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Material Prices Soar MEMBER PERKS PUT MORE MONEY IN INVESTORS’ POCKETS
MILLWORK UP OVER 7 %
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130% LUMBER UP
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PUBLISHER & CEO Eddie Wilson
EDITOR-IN-CHIEF Kelli White
SALES MANAGER Rodney Halford RHalford@ThinkRealty.com
FULFILLMENT COORDINATOR Blair Pierce
DESIGNER David Rodriguez
CONTRIBUTORS Sonia Booker Ellis Hammond Jeremy Kloter Bruce McNeilage Tori Martin
Bob Preston Damon Riehl Brian Snider Steve Streetman Shawn Tiberio Michele Van der Veen Ingo Winzer Michael Zuber
HEY! LET’S BE FRIENDS! GET SOCIAL. STAY CONNECTED.
Like, Follow & Share for the Latest Real Estate News, Trends and Insights from Think Realty
COVER DESIGN David Rodriguez
Are you following Think Realty on social media? Things move pretty fast in real estate. Don’t miss out on the latest trends, tips, insights and news from your trusted resource for all things real estate investing! Follow. Like. Love. Share. Comment. You can do it all with Think Realty’s social media channels. Join the conversations in Think Realty social communities and connect with like-minded members who range from first-time to seasoned investors. Check out all of our social media channels and connect with us - and other investors - today!
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FROM THE EDI TOR- IN-CHI EF
By Your Design
esign means more than pretty interiors
design features. In the cover story this month, we showcase our valued suppliers who partner with Think Realty to bring dis- counts to our members. This year, we have several new part-
and paint colors. To me, design is also how we plan our lives— how we choose to invest our money and our time. Design is planning and creating the life we want. And, as Think Realty readers know, real estate can be an adventurous, prosperous career choice that helps you design the life you desire. July marks our annual design issue when we bring you stories from acclaimed renovators like country music singer and real estate investor, Tori Martin. She takes us on the rehab journey of one of her noteworthy Airbnb properties in Georgia. See the transformation on page 66. And successful designer, Michele Van der Veen, whose entire family is in the real estate investing business, shares another of her fabulous flips in beautiful California Gold Country. See how she integrates history in a fast-selling modern fixer upper (page 70.) But, our July issue marks more than
ners and are excited for you to start saving money on paint, flooring, appliances and other materials and products needed for your investment properties! As always, we aim to include a variety of topics like networking, property manage- ment, marketing and more! With intention, Think Realty delivers content to help you grow, manage, and scale your real estate investing business while being inspired along the way to create the life you want. If you have a story idea to share, send me a pitch. After all, hearing your real estate stories and learning about your investing strategies, is what helps me put together this magazine each month. So, keep sharing, keep designing, keep invest- ing, and keep inspiring.
KELLI WHITE, EDITOR-IN-CHIEF
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INSIDE THIS ISSUE
Member perks put more money in investors’ pockets by Kelli White
MATERIAL PRICES SOAR
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THINK REALTY 8 News & Events
STRATEGY 58 Custom Furniture Printed for Your Home What can happen when technology and design meet by Steve Streetman 62 Building a Wholesale Business How to achieve balance between work and life by Brian Snider 64 Design Elements in Rental Homes Layout and interior design are crucial in the Build-to-Rent strategy by Bruce McNeilage DESIGN POINT 66 Turning a Nightmare Home into a Dream Home Focusing on the pros of a scary property sparks inspiration by Tori Martin 70 Connecting Past and Present Through Design Using history to achieve timeless, modern appeal by Michele Van der Veen
INVESTOR STORIES 10 Increase Your ROI with Architects and Designers Gaining an edge over competition in new construction and renovations by Jeremy Kloter
12 The Secret to Living Your Perfect Day How strategic relationships bring greater success by Ellis Hammond
13 Contributor Corner
Meet Michael Zuber
FUNDAMENTALS 24 Designing Your Thought Leadership Platform Rethinking real estate in terms of audience and content by Ellis Hammond
27 Navigating the Private Lending World What investors need to know about using other people’s money by Damon Riehl
MARKETS & TRENDS 73 Hit the Accelerator
Ten markets with a faster growth rate by Ingo Winzer 76 10 Best Practices for Relationship Management Laying the groundwork for the best customer experience by Bob Preston
30 Rewarding Good Tenants
Addressing overlooked assets in single-family rental investments by Michael Zuber
35 Investor Review
52 How to Design an Effective Online Marketing Campaign
MINDSET 82 Invest with Heart
Understanding the best digital strategies to boost business by Shawn Tiberio
How compassion can lead to better deals for all by Michele Van der Veen
56 Design a Life You Love Using Real Estate Making a difference while making a profit by Sonia Booker, a Think Realty Resident Expert
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NEWS & EVENTS
Top Trends for 2020 DESIGN POINT Real Estate for Humanity: Touching Lives with Every Deal FUNDAMENTALS
ETHICS UNDERPIN GROWTH FOR CRESTCORE REALTY Running withValues
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Call for Contributors!
Are you an expert in a certain niche of real estate investing who likes to write and are passionate about educating other investors? Then we want to hear from you! Think Realty is looking for more contributors to join our list of valued real estate professionals who want to produce quality articles that inspire, inform, educate and empower our readers. See your name in print and online! Your content will also be shared across our social media platform.
Email email@example.com to share your ideas!
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INVESTING STRATEGIES FOR DYNAMIC MARKETS SEP 18-19 BALTIMORE
Experience what the Think Realty Conference has to offer:
Network with top-tier real estate professionals at the Cocktail Reception. Meet 30+ exhibitors offering real estate investment tools, products and services. Attend sessions and specialty workshops on a variety of investment strategies. Access deal-making opportunities with the biggest names in the business.
Register at ThinkRealty.com/Baltimore.
Think sponsorship with Think Realty! Find out more at thinkrealty.com/sponsorship.
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Increase Your ROI with Architects and Designers
GAINING AN EDGE OVER YOUR COMPETITION WHEN DOING NEW CONSTRUCTION AND RENOVATIONS
by Jeremy Kloter
n one of the hottest real estate markets in the country, Tam-
pa, FL, my wife Gloria Kloter and I launched Glow Architects. With her background as an award-winning architect, being in the industry since 2004, and having a variety of expo- sure to different design styles, we were poised to take a new invest- ing angle in our community. But we’d heard it time and time again, “The market is competitive, deals are scarce, and profits are being squeezed. As investors how can we continue to compete?” I didn’t realize it at the time, but marrying an archi- tect turned into the perfect marriage of skills for my real estate invest- ment business. My background in business and operating a real estate brokerage with 50+ agents, a property manage- ment company that assists investors with single-home or multifamily buildings, and a 506b Reg D real estate investment fund, I had built a solid network of investors. The demand to do new construction in the residential space has been booming as investors have found the fix-and-flip market flooded with those who target the typical single-family flip. We have noticed a shift in savvy, well-capitalized investors target new-builds to keep money moving. Whether develop-
ing lots or tearing down an existing structure to rebuild, we see this strategy as a viable option. Not only are there fewer investors doing it, but as the housing inventory contin- ues to decrease through the resale market and with local builders, the private investor can make a solid return if the strategy is implemented correctly. We have also seen a shift in insti- tutional investors looking for new construction to buy and rent out, a
model not typically seen at scale before. There is also a lack of those willing to provide this product to the market and we have been able to offer services to investors utilizing the architecture license my wife has to get in on the action. There is also a high volume of activity around fix and flips, so as a design firm we are always looking for new ways to have more functional layouts with well thought out designs to help investors create a buzz
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around renovated properties coming to market, not only building the indi- vidual investor’s brand but offering a sought after, quality renovation that is targeted at likely demograph- ics. This may also include chang- ing a two-bedroom, one bathroom home into a three-bedroom, two- bath either through rearranging the layout or through an addition, often finding value where other investors are only considering a typical remod- el of the current setup. These same design skills can apply in the multifamily space whether it is changing the exterior facade of a building or altering ame- nities to compete with neighboring properties. The mindset behind how our design process works as investors plays a big role in how we offer a new style of architecture and interior design to those we work with. As an example, we have had discussions with a developer who has approval for 28 units nearby through a mixture of quadplexes and duplexes. They contacted me for property management once it is built, but as I reviewed the plans by their current architecture firm, I was able to recognize how the unit layouts could be more functional and advised them on the right unit mix of bedrooms and bathrooms and ways the property could feel more like a community. Investors should seek the skills of architects due to the license need- ed to accomplish certain strategies and their education differs wildly from engineers, contractors, and other consultants. Although, not all architects understand design intent, interior design, and the importance of an investor’s strategy, so ask around your local investor circles to see if any investors currently work with an architect. With the variety of asset classes and skills, ensure the
Living Room of the Cabrera House, Dominican Republic
Bedroom of the Cabrera House, Dominican Republic
lease faster, decreasing the vacan- cy turnover process and raising the likeliness of lease renewals, which improves the cashflow over time. •
architect you choose has experience in the type of projects you are look- ing to do. Finding the right power team to work with when it comes to archi- tects and interior designers can aid investors in making smarter deci- sions, saving construction costs, building a better product for the end user, and avoiding delays. If a prop- erty is better designed, it translates to a faster resale if it’s a fix and flip. If a unit has the right setup, it will
Jeremy Kloter, A Marine Corps Veteran turned Broker, was raised in the Tampa Bay Area. Jeremy is Co-Founder of Glow Architects, an award-winning
design firm. His other business ventures include being the Co-Founder in a real estate investment fund (506B, Reg. D), a real estate brokerage, and a property management company.
Pictured left to right: Robert Martinez, Jorge Abreu, Ellis Hammond
The Secret to Living Your Perfect Day
HOW STRATEGIC RELATIONSHIPS BRING GREATER SUCCESS
by Ellis Hammond
purchased over 6,000 multifamily units and raised mil- lions of dollars from investors. But what I learned after spending two days with them is that their success is replicable. Just a few conversations with them unlocked answers to questions I didn’t know and brought about new insights I didn’t even know to be looking for. This is the power of a strategic connection. After sharing my insights with them at this event, we discussed how we could take this same principal of “one connection” and give that to others. This inspired us to host our own “one connection” event later this year in Houston, Texas, for multifamily opera- tors across the country. This one-day mastermind event will provide the opportunity for 30 men and women to net- work with one another and more experienced investors like Robert, Jorge, and myself. I am grateful for Think Realty and the opportunity they provided me to “show up.” I hope this story will inspire you to schedule and budget time and money in your cal- endar this year to “show up!” Your perfect day is counting on it! • Ellis Hammond manages a private network of investors seeking passive investment opportunities in multifamily syndications across the United States. Ellis is passionate about the intersection of faith and capital and hosts a weekly podcast show, Kingdom REI, in order to educate and inspire other investors and entrepreneurs to see capital as a means for greater Kingdom influence. To learn how you can invest alongside Ellis and this community, visit EllisHammond.com.
Do you ever take time to imagine what your PERFECT daywould look like? The time you wake up, what you eat, who you spend time with, how many hours you work, the fun activities you would prioritize—imagine all the details of what your perfect day would look like. Ok, so why am I asking you to think about your perfect day? For many of us, that perfect day seems so far away. It seems unattainable. It would be so much easier if we just had a roadmap or a manual that showed or taught us how to get there. Unfortunately, life doesn’t come with a manual. How- ever, I have realized the next best thing to accelerate anyone’s path is strategic relationships. Recently, I attended the Think Realty Conference in Houston, Texas. I was asked to speak at this event, but the real reason I was excited to attend was the other great speakers I was sharing the stage with. As an early entrepreneur, there are still so many unan- swered questions I have about how to grow and scale my business and real estate portfolio. Having the chance to rub shoulders with those who have already accomplished what I want to accomplish, gets me that much closer to my perfect day! While there, I met Robert Martinez of Rockstar Capital and Jorge Abreu of Elevate Capital. Their success in the multifamily industry is inspiring. Collectively, they have
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The Contributor Corner
Meet Michael Zuber With more than two decades in the real estate investing industry, Michael Zuber has been sharing his single-family-rental expertise with Think Realty readers for the past year. We are grateful for his investor stories and strategies that offer insights for those traveling a similar REI path. Plus, we love that this author of One Rental at a Time is always on time with his articles! Here is why he continues saying “yes” every time we ask him to write.
Q: WHAT DO YOU ENJOYABOUTWRITING FOR THINK REALTY?
I enjoy writing for Think Realty because it offers a chance to give back to the wonderful community of real estate investors. For over 20 years I have been helped by so many wonderful people via articles, real estate meetups, and just general conversations. If my articles help only one person each month, then it is worth my time as I want to help as many people as I can going forward as so many helped me reach financial freedom. Lastly, Think Realty gives me the opportunity to think about different important topics as the business of being a real estate investor is ever-changing and I know Think Realty will stay ahead of the game as it gives back each and every month. • A:
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How to Develop a Strong Investor-Lender Relationship
A STRONG INVESTOR IS AS GOOD AS THEIR NETWORK
by Grace Soueidan, Temple View Capital
you can nurture a relationship that could pay off down the line. After all, who is going to know your portfolio inside-out as well as you do? BUILD TRUST Most – if not all – lenders are looking to develop personal rela- tionships with investors, so it really is a two-way street for keeping the lines of communication open. One way of developing the trust in your professional relationship is by being open about the bad as often as you are about the good. If unforeseen challenges come up in a project, it’s better to be upfront with your lender
ike in any other industry, a successful real estate investor
But how can an investor expect to grow together with their lender and see the fruits of their partnership reflected in their portfolio?
is only as good as their network of well-versed, experienced profession- als, and that begins with the rela- tionship they develop with their lend- er. Having a strong relationship with your lender that’s built on mutual understanding and trust can be vital to the success of your investment business. Not only should your lend- er understand your real estate goals, but they should also be a source of advice to help guide you toward that finish line. A strong, positive rapport is critical; after all, your lender pro- vides you with access to capital!
BABY STEPS Start small. If you’re confident that real estate investment is the next step you want to take in your profes- sional life, begin meeting with local lenders and see who you click with most. You have short-term and long- term goals, and you want to find a lender who understands both and can help get you from point A to point B. By partnering with a lender in the early stages of your investing career,
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about what the challenge may be and work toward putting a plan in place that works for both parties. This not only shows that you can be objective and pragmatic about your real estate business, but that you can also be trusted to not hide pertinent infor- mation that can change the trajec- tory of a project’s progress – or your loan paid back on time. MANAGE EXPECTATIONS This goes hand-in-hand with open communication. The more honest you are about your finances, your goals, and your long-term plans, the better chance you have of hitting it off with a lender who understands your vision and is willing to work with you to make it happen. This, in turn, helps manage both parties’ expectations. OFFER REFERRALS You probably know other investors who are looking for their own lender to fund an upcoming real estate project. If you are happy with your
One way of developing the trust in your professional relationship is by being open about the bad as often as you are about the good.
investor-lender relationship, the work the lender has put in, and your plans for your investment business, make some introductions. Nothing says ‘thank you’ more than bringing someone more potential business. If you are new to real estate invest- ing – or haven’t quite dipped your feet into it yet – now is the time to explore why it’s important to develop a rela- tionship with your lender. A relation- ship that can be hard won but easily lost, an investor-lender relationship is one that can make or break your success as a real estate investor. Doing your due diligence to find a reputable lender in the real estate industry is the first step to creating
a symbiotic relationship both parties can benefit from. If you are ready to discuss your lending needs, contact Temple View Capital today. •
Grace Soueidan is Chief Lending Officer at Temple View Capital. Temple View Capital is a national private portfolio lender that offers flexible financing for investors in residential real estate. Founded by entrepreneurs with more than 20 years of residential mortgage and real estate investment experience, Temple View has been at the forefront of innovative product development since its inception. Utilizing a common sense underwriting approach, deep commitment to customer service and a well-capitalized balance sheet, Temple View enables real estate investors, correspondent lenders and brokers nationwide to optimize financing efficiency on real estate investment projects and rental properties.
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Material Prices Soar MEMBER PERKS PUT MORE MONEY IN INVESTORS’ POCKETS
At one time or another this past year, these numbers reflect how much lumber prices have increased. Although, it’s hard to determine just how high lumber prices have climbed because the numbers seem to increase daily, and they drastically vary by source. (Which makes an article like this a bit challenging to write.) It also depends on if we’re talking retail prices or future cost indices, and softwood or hardwood lumber. Regardless of the percentage increase or the source, it’s safe to say lumber—and many other building materials—are more costly than ever. But even with material prices and construction costs as high as they are, savvy real estate investors can still make money on their renovations, flips, and even new-build projects. At the time of this writing, material costs included in new multifamily con- struction were up 30 percent over the past year, according to CoStar Advisory Services. That increase—not just in pric- es for lumber but for other commodities like fuel, copper, and steel—was the largest since 1988. The cost of softwood lumber, often used for framing, is now at a record, up over 83 percent from this time last year, according to CoStar.
What do the following percentages have in common? 50% 130% 323%
Look for this logo throughout Think Realty magazine to learn more about our national partners that can save you money!
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The Bureau of Labor Statistics puts the price of retail hardware up a whopping 31.4 percent and even cut stone like granite is up more than six percent. Plywood is up more than 19 percent. Millwork—a category that includes materials used in cabine- try, vanities, flooring, trim, molding, and wall paneling—is up over seven percent. You get the idea. Everything needed in home building and remodeling costs more than it ever has before. This is caused by simple economics—an increased demand and decreased supply. The reasons for that gap, however, are not as simple. Pair the pandemic and a lack of labor with increased demand and a hot housing market, and you get a supply-and-demand gap in building materials that, according to fortune.com, isn’t expected to be filled until early 2022, which means consumers will not see cost savings until then. According to the Thomas Index Report, “The recent sourcing surge surrounding lumber is really a case study of the market-wide effects of COVID-19 across the industrial sourcing landscape--limited supply coupled with soaring demand has led to a perfect storm of lumber avail- ability. This surge is being caused by three main factors: COVID-related supply chain disruptions and unpre- dictability, a spike in building materi- al demand driven by the resurgence of construction and infrastructure projects, and growth in consumer demand for lumber for use in home improvement and DIY projects during quarantine. As a result, lumber pric- es have gone up 130% since the start of the pandemic.” Luckily for Think Realty mem - bers, you can save money on your investment projects in other ways.
One way to be smarter about your REI deals, is through your business operations and management. Know- ing that sometimes it’s not what you make, it’s what you save that can put more profit in your portfolio, savvy real estate investors take advantage of any discount that could enhance their real estate deals. The Think Realty Supplier Pro- gram is one of many perks available to Think Realty members, and this program is one of the deals destined to save investors like you time and money. By partnering with compa- nies that have a nationwide footprint and that offer quality products or
services beneficial to real estate investors, Think Realty passes sav- ings on to its members. This year, we have added sev- eral new partners to this program ensuring Think Realty members can redeem even more savings from val- ued national brands. Read on to find out about these companies and what they offer that could help you do business more effectively, taking you down the path of higher profits. Only those who join Think Realty, including the FREE level of member - ship, are eligible to participate in the program. Visit thinkrealty.com and click on Discounts.
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The NewThink Realty Paint and Flooring Program Nationwide brands Benjamin Moore and PPG and flooring supplier Tarkett have partnered with Think Realty to provide its members—real estate investors like you—savings on quality supplies and services to help you keep up your investment properties while keeping more money in your bank account.
Benjamin Moore: Home Color Inspiration
Benjamin Moore paints have a reputation for quality, whether you’re painting inside or out. Although you can redeem discounts on both interior and exterior Benjamin Moore paints, the team at Benjamin Moore explains how you can choose the right exterior paint for your next fixer upper or remodeling project:
hen painting the exterior of your investment property and other outdoor features, you have
FINISH LINES Color is only one aspect of an exterior paint choice; sheen is another important factor. Low Lustre finish is a top choice for the main siding color—the low-reflective finish adds a slight gloss, hides surface imperfections, and cleans well. Semi-gloss paints add extra durability and clean up easily, making them a good choice for areas such as windowsills that bear the brunt of weather shifts. High-gloss finishes make color look richer but magnify surface imperfections. SELECT COLORWITH CONFIDENCE With over 3,500 paint colors to choose from, Benjamin Moore’s color selection is unparalleled— but can be overwhelming for many homeowners.
two important characteristics to keep in mind: how well it lasts and how good it looks. Benjamin Moore Aura® Exterior has you covered, with a line of dura - ble paints that resist the punishing effects of weath- er—and offer a lifetime limited warranty to prove it. THE RIGHT LIGHT Just like interior paint colors, exterior colors shift depending on how the light hits them. Out- doors, surrounding landscapes also play a role in how a paint color is perceived. Always “try on” your paint colors with a paint sam- ple, available at your local Benjamin Moore retail- er. Once you have applied color samples, observe the color during different times of the day.
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The good news is that we offer a wide range of tools and resources designed to help select color. You can differentiate yourself and your prop- erties by matching wallpaper, rugs, tear sheets and more with Benjamin Moore colors using our ColorReader device and the Benjamin Moore Color Portfolio™ app. The lightweight and profession- al-grade ColorReader and ColorRead- er Pro devices match any color to the Benjamin Moore paint color equiva- lent—with over 90% accuracy. While both pair with the Benjamin Moore Color Portfolio® app via Bluetooth®, the ColorReader Pro can also be used independently from the app.
With the BenjaminMoore Color Portfolio® App you can:
Use the photo and video visualizers from your phone to “try on” colors in a room. Quickly find Benjamin Moore paint colors that match the colors your clients love. Use on a larger format tablet view to spur faster paint color decisions. Easily access Benjamin Moore fan decks: Color Pre - view®, Benjamin Moore Classics®, Affinity®, Histori - cal Collection, Off-Whites and the Designer Classics. Save and store paint colors for easy future reference.
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PPG: Color Expertise andAdvice If you are a painting contractor, new home builder, or real estate investor working on your first (or 50th) flip, you can save money with PPG paints. And you can save time by simply submitting your order and managing your account online. From product information at your fingertips to pro painting tips, the company has made it easy for you to find the right paint for your next project with their variety of professional products and support for professional contractors. Home construction projects require very specific coatings expertise. Touchup ability, batch-to-batch product consistency, and world-class color support are requirements for a successful paint partnership. Explore why the PPG Paints team has the resources and know- how to streamline the process for you and deliver your vision.
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MORE COVERAGE, MORE SAVINGS PPG’s high-performance paints allow you to get more out of every project because more coverage equals more savings, and our color tools are available to give you everything you need to effortlessly manage color on the job.
PPGTIMELESS ® offers one-coat coverage in a premium paint and primer Break-Through! ® is ideal for doors, windows, cabinets, shelving, and trim Speedhide ® Interior Latex is formulated to meet your performance requirements
PROFESSIONAL COLOR TOOLS &ADVICE As a business owner, we know that time is your greatest asset, and having account information readily available is critical. PPG’s e-Account professional service provides a detailed, online account overview, as well as a convenient payment tool that features:every project because more coverage equals more savings, and our color tools are available to give you everything you need to effortlessly manage color on the job.
Invoice search functionality, complete with capability to download multiple invoices and export invoices and data in either Excel or PDF formats; Online bill pay by credit card or checking account; Detailed, up-to-date account balance and pay- ment information, including ability to view histor- ic payments and credits applied to your account. In-depth, comprehensive and customized equipment and product analysis to streamline your operation Unsurpassed color tools and expertise, including custom color cards and professional color consultants ready to assist Detailed written specifications and warranties tailored to each product
FACTORY-BUILT HOUSING SOLUTIONS
For decades, PPG has been partnering with some of the biggest names in the Factory-Built Housing Industry. We understand the processes and practices of your business and have worked diligently to provide you with the resources you need to manufacture the highest-quality, most cost-effective products in the industry.
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Tarkett: Durable Flooring Solutions Tarkett creates people-friendly flooring solutions for any property. In your investment properties or your own home(s), you know how important quality flooring is. And with industry trends changing rapidly, there are so many new products to freshen floors and make them last. Gone are the days of replacing carpet with every tenant! Read on to learn about what Tarkett offers renovators, builders, homeowners, and investors:
Our slip-resistant and static control products raise levels of building safety Tarkett solutions offer outstanding cleaning and mainte- nance properties, thanks to unique surface treatments The low VOC emissions of our products contribute to better indoor air quality We continually look for new ways to increase the content of recycled materials in our flooring solutions and to recycle more We also design our products for the lowest possible use of water, detergents, and energy for cleaning, thus reducing their environmental footprint.
arkett’s leadership is based on one of the broadest product offerings in the
industry as well as on its global and region- al rankings in all the major types of floor coverings (excluding ceramics) and surface segments. We supply vinyl, laminate, wood, carpet rolls and tiles, linoleum, artificial grass and tracks—this broad scope enables us to recommend to each customer the perfectly adapted product as part of a fully integrated flooring solution.
Save with Exclusive Members-Only Access to GE Appliances
The GE Appliances Store is an exclusive, online shopping site where Think Realty members can purchase high-quality appliances direct from GE Appliances at discount member prices. Full service, in-home delivery available to most properties! You will gain access to members-only savings of up to 25% off MSRP every day on the latest in high-quality appliances for your investment properties. Shop your favorite GE®, GE Profile™ Series, Café, HotPoint®, Haier, and Monogram® appliance brands in premium finishes and be the first to know about special offers and national rebates.
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Where will your network take you?
The top echelon of the real estate investment and private lending industries meet in one place: the Presidents’ Circle. Circle members build deep connections across the REI landscape, learn tomorrow’s trends from leaders driving the industries, and step into the spotlight via Think Realty and the American Association of Private Lenders’ powerful media outlets. Will you be there? aaplonline.com/presidents-circle
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Designing Your Thought Leadership Platform
RETHINKING REAL ESTATE IN TERMS OF AUDIENCE AND CONTENT
by Ellis Hammond
ave you ever thought of the internet as “digital real estate?” Have you considered people’s attention as “mental real estate?” Would you agree that as more content is being consumed by the average user, it becomes increasingly important for you to own other forms of “real estate?” As real estate investors, it is important to design the founda- tion for your own thought leader- ship platform and begin to attract and keep more of the “mental real estate” of your ideal clients. WHAT IS ATHOUGHT LEADERSHIP PLATFORM? From a talk show, a live event, or a YouTube channel, a thought lead - ership platform is any source that allows you to create and distribute content. It’s a stage that shows off your expertise and builds credibility with your audience through the dis- tribution and consumption of your content. So, first ask who is your audi - ence? Whom are you serving? Who your clients are determines what platform you will choose. If you serve Baby Boomers, Tiktok might not be a great suggestion. A pod- cast or a YouTube channel would be more relevant. H
Then, consider your audience’s problems to ascertain the type of content to create. Here are four questions to ask your clients that will help with content creation: 1 What is your biggest fear regarding your current situa- tion?
focused on high-level strategic activities like interviewing, writing, and speaking, and hire others to manage activities like editing and distributing. If you aren’t sure where to begin posting your content, start with Youtube as it is the second-largest search engine on the internet, only behind its parent company, Google. Stay consistent. The most diffi - cult barrier to overcome with any thought leadership platform is con- sistency. Make the commitment to create every week. Having your own thought leader- ship platform in our current media world is not up for negotiation or deliberation. No one makes buying decisions without the help of Goo- gle anymore. Strong, compelling, and lots of organic content will be the future blue checkmark of your company. •
2 What is your biggest frustration with this fear?
3 If you could wave a magic wand, what outcome do you really want out working with us?
4 What are your biggest aspira- tions in life right now?
In my experience, the easiest and most effective way to design your thought leadership platform is via a “talk show” format because it requires the least amount of plan- ning; it’s a Q & A format, which peo - ple like; and having guests join your show will bring in new audiences. Plus, you can create multiple pieces of content from one episode including mini clips, blogs, audio excerpts, and quote cards. Be the CEO of your thought leadership platform. Meaning, stay
Ellis Hammond manages a private network of investors seeking passive investment opportunities in multifamily syndications across the United States.
Ellis is passionate about the intersection of faith and capital and hosts a weekly podcast show, Kingdom REI, to educate and inspire other investors and entrepreneurs to see capital as a means for greater Kingdom influence. To learn how you can invest alongside Ellis and this community, visit EllisHammond.com.
24 | think realty magazine :: july 2021
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26 | think realty magazine :: july 2021
WHAT INVESTORS NEED TO KNOW ABOUT USING OTHER PEOPLE’S MONEY Navigating the Private LendingWorld
by Damon Riehl
n working with real estate investors, we have found that very few have unlimited capital with which
is a Rule of Thumb that many investors use: Purchase Price + Rehab Budget <= 70% of After Repair Value (ARV) Here are three keys to getting your largest private loan amount (aka the least amount of your money) in the transaction:
to buy properties and grow their portfolios. They build wealth using OPM (Other People’s Money.) This can come in the form of loans, equity, or JV partnerships, etc. This article will provide insights into the world of private lending and how to use these sources to build a sizeable portfolio of rentals or flip properties to generate current income. One key principle of lending is that Lenders want the borrower to have “skin in the game.” This comes in the form of cash in the deal called a down payment, which helps to ensure that if something goes wrong, the bor- rower has the proper level of incentive to stay engaged and work out any problems that arise. These problems could include cost overruns and other property issues undetected at the time of purchase. Additionally, inves- tors could have a period of vacancy that stresses their ability to continue to make mortgage payments. A down payment helps to ensure the owner continues to pay the mortgage obligation in fear of losing that investment. The key conflict to resolve is lenders want commitment in the form of down payment and investors want the least amount of funds tied up in any one property. You need to position yourself to make a lender comfortable with allowing you to commit the least amount of down pay- ment possible and get preferred lending terms. If investors purchase stabilized rent ready properties, they are generally required to provide a down payment of 20-25 percent of the purchase price. These funds are then stuck in that investment until the property appreciates or loan amortizes down to a level where equity is created. This could take years. Therefore, many of our clients are focused on “Value Add” properties. This minimizes capital outlay since lenders typically lend on the “As Repaired Value” or “After Repair Value” (ARV). For an experienced borrower, most can borrow between 85-100 percent of cost. (Purchase Price + Rehab costs). To ensure you minimize your capital in a property, here
1. Investing Experience 2. Good FICO Score 3. Ample Liquidity
INVESTING EXPERIENCE To get a maximum loan size, most lenders currently require experience in rehabbing similar size and priced properties or experience in owning rental properties. In the current private lending market, the key to getting the maximum loan size is being able to prove 3-5 completed projects and/or rental owned in the last 24-36 months. If you are unable to do that on your own, many lenders will allow you to partner with an experienced investor on the deal by adding them to your LLC and making them a bor - rower on the transaction. This partnership can help you get the higher loan amount and lower rates and fees to make the deal more profitable. FICO SCORE Most lenders require a satisfactory credit score to get the maximum loan amount. Many will begin reducing the loan amount if your score is below 680-700. It is worth your time to manage your credit report and increase it to those levels or higher. Our investors regularly experience situations where they have used credit cards to fund rehab projects, only to find out that their FICO score has declined by 60-100 points due to credit utilization. This is devastat- ing to many who planned to refinance the property into a long-term rental, only to find that they must leave more money in the property and the rates are much higher than they expected due to their much lower FICO score.
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Test #1: The 70% Rule
Purchase Price + Rehab Budget <= 70% of After Repair Value (ARV)
Cost: $70,000 + $30,000 = $100,000 ARV: 70% x $150,000 = $105,000
This property meets the 70% Rule as $105,000 is greater than $100,000.
LIQUIDITY Most lenders require a minimum level of liquid assets to approve a loan. Lender guidelines vary in this area, but a good rule of thumb is they typically want to see at least six months’ worth of loan payments, plus 10 percent of the rehab budget and an overall minimum liquidity of $25,000. This amount is over and above any down pay- ment and closing cost associated with the transaction. This also applies to situations where the lender is financ - ing 100 percent of the project cost. Now let’s look at a loan example where an investor can minimize his cash in a deal by following these principals.
Test #2: Experience
3 Rehabs in last 36 months and 2 Current Rentals = 5 Total Experience
The investor meets experience requirements for max loan amount of 90%-100% of cost.
Test #3: FICO Score
Property / Project Profile:
Purchase Price: Rehab Budget: After Repair Value:
$70,000 $30,000 $150,000
Lenders generally use the lowest FICO score of the partners with over 20% ownership in the entity. In our example, 700 FICO would be used for determining loan amount and rates. The investor meets experience requirements for max loan amount of 90%-100% of Cost.
Mid-FICO Score: 700
Test #4: Liquidity
(Two partners with 50% ownership each and FICO scores of 720 and 700 respectively.)
3 rehabs in the last 36 months and two current rentals = 5 Total Experience
$40,000 in Business Checking Account
Assume the private lender approves a loan of 90% of Cost and $5,000 in closing costs including lender points, fees, appraisal, and title charges. Additionally, they have a liquidity requirement of 6 months payments + $10% of rehab budget. The approved rate will be 9.00%.
$40,000 in Business Checking Account
28 | think realty magazine :: july 2021
Cost = $100,000 ($70,000 Purchase + $30,000 Rehab) Financing 90% of Cost = $90,000, Down Payment = $10,000 Assume a 9% Rate on the short-term rehab loan the monthly interest payment assumption = $90,000 loan x 9% Rate / 12 months = $675/month. 6 months payments = $4,050 10% of rehab budget = $3,000 Total Liquidity requirement = (Costs Brought to Closing) $10,000 down payment + ~$5,000 closing costs (Excess Liquidity) + $4,050 payments + $3,000 10% of budget (Total Required Liquidity) = $22,050 With $40,000 in the Business Checking Account, the investor passes this requirement.
Now let’s analyze the options for whether to flip (sell) this property for a quick profit or turn into a long-term rental.
Cash in the Deal Economics: Rehab Loan Flip Loan amount: $90,000 Down payment: $10,000 Closing costs: $5,000 Insurance: $1,000 Carry costs: $4,050 TOTAL: $20,050
Sale Price: $150,000 Loan Payoff: Selling Expenses:
$15,000 (Assuming 10% all-in)
Cost of Financing/Insurance:
Flip ROI = $34,950 / $20,050 = 174% BRRRR Loan: Converting to Rental Refinance Loan amount: 75% of ARV ($150,000) = $112,500 Closing costs: $5,000 Escrows: $1,000 Loan payoff: $90,000 (loan #1) Closing/carrying costs/down payment from Loan #1: $20,050 OVERALL CASH IN DEAL AFTER FULL BRRRR: ($3,550 or 2.3% of ARV Value) New PITIA = $805/month Estimated rents = $1,200/month Y1 COC (Cash-On-Cash) return (6 months of cashflow) - $2,370 net cashflow/ $3,550 cash in deal = 66% COC Y2 COC return (12 months cashflow) - $4740 NOI / $3,550 cash in deal = 134% In comparison, if you were to complete this transaction entirely with your own cash, your COC return would be ~12% ($12,400 NOI/100,000 cash input = 12.4% COC
Based on the analysis above, the inves- tor will make a good profit either way, flipping or holding. The lesson here is to build your wealth with OPM and it will take you farther and faster than you could have imagined. •
Damon A. Riehl, Founder and CEO, has 35+ Years of lending experience in a broad array of asset classes, including commercial and residential mortgage, home equity, consumer, small business, and construction lending. Additionally, he has extensive experience in the areas of lending business startups. He has held leadership roles with some of the largest banks and lenders in the world. Some of those include: Head of Commercial Lending for Ocwen Mortgage Servicing, Head of Unsecured Lending for Citibank NA, Global Mortgage Leader for GE Capital, Head of Construction Products at Fannie Mae. Damon has built six de novo lending platforms and is now using that knowledge to build and grow Investment Property Loan Exchange.
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