TR_December_2020_lr

I N FORM . I NS P I R E . E DUCAT E . EMPOWE R .

STRATEGY

Becoming an Accredited Investor

DESIGN POINT

Reinventing the Ranch

Invest in Color

$5.95 U.S. :: $6.95 CAN DECEMBER 2020

HOW PALETTES CAN BOOST PROFITS

PUBLISHER & CEO Eddie Wilson

EDITOR-IN-CHIEF Kelli White

SALES MANAGER Rodney Halford RHalford@ThinkRealty.com

FULFILLMENT COORDINATOR Blair Pierce

DESIGNER David Allen Rodriguez

CONTRIBUTERS Scott Brady Grant Cardone Ellis Hammond Fred Heigold III Michael Jordan W.J. Mencarow Bruce McNeilage Gene Powers Marla Roberds Shawn Tiberio Don Wenner Ingo Winzer Brian Wojcik

HEY! LET’S BE FRIENDS! GET SOCIAL. STAY CONNECTED.

COVER PHOTOGRAPHY Sherwin-Williams

Like, Follow & Share for the Latest Real Estate News, Trends and Insights from Think Realty

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!

Think Realty 12200 N. Ambassador Dr. Suite 301 (Office A) Kansas City, Missouri 64163 816-398-4130 ThinkRealty.com Copyright ©2020 Think Realty ABOUT THIS MAGAZINE :: Think Realty Magazine is a publication of Affinity Real Estate Media LLC. Reproduction or use of any editorial or graphic, without permission, is prohibited. We are not responsible for the content of any paid advertisements. For reprint rights; to ob - tain a detailed statement of our privacy policy; and for all single-copy requests, address changes and other subscription inquiries: SUBSCRIPTIONS :: The annual subscription for Think Realty Magazine is $36.00 in the U.S. Order online at www.ThinkRealty.com or call 816-398-4130. 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.

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2 | think realty magazine :: december 2020

FROM THE EDI TOR- IN-CHI EF

A Colorful Year

can inspire creativity, and can even bring a higher price in your real estate deals! Who knew? Think

h, 2020 … Don’t worry, I will

spare you an end-of- year recap. But, with everything that has

Realty trusted partner Sherwin-Williams’ Color of the Year for 2021 is revealed—see how this color

happened this year, there is still so much good we can choose to focus on. My dad always says, “Everyone

trend can be used throughout a property and what colorful tricks can take your property values higher. Also, you will notice four little, yet powerful, words have changed on the cover of Think Realty Magazine. The team put our thinking caps on to create a new tagline that embodies our brand— and more importantly—our members like YOU! The first little word? Inspire. We hope you find some inspiration in Think Realty’s content—enough to propel you into a profitable real estate investing future. In the meantime, inspire, inform, educate, and empower. •

needs inspiration – it doesn’t matter where you find it.” I find mine in song lyrics, literature, nature, yoga, and yes, real estate! Where do you find inspiration? One inspiring place is—or can be— the home. Just think, as real estate investors, you are responsible for creating homes for many tenants and buyers, and you have the power to make them amazing. A simple way to make those properties stand out is with the use of color. In this month’s cover story, we explore how color can affect our mood,

Keep Going!

KELLI WHITE, EDITOR-IN-CHIEF

thinkrealty . com | 3

CONTENTS

INSIDE THIS ISSUE

THINK REALTY 6 News & Events

ENGAGEMENT 18 Realty Matters: New Supply Chains for Low-Cost Housing

What pandemics teach us about how to solve the affordable housing crisis by Brian Wojcik

FUNDAMENTALS 21 Reflect and Prepare

Positioning yourself for success in uncertain times by Don Wenner

28 Profiting from Single-Family Rentals Follow this formula for higher profits and fewer headaches by W.J. Mencarow

COVER FEATURE

30 Real Estate Licensing Do aspiring investors need a license? by Michael Jordan

COLORFUL INVESTMENTS

32 Association Management: A Profitable Growth Strategy

How residential managers can find another revenue source by Scott Brady

THINK REALTY

INVESTOR STORIES

CONTRIBUTOR CORNER

PRESIDENTS’ CIRCLE

Meet Abhi Golhar

Featured Member: Gary Pinkerton

35 Sponsored Content: Investor Review

4 | think realty magazine :: december 2020

STRATEGY

52 Managing Costs in Build-to-Rent Simple steps to guard against cost overruns by Bruce McNeilage

56 3 Keys to Guaranteed Growth in 2021 When a year ends, the plan for the next year begins by Shawn Tiberio

62 Becoming an Accredited Investor Where do you go to find REI opportunities if you are not accredited? by Ellis Hammond

DESIGN POINT 66 Reinventing the Ranch

Modern living steeped in decades past by Marla Roberds

Why color is important in your real estate deals By Kelli White Photo courtesy of Sherwin-Williams

MARKETS & TRENDS 70 Market Spotlight: Cincinnati Good fundamentals and future upside potential by Fred Heigold III

STRATEGY

MARKETS & TRENDS

MINDSET 76 The 7 Steps to Financial Freedom

4 REASONS REAL ESTATE IS BETTER THAN STOCKS Why apartments last longer and are better wealth-builders

LONG-TERM THINKING

Step Five: CREATE, PREPARE, and BEGIN Your Journey by Gene Powers

Markets with relative stability is a good starting point

thinkrealty . com | 5

THINK REALTY

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

PAGE 12

$5.95 U.S. :: $6.95 CAN JAN/FEB 2020

Think Realty Magazine Gets a NewTagline

THINKREALTY.COM

While Think Realty Magazine is the trusted publication for real estate investors nationwide, we wanted to to be up front (literally) about what the brand really stands for. These four words embody Think Realty’s mission as well as that of our valued members.

Inform. Inspire. Educate. Empower.

6 | think realty magazine :: december 2020

2021 Think Realty events are in the works! Mark your calendars!

or once in real estate, it wasn’t about location as 2020 brought forced changes to the event- planning industry that resulted in ingenuity and innovation. The Think Realty hybrid events were a big hit and are planned for next year as well! While you can choose to attend virtually, you might want to network and learn in person. The beauty is you F

have the choice! We are mixing things up a bit with our onsite events for next year — a new city is on the agenda. Keep watching thinkrealty.com and our weekly newsletter for more details, but for now, make it a New Years’ goal to attend one or both Think Realty Conferences & Expos – it will be a value-add to your REI business! •

HOUSTON,TX THINK REALTY CONFERENCE & EXPO POWERED BY THINK REALTY

BALTIMORE THINK REALTY CONFERENCE & EXPO POWERED BY THINK REALTY

MARCH 2021

SEPT 2021

Think Realty andAAPL Continue the Conversation on Capitol Hill

n 2019, members of Think Realty and the American Association of Private Lenders (AAPL) went to Washington,

D.C. to meet with legislators on key issues affecting the real estate investing industry. This initiative launched a meaningful dialogue with legislators, informing them on how investors can help solve issues in affordable housing. The conversation will continue in 2021 with top issues being affordable housing and taxation and mortgage licensing. Conversations like these can lead to reform and benefit not only real estate investors and private lenders, but also communities nationwide. •

Visit thinkrealty.com and applonline.com for more news and updates on the conversation that could change real estate investing.

thinkrealty . com | 7

INVESTOR STORIES

NEWS & EVENTS

The Contributor Corner

P erhaps you already follow podcast host extraordinaire, accomplished real estate investor, Think Realty Resident Expert and social media influencer Abhi Golhar. Perhaps you’ve read his many articles for Think Realty and AAPL. If you haven’t met Abhi yet, here’s a glimpse into a side of this multi-faceted investor and Think Realty contributor. We asked him about how the end of a year often brings a time of reflection and what three things he has learned and acted on in 2020: Meet Abhi Golhar

“THERE ARE THREE WAYS OF BEING THAT HAVE BROUGHT ME SUCCESS THIS YEAR: BEING VERSATILE, CONNECTED, AND OPTIMISTIC.”

CONNECTED “As host of the Think Realty Podcast and a member of the Presidents’ Circle, I'm up to date on the latest happenings in the real estate industry and keep company with the best movers and shakers. It's simple

OPTIMISTIC “During a year where seemingly everything has hap - pened, it is easy to become bearish on all

“I identified

VERSATILE

opportunities in a pandemic and charted a course to capitalize on them, with the right team. Versatility is a skill that must be honed and will bring success.”

things. However, keeping an optimistic mindset allows one to be open to ideas that can lead to wonderful long-term partnerships and return on investments.”

— benefit from the best information out

there, and then execute on it.”

8 | think realty magazine :: december 2020

THINK REALTY’S COMMERCIAL REAL ESTATE MAGAZINE IS COMING SOON!

Discover investing tips, must-know strategies and data-driven content in our all-new digital quarterly magazine, arriving online March 2021. Topics include: MULTIFAMILY • STORAGE •

IAL

RETAIL • OFFICE • INDUSTRIAL • AND MORE! Think Realty FREE members can access the

ATE E IS

magazine at thinkrealty.com/CRE. Not a member? Subscribe today at thinkrealty.com/join.

“M ultifaMily real estate is so good to My faMily ; K nowing i’ M taKing care of theM with indestructible investMents is rewarding . P lus , i aM looKing hard at retail and office because where there is so Much bad news , there is oPPortunity .” – OCTOBER THINK REALTY MAGAZINE COVER PERSON AND FAMED REAL ESTATE INVESTOR, GRANT CARDONE

OON!

es ital

E • USTRIAL •

thinkrealty . com | 9

can access the

INVESTOR STORIES

PRESIDENTS’ CIRCLE

FeaturedMember: Gary Pinkerton

“My primary role as a wealth strategist is to help clients stabilize their business and family finances and get them moving consis- tently and predictably in the positive direc- tion; I help them build a foundation they can lean on when things like COVID-19 and other unexpected events stress their financial re- sources. Immediately after achieving that, the question they pose is ‘Can you help me safely grow my finances from this new safe founda- tion?’ They are looking for ways to invest their resources that offer both strong returns and a high likelihood of success, and the biggest risk to failing is the person you entrusted with the money, not the deal itself. The adage ‘Never do a good deal with a bad person’ is some of the best advice I have ever received. So, I’ve devoted myself to being in groups with the best people to connect with my clients. No question, that’s the Think Realty Presidents’ Circle,” Pinkerton said.

he Think Realty Presidents’ Circle attracts the best of the best — real estate investors and entrepre -

neurs with extensive backgrounds and experience from which all members can benefit. The Circle meets several times each year where members share knowledge, net - work, and inspire continued success. This month, our featured member is Gary Pinkerton, a wealth strategist, veteran, entrepreneur, speaker, author, and real estate investor. He has degrees in engi - neering from the US Naval Academy and the University of Illinois, and 25 years’ experience as a Navy nuclear submarine officer. He commanded the attack subma - rine USS TUCSON, was a Pentagon Division Director for the Joint Chiefs, and a Senior Ethics Professor at the Naval Academy, retiring as a Captain. He has extensive experience in life insurance, real estate, and alternative investments. Pinkerton said he joined the Think Realty Presidents’ Circle because he was searching for strategic relation - ships “with only the most ethical, high-performing, and like-minded leaders in real estate” for the benefit of his clients and his business.

10 | think realty magazine :: december 2020

“My intent is to strengthen America by bring- ing resiliency, control, and confidence to real estate investors and small-to-medium busi- nesses. These are the groups that innovate, that produce and that formed and sustained America for the past 250 years and are des- perately needed to do the same for the next 250 years. The Presidents’ Circle is a group of leaders who can help me achieve this goal. When I commanded the USS TUCSON, I was alarmed at times to find the ship off course because the crew had gotten misled or unfo- cused. I see the same with America right now and am excited to work with my new Circle of friends to get the world’s best ship back on course!” •

Every member of the Think Realty Presidents’ Circle has a story that drives their tremendous success and often an equally inspiring story about how they have overcome adversity on their journey. “Our meeting every few months is unmatched in the quality lessons it teaches me and in the energy I gain. I leave recharged and enthu- siastic to conquer new mountains and with renewed faith in the abilities of the quality Presidents’ Circle entrepreneurs and business owners that come together to share time from across this great nation,” he said. From his membership, Pinkerton plans to improve his business and help more people.

PARK CITY, UTAH THINK REALTY PRESIDENTS’ CIRCLE MEETING FEBRUARY 2021 PARK CITY, UTAH THINK REALTY PRESIDENTS’ CIRCLE EETING FEBRUARY 2021

thinkrealty . com | 11

COVER STORY

COLOR OF THE YEAR

Boost your real estate profits with the right color palette Invest in Color

BY KELLI WHITE PHOTO BY VINTAGE REVIVALS

12 | think realty magazine :: december 2020

thinkrealty . com | 13

W earing the right color can make your eyes or buy-and-hold property the right color can add value. Yes, color is powerful enough to affect your pocketbook! But, it’s choosing the right color in the right place that is key to higher profits for investors. You want to make sure the value of your property goes in the right direction! Did you know that the right paint color can increase your property's value by thousands of dollars? While it might seem safe and easy to stick with neutrals and light colors on the walls of your investment properties, if you’re looking to sell, most potential homebuyers still want color. In fact, a paint color analysis from Zillow in 2018 found that homes with white walls dropped in price by $4,000. brighter, seeing a certain color can affect your mood, and painting your next flip, rehab project, Another area of the home for potential value-add is two- toned kitchen cabinets. If the lower cabinets are a bold color such as black or navy, you can see a price increase of ap - proximately $1,500. Also, Zillow’s analysis found homes with front doors that are a shade of black can increase a home's value by more than $6,000. Think Realty Supplier, Sherwin-Williams, has been committed to supporting homeowners and real estate

professionals with paint, flooring, and design expertise for more than 150 years. The company provides customers with resources to confidently choose colors, like their annual Colormix® Forecast and Color of the Year. As we say goodbye to 2020, we don’t necessarily need to stop using the 2020 Color of the Year, Naval, a bold navy blue that has quickly become a “new neutral” according to Sue Wadden, Director of Color Marketing at Sherwin-Williams. But, it is time to say hello to a new hue and begin incorpo - rating it in rehabs and remodeling projects.

THE 2021 COLOR OFTHEYEAR — URBANE BRONZE Each year, the Sherwin-Williams Global Forecast Team works to identify and re - search key trends that influence how people interact with color. “The use of color in interior design is changing—it’s not just about what a space looks like anymore, but the feelings a space can evoke. This year is causing us to pause and be mindful of how we are

2021 Color: Urbane Bronze

14 | think realty magazine :: december 2020

Think Realty members receive discounts from Sher - win-Williams, a leading paint and flooring provider with locations nationwide. Save up to 50 percent off paint and receive wholesale pricing on flooring for all your investment properties. Imagine how much more cash can stay in your pocket on every deal! Be sure to check out the Think Realty Supplier Program and learn about all the savings available for members!

Photo credit: John McClain Design and Stephen Allen Photography

living,” Wadden said. “So, we gravitated towards Urbane Bronze SW 7048 for its ability to create a sense of calm while making us feel safe and secure.” Wadden further explained that the “stay at home” direc - tive in 2020 has influenced where we go and what we do, but it will also influence interior design trends for 2021 and beyond. Urbane Bronze is part of the Sanctuary palette in Sherwin-Williams 2021 Colormix® Forecast, which predicts a need for balance in design for the year ahead. The new de - cade ushered in a return to rich, bold colors, stepping away from the cool neutrals of the 2010s in an effort to bring more personality into design. “Urbane Bronze is a comforting color, drawing from nature for a feeling of relaxation and serenity,” explained Wadden. “There’s also reassurance in its sentimentality, with nostalgic ties to the design of the ‘70s and ‘90s, but with gray undertones that give it a distinctly modern twist.” Bold and understated at the same time, Urbane Bronze is the new neutral that can be used anywhere in the home — inside or out — from the kitchen island to the front door. Whether used as a primary or accent color, Urbane Bronze has an anchoring quality that conveys a sense of comfort and sanctuary in bedrooms, living rooms and dens, or calm

Photo credit: Sherwin-Williams

Photo courtesy of Sherwin-Williams

thinkrealty . com | 15

concentration in home offices. “Now more than ever, people are living and working in the same place and are using paint and color to create a calming environment. We are seeing homeowners use color to differentiate workspaces from living spaces by creating a place of respite from everything else they have going on at home. We were noticing a shift towards warmer colors before the start of this year, and now with everyone spend - ing so much time at home, we expect this trend to continue,” Wadden said. She recommends complementing the simplicity of Urbane Bronze with natural materials like wood finishes, organic stone accents, woven textiles, or mixed metals “to create a serene space grounded in nature.” For an updated take on minimalism, pair Urbane Bronze with other warm neutrals, including elegant bone whites like Modern Gray SW 7632. To bring in more color and a hint of the bold pairings of the 1970s, add a modern green like Messenger Bag SW 7740. A monochromatic look with Urbane Bronze on all four walls and trim creates a soothing site for working from home. THE RIGHT PAINT COLORAND QUALITY LOWERS COSTS LONG TERM In its long company history, the Sherwin-Williams brand has become synonymous with timelessness and durability — something housing providers and real estate investors value because high quality makes less work and cost in the long run. “Sherwin-Williams has perfected paint qualities such as washability, paint-and-primer-in-one solutions, and technologies that help reduce odors and moisture to provide maximum durability,” Wadden said. These features help make the painting process easier for professionals like contractors, property owners, and housing providers. “Homeowners want to create calm spaces and color is an easy and effective way for real estate investors to achieve this feeling in their properties,” Wadden said. Explore the Color of the Year with the ColorSnap® Visu - alizer app, a tool designed to help consumers and profes - sionals make confident and smart paint color selections. Download the app to try out Sherwin-Williams 1,700 hues in your own space in real time with the app’s Instant Paint augmented reality tool. Plus, sampling colors is now more convenient than ever with free color chip ordering and deliv - ery at swcolorchips.com. If you haven’t played with color before in any of your prop - erties or projects, now is the time! Choosing the right hue will attract the right tenants and buyers while adding value to your investment. •

About the Sherwin-Williams Colorof theYear As director of color marketing, Sue Wadden leads the Sherwin-Williams global color and design team to research and identify key trends that influence the way we interact with color. From those findings, the team turns emerging themes into the annual Colormix Forecast and zeroes in on a Color of the Year. The 2021 selec - tion, Urbane Bronze SW 7048, is the 11th official Color of the Year. Here are a few of the previously selected colors:

2016: Alabaster SW 7008

2018: Oceanside SW 6496

2020: Naval SW 6244

16 | think realty magazine :: december 2020

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Find your next financial partner today at aaplonline.com/directory.

thinkrealty . com | 17

ENGAGEMENT

REALTY MATTERS

New Supply Chains for Low-Cost Housing

WHAT PANDEMICS TEACH US ABOUT HOW TO SOLVE THE AFFORDABLE HOUSING CRISIS

by Brian Wojcik

e’re all familiar with the phrase “history repeats itself.” Unfor -

age to society a century ago, but the result of the response strategy to COVID-19 is vastly different. A vaccine is likely to be available much more quickly than the two decades it took for the Spanish Flu vaccine. To - day, information and knowledge can travel the world in an instant, unlike in 1920. It forces the hand of govern - ments to (mostly) acknowledge what occurs as overwhelming truth. And in doing so, it enables the minds of many in the private sector to solve problems, as opposed to only those in government. Much like the lack of acknowl - edgement and national planning gaps with the response strategy for the Spanish Flu, the same could be true for undersupply issues on low-cost housing. Today, when government acknowledges the ac - tual overwhelming truth, and seeks private sector help, the outcome has

been demonstrated as overwhelm - ingly positive.

tunately, we seem to be in one of those cycles again. In many ways, 2020 was a repeat of 1918, but with some key differ- ences. In 1918, the world was swept with the Spanish Flu pandemic, which ultimately took between 20 to 100 million lives worldwide, includ - ing 675,000 Americans. After two years and four waves, it eventually just ran its course. A vaccine wasn't created until the 1940s. Contrasting and comparing the responses to the Spanish Flu and the present day COVID-19 pandemic are intuitive for housing solutions. CONTRASTING EACH PANDEMICAND COMPARISON TO HOUSING Gaps in the Spanish Flu response strategy resulted in terrible dam-

PRIVATE SECTOR PARTICIPATION

Modern science, technology, and innovation effected a vastly different outcome as compared to the Spanish Flu. Private sector response was overwhelming when government leadership on the federal and state levels asked for help to fill supply gaps for masks, face shields, and ventilators. It gave rise to a move - ment where individuals became entrepreneurs and were able to participate in creation of new supply chains to shore up device and safety equipment shortages. The response as a collective was beyond imagin - able. DIY makers at home used 3D printing to produce components for ventilators, and face shields for first

18 | think realty magazine :: december 2020

could have the likeness of the 2008 real estate collapse, particularly with low-cost rental housing, but also with home mortgages and foreclo - sures. The CARES Act, provided an evic - tion moratorium for renters, which was continued by many municipal governments around the nation. It did not, unfortunately, provide sig - nificant aid to independent landlords who rely on rental income to pay the mortgages on their properties or to invest in upgrades to attract renters. Reviewing data, instead of relying on preconceived ideas, would have demonstrated the need to aid the independent investor market sector. The enemy is a broken system on both sides of the aisle that continues to cast aside the independent inves - tor. It is time to influence our future! FOCUS FORWARD As an industry, we must improve our standing. We should not under - estimate our collective social impact on society. We should be proud that independent investors provide stable housing at fair prices to tens of mil - lions of people across the country. Our investments improve commu - nities. And our efforts contribute hundreds of millions of dollars to local and state governments through taxes. Government will have to accept and acknowledge the impor - tance of small business, low-cost housing providers, not just as suppli - ers, but as a key to local prosperous economies. As an industry of small businesses, we need to capitalize our cumulative power to encourage government policy that supports and fosters creative solutions in the private sector. In 2021, we will leverage the impact we have as Social Entre - preneurs. We have to reconsider how we’re communicating to those

“IT IS TIME WE STAND TOGETHER AND GET WASHINGTON’S ATTENTION.”

responders while distilleries retooled and began making hand sanitizer. The benefits of capitalism allowed fair compensation for the exchange of value for undersupplied goods. Everyday citizens were suddenly considered “heroes” responding to a crisis and filling a desperate supply chain shortage. The shortage of affordable hous- ing is solvable in the same manner because it is largely a supply chain problem impacted by government rules, regulations, and policy. This is only possible if government officials are willing to make distinctions between trusting facts or fallacy among those who continue offering inaccurate advice that worsens the problem (Who would you trust with a vaccine — a lobbyist or a scientist?) If government has the courage to ask the private sector for help in solving the low-cost housing shortage, it will step us in the right direction. However, a counterbalance to the age-old narrative that government should provide low-cost housing because the private market is unable to do so must be exposed first. Gov - ernment may need to have its hand forced on the issue, which is where the private investor community steps in to become an overwhelming voice

for truth. When government realizes the private sector can be a partner, and not the enemy, big change is possible. Once private investors as a group demonstrate capacity to in - fluence public perception, politicians will want to become our partners because public perception drives voting behavior. INFLUENCE FOR NEWSUPPLY CHAINS FOR LOW-COST HOUSING It is time for government to utilize innovative thinking from the private sector for a new system to increase supply of affordable housing and to implement policy that fosters invest - ments that circulate through com - munities rather than extracting from them. It is time we stand together and get Washington’s attention. As we reviewed in last month’s column, one of the key gaps in the aid packages is the needs of the in - dependent housing provider—those who lease fewer than 50 units but who make up more than 60 percent of the available rental housing units in the nation. Failing to address the needs of these small business own- ers means that the housing industry sits on the precipice of a crisis that

thinkrealty . com | 19

of both housing providers and renters alike, who seek common ground, by re-envisioning a parallel system using innovation to focus forward and problem solve. • Demonstrate neutrality and accountability, whether it be from bad actors within, or external players that are acting detrimentally to the industry, as determined by a joint housing committee consisting of both renters and housing providers. • Advocate and create uniform industry standards for rental housing that may appropriately be adopted by federal, state, and local governments (much like building and fire codes) and actively educate and enable instructive guidance using innovation. • Advocate for revision of existing financial instruments and participate with creation of additional financial instruments and funding mechanisms for community development investment for market-rate low- cost housing. As a collective group, our first action is to demonstrate the strength of our voice. Show your support and simply sign the petition so Washing - ton will put us on their radar. Go to fairh.org to learn more and see what you can do to assist. Through our numbers and influ - ence, we demonstrate capacity as a cause for change in the communities we serve. In Baltimore, for example, we’re creating a Zero Eviction Ini - tiative, with a mission to prevent the eviction of 2,100 families from their homes. This will lead to an econom - ic impact of $8.4 million back into low-cost housing. Fewer evictions is common ground that renters and

who are external to the Real Estate Investment Industry. They mostly see the internal marketing messages in this sector; having the likeness of “Get Rich Quick” schemes that paint an unpleasant picture. And, mar - keting is necessary — consider that we are responsible for the public perception of our industry, and we have responsibility to communicate the public benefit of what we do. As housing providers, we invest in communities (some of the poorest) which demonstrates our belief in humanity by trusting those who are most at risk. Ability to do so largely depends on a historically valid Social Contract — where a provided val - ue-added service (housing) warrants an exchange of value (rent money) that has been faithfully agreed between two parties (the housing provider and the renter). During this pandemic, federal, state, and local public officials have re-written that Social Contract with the eviction moratorium, undermining the entire industry. It is our duty to respond collectively and be responsible for our part and hold others accountable for their part. FAIR HOUSING IS LEADING THE EFFORT. HERE IS HOW: • Emphasize and define the value we bring to communities as Social Entrepreneurs through a Public Relations campaign rather than be incorrectly defined as profiteers. • Illustrate the Social Impact our investments have with communities and renters, through a collection of real experiences that demonstrate the generosity of humanity. • Lead by example as neutral advocates for the industry-at- large to serve the best interest

housing providers can agree upon. It re-envisions connecting individu - al components of a broken system to more easily provide financial assistance for renters and instruc - tional guidance for housing provid - ers. It is proactive, preventive, and self-sustaining rather than reactive, encumbered, and depleting. It also improves systematic accountability and visibility through government and participating organizations. We believe success may inspire adoption in cities around the county. Through our ongoing FAIR Hous - ing organization, we also intend to leverage the power of the millions of independent low-cost housing providers, so that federal, state and local governments view us as small business owners (who have been the early pioneers of investment that is doing social good, before it became fashionable as Social Enterprise), adding to the economic stability of our communities and give us the influence and consideration we de - serve as social entrepreneurs. • For Column Notes, Resources and Language Translation for this Column, go to: RealtyMatters.Online/Column/December-2020

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 management, 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.

20 | think realty magazine :: december 2020

FUNDAMENTALS

PREPARATION

Reflect and Prepare IF ONLY YOU HAD A CRYSTAL BALL AT THE OUTSET OF 2020…

by Don Wenner

Did you predict 2020would turn out this way?

changed this year, especially with lending. A late summer survey of bankers displayed the fears many lenders have. According to the industry survey, nearly half of presidents, CEOs, and CFOs believe commer - cial real estate lending faces the toughest road ahead. Nearly a quarter said industrial and com - mercial lending was the top con - cern for their bank. It appears these concerns are jus - tified. In the multifamily space, big lenders have encountered a difficult road. M&T Bank, New York Com - munity Bank, and Signature Bank have all seen shares decline by 30%+ since the start of the pandemic.

through the COVID-19 pandem - ic, with virtually no impact on our funding commitments. Through our experiences this year, we have some insights to share about how to better prepare oneself as a real estate investor. After all, the future is uncertain, but you have to be ready to navigate through it. So, in this article, let’s review the past year and see what lessons we can take from it. This will help en - sure we head into 2021 with the right strategy and a winning mindset. LESSON #1 SURVEY THE LANDSCAPE AND PREPARE ACCORDINGLY It’s helpful to review how the real estate investment landscape has

If you had a crystal ball, or at least were prepared for this sort of un- certainty, you probably are in a good position to emerge from this year strong and well-positioned for 2021. As you plan for the coming year, realize that 2020 has much to teach us. Our goal should be to learn from this past year and create a structure to thrive, regardless of prevailing conditions. At DLP Lending, we’ve continued working with real estate investors

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lending, you can miss out on poten - tially lucrative deals. Therefore, you should prepare ac - cordingly. Only consider deals after careful analysis and when you have adequate cash on hand and reliable access to capital. LESSON #2 TAKE GREATER CONTROL OF YOUR ACCESS TO CAPITAL With all this said, lucrative oppor - tunities still exist in the real estate space. For instance, single-family homes saw incredible rises in 2020, defying the pandemic. At the end of August 2020, the median home sale

Research published by the Financial Times notes Wall Street investors in the $1.4 trillion commercial-backed mortgage securities market are bracing for losses. Investors across all real estate sectors must exercise more caution than ever before. Fewer funding sources and tighter lending requirements Such developments have created a problem: funding gaps. With Wall Street taking losses, lending require- ments have become more strict. This means more is required from

investors in order to obtain capital. You must embrace the new norm lenders have taken to mitigate risks themselves. As a borrower, you should expect: Lower leverage and the need for more cash out of pocket Higher rates and a higher cost of capital A need for more cash reserves Tighter borrower requirements The fact is, many lenders have become much more conservative in their underwriting. If you don’t come ready to meet these new norms in

22 | think realty magazine :: december 2020

price had reached nearly $330,000. Such rises in home prices present opportunities to fix-and-flip inves - tors with capital on hand. Opportunities have popped up in places you may not have considered as well. Given changes to the food supply chain during the pandemic, demand for cold-storage facilities to keep food chilled has skyrocketed. So, you can have tons of success if you know where the opportunities are. However, you can’t close a good deal if you don’t have consistent access to capital. Access to capital is a problem many real estate entrepreneurs have encountered during the pandemic. It’s also probably why many investors had issues with disposition at the on- set of COVID-19, as potential buyers couldn’t access capital. According to CoStar, a commercial real estate data analytics firm, second-quarter transaction volumes declined by around 65%. So, if you needed to liquidate an as- set, you may have had trouble. Or, if you discovered a great deal, you may have not had the capital to close. We’ve seen such experiences first - hand. One homebuilder in Florida, hoping to capitalize on the housing inventory shortage, had a lender back out last minute on funding for the building of single-family homes. That’s because the lender’s funding sources, which were likely tethered to Wall Street or institutional capital, had begun drying up. The home- builder already had pre-sales, so this put his entire business at risk. Here’s what the home builder said about the importance of having access to capital: “It saved my business while most of my competitors had to cease operations.” Imagine if you had similar access to

only ensure you go after the right deals, but also that you’re in a posi- tion to have success. You also have to execute. It sounds easy, but many investors get lackadai - sical with their strategy. For instance, they may neglect to do good due diligence and enter into a bad deal. Additionally, you need the right culture. If you have a resilient, thriving culture, you’re more likely to endure and even accelerate growth during tough times, according to a Gallup study. That means you should focus on having a team with disci - plined thought, disciplined people, and disciplined action. Moreover, ev - eryone must be united and working towards a common goal. With the right strategy, right exe - cution, and right culture, you’ll be in a position to thrive in 2021. On to 2021 and beyond It’s easy to say let’s just be done with 2020. But thoughtful reflection can uplift us. We can learn a lot from this past year. 2020 has shown us the resiliency of the human spirit. Real estate is no easy game, yet here you are. You’re reading this and preparing for the road ahead. Take these lessons from 2020 into 2021 and beyond, and you’ll be in a position to not only endure good times and bad, but also excel in any environment. As it turns out, you don’t even need a crystal ball. •

capital that was virtually impervious to the market shifts? You could ensure virtually no good deal passes you by. This is why you must evaluate your sources of capital so that you can manage future fluctuations. Where you should get your capital What works for you may vary, but it is important to create certainty during uncertainty. Take steps while you can to: 1 Analyze where your current capital partner gets their funds. If that money is tied to sources they can’t control, such as a Wall Street fund, know you may have fewer options during a market downturn. 2 Find a lending partner that is solely reliant on their ability to garner investments. These private money lenders have a structure that allows them to continue lending, even during hard times. 3 Identify a stable, scalable source of capital, i.e. a line of credit. This gives you consistent access to funds. When getting a traditional loan becomes tough, that means you’ll have backup sources of cash. We’ve seen many investors open lines of credit during the pandemic for this very reason. LESSON #3 CULTURE IS EVERYTHING When Coronavirus hit, it imme - diately became clear: Only the elite organizations would survive and thrive. You can have a good strategy, but you also need a good culture to win in real estate. This begins with committing to a conservative approach, always doing your due diligence, and having more cash reserves on hand. This will not

DonWenner is Founder and CEO of DLP Real Estate Capital.

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