Ep. 141 Brian Bailey: A Federal Reserve Commercial Real Estate Expert’s Outlook on Florida

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As part of the Federal Reserve’s wide scope of responsibility and oversight, the eight regional branches are tasked with monitoring residential and commercial real estate markets; tracking trends and data in order to more accurately adjust to market fluctuations affecting the economy. These studies provide hard data for the Fed to make economic adjustments, but they can also be a great gauge for real estate investors. Any successful investor will tell you that the ability to forecast changes in the real estate cycle is vital. As much as knowing your market and asset class, an awareness of other economic factors is important for mitigating investment risk.

The Federal Reserve Bank of Atlanta serves as the central bank’s regional authority for the southeast. It tracks real estate markets for the region, including Florida and offers comparisons on a national scale. Our guest this week is a commercial real estate expert with the Fed’s Atlanta branch.

Florida commercial real estate outlookBrian Bailey is a Senior Technical Expert in the Supervision and Regulation Division of the Federal Reserve Bank of Atlanta. Specializing in commercial real estate, Brian tracks and analyzes emerging trends in the southeastern region and provides thought leadership on commercial real estate and guidance for the central bank.

Brian brings a diverse background in commercial real estate finance and acquisitions to the Fed. He has over 15 years of experience in commercial real estate finance, having managed financing for millions of square feet in real estate holdings for several large-scale equity and development firms. Brian received an MBA with concentrations in Real Estate and Finance from the University of Florida and has earned a CCIM designation.

You won’t want to miss this commercial real estate outlook on Florida!

 

 

 

Ep. 103 Reed Goossens: Talking Syndication of Multifamily Projects

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syndication of multifamily projectsLet’s face it, every real estate investor just starting out dreams of landing the huge deals. The question remains though: how to make it to the institutional level?

The answer comes with syndication. Syndication expands the opportunity to make larger deals by leveraging capital from a group of investors.

For singlefamily and small, residential multifamily, the first syndication deal can seem like a large step. There are a lot of moving pieces to keep track of in a syndicated deal that may seem complex to investors used to self-financing.

Reed Goossens knows the power in syndication.

A native Australian, Reed moved to the U.S. after educating himself in real estate investing. As a foreign investor, Reed saw the potential for earning cash-flow in U.S. real estate markets and set about acquiring properties.

Initially investing in small duplexes in tertiary markets outside of New York City, Reed had been using his own capital to finance deals.

He realized the need to scale his real estate investment goals and set about transitioning from residential multifamily to commercial multifamily through syndication.

Reed founded RSN Property Group and has been investing in commercial multifamily properties through syndication since 2011.

In addition to expanding his asset portfolio and investor base, Reed also hosts a podcast to educate foreign investors in the U.S. real estate market

Syndicating Investment Deals

  • SEC has strict rules for syndication under Regulation D
    • Rule 506 (b)  – allows for unlimited accredited investors (earn +$200k/yr. or personal worth of +$1 million); up to 35 unaccredited investors (earn under $200k/yr.)
  • Surround yourself with credible investors; find a mentor
  • Have pitch deck to educate potential investors on deal specifics
  • Private Placement Memorandum (PPM) – after sourcing investors, a PPM is needed
    • Drafted by syndication attorney
    • Outlines how deal is being syndicated under a regulation (e.g. Rule 506)
    • Tailored to individual investments
  • Syndication Contracts
    • Typically, 30 days for due diligence; 45 for larger properties
    • 15 days for financing and 15 days for closing
  • Preferred Returns
    • Limited investors get “x” percent of 1st earnings, decided in contract
    • Future returns split between limited partners and general partners (syndicators)

Resources

Reed and RSN Property Group are always on the lookout for value-add investment deals. If you think you have a potential deal, contact Reed at reed@rsnpropertygroup.com.

Reed also hosts a podcast that educates foreign investors on U.S. investment real estate markets- Investing in the U.S.: An Aussie’s Guide to U.S. Real Estate

Like many beginner investors, Reed learned about creating financial independence and the power of passive cash-flow through Robert Kiyosaki’s Rich Dad Poor Dad.

Ep. 100 Gavin Welch: Improve Your Quality of Life by Shortening the Time You Spend on Your Investment Properties

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Full-time real estate investors know more than anyone that there are only so many hours in the day. Finding time to actively land new investments can be hard when its necessary to manage other investment properties. Maximizing time is one of the most valuable tools a real estate investor can have. Shortening the time you spend on your investment properties can greatly improve your quality of life as a real estate investor.

investment propertiesGavin Welch, an entrepreneurial real estate investor, knows just how precious his time is. With seven properties in his portfolio and work commencing on an apartment development, Gavin has a lot on his plate. With a goal in place of acquiring 25 investment properties, Gavin simply cannot afford to spend time on everyday property management concerns for each of his properties. He has implemented a method that allows him to attend to his current investment properties while providing himself enough flexibility to focus on his investment goals.

Limiting Time Spent on Investment Properties

  • Landlording on Auto-PilotMike Butler
  • Google Voice
    • provides automated information for tenants and clients to call in for property info and maintenance requests
  • Limited property showings
    • Schedule property showings and open houses for set days and times cuts down on time spent visiting investment properties
  • Auto pay system for tenants
    • Tenants pay automatically when monthly bill is due. Landlords and property owners don’t need to spend time tracking down payments
  • Passive Marketing
    • Bandit signs circulate property availability
    • Youtube videos provide property details and photos
  • Property Uniformity
    • Using the same materials and paints on all properties greatly reduces time on maintenance and up-keep

Gavin is currently in the market for viable single family investment properties in the Lakeland, FL area. Suitable fix-and-flips or rental property offers may contact Gavin through his website by going to the Contact Us page. Listeners should also check out Gavin’s own podcast, The Real Estate Loop for more investing advice.

Sandra Adomatis: Energy and Sustainability Initiatives to Increase Your Bottom Line

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sustainabilityCommercial real estate investors and developers know the term: “Green”. In Florida, it seems that “green” is the phantom criteria for real estate: many have heard of it, few have seen it. The term brings to mind vague notions of sustainability and energy efficiency, but what exactly is it? What is the merit in “going green”? As an effort to shift toward sustainability becomes a rising trend in the nation, Florida continues to lag behind as commercial developers and investors grapple with the nebulous nature of sustainability and green construction.

Sandra Adomatis, SRA, and LEED green associate is an appraiser with a focus on green initiatives and sustainability in real estate. Based out of Punta Gorda, Florida, Sandra has over 25 years of experience in real estate appraisal in the state of Florida. Sandra is a green valuation expert for the Appraisal Institute. Through course development, seminars and literature, Sandra has been helping commercial real estate investors integrate sustainability and energy efficiency into their investments.

  • 6 Elements of a True Green Building
    • Site orientation
    • Water efficiency
      • Low-flow plumbing, greywater recycling, rain barrels/cisterns, energy star rated washing appliances
    • Energy efficiency
    • Environmentally-friendly materials
    • Clean air circulation
    • Operations & maintenance
  • Adapting Existing Structures
    • Lighting
    • Heating/cooling
    • Insulation
  • Energy Modeler/building scientist
    • Assess what existing structures can handle for energy and sustainability adaptations
    • Calcs-Plus (Florida)
  • Green building investment appeal
    • Low-interest, flexible financing exclusive to green buildings
    • Cost-saving on appliances and utilities
    • 2-10% sale premiums vs. traditional structures
  • Resources and Info

To find out more about sustainability options or for appraisal services, visit Susan’s website or email her at adomatis@hotmail.com

Ep. 94 Shawn Yesner: 10 Important Items You Will Want to Know About Commercial Deals and Contracts

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commercial real estate deals and contractsCommercial real estate investing is not the same thing as residential real estate investing. Just because both property types have four walls and a roof does not mean they have the same investment strategy. Commercial deals and contracts are subject to different regulations than residential properties. Residential real estate investors looking to invest in commercial real estate should be aware of the different facets of commercial deals and contracts.

Shawn Yesner, of Yesner Law Firm of Tampa, specializes in real estate law. After getting his start in real estate law representing lenders, Shawn began his own law firm in 2004 representing homeowners. Shawn has since expanded his firm to encompass all aspects of real estate law, representing property owners in a variety of legal processes. Shawn discusses some important points for investors to consider when completing commercial deals and contracts.

  • Contracts
    • Residential real estate uses one contract template – FARBAR (FL Assos. of Realtors + FL Bar Assos.)
    • Attorneys specialized in commercial real estate should draft commercial contracts
    • Only clauses that meet buyer/seller agreement should be introduced
  • Tenant Leases
    • Make sure tenants are current on lease payments
    • Track lease deposits
    • Keep leasing contracts in same format
  • Tax-Deferred Opportunities (1031 Exchange) 
    • Strict timelines and regulations to be aware of
    • Seek assistance from CPA or certified agent
    • Be able to prove constructive receipt of funds; don’t get stuck with tax liability
  • “As Is” Contracts
    • Seller should always disclose state of property
    • in FL, Johnson v Davis sets “as is” precedence: Seller must disclose anything material to purchase of property and/or anything that might not be found after a reasonable inspection
  • Assignments
    • Buyers may choose to assign ownership of property to LLC or other business name
    • Contracts should hold original buyers liable
  • Buy/Sell Authority
    • FL recently changed LLC laws
    • Sellers should be aware of who holds legal authority to make buying or selling descisions
    • Title companies can do bulk of research on this
  • Incomplete Agreements
    • A detailed contract should outline purchase agreements
    • Sellers should not leave any gray areas to argue incomplete agreements
  • Zoning
    • Make sure you know your property’s zoning authorizations
    • Zoning can be changed, but make sure your property can accommodate changes
  • Environmental Issues
    • May pose big concern for environmental properties
    • Owners may be responsible for environmental factors that occurred prior to purchase
    • Buyers should complete phase I assessments of properties for any red flags during due diligence process

To contact Shawn for any real estate law needs, visit his website!

Shawn also hosts a podcast covering many legal topics in real estate investing and ownership. Check out Yesner Law Podcast on iTunes, Stitcher or your favorite major podcast platform!

Ep. 88 Beshears & Associates: Update of the Multifamily and Self Storage Market in Florida

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e2bc79_37043315246c4693996f91e865cad488 e2bc79_e3001e806a764241a578a62d31aad77cReal estate investors in Florida know that the market has seen a steadily increasing return to normalcy since it bottomed out in 2010. Asset classes of all types have been undergoing a resurgence as the market continues to correct itself. With investing outpacing development though, investors are seeing access to viable properties tightening up. Investors need to become more creative when finding deals and stay ahead of new trends arising.

David Beshears, head appraiser and owner of Beshears & Associates, has been appraising properties in Florida for over 20 years and he is very knowledgeable about the self storage market. John Miller, senior appraiser and realtor for Beshears & Associates, specializes in multifamily asset classes, having completed over 200 multifamily appraisals since 2008. This episode, David and John discuss where Florida markets are at, particularly in the multifamily and self storage market.

Multifamily

  • 4% vacancy in Tampa area markets
  • Uptick in rental rates across sub-markets
  • High occupancy rates causing higher appreciation in Class B and C properties
  • Class A properties new builds at $2/sqf (Central Tampa Sub-market: Hyde Park, Westshore, Downtown Tampa, Davis Islands)
  • 3300 units entitled to construction; 2200 scheduled for 2016 completion
  • Class A super properties arising in suburban markets (Riverview)
    • Luxury trend in new developments (zero-entry pools, state-of-the-art amenities)
  • No new builds for Class B and C properties
  • Cap Rates (Tampa): Class A: 4.5-5.25%; Class B: 5.25-5.75%; Class C: 6.5-9%
  • Value-add opportunities still available with focus on interior of units

Self Storage

  • Traditionally lag behind multifamily cap rates by 150-200 basis points
  • Self storage market similar to multifamily market
  • Subject to overbuilding in 3rd tier markets
  • 12% of market owned by institutional investors
  • Value-add opportunity for private investors
    • Online/web presence
    • Upgrade security and lighting
  • Cap rates: Class A: 5-7%; Class B: 7-9%; Class C: 9% and up
  • Major markets in need of new development
    • Opportunity for developers if they can find land
    • 2-3 acres at $5-8/sqf is ideal

Beshears & Associates offers a newsletter providing an overview on a variety of asset classes in Florida, including the multifamily and self storage market. To check out their newsletter and to find out about the other services they offer, visit their website at www.beshears.net

Ep. 72 Santosh Govindaraju – Florida Developer Applies Wall Street Lessons to the Tampa Market

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5xa5OmeFor the average Florida real estate investor, Wall Street banking and investing practices may seem worlds away. However, one investor and developer in the state has managed to successfully fuse his expertise in Wall Street investing with the Florida real estate market.

Santosh Govindaraju is a Florida developer with an interesting history. Prior to finding success in Florida real estate markets, Santosh was immersed in the world of high-strategy investment banking on Wall Street. After moving to Florida, Santosh applied his investment banking expertise to Florida real estate with a focus on the Tampa market. Santosh and his firm, Convergent Capital Partners, have been providing equity and debt investment options in a variety of Florida commercial real estate for over 17 years. This episode, he discusses his transition to real estate investing and what’s next for the Tampa market.

  • Wall Street Lessons
    • “Reversion to the Mean” – markets and prices fluctuate, but they will always indicate a trend, or mean
    • Relative-value trading – With two similar asset classes, sell asset class sitting above the mean and buy the asset class sitting below the mean
  • Convergent Capital Partners
    • Santosh paired his understanding of financial side of investing with partner’s physical knowledge of real estate
    • Saw relatively stable markets in FL during late 1990s
    • Opportunistic commercial investing: all commercial asset classes except industrial; looking for properties with mixed-use potential
    • Private Equity Platform Fund-Operation: base of 10 investors; deal offered first to fund as whole, then to individual memebers
  • Tampa Market
    • Strong recent investment/development growth
    • Institutional capital competing for projects
    • New vision for Downtown Tampa
    • Harbor Island Project: “The Point” – Convergent Capital developing 115k sqf. property in Tampa harbor

For more information about Convergent Capital’s current projects or to contact Santosh, visit their website