real estate investments if you are a non-accredited investor? For far too long the most appealing investments have been closely guarded and preserved for only already wealthy investors. That has been one of the key factors in the rich getting richer, while the poor get poorer. This divide is often the line in the sand between accredited investors, and those who are not. Newer rules may have opened a small window of opportunity for regular individuals. How can you take advantage of that? Accredited Investor Status The Securities and Exchange Commission (SEC) lays out the rules for qualifying as an accredited investor. In addition to big institutional investors like banks and pension funds, this also applies to individuals. To qualify you generally need to have a net worth of at least $1M. Or you need to be earning $200,000 per year, or $300,000 between you and your spouse. This requirement has long been used to separate who can invest in what. The public argument is that these restrictions ‘protect’ consumers. Yet, they also prevent individuals from many investments, and control who can offer investments. The result has often been ensuring only the big old finance companies can control the flow of money, and only their best clients with the most money get access to the best deals. The JOBS Act & Crowdfunding Things began to change with the JOBS Act. This new law was introduced as a solution to breaking down the barriers and allowing more people to start businesses and offer opportunities while giving regular people to invest in a broader and better range of choices. Unfortunately, most crowdfunding platforms and companies with these opportunities have not actually begun accepting non-accredited investors. Why? Because the legal expenses can be costly often times. Yet, structuring an offering and opening the doors to non-accredited investors, can mean a lot more up-front work for the crowdfunding platform. It also can afford the opportunity to a broader base of investors. Options for Investing in Real Estate Fortunately, there are some options for individuals who want to get into real estate investing and are eager to work their way up to accredited investor status. These include: Direct investment in properties all by yourself REITs and funds Select real estate crowdfunding portals Without a lot of capital or experience of your own, and to avoid the high multiple layers of fees from old traditional brokers, it is normally best to leverage some expertise and partners to get best investments. This increases for upside potential and lowers your risk, by going into some form of private partnership or crowdfunding offer. Just make sure you understand what you are investing in, and ask lots of questions if you aren’t sure.
May 26, 2017
What exactly does passive income investing mean? How involved do you need to be to make passive real estate investing work? The Need & Desire for Passive Income Investments The need and desire for passive income is growing among investors. Individual investors, advisors, and economists have realized just how important it is to incorporate the cost of time and effort in an investment. Ongoing income or cash flow is a way to make the money you do have do the work. Some people win the lottery and then go broke by the very next year. What if they invested that money in working for them? There would be a different outcome. Passive income is vital for retirement. The truth is that we never know when we are going to have to retire. Some want to retire early. Others will be forced to quit work decades ahead of their expectations. Some are relying on social security or a pension to get them through their golden years and need more income than a low yield retirement account can offer. Many want to enjoy more financial surplus now. A surplus which can only be created by investing and generating passive income which is not based on how much work they can personally do. The Promise of ‘Passive Income’ in Real Estate While there are several options for generating passive income from real estate, buying and holding rental properties is easily the most common. Real estate is one of the most obvious choices of passive income investment because of the opportunity for cash flow. A good real estate investment from a reputable source can offer security, cash flow, and equity growth potential. For many real estate crowdfunding opportunities it is a low capital amount and ease of entry which really sets it apart, and makes it more accessible to the everyday investor. The Myth of Passive Income Real Estate Investing Sadly, despite all the hype and promises, most real estate isn’t really passive at all. Being a solo business owner, realtor or house flipper is not passive. Even the way most investors handle buy and hold rental properties is not really passive. For those who go out and find rentals, find tenants, and then hand the property off to a property manager they are still hands-on and in an overseeing role that takes time and effort. It is a lot of work and due diligence to find deals, negotiate and close them, manage property managers, and figure out the best times to exit. Multiply this by a whole portfolio of properties. It can be a full-time job. A good job, and often a well-paid one, but still a job, trading your hours and life for dollars. As Good as it Gets Fortunately, there are other alternatives to invest. One which can provide truly passive income. Turnkey real estate investing provides investors with end-to-end service from vetting and securing properties, leasing and daily management, bookkeeping, and identifying smart times to exit or restructure. Crowdfunding opportunities can take this even further by providing allowing you to invest smaller amounts of capital in multiple deals. Do your due diligence and factor in the time needed to manage your portfolio of real estate. You may find that your time is worth the effort to look into a more passive way to invest in real estate so you can sit back and enjoy the cash flow!
May 24, 2017