Chicago: The Rise of Silicon Prairie MARKETS & TRENDS
Has the Topic of Technology Disrupted Real Estate? REALTYMATTERS
LUCAS HALDEMAN AND SMARTRENT ADDRESS PAIN POINTS IN THE RENTAL INDUSTRY Get Smart
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© 2019 Real Property Management.Each office is independently owned and operated.
INSIDE THIS ISSUE
THINK REALTY 8 News & Events
Updates from around the industry.
10 Think Realty Supplier: Sherwin-Williams Paint The 2020 Colormix Forecast, Continued. by Sue Wadden
INVESTOR STORIES 11 Presidents' Circle Featured Member: Greg Slaughter
12 A Different Path to Success
When you want different results, first change your behavior. by Tammy Phelps
ENGAGEMENT 21 Realty Matters: Technology Has the topic of technology disrupted real estate? by Brian Wojcik
BUSINESS FUNDAMENTALS 33 Sponsored Content: Investor Review 56 The Morals of Ancillary Fees
Quality service and products often require higher revenue. by Todd Ortscheid
68 Notes, Then and Now
How the technology age has impacted real estate note investing. by W.J. Mencarow
MARKETS & TRENDS 74 Chicago: The Rise of Silicon Prairie
A thriving market with room to grow. by Yardi Matrix
COVER FEATURE GET SMART LUCAS HALDEMAN and SmartRent address pain points in the rental industry. by Katie Bean :: photos by SmartRent
MINDSET 80 Just Say No!
Why declining is such an important skill. by Abhi Golhar
4 | think realty magazine :: february 2020
CEO of SmartRent, Lucas Haldeman
MARKETS & TRENDS
QUICK TO CLOSE
Investors have always leveraged technological evolution.
Lesser-known markets can provide hidden gems worth the investment.
Tips from an attorney to protect yourself — and your investment.
How promising technology can further transform real estate transactions.
thinkrealty . com | 5
PUBLISHER & CEO Eddie Wilson
EDITOR-IN-CHIEF Kelli White
SALES MANAGER Rodney Halford RHalford@ThinkRealty.com 816-398-4111 x86122
FULFILLMENT COORDINATOR Blair Pierce
ART DIRECTOR Emily Bowers
CONTRIBUTORS Katie Bean Clint Coons Abhi Golhar Yardi Matrix W.J. Mencarow Tom Olson Todd Ortscheid Tammy Phelps Steve Streetman
Sue Wadden Ingo Winzer Brian Wojcik
HEY! LET’S BE FRIENDS! GET SOCIAL. STAY CONNECTED.
COVER PHOTOGRAPHY SmartRent
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SUBSCRIPTIONS :: The annual subscription for Think Realty Magazine is $36.00 in the U.S. Order online at www.ThinkRealty.com or call 816-398-4085. Provide your full name, address and telephone number. DISCLAIMER :: Think Realty Magazine , its owners, contractors, distributors and their respective representatives do not provide tax, accounting, investment or legal advice and make no guarantee as to the effectiveness or success of any investment or tax strategies discussed herein. Please consult your own independent adviser as to any questions you have or decision you are contemplating. ABOUT THIS MAGAZINE :: ThinkRealtyMagazine isapublication ofAffinityRealEstateMediaLLC.Reproductionoruseofanyeditorial orgraphic,withoutpermission, isprohibited.Wearenotresponsible for thecontentofanypaidadvertisements.Forreprintrights; toob- tainadetailedstatementofourprivacypolicy;and forallsingle-copy requests,addresschangesandothersubscription inquiries:
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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6 | think realty magazine :: february 2020
FROM THE CEO
elcome to the second issue of Think Realty Magazine
In this issue, read about how Lucas Haldeman and his team at SmartRent are creating and using technology to enhance rental properties. And investor and technology maven, Steve Streetman, explores why, with all the technological advancements in the REI space, can it still take 30 days or more to close a typical transaction? We are working on some intriguing advancements of our own at Think Realty, so be sure to stay in touch to learn about upcoming news. One much-anticipated ven- ture is our Titan Talks set to launch soon. I am very excited about this project and what it will bring to the Think Realty audience! Want to find out more about what is going on in Real Estate Technology? Join us in Baltimore at the Think Realty Conference and Expo where we’ll have a technology panel featuring Gary Beasley of Roofstock as the moderator. I hope to see many of you there! •
in 2020! I hope the new decade is off to a great start for you and your real estate investments. In this edition, we tackle the double-edge sword of technology
and how it can alter the way we invest. Technology has always led the retail real estate side yet lagged on the investment side. It is time we pay attention and use technology to our advantage as investors. Entrepreneurs often want to build tech- nology to support what they are doing, but first they should look to see who has al- ready built something that is usable. Don’t take your eye off what you are good at. Attempting a technology build could cap- size your business, so stick to what works and if something exists that could help you improve, don’t spend time and money investing in what is already there — unless you have the means and know-how to build it better.
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Think Realty's Core Focus is to be the trusted source in the Real Estate Investment Industry by providing products and services focused on serving the Real Estate Investor.
NEWS & EVENTS
Think Realty Conference and Expo Returns to Baltimore EXPERIENCE FIRSTHAND WHAT THINK REALTY HAS TO OFFER.
M ore than 40 exhibitors will showcase various tools and services focused on helping you achieve your goals as a real estate entrepreneur. Attendees will also learn from keynote presenters, a local market panel, and Think Realty Resident Experts. Think Realty events are the best opportunity to invest in yourself and your business!
Brent Kesler The Money Multiplier Keynote Speaker
Demetrios Barnes SmartRent
Charles Sells PIP Group
Gary Beasley Roofstock
Tom Olson Good Success
Clint Coons Anderson Business Advisors Featured Speaker
Charlie Einsmann Clear Sky Financial
Jeff Tesch RCN Capital
Jason Engelman Freaky Fast Homebuyers Featured Speaker
Sam Jacknin Clear Sky Financial
Daniel Huertas Washington Capital Partners
8 | think realty magazine :: february 2020
WHY is it beneficial for any real estate investor to attend the Think Realty Baltimore event?
For a number of reasons! First, it's a great place to meet and connect with like-minded people. Real estate is all about contacts and networking and a great way to expand your network outside of your local market. Second, you never know who you will meet and have an opportunity to joint venture on a potential deal that you may not otherwise have been able to do. Third, the main speakers are fantastic and give you a broad stroke on what is happening in the real estate industry as a whole and not just what's hap- pening in your market. Real estate trends on a national level always trickle down at some point to local markets. Fourth, it's a great place to meet vendors who specialize in the real estate investment space that could help you in your business. LORRAINE BEATO Atlanta's Residences - PalmerHouse Properties
You’ll learn the answer to a rental housing provider’s most important question: Have I followed all of my local laws and are necessary safeguards in place to mit- igate risk when something eventually goes wrong? You’ll learn how to be your own advocate to maximize profit and proactively pre- vent financial losses. You’ll learn how to source author- itative compliance informa- tion, how to avoid the known landmines and pitfalls of the industry, and how to incorporate industry trends in your business. You’ll gain access to wisdom through a community of local expe- rienced experts, and you’ll learn how properly applied technology innovations can be a preemptive monitor, which provides peace of mind so you can rest as- sured the required standard of care is met. BRIANWOJCIK diyRealty
The Think Realty events are the premier real estate events of the year. You will find yourself motivated to change your life and live your dreams through real estate investing. The speak- ers, coaches, panels, and sessions are designed to help you be successful and expand your knowledge in the real estate field as well as help you succeed in your business. I never miss the Think Realty events be- cause I always leave reju- venated and ready to reach new heights! JASON ENGELMAN Freaky Fast Homebuyers
With the lineup of industry experts slated to speak at the Think Realty event in Baltimore, this is the perfect opportunity for both first-time and seasoned investors to gain a wealth of knowledge on how they can expand their businesses in 2020.
To learn more about upcoming Think Realty events and to buy tickets, visit ThinkRealty.com/ TR-Events.
JEFF TESCH RCN Capital
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BRING BALANCE INTO 2020 WITH THE SHERWIN-WILLIAMS COLORMIX FORECAST.
by Sue Wadden, director of color marketing at Sherwin-Williams
The use of color in home design is evolving as we enter a new decade. 2020 promises to be an empowering year of change, focused on colors that bring joy, serenity and clarity. Homeowners continue to move beyond how spaces look and toward how they make them feel. Sherwin-Williams 2020 Colormix Forecast identifies five inspirational palettes – Alive, Mantra, Play, Haven and Heart – that can help homeowners pave the way for wellness and self-nurturing in today’s new interiors. We showed two palettes last month and now here is a look at Heart:
Heart is a unique fusion of iconic modern design mixed with an intergenerational boho vibe. From silky neutral tones like Angora (SW 6036) to Dark Clove (SW 9183), these hues are a meditation in comfort and connection found in the everyday. Heart pairs well throughout the home with retro-inspired elements and warm, earthy finishes.
The unique tones and stories in the 2020 Colormix Forecast are meant to inspire future projects and help designers and homeowners alike bring exciting aesthetics into their spaces. •
Through the Think Realty Supplier Program, Think Realty partners with companies like Sherwin-Williams to bring discounts to Think Realty members. Learn more about savings available to Think Realty members at ThinkRealty.com/supplier-discounts. For more about Sherwin-Williams Colormix Forecast, visit swcolorforecast.com.
10 | think realty magazine :: february 2020
FeaturedMember: Greg Slaughter WAITING FOR A CAREER IN REAL ESTATE WAS WORTH IT FOR THIS PERSISTENT INVESTOR.
by Kelli White
ot many young high schoolers know what they want to do with
not a property, but a car stereo. “I was a teenager after all!” he said. The second thing he ever bought was a real estate seminar — the Rob- ert Allen Nothing Down Conference. “I was about 19. It was a lot of money for me then. Nothing down was new back then. I left thinking I would purchase a house with nothing down. But during my first attempt to do so, I was laughed out of the bank!”
Do's and Don'ts
their life after graduation. But Think Realty Presidents’ Circle member Greg Slaughter did. He knew he would have a career in real estate. What he didn’t know is how long he’d have to wait to make it happen. “My junior high school debate team got second in State, and I made it a personal goal to win se- nior year. I asked my parents
DON'T quit your job too soon.
DO know your WHY.
DON'T chase shiny objects and flip strategies too quickly .
to send me to a debate workshop to get a head
Slaughter searched FSBO’s and called on duplexes. “I negotiated a
start on next year’s topic, but they said ‘no’ due to afford- ability. We were
DO write down your vision and focus on what you want, not where you are.
deal over the phone, but it wasn’t a
not poor, but they wouldn’t pay for it. I remember it like it was yesterday, when they told me I couldn’t go, I got so upset and frustrated. I made the deci- sion right then that I’d never have to worry about money again.” That was 1983. Slaughter learned that 92 percent of all millionaires earned their wealth through real estate. “I just knew it was for me,” he said. He immediately got to work. But not in real estate. Not yet. “I put in my one and only applica- tion I’ve ever completed in my life. It was for McDonald’s. I got hired and started saving money.” The first thing he ever bought was
zero-down deal. I needed a small
down payment but had spent all I had at the conference. My friends were broke. My parents wouldn’t lend me
McDonald’s as a training consultant and began doing real estate full time. Slaughter
money. It was a fantastic deal, but I couldn’t get money. So, I dedicated everything to McDonald’s and even- tually ran my own restaurant.” It was 1986. He lived in Tucson hadn’t bought a real estate invest- ment property, but he did get his first rental. He converted his Las Vegas home into a rental when he moved to Phoenix and was finally in the real estate business. Three years later, Slaughter retired from and relocated to Las Vegas. It was 1999. Slaughter still
put off his dream for more than a decade, but he finally got started. Patience and perseverance paid off, and now Slaughter enjoys helping others who are finding their way in real estate. “There’s nothing greater than cre- ating moments and helping others find financial freedom,” he said. •
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A Different Path to Success WHEN YOU WANT DIFFERENT RESULTS, FIRST CHANGE YOUR BEHAVIOR.
by Tammy Phelps
Disrupt: “to drastically alter and interrupt the normal pattern” “to cause [someone/something] to be unable to continue the process”
t each Capital City REIA Meetup for nearly two years, I observed a young man who always sat in the chair nearest the exit, quietly amassing the vast real estate investing knowledge being shared. His name is Mark, and eventually, I learned his story. Mark is not unlike many who start adulthood sub- scribing to doing what our society dictates us to be: a productive member of society. Mark did exactly what he was raised to do: complete 12 years of school, attend university, and graduate with a degree. His parents were proud. He then landed a prestigious position for a large company and began his career. He contributed to a retirement ac- count and accrued yearly paid vacation. He exceeded every- one’s expectations and is accomplished by most standards. Mark married Ann and they have two kids. Mark and Ann spent demanding and exhausting hours in their respective management roles, which came with long, grinding commutes. They purchased a home following the prescribed formula for success, and so by all standards of society, they are living proof of the “American Dream.” After 15 years of this daily grind, Mark and Ann began to question their unfulfilled “American Dream.” The stark realization that they were simply technicians working overtime in the 9-5 rat race for someone else began to deteriorate their motivation. Something needed to change. They realized if they sacrificed 20-30 years of their life for Corporate America, continued to contribute to the company retirement accounts all while living their current lifestyle, they would still not have enough. Mark joked, “I call it society’s golden handcuffs.” Mark knew he needed to “disrupt” his mindset. But how? Then, during a Meetup in July 2017, I shared how to create wealth and freedom with small multi-unit acqui- sition, reposition, stabilization, and management and un- knowingly hit a nerve with Mark. I drastically altered the
axis of Mark’s world and so began the disruption of their seemingly perfect, socially correct “American Dream.” After the initial interview to see if they would be a good fit for our REIA’s “Inner Circle,” I shared that it would not be easy, but it was simple. We discussed what it meant to be coachable and open to change. We talked about how they would have to accept being com- fortable with being uncomfortable. We discussed there would be new tools, resources, and technology to learn and implement. We discussed that they had to:
NO. 1 BELIEVE in themselves! NO. 2 Have FAITH to know it’s possible! NO. 3 TRUST the process!
Today, Mark and his family are living life on their terms. The average timeframe before someone can quit their em- ployment is approximately 3-5 years. You must have cash- flow to replace not only your household income but benefits like health insurance, etc. Mark and Ann are getting close to terminating their respective management positions. They have acquired 17 units with possibly 10 additional units soon to be added to their portfolio. Their monthly cashflow is over $10,000 and they continue to build their power team. They continue to disrupt the market by profoundly impact- ing the lives of those they provide homes for, and they have realized what it means to build community! Mark decided to disrupt the status quo and is now living an extraordinary life on his terms, with purpose and intention. •
Tammy Phelps is known as "The Lady Boss of Real Estate." She is an educational speaker, coach, mentor, and founder of Capital City REIA, a Real Estate Investment Alliance in Maryland, D.C., and Virginia. The group's focus is on the personal growth and business development of
the real estate entrepreneur.
12 | think realty magazine :: february 2020
Lucas Haldeman and SmartRent address pain points in the rental industry GET SMART BY KATIE BEAN PHOTOS BY SMARTRENT Lucas Haldeman and SmartRent address pain points in the rental industry GET SMART
THEWAYWE INSULATE AGAINST BEING MADE OBSOLETE IS BY CONTINUING TO INNOVATE.”
LUCAS HALDEMAN FOUNDER & CEO, SMARTRENT
BY KATIE BEAN PHOTOS BY SMARTRENT
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LUCAS HALDEMAN started his career as a software developer at one of the first companies to put a database of apartments online. Today, he leads a cutting-edge PropTech firm, SmartRent, based in Scottsdale, Ariz. SmartRent is an enterprise home-automation company devel-
oping software and hardware that helps owners, property managers, and renters in multifamily commu- nities to better monitor and protect their assets, as well as create operational efficiencies. “It’s kind of funny when you wake up one day and think, my gosh, my whole life has been leading up to
this point,” he said. “I have spent my entire career embracing tech- nology but also in real estate, and it’s sort of a weird combination.” As a young web developer, Lucas Haldeman began his career at AllApartments.com, one of the first companies to put a database of apartment listings online. Listing
Top: SmartRent Resident Pre-Install meeting Bottom: SmartRent team members.
14 | think realty magazine :: february 2020
ON THE HORIZON
Lucas Haldeman, CEO of SmartRent, weighed in on a few trends he sees coming to multifamily living spaces.
‘ROLL UP STRATEGY’ One trend Haldeman sees is a “roll up strategy” of consolidating products into one company, rather than each “new whiz bang thing” existing on its own. The end result will be fewer vendors providing more functionality to owners, he said. COWORKING + LIVING As the gig economy changes how people work, Haldeman sees coworking becoming integrated with living spaces. For example, a developer might turn an unused building near multifamily living into a coworking space — keeping it within walking distance adds to the appeal of the living units. Another way property managers might integrate coworking is by adapting underutilized spaces within their complexes. Say a complex’s common area has comfy seating, WiFi and a TV, and it’s often empty. The space could be used for coworking during the day, allowing users to collaborate in the space and give presentations on the big screen — and, using SmartRent access controls, building managers would be able to control and monitor access to the space. GIG ECONOMY INFLUENCE The current model for property maintenance, Haldeman said, is to have a few people on staff to handle general problems and hire for large or specialized work. However, as platforms like SmartRent allow property managers to monitor and preemptively fix problems, it could be possible to outsource jobs as needed “versus just having more bodies on staff driving golf carts around.” INSURANCE The future of insuring multifamily properties could be on the verge of change, Haldeman predicted. New technology allows owners to better protect both residents and property. He said both startups and insurance industry incumbents will have “new, disruptive insurance technology coming down the pike.” POWER CONSUMPTION Haldeman noted that new battery technology is changing the way property owners see the grid. Some are beginning to consider integrating power storage, which could change the way they buy and use power in their buildings. “There are some innovative owners out there and innovative companies that are looking to build that into the base offering,” he said.
apartments introduced him to the multifamily industry. “I really fell in love with it,” he said. In fact, he left the tech scene to become a real estate investor. He owned apartments and self-stor- age, and he managed other peo- ple’s property. “That’s what really gave me the operations experience,” he said. “When you’re the head of leasing and the head of maintenance be- cause you’re the only guy on staff, you certainly get an appreciation for what people are doing every day at apartment communities.” Haldeman moved back into cor- porate roles as chief information and marketing officer for Beazer Pre-Owned Rental Homes before becoming chief technology and marketing officer at Colony Star- wood Homes, which rented sin- gle-family homes — 44,000 of them. Now, as CEO of SmartRent, he ended up with exactly the right mix of skills to bring SmartRent to a market in need of solutions. “As the CTO, the operations team looked to me and said, ‘We real- ly need these homes to be smart homes,’” he said. But at the time, (2014), no solu- tion fit the company’s needs. The platforms weren’t built for man- agers of many properties. One particular pain point was showing properties. In a sprawling city with single-family rentals throughout the metro, Haldeman said leasing consultants were at times driving an hour each way — or more — to show a home to potential renters. “There was no good company that really understood what we did as operators, that understood our business. They were approaching smart homes from the consumer side. … There was no good enter- prise control of smart homes.”
thinkrealty . com | 15
Honeywell Thermostat Pairing
Installing Yale 256 Lock
Pairing Leak Sensor
Haldeman and his team tried for a few years to test various products that were available or even cus- tomize off-the-shelf options. “We tried different solutions with- out any luck,” he said. “Myself and some of my key team got so frus- trated that we said, ‘This is our call- ing. This is our purpose. We have to go build this for the industry.’” So, in 2016, Haldeman and sev- eral colleagues struck out on their own to build a platform specifically for smart rental properties. Start- ing out with a team that had a long history of working together gave SmartRent a leg up, he said. “Some of these key guys, we’ve been working together, solving these problems for seven, eight, nine years now,” he said. “That’s great in a startup. … You really have a high level of confidence — you know what you’re getting. There’s a trust level that allows you to inno- vate quickly.” TSUNAMI OF ROI Haldeman and his team have built a platform that works for property managers of all stripes — single-family or multifamily, four-plexes to thousands of units, long-term leasing to Airbnb and VRBO rentals. The company is
On top of the cost savings, smart buildings also command higher rent. And, with access controls, SmartRent enables self-tours — prospective residents can view apartments at their convenience and apply online, which Haldeman said “removes friction from the pro- cess” and increases leasing velocity. By combining these smart features into one platform, it’s unsurprising that Haldeman says the feedback has been “overwhelmingly positive.” OPENING DOORS The company is by no means resting on its laurels. Last fall, SmartRent rolled out a new parking solution allowing property owners to monetize unused parking spaces. Using sensors and QR codes, guests can rent spots when they’re avail- able. Residents use a window tag that, when scanned, will note in the system that their space is unavail- able — and it can also tell if they are parked in the wrong spot. Other new features aim to improve security. SmartRent has integrated video intercoms into its platform. “It works with a touch screen hub in the unit,” Haldeman said. “If you walked up to visit your friend, you can see them on the video. You can click a button on your screen to let them into
even beginning to sell to some consumers who lived in apart- ments serviced by SmartRent and who want the same functionality in their homes. In the past 18 months, the compa- ny’s penetration has reached 75,000 units. In 2020, Haldeman expects to reach another 200,000 units, and he said the near-term pipeline includes about 500,000 additional units. The huge growth comes from “the tsunami of ROI” that SmartRent creates, Haldeman said. It adds together components that create value for property owners, he said:
• Controlling access and better protecting assets
• Operating more efficiently with fewer staff on hand
• Utility cost savings through smart thermostat settings
• Monitoring building systems such as water lines and get- ting warnings when there’s a problem, rather than finding out after a leak has caused damage. “We have owners reporting back to us that they’re decreasing their out-of-pocket spend on water dam- age by 70 percent,” he said.
16 | think realty magazine :: february 2020
the building to come visit you.” The system also includes facial recognition, which is “totally volun- tary,” he said. If activated, residents would only have to look at the camera to gain access and wouldn’t need a fob. Haldeman said he uses the facial recognition at his office. “It’s great. You can never forget your fob because if you’re wearing your head, you can get in,” he joked. SmartRent also has more deeply integrated common area access con- trol into its system. By making sure all aspects of the database are connect- ed, the system can better keep track of whose credentials should expire when they move out, rescinding access to pools, gyms, or parking. “It all works in harmony to really understand who and what is at your property,” Haldeman said. Pilot programs in university housing have allowed SmartRent to enter new a new market sector while challenging the team to inte- grate with systems already in place, such as using student IDs as entry
credentials. Haldeman said his goal is to play nicely with legacy systems rather than try to force institutions to change. “Since we have a really flexible platform and we’re really good at integrating, that opens up doors for us,” he said. A BADWORD Even as SmartRent rolls out new features, competitors across the country continue to pop up. Halde- man isn’t bothered in the least. “It’s flattering that people are following us. I think they see we’re getting traction. They understand what’s missing, but we’re still out ahead of that,” he said. “We feel peo- ple nipping at our heels, but we’re innovators at heart. We’re looking to solve more problems for people.” Its multifaceted solutions set SmartRent apart. Without the platform, residents might have to download five or six different apps to access the same smart home features that SmartRent offers.
“That just doesn’t seem smart to me — that seems crazy,” he said. Haldeman keeps an eye on emerging technologies with an aim to partner with or even acquire new tools. One of his driving principles is that tech solutions in the indus- try should work together. He sees standalone solutions causing “ven- dor fatigue.” “Our view is ‘proprietary’ is a bad word and doesn’t help the owners, so everything we do needs to be open and flexible,” he said. “You should win customers based on product innovation and customer service and not on locking someone into a proprietary system they can’t get out of.” To that end, SmartRent has inte- grated Amazon’s Ring doorbell into its platform. That means residents don’t have to visit a separate Ring ac- count — they can see visitors, unlock the door and review their video histo- ry all within SmartRent’s platform. CONSTANT INNOVATION Although SmartRent keeps its focus on the industry’s future, potential disruption to the business model is never far from Halde- man’s mind. “Being someone who loves tech- nology, if you’re not thinking about that, you should be,” he said. “I think there are a lot of new and innovative things coming. The way we insulate against being made obsolete is by continuing to innovate. We’re looking at a lot of interesting things launch- ing—if we weren’t embracing them, they could be very big threats to us, but we’re going to go the opposite route and embrace and adapt and change and constantly evolve to re- ally create the best platform and the best solution.” •
Katie Bean is a writer in Kansas City, Mo., who loves to tell the stories of businesses and leaders.
SmartRent installation team
thinkrealty . com | 17
18 | think realty magazine :: february 2020
Technology and the Modern Investor
Sponsored Advertising Content by Hubzu
E very day, mobile technology becomes more ingrained in the real estate space. Consumers and industry professionals alike benefit from the tech tools that are rapidly changing the way property owners buy, sell and invest at auction. In 2019, smartphone usage increased, with 90% of smartphone time being on mobile apps. As more people shop and conduct business online via mobile devices, the real estate industry is keen on developing technology that caters to the mod- ern investor. To stay ahead of the curve, it’s vital to know what mobile tech resources are out there and which tools can help you find and secure the right investment opportunities. browse new properties and par- ticipate in home auctions from a mobile device is priceless in the fast-moving real estate space. Many of the leading home auction marketing platforms are imple- menting mobile-first strategies, where useful features are specif- ically designed to meet investors wherever they are. By using the various mobile applications that tailor the online marketplace to on- the-go investors, you can bid at any time, from any place. With the increasing implementa- tion of mobile home auction apps, MOBILE APPS As an investor, the ability to
investors can experience an end-to- end auction process that isn’t tied to their desktop. Mobile apps offer a uniquely integrated user experience with more options to browse prop- erty inventory and bid directly from a mobile device. SMS Other than face-to-face inter- action, no other mode of commu- nication seems as simple or as lightning fast as texting. Fortunate- ly, investors can take advantage
ing tabs on active and upcoming auctions, users can also use this SMS feature to bid via text message.
ACCESSIBLE RESOURCES Easier access to resources has been one of the biggest advan- tages of the real estate industry’s embrace of a mobile-first approach to technology. At the tip of your fingers, you can access a host of helpful tools and tips as you pur- sue new investment opportunities. Blogs are one of the most popu- lar ways to disseminate infor- mation. As an investor, blogs can provide an abundance of infor- mation from subject matter experts.
of bid-by-text, a brand-new feature recently launched by Hubzu™, one of the
largest online home auction marketing platforms. Their new SMS
Insight from these sources have the
feature sends real-time noti- fications to your
potential to help you stay ahead of emerging trends, avoid common pitfalls and help you build upon your current knowledge and experience.
phone with updates on information like auction outbids and end times, foreclosure auction alerts, bid prices and
In this bustling digital age, savvy investors have plenty of opportu- nities to use technology to their advantage. With the help of mobile apps, SMS features, and access to resources on the go, your next auction can be more flexible, con- venient and engaging. Learn more about Hubzu at Hubzu.com/ThinkRealty. •
new properties. Over 50 percent of Hubzu’s users are accessing the site via a mobile device and according to Patrick G. McClain, Senior Vice President, Marketplace Product for Altisource™, “Hubzu is dedicated to investing in the right technology to help bring bidders and sellers together in real time.” Along with browsing new properties and keep-
thinkrealty . com | 19
EasyAnswers TIPS FROM AN ATTORNEY TO PROTECT YOURSELF — AND YOUR INVESTMENT.
When it comes to your real estate investing business, asking questions is part of the job, especially during tax prep season. Think Realty Resident Expert, financial advisor, and attorney Clint Coons offers his advice to questions he hears from clients every day.
A: A home-based business deduction for the business use of your home is typically for sole proprietors and flows onto a schedule C of your 1040. This deduction is highly scrutinized and runs the risk of audit. A better method might be to capture a business deduction with 280A and avoid the recognition of income. The plan works like this. Your corporation will rent your house from you for no more than 14 days per year to have various business meetings e.g., entertaining business associates, required director meetings, etc. The money the corporation pays you for the rental use of your personal residence is tax-free to you and deductible to your corporation. This strategy will only be respected if you actually use your home for business activities such as entertaining clients, holding meetings, etc. You will also need to substantiate any value you ultimately decide on for the daily rental use of your personal resident by keeping a record of comparable properties or square footage. Just think, if you have five business meetings throughout the year and entertaining business associates another four times, you will have nine rental days. If the daily rental value of your personal residence is $1,000 per day, then you will receive $9,000 tax-free from your corporation. If you are in a combined state and federal tax bracket of 35 percent, your savings are just over $3,000.
Q: If I have a home-based
business that is a C-Corporation, do you report this business on your 1040 in order to claim the home business office?
Have a legal, finance, or tax question that might affect your REI? Send questions to Think Realty’s editor at email@example.com.
20 | think realty magazine :: february 2020
RealtyMatters: Technology HAS THE HOT TOPIC OF TECHNOLOGY DISRUPTED REAL ESTATE?
ow many times have you heard about the latest technology or new company “disrupting” an indus- try? The real estate industry hasn’t seen any significant- ly disruptive innovation; the edges of existing processes have evolved, a bit. Did We-Work “disrupt” leasing? Nope. They simply added some Silicon Valley sizzle to an existing economic model. Has Zillow “disrupted” the in- dustry? Not really, but they have raised some eyebrows. A LOVE-HATE RELATIONSHIP Early on, Zillow fed real estate agents new customers and business. That relationship soured over time when Zillow entered into agreements to syndicate listings and charged the very same agents for their own listings. The same tech- nology that feeds agents can also eat them. To Zillow’s cred- it, they forced the hand of complacent national brokerage houses, agents, and the National Association of Realtors 1 . Some are modernizing and developing technology, but aside from searching online, most real estate is largely bought, sold, and leased the same way it has been for ages. Real estate remains transactional, superfluous, and mostly paper based. It is opposite of my previous profes- sion as an industrial engineer. Automation was essential in manufacturing for profitability. Interfaces that displayed real time input were common. Programmable Logic Con- trollers used sensors to control conveyors, pumps, valves, and other equipment in sequence to move raw materials and transform them into value-add products. Akin to those industrial technologies are affordable con- sumer options. The Internet of Things (IoT) is seeing an ex- plosion by makers and tinkerers. Inexpensive controllers, visual programming code and stock sensors, combined with 3D printing, spawned a new era of creativity. The real estate industry is on the cusp of indus- try-changing technologies as well. Familiar products using these concepts include Nest, Ring Doorbell and H
August Locks. While many of those items are nice to have, demand for “luxury” isn’t going to sufficiently tip the market. The average consumer really doesn’t care if they can open and close their window blinds remotely.
BrianWojcik is a housing industry advocate who transitioned into real estate, both as an investor and property manager, after more than two decades of experience in engineering, sales, executive man- agement, and operational/business process reengineering consulting. He resides in Howard County, MD, where he volunteers to teach a “Tenant Success” program he created for Bridges to Housing Stability, and where he created Landlord411 to assist rental housing providers. His expertise of the independently owned rental-housing market has been sought after for local and state level legislation/policy development. Mr. Wojcik has been published in national publications about legislative issues, affordable housing matters, and rental housing advocacy. He holds a Bachelor of Science degree in Manufacturing Management from Clarkson University and a Master of Science degree in Real Estate from The Johns Hopkins University. He is founder of diyRealty.co. Technology is everywhere. Our lives are intertwined to the extent that we are unconscious to the “data ex- haust” we emit. It's inevitable the real estate industry will see significant change, using technology in uncon- ventional and creative ways to span knowledge gaps; increase safety and legal compliance; reduce evictions, better use natural resources and improve conserva- tion; ameliorate affordable housing cost burdens; and promote healthier homes capable of having significant effects to solve real world problems. • UNREALIZED POTENTIALWILL SEE A SPRINT, THEN CONSOLIDATION. In the near-term, I foresee innovations spawning new applications for everyday residential real estate. Once that code is cracked, the floodgates will open, and a proliferation of interesting innovations will reveal themselves, adding value to our industry.
thinkrealty . com | 21
22 | think realty magazine :: february 2020
thinkrealty . com | 23
HARD MONEY - COMMERCIAL - FIX & FLIP Stated income and Full doc programs! Purchase & Refinance loans
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ERIC TRAN CEO 714.300.8223 firstname.lastname@example.org
24 | think realty magazine :: february 2020 IVY BACA VP SALES 213.784.2497 email@example.com www.universalcommercialcapital.com
Is Your Private Lender Technologically Ready for 2020?
YOUR CAPITAL COULD DRY UP IF YOUR LENDER IS NOT PREPARED FOR THE NEW DECADE.
by Eric Tran, Universal Commercial Capital
eal estate in 2020 will exist in a unique envi- ronment: a market in which private capital is
when it comes to keeping your business.
clamoring for placement. In 2020, most experts agree that institutional money will reach new levels of des- peration when it comes to generating the yields its investors demand. This desperation will drive many “mega-funds” into the private capital space in real estate, and it could mean great opportunities for real estate investors. However, investors who fail to understand how their lender is adapting to an increasingly competitive and technologically advanced marketplace could end up unable to leverage any capital whatsoever. Even if you have a preferred private lender already, you ignore these new developments at your own risk. There are three primary indicators that your private lender is technologically ready for the new decade: Historically, many private lenders have refused to make loans in cities with populations smaller than 20,000, and the majority have avoided tertiary markets and most secondary markets entirely. With iBuyers increasingly distorting the market metrics in prima- ry markets and most 24- and 18-hour cities, if your private lender is not lending in the markets where you can be competitive, then they are no longer competitive NO. 1 They lend in markets where you may have a competitive advantage.
NO. 2 They are open to having “the blockchain conversation.” When you think of blockchain, you probably think of cryptocurrency. That is where most of the headlines are. However, blockchain technology is increasingly relevant in private lending because it is extremely secure. With cybersecurity an increasing issue for every real estate investor, your private lender must be able to explain how they are protecting your privacy and the security of your business. You may not need to leverage blockchain tech yet, but your lender must be able to explain how they keep data secure on their side of the equation. NO. 3 Their fees are feasible for you. With the competition rising across the private capital sector, many lenders are slashing interest rates and then quietly hiking their fees. Read through the fine print with your lender to make sure your quest for the lowest rate is not leading you to overpay in the fees department. •
Eric Tran is the CEO of Universal Commercial Capital, a private lender based in Southern California specializing in Fix and Flip and Rent and Hold loans. Universal Commercial Capital also offers a no- tax-return, non-recourse apartment lending program. Learn more at UniversalCommercialCapital.com.
thinkrealty . com | 25
HOW MOBILE HOME INVESTING LEADS TO MILLIONS.
by Chimene Van Gundy, “Mobile Home Millionaire”
t isn't glamorous, and it's not met with intrigue or fervor at social gatherings. It sounds quite dull. However, if you saw the bank accounts of most mobile home investors, you might be compelled to find out more about this profitable investing method. Many investments are risky. I've even heard you don't get rich playing it safe. I'm here to disagree. Mobile home investing is one of the safest gambles you can make and yields some of the most reliable returns in your portfolio. When you own a mobile home park, you own the land and rent the lots. Do you know the percentage of turn- over? Compared to apartments that lose more than half their tenants, and have to find new ones regularly, only two per cent of mobile homes leave the park yearly. There is not significant competition in the market for mobile homes. Rent doesn't have to vary with new builds going in because restrictions prevent mobile home parks from being built almost everywhere now. While construction of apartments continues, mobile home residents aren't likely to jump ship to another park that is newer and shinier. Their home is their home, and time has demonstrated that they tend to prefer to stay put. Other real estate investments like office, retail, hotel, and industrial are not recession-proof. Offices and retail spaces are so dependent upon tenants and are seeing higher turnover based on the benefits of doing business
online. Hotels come with fixed expenses that can't be di- minished when occupancy drops for a season or a night. If you lose one tenant, it could destroy all profitability. In stark contrast to the alternatives, mobile homes and mobile home parks as an asset class are almost 100 percent recession-proof, with fixed costs kept very low and capital requirements being low. The tenant turnover is low, and the staffing requirements are min- imal. This equates to consistency. Consistency is key to keeping yourself solvent in to- day's economic climate. If you are looking for the right investment, and you are willing to put in some effort, you can expect consistent returns when you invest in mobile home parks. Mobile homes are one of the most fail-safe methods of investing in the market and will continue to have strong positive returns. Contact mobilehomemillions.com for more in- formation on mobile home park investments. • Chimene Van Gundy is the mother of five children, and she runs and manages five different companies. She is known as the "The Mobile Home Millionaire" and “Queen of Mobile Homes” because she has fixed, flipped, and wholesaled more than 400 units to date in four years and in 11 states. She currently owns 20 mobile home parks and has taken her business international by rehabbing mobile homes in Ireland, where they are called “Holiday homes.” Chimene is on a mission to preserve the “last frontier of affordable housing for the U.S.” and is currently teaching others how to use these “little boxes that spit out cash” to change their lives and live the life of their dreams through her mobile home millions platform.
26 | think realty magazine :: february 2020
Tax-Sale Horror Stories SOMETIMES, THE BIGGEST WARNING SIGNS ARE RIGHT IN FRONT OF YOU.
by Charles Sells, PIP Group
hen the absolute truth seems too good to be true, how do you know whom to trust? That statement is the most-often-cited reason in- vestors give for why real estate investors have not yet gotten involved in tax lien and tax deed investing. Many aspects of this strategy just seem too good to be true. W
Even though those are accurate statements about tax lien investing, an investor’s success is not absolutely guar- anteed simply because he or she is pursuing this strategy. There are certain things that can go wrong with a tax lien or tax deed investment. These are the true “tax investing horror stories,” and they have nothing to do with whether or not you can routinely get properties for pennies on the dollar at the tax sale. They are worth sharing here because of the preventative lessons they offer you as an investor. Here are three of the worst you will ever hear: NO. 1 The Negative Neighbors Make Your Profits Nosedive Probably one of the worst tax-lien horror stories you may ever hear has to do with an investor who nearly gave up on tax deeds because of a dead raccoon. And before you think he was just being a little high-mainte-
Consider the following:
• You can absolutely gain access to incredible prop- erties at rock-bottom prices.
• Your investment is absolutely backed by the full force of the government.
• Your lien absolutely does take precedence over just about every other debt on the property.
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