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Ep. 53 – Ken McElroy: Tips on Investing in Multi-Family Property

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ken-mcelroy-1Investing in multi-family property has its definite upsides. Investors who have considered multi-family investing know that it is an intimidating process: the stakes are much higher. Our guest this week has made calculated investments in multi-family properties…and it’s paid off big.

Ken McElroy may be the expert on investing in multi-family property. As founding partner of MC Companies, Ken oversees day-to-day operations of a nearly 10,000-unit portfolio of multi-family properties. With over 20 years experience in the field, Ken covers the key tips on investing in multi-family property.

  1. What to Know About Multi-Family
    1. Bigger is better
      1. Higher return rate than single-family
      2. Easier to finance
      3. Enables support staffing
      4. Does not require as many deals as single-family
    2. Requires long-term investing
      1. Unlike “flipping” single-family properties
    3. Familiar market landscape
      1. Single-family investors will recognize the similar processes in terms of due-diligence, lending and raising capital
    4. Multi-family debt market options
      1. Ken advises agency debt options for financing such as FANNIE MAE
        1. Tedious underwriting, but offers favorable rates and pricing
        2. Non-recourse
        3. Supplemental pieces available (not forced to sell existing properties before purchasing new ones)
        4. Not taxable
  2. Advice to Investors
    1. Due-diligence is key
      1. Track upcoming cities and neighborhoods
      2. Follow market trends and economic trends
      3. Tailor search for specific markets (e.g. retirees, single-family homeowners, renters)
    2. Real estate is cyclical
      1. Look to where the market is heading not where it is at present
    3. Good property management is a must for multi-family
      1. Use local, knowledgeable, responsive PM firms
    4. Finding deals
      1. Look for properties that are mismanaged
        1. Mismanaged properties may be holding unrealized “value-add potential”
      2. Stay focused on specific areas
        1. Do not expand to quickly or invest in remote locations
      3. National and local brokerage firms, in-house acquisition teams good resources for finding deals

More about Ken:

Ken is the author of The ABCs of Real Estate Investing as well as several other books covering all aspects of investing in multi-family property and property management.

He has also partnered with Robert Kiyosaki, author of Rich Dad Poor Dad and serves as an adviser for Rich Dad

To find out more about Ken or MC Companies, visit their website – www.mccompanies.com

To find out more about Ken’s books or other informational resources he offers check out his website – www.kenmcelroy.com

 

 

 

Ep. 52 – Real Estate Development is a Big Part of All Aboard Florida Rail Project

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john_guitar_final_3-24-2015For those who haven’t heard, All Aboard Florida is a high-speed rail project connecting Miami and Orlando via Fort Lauderdale and West Palm Beach. The project is slated for public use in 2017.

The project will have a major impact on transit in South Florida and Central Florida. The rail project will also have a profound effect on real estate development in the state. John Guitar, Senior V.P. of Business Development discusses All Aboard Florida’s interests in stations and transit-oriented real estate development.

  • 4 million sq. ft. rail transit
    • Miami
    • Orlando
    • Ft. Lauderdale
    • West Palm Beach
  • Utilizing privately owned space in F.E.C. “Flagler Corridor”
  • High-speed Transit
    • 79-110 mph
    • 125 mph (with no grade crossings)
  • Miami
    1. Retail
      1. 200k sq. ft. real estate development for Downtown Miami Station
      2. Servicing local and commuter traffic
    2. Office
      1. 2 Developments planned: 200k sq. ft. & 100k sq. ft.
      2. Accessible locations for commuters
  • Ft. Lauderdale / West Palm Beach
    • Several retail and residential plans in works for future development

To contact John with questions regarding All Aboard Florida’s real estate development and leasing opportunities or to find out more about the project visit the project website www.allaboardflorida.com

www.miamicentral.com

All Aboard Florida – Economic Story

Update***

Now referred to as Brightline

https://gobrightline.com/

 

Ep. 51 Joe Fairless: Transitioning From Single-Family to Multi-Family with Creative Equity

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jf-homepage2Joe Fairless bought his first single-family investment properties in his home state of Texas after leaving a successful, but unrewarding career in advertising. After finding that multi-family investing offered greater returns and less inventory, he began making the transition to multi-family investing.

His first deal was managed through unconventional measures. Lacking the standing as a seasoned multi-family investor, Joe incorporated non-traditional, creative equity solutions for obtaining capital for his first 168-unit apartment complex in Cincinnati, Ohio. Now founder of Fairless Investments, Joe controls millions of dollars in multi-family investment properties. Joe shares his experience in multi-family investing and provides tips for securing capital through creative equity methods.

  • Challenges for Single-Family Investors
    • Lack of credibility in multi-family markets
    • Traditional lending and private financing may be difficult to attain
  • Network Personal Contacts
    • This is a good practice for single-family investors to find financing by networking personal relationships for interest in multi-family investing
  • Strategic Networking
    • Network and affiliate with organizations that may not be lenders but have cash flow or may have eye towards investing
      • i.e. philanthropic organizations, community foundations, business groups
  • Establish Investment Base First
    • This does not mean a blind-fund or requirement of prior monetary investment
    • Form verbal contract with investors based on shared financial goals
    • Pursue investment opportunities that suit shared criteria
  • Structuring Deal With Investors
    • Preferred returns – investors get cash from deal before yourself
    • Acquisition fees
    • Performance hurdles
    • Post-sale incentives
  • Tips
    • Make yourself attractive to lenders and investors
    • Know the market, know the deal
    • Investing is starting a small business; structure so that you may sell that business. Don’t get tied down to an investment

Joe has his own daily podcast in which he interviews guests on a variety of real estate investment strategies

For more information on Joe, visit his website

You can also contact him by email at info@joefairless.com with questions or investment opportunities!

Joe also shares some helpful literature for single-family investors looking to make the transition:

Investing for Dummies – Eric Tyson

Commercial Real Estate Investing for Dummies – Peter Conti & Peter Harris

The Complete Guide to Buying and Selling Apartment Buildings - Steve Berges

 

Ep. 50 – Three Types of Creative Mortgages for Real Estate Investors

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Successful investing needs capital. For real estate investors, that often means mortgaging existing properties as a source of attaining capital. Traditional lending through banks and other financial institutions is often the method of acquiring hard-money loans. Sometimes though, the loan approval process may be too time-consuming or their lending practices may be too restrictive for investors.

Keyur Patel (top, left) and Naim Hamdar (top, right) of Synergistic Funding share three types of creative mortgages that are available to real estate investors as an alternative to traditional institutional lending.

  1. Commercial Mortgage-Backed Securities – CMBS Loans
    • Currently strong alternative loan product
    • Cyclical nature – this type of loan dissipates with market downturn
    • Undisclosed, non-restrictive cash-out feature
    • Assumable
    • Non-recourse
    • Quick execution – loan sold as packaged, traded security or bond
    • Competitive Interest Rates compared w/ institutional lending (< 8%)
  2. Bridge Financing
    • Often used as alternative loan for investors making balloon payments on existing mortgage and institution not offering re-financing options
    • Up to 65% loan-to-value
    • Typical terms – 1-3 yrs. w/ balloon
    • Interest rates between 8-12%
    • Quick-closing
    • Non-Recourse
    • Creative underwriting – “carve-outs” prevent loan being taken out with malicious intent
    • No minimum for financing, but $100 million ceiling
  3. Line of Credit
    • Designed for seasoned investors w/ multiple projects per year
    • Private lines of credit offered to investors
    • Available for entire term (1yr)
    • No annual fees if not used
    • Once used, 1% monthly fee applied + 9-month repayment term
    • Quick-closing
    • Relatively quick approval turnover (1-3 weeks)
      • Investors must have at least 2 successful closings per year
      • 1 yr. tax returns
      • 3 months bank statements

For more questions on these types of creative mortgages for real estate investing or to find out about other services Keyur and Naim offer:

Call Synergistic Funding – 813-333-5128

or email them at info@synergisticfunding.com

 

Ep. 49 Kevin Jursinski, Esq: Update on Dodd Frank Seller Financing Laws and Real Estate Lending on Single Family Properties

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Kevin-F.-Jursinski-B.C.SSince the Dodd-Frank Act was signed into law in 2010, the immense and labyrinthine series of stringent financial regulations has been a foreboding presence in real estate lending, especially in Florida. Instituted in response to the Great Recession, Dodd-Frank has posed a formidable threat to investors. With over 2000 pages of new rules and financial regulations, investors are unsure exactly what is exempt from Dodd-Frank stipulations.

Kevin Jursinski, B.C.S is FL Bar Board certified in real estate and construction law as well as business litigation. With over over 30 years of practice in Florida real estate law as well as personal experience in the Florida investment market, Kevin has the knowledge and insight to summarize the bill and define its role in real estate lending. Kevin also discusses how Dodd-Frank related litigation might be approached in court.

  • Dodd-Frank Act (2010)
    • Dense and punitive set of rules outlining financial regulation
  • Seller-Financing & 3rd Party-Financing Affected
  • Gray Areas Explained
    • Dodd-Frank does not apply to non-consumers (Investors) of residential property
    • Commercial properties do not apply
    • Dodd-Frank only affects primary residences (vacation homes exempt)
    • Purchase-money financing only affected by Dodd-Frank in owner-occupied sales
    • Residential home-builders are precluded under Dodd-Frank from becoming contractors of seller finanacing
    • Dodd-Frank does not apply retroactively – previous owner-occupied financing not affected
    • Dodd-Frank applies to origination of loan intent
  • Recent Dodd-Frank Changes
    • Owner-occupied residence lending/financing
      • 1-Sale exceptions – Sell one property per year w/ Dodd-Frank guidelines
      • 3-Sale exceptions – Sell up to three properties per year w/ Dodd-Frank guidelines
  • Government Oversight

To keep updated on changes to Dodd-Frank and its impact on real estate lending visit Kevin’s website, www.kfjlaw.com

Kevin’s article on  Update-as-to-the-Dodd-Frank-Act-Seller-Financing-Restrictions

Dodd Frank Seller Financing Rule Update

 

 

 

Ten Suggestions for Landlords and Managers of Residential Properties – Josh Diggs

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Headshot_JoshOkay. So you have made the leap and acquired a real estate investment asset to begin your portfolio. The next step, managing the property, is a recurring problem that arises for many investors. Real estate needs to be managed. A poorly managed property is a strain on any investor’s time and finances.

Josh Diggs, of Palm Capital Partners of Tampa, shares with us 10 tips for successful and effective property management. With years of experience in owning and managing investment real estate, Josh has crafted the essential shortlist to property management. His 10 tips cover all the points landlords and managers need to know about residential property management.

  1. Due diligence on tenants
    1. Background checks, credit checks
  2. Don’t make exceptions on tenant-screening policies
  3. Don’t buy used appliances
    1. Repair costs on used appliances total more than purchasing new
    2. It is better and more cost-effective to purchase new appliances w/ warranties
  4. Condition forms
    1. Have tenants complete and sign formal acknowledgments of unit conditions upon move-in
  5. Be cautious hiring sub-contractors
    1. Cheap ones may be appealing but service is unreliable/faulty
    2. Referrals and word-of-mouth are best vehicles for finding reliable sub-contractors
  6. Bed tenants mean bad communities
    1. If existing tenants are bad influence on community, remove them
  7. Complete regular property inspections
    1. A/C, smoke alarms, etc.
  8. Always deal with tenant directly
    1. Don’t allow friends or family of tenant to intervene in matters involving the property
  9. Maintain timely property maintenance
    1. Waiting on necessary replacements and repairs may have serious long-term consequences
  10. Always be professional
    1. Regardless of situation, never allow personal matters to affect business

Josh’s company Palm Capital Partners, LLC is always looking for new investment opportunities. They are mainly interested in B+C multi-family properties.

If you have any questions on investing in the Tampa area or have a property you wish to sell you can contact Palm Capital Partners at 888-805-9317

or you can contact Josh directly at 727-859-6510

How to Make $100k Investing in Mobile Home Parks

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449Mobile home parks seem to have earned an unjustly bad rap in the investment game. As a primarily affordable income based asset class, mobile home parks have received the reputation of being an investment with low returns and little value to an investor’s portfolio.

Mike Conlon, the “Mainstreet Millionaire” has some pretty convincing arguments that prove otherwise. After cutting his teeth in the Florida multi-family market, Mike bought his first 4-acre, 80 unit mobile home park in the mid-2000s. Now President of Affordable Communities Group (ACG) Mike’s company owns and manages 25 mobile home communities throughout the southeast. With each complex netting over $100k in returns, Mike shows that with due diligence and an emphasis on community, mobile home parks may present a sizable addition to any investors’ portfolio.

  • Mobile Home Park or Trailer Park?
    • Change the paradigm: affordable housing is not sub-standard
  • Property Class with Room to Grow
    • +50k parks in U.S.
    • No new developments in past 20 yrs.
  • Low Turnover on Units, but Stable Revenue Base
    • Permanent living situations for majority of residents
    • Costly and difficult to tow a mobile home, low incentive to leave
  • Own the Soil, Not the Unit
    • Easier and more cost-effective to lease space to mobile homeowners.
  • Recession-resistant… With Proper Management
    • Property class affected least by economic downturn
    • Demand for affordable housing increases during recessions
  • How to Earn +$100k
    • Know the area and the market
    • Stay within 30-40 min of metro areas
    • Look for high-occupancy complexes or look to improve occupancy
    • Build communities and increase resident involvement

You can get Mike’s best-selling book, Unconventional Wealth: The New Main $treet Millionaires on Amazon

Mike attributes his success in real estate to the book Rich Dad, Poor Dad, available on Amazon

Interested in a mentorship under Mike? Want to stay up-to-date with market news and information? Visit Mike’s website www.mainstreetmillionaire.com for these resources and more!

For more information on Mike’s mobile home parks visit acgmhc.com

Ep. 46 Steven McCraney – Talks Industrial Property and Why He is Bullish on the Central Florida Market

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Steven McCraney, President and CEO of McCraney Property Company, lives his life by the Helen Keller quote: “Life is either a daring adventure or nothing.”    The West Palm Beach developer is an avid outdoors-man and mountain climber, scaling notable peaks such as, Mt Elbrus in Russia, Mt Rainier in Washington and Mt Aconcagua in Argentina.  He has now turned his attention to the I-4 corridor and intends to build that area between Orlando and Tampa in to the next great industrial powerhouse.  He has multiple projects in various areas of the corridor, but most recently, he is teaming with Northwest Mutual on a $30 million development of 603,000 square feet of warehouse space in Davenport, near US 27 and I-4.

Steven  has developed, owned and managed over 3,000,000 industrial properties all over Florida. This episode, Steven discusses the merits of the industrial property market as well as his philosophy to approaching the market. This show is a must listen for stakeholders in Central Florida!

  • Industrial Property Market is New Retail
    • Rise of online-shopping leading to emphasis on warehouse/storage space
    • Companies expanding warehouse/distribution centers
  • Central Florida new ‘Hot Market’
    • I-4 undergoing expansion project
    • I-4 corridor (Tampa-Orlando-Space Coast) anticipating boom
    • Amazon, Walmart developing large-scale distribution centers along corridor
  • Other FL Markets
    • Daytona, Space Coast growing
    • South Florida good sellers’ market
    • Lakeland
  • Tips for Success
    • Treat clients as customers, not tenants
    • Strive for class “A” properties and class “A” clients
    • Anticipate change
    • Keep close working relationship with financiers (banks, lenders, investors)
    • Never be afraid to take the next step!

For more information on Steven’s company or to check out current projects visit his website.

 

 

Ep. 45 What Real Estate Investors Need to Know About the Family Office Market

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Brian_Prax_WebThe elusive family office market. Investors may have heard that it offers a deep pool for raising capital for deals, but for many it remains an enigma: a veritable El Dorado of investment capital, discussed in hushed tones in investment seminars and conferences throughout the country. What IS the family office market? How do you get involved in it?

This week, we have Brian Burke stop by. Brian is the co-founder and managing director of Praxis Capital, an investment firm that manages investments in a variety of markets. In addition to his extensive knowledge and experience in single and multi-family markets, Brian also has invaluable experience working in the family office market. He discusses what the family office market is exactly along with providing tips for working your way into the market.

  • Family Office Market
    • High net-worth families that need to invest
    • Usually managed by family member or RIA
    • Offers high investment opportunities, but difficult to get into
  • How to Get Into Family Office
    • Get Noticed – use word-of-mouth and alternative press (podcasts, radio shows) to get word out
    • Do not solicit to family office markets…You will be approached if there is an intereset
    • Attend family office conferences
    • Networking is key

For more information on Brian’s firm Praxis Capital or to contact his team, visit their website!

 

Ep. 44 Carl Hudson – Did You Know the Federal Reserve Monitors Florida’s Real Estate Market?

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hudsoncarlpThe Federal Reserve is institution many are aware of. As the central bank of the United States, it serves as the standard for banking as well as regulates and moderates national interest rates. What many don’t know is that the Federal Reserve also has many other responsibilities.

Carl D. Hudson, Ph.D. is the Director of the Center for Real Estate Analytics at the Federal Reserve Bank Atlanta. The Atlanta division of the Fed (1 of 12) oversees much of the Southeast U.S., including Florida. Dr. Hudson is responsible for identifying and analyzing systemic impacts in real estate, economy, financial institutions and consumers. This week he shares his insights on the post-recession rates of Florida’s real estate market and its relation to the rest of the nation.

  • Florida is real estate market economy
  • Immigration major factor in FL real estate market
    • 2000-2007 – >300k/ year in population growth
    • 2008-2009 – <100k/ year
  • Economy is improving slowly
    • FL employment growth rates – 3.4% annually, highest in Southeast U.S.
    • Only .2% growth from pre-recession peak
  • Interest Rates may see increase over time
    • Short-term rate increases likely
    • Indicative of returning economy
    • No dramatic increases
  • Multi-Family markets in FL
    • 40% year-after-year construction growth rates
    • Major Markets: Tampa, Ft. Lauderdale, Miami, Jacksonville, Orlando seeing positive trends in construction
  • Miami
    • Largely driven by foreign market
    • July 2012: 4200 units under construction; June 2015 20,000 units under construction
    • Strengthening of U.S. dollar may inhibit foreign investment
  • Yield rates
    • Lower rates than pre-recession, but functioning at rates equivalent to early 2000s
  • Changes to investing
    • Prior to recession – financing investment involved a deposit
    • Post-recession – “pay as you go” financing on the rise
    • Greater commitment to investment, not easy to walk away
  • Growth trends for Florida?
    • Panama Canal reopening could mean major impacts on East Coast port cities
    • In FL – Jacksonville, Tampa, Miami, Ft. Lauderdale

To find out more from Dr. Hudson’s department, visit The Federal Reserve Bank of Atlanta’s website and click the Center for Real Estate Analytics link

Click here to read the President of the Atlanta Federal Reserve, Dennis Lockhart‘s speech on the national economy

Stay informed with Dr. Hudson’s blog, Real Estate Research