MARKETS & TRENDS | 12 Vacant Housing

MARKETS & TRENDS | 14 Healthy Returns

STRATEGY | 16 Cryptocurrency: Inherently International


Real R OI






RCN Capital provides time- sensitive, bridge financing to real estate investors to fund their non-owner occupied residential and commercial properties. The company has grown to employ 70 people, under-write thousands of loans ranging from $50,000 to $2.5 million and originate more than $1 billion throughout the United States. CEO Jeffrey Tesch owes this growth to customer service being the number-one priority.

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Vacant Housing ATTOM Data Solutions recently released its Q3 2019 Vacant Property and Zombie Foreclosure Report, which found there are more than 1.5 million (1,530,563) U.S. single-family homes and condos vacant in the U.S. 12 MARKETS & TRENDS

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14 MARKETS & TRENDS Healthy Returns The U.S. economy keeps evolving toward a regional service model, where urban centers concentrate certain specialized services that are available to a wide regional population. A look at how regional service models are affecting real estate.

Cryptocurrency: Inherently International 16 STRATEGY A currency that crosses boundaries and eases real estate investing does exist.

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Jeffrey Tesch Puts Customers First to Grow RCN Capital SERVICE Rooted in




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FEATURED ARTICLE: Rooted in Service

T hough his roots might be far from residential and commercial financing, RCN Capital CEO Jeffrey Tesch’s first foray into real estate investing opened his eyes to a world of opportunity. In the 1990s, while Tesch oper- ated several Subway restaurant franchises, he sought hard-money lenders to fuel his first real estate deals. On several occasions, Tesch encountered less-than-scrupulous lenders that soured his experience. Not only did the lenders inflict various fees to simply discuss a loan, Tesch said communication was poor, the delays were long, the terms often shifted, and the total cost at the signing table was more than what was first promised. “It took days without hearing anything, sometimes a week, and then if you're lucky, you’d get a commitment letter,” Tesch recalled. “And the commitment letter may or may not hold up at closing — it’s the bait and switch commitment to get you to the table. They’d say ‘Well, unfortunately, this came in a little higher because the treasury market is fluctuating.’ They’d use any excuse to change the terms at closing. That was real- ly the experience I always had with hard-money lenders.” While less than ideal, the lacklus- ter lending experience ultimately proved to be an invaluable spring- board into Tesch’s current venture, RCN Capital. With more than 20 years of prioritizing meticulous cus- tomer service at his Subway fran- chises, Tesch contemplated how he could create a lending organization that stood by its word and provided lessors a quality experience. It didn’t take long for Tesch to realize that his firm could differ- entiate itself through integrity and strong customer service. And thus

I had no formal training in commercial lending at all. But I did knowwhat my experiences were with hard money as a real estate investor and I did knowhow I could take the lessons learned from running the Subways from a consumer perspective and put those best practices into building out a commercial lending platform that, at the end of the day, was servicing the consumer…My roots are in consumer service."

A NEWFRONTIER Based in South Windsor,

in 2010, with his lending expe- riences fresh in his mind, Tesch launched RCN Capital. “When I exited the Subway busi- ness and entered the commercial lending business, I took all of that knowledge that I had from the Subway brand regarding consumer service and I brought it with me to build out RCN Capital,” he said. “From what I learned about cus- tomer service back in my restau- rant days, I knew exactly how not to treat customers when starting in the lending industry.” Without professional lending ex- perience, Tesch leaned on what he knew best — customer service. “I had no formal training in com- mercial lending at all,” Tesch said. “But I did know what my experienc- es were with hard money as a real estate investor and I did know how I could take the lessons learned from running the Subways from a consumer perspective and put those best practices into building out a commercial lending platform that, at the end of the day, was servicing the consumer. … My roots are in consumer service.”

Conn., RCN Capital now provides time-sensitive, bridge financing to real estate investors to fund their non-owner occupied residential and commercial properties. It also offers bridge loans and provides real estate-backed lines of credit. Over the years, RCN Capital has grown to employ 70 people, under- write thousands of loans ranging from $50,000 to $2.5 million and originate more than $1 billion throughout the United States. In addition to its priority of customer service, Tesch said RCN Capital quickly grew thanks in part to its timing. Coming out of the Great Reces- sion, Tesch said that RCN Capital focused on taking what was then known as hard-money lending and elevating that to become a commer- cialized lending product. It specifi- cally serviced real estate investors that were buying distressed assets and foreclosures, helping investors return the properties to occupancy status and put them on the market. “We certainly wanted to build a

business that was going to profes- sionalize a segment of the lending world that was seedy and often not a pleasure to deal with,” Tesch said. “But, more importantly, we saw a tremendous opportunity to grow a business that was bringing value to neighborhoods that often had an eyesore. And the only way that eye- sore was going to be cured was if an investor came in and was willing to take a risk. … At the end of the day, we wanted to make a profit, but we wanted to build something that we were really proud of.” That approach paid dividends. Through 2016, Tesch said that RCN Capital doubled its portfolio every year and continued adding staff to meet the swelling demand. As the volume of customers seeking to revamp foreclosures declined, RCN Capital evolved to

serve a more diverse customer base. The company began to help investors seeking not only to fix- and-flip homes, but also renovate and acquire long-term rental homes and multi-unit buildings. The company’s 30-year, long-term loan program has been particularly popular, Tesch added. “We're having such a great year because we entered the 30-year rental market, or the 30-year single-family, one-to-four non-owner-occupied rent- al loan space,” he said. “We entered it in a big way at the beginning of 2018, and for us it took a good six months for our team to get a handle on it. We have a lot of loan officers who needed to get comfortable with it. … In the beginning of 2019, our team was so well versed in it that we were capturing market share left and right.” That success in capturing market

share is in part thanks to Tesch’s perspective on how to earn and keep customers’ business. Tesch said he often shares that perspec- tive with his team via an analogy. “I often say to the team when we're doing team meetings, ‘You folks are selling gasoline out there and when you're driving down the road, the gas station that you're going to pull into is the one that's clean, bright, and the one you're going to get the best experience at because the price is all just about the same,” he said. “I look at it the same exact way here at RCN Cap- ital. It's a commoditized product, and the only way we win is with our staff really being engaged with our customers. I believe we're winning because of the level of customer service that we're giving to our consumers.”

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FEATURED ARTICLE: Rooted in Service

Tesch also attributes the com- pany’s growth to his experienced team. RCN Capital was methodical in the additions it made to its team thanks to a piece of valuable advice Tesch received early on. “My mentor said, ‘When you’re making your new hires, make sure they are smarter than you are,’” Tesch said. “If you hire right and you make them part of your team, they will elevate your company and they will make everybody look bet- ter. Never fall into the trap of hiring people that aren't on your level because you're afraid it would be something more than you. That was the best piece of advice I ever got, and we continue to do that today.” he’s excited to be rolling out more avenues for customers to connect with the company. While he will always love human interactions with customers, Tesch said RCN is now working to build out a system in which a customer could conduct an entire transaction online. “We're going to continue to develop that portal as more folks are wanting to interact through an electronic means,” he said. “We’ll always be a consumer-friendly, pick-up-the-phone-and-speak-to- us company. But we've really gotten serious over the past two years about being able to interact with a consumer so that they hardly need to speak to us if they don't want to.” When looking at broader trends in real estate, Tesch said that he’s often asked when the United States will encounter its next recession. In general, Tesch said he believes that the single-family housing market in the United States is dramatically underbuilt at the moment. While some markets are exceptions, Tesch said that most are underbuilt, which has caused a steep rise in the aver- age transaction price over the last WATCHING THE MARKET For RCN Capital, Tesch said

five years and the continued reha- bilitation of existing properties. “I don’t see a slowdown of any sort in the demand for single-fam- ily housing for at least the next 24 months,” he said. “Rental housing also continues to be in demand, and a lot of that is driven by folks wanting to live closer to urban cen- ters and not live such far distances from their workplaces. We expect that, without any major event like an

the rehab, make sure to be as spe- cific and deliberate with the repair list as possible," Tesch said. “The reason you want all these details is that when an appraiser goes to look at what your compa- rables are in the neighborhood, you will have a much better idea of whether or not you are on point for improvements, whether you're under-improving it or over-improving it for your specific geo- graphic area,” he said. “That's su- per important because you never want to be the most expensive house on the street.” Tesch is a firm believer that his custom- ers’ growth and development will fuel RCN Capital’s future. It’s why he takes great pride in coaching customers and pairing them up with an account executive that will be with them throughout the business relationship to ad- dress questions, concerns or ideas. Tesch acknowledges there’s a lot of noise and competition in the lending space, but rarely are there lenders that ensure customers have all the tools possible for success with the projects they’re undertak- ing. That’s ultimately what puts RCN Capital ahead of competitors. “At the end of the day, how RCN wins time and again is that level of service,” he said. “To me, that’s really how things should be.” •

international cri- sis or oil hitting $200 a barrel, that business will continue to grow on a very brisk pace.” Regardless, Tesch knows that the market can’t continue at

its breakneck pace forever. When that eventually occurs, Tesch is comforted in knowing that his firm’s foundations are solid. “I believe that if you build a com- pany with really sound values and roots that it will have the ability to weather any storm,” he said. “That's how we set RCN Capital up for long-term success. … The roots run deep here, and no matter where the economic volatility takes us, we're going to move forward to be a substantial and profitable force moving forward.” Asked what advice he might offer real estate investors, Tesch said that due diligence is imperative. RCN Capital is keen to coach its customers with their specific deals as to maximize their success, he said, including on how to approach a rehab project. "Make sure to get a licensed appraiser to value the property to get an opinion on what the price is today. Then, when you’re filling out your pro forma or scope of work for

Bobby Burch is the Founder of Bobby Burch Creative, a small business storytelling studio. Learn more at bobbyburchphotography. com and contact him at

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by ATTOM Data Solutions

A TTOM Data Solutions recently released its Q3 2019 Vacant Property and Zombie Foreclosure Report, which found there are more than 1.5 million (1,530,563) U.S. single-family homes and condos vacant in the U.S. This number rep-

properties (2,428), followed by Flor- ida (1,634), Illinois (985), Ohio (891) and New Jersey (463). In drilling down to the local market level, which housing markets have the most “zombie” properties?

resents 1.6 percent of all homes. The report showed there are a total of 9,612 “zombie” homes, or properties facing possible foreclo- sure, which have been vacated by their owners nationwide. New York had the highest number of zombie

The report also noted the high- est levels of vacant investor-owned properties were in Indiana (8.8 per- cent), Kansas (6.7 percent), Minne- sota (6.0 percent), Ohio, (5.9 percent) and Rhode Island (5.8 percent). And at the zip code level, the top 10 zip codes with the highest number of vacant investor-owned properties were in these zips:



New York-Newark-Jersey City, NY-NJ-PA


Chicago-Naperville-Elgin, IL-IN-WI




#2 48505 Flint, MI 2,828 vacant properties

#5 48504 Flint, MI 1,774 vacant properties #10 48224 Detroit, MI 1,627 vacant properties


Miami-Fort Lauderdale-West Palm Beach, FL

29928 Hilton Head Island, SC 4,941 vacant properties

29582 Myrtle Beach, SC 2,728 vacant properties

29572 Myrtle Beach, SC 2,325 vacant properties


Cleveland-Elyria, OH

Tampa-St. Petersburg-Clearwater, FL



Philadelphia-Camden-Wilmington, PA-NJ-DE-MD



Albany-Schenectady-Troy, NY

#6 48227 Detroit, MI 1,733 vacant properties


#8 48228 Detroit, MI 1,670 vacant properties

19132 Philadelphia, PA 1,648 vacant properties


Rochester, NY

92262 Riverside, CA 1,727 vacant properties


Baltimore-Columbia-Towson, MD


Jacksonville, FL

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T he U.S. economy keeps evolving toward a regional service mod- el, where urban centers concen- trate certain specialized services that are available to a wide regional population. This is especially true with healthcare, which is increas- ingly complex and is most efficient when clustered together. Regional healthcare centers there- fore are an attractive place to invest in rentals, even if the local economy isn't otherwise compelling. You'll want to locate properties that are close to hospitals, medical offices, or

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(sometimes) a medical school. Look at these 15 markets. Healthcare provides around 20 percent of all local jobs, and the number of those jobs grew at a fast clip in the past year. The good increase in home prices in these markets in the past year (except in Hartford, Syracuse and New Haven) also means that demand for housing (single-family and rental) is strong. With a few exceptions, these aren't sexy investment locales, but they're likely to give you healthy

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Spokane, WA






Lancaster, PA






Milwaukee, WI






North Port-Bradenton, FL






Fort Wayne, IN






New Haven, CT






Providence, RI






Asheville, NC






Syracuse, NY






Springfield, MA






Deltona-Daytona Beach, FL






Provo, UT






Winston-Salem, NC






Springfield, MO






Hartford, CT






Source :: Local Market Monitor, 2019

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Cryptocurrency is not controlled by any government, so its transfer cannot be arbitrarily stopped. This property of cryptocurrency flips the incentives for the Treasury Department.

block the transfer indefinitely. They can even require an Office of Foreign Assets Control (OFAC) license for some transactions. In essence, ‘no’ is the default answer and the money is not transferred until these third parties are assured of the money’s provenance. Cryptocurrency is not controlled by any government, so its transfer cannot be arbitrarily stopped. This property of cryptocurrency flips the incentives for the Treasury De- partment. They have incentive to complete their investi- gation in a timely fashion or risk having the transaction go through without a proper investigation. No one is advocat- ing an end run around regulations. But moving funds in cryptocurrency form stacks the enforcement mechanisms in your favor. ‘Yes’ is the default answer. Another mechanism for facilitating international investing is the STO. Tokenizing real estate and mak- ing the tokens available on a cryptocurrency exchange allows international investors to find, purchase, and own real estate from anywhere in the world. STOs are typically created as smart contracts that can automat- ically incorporate all the regulatory restrictions from multiple countries. So, the MiFID rules in Europe and the U.S. Regulation D restrictions (such as owning a year before being able to sell) can all be embedded as features of the cryptocurrency and be self-enforcing. As STOs become more popular, it will be possible for smaller investors to gain access to larger commercial projects and for international investors to invest in multiple countries while browsing on an exchange. This approach makes properties in other countries easier to find and assess as well as easier to purchase and own. Transactions can be completed much more quickly as well. STOs are available now as strategies for syndicat- ing real estate, though only a few have been completed. With STOs and the ability to transfer funds quickly, cryptocurrency has great potential to facilitate interna- tional investing even before new capabilities such as title on the blockchain become realities. Cryptocurrencies are rapidly being deployed in many aspects of real estate investing, all of which increase the capacity of investors worldwide to invest outside their own countries. • Steve Streetman, president of StreetSmart Investments, LLC, a commercial real estate investing company, is an avid cryptocurrency investor and has worked in cryptography and high-end computer modeling for over 30 years. He teaches commercial real estate invest- ment courses and is a real estate agent with RealInvestors Real Estate Services. His book “Cryptocurrency and Real Estate: How Bitcoin and BlockchainWill Transform Real Estate Investing” is anticipated to release fall 2019.



a beautiful estate in the Philippines from my computer (oh, and by the way, I made the offer in cryptocurrency). Recently there was an online auction in Australia where the price was in Bitcoin or Binance Coin. It was viewed internationally by a huge audience. Other capabilities for placing offers on real estate, creating, editing, negotiating, and executing contracts, and closing deals are also being developed and, in some cases, have completed their first few projects. Many of these opportunities are in beginning stages. There are, however, two important ways that cryptocur- rency can help with international investing today: using cryptocurrency for cross-border transfer of funds and the creation of security token offerings (STOs) for tokenized international investing in larger commercial properties. There are many potential issues with transferring funds to the U.S. from foreign countries. The U.S. Treasury Department or even a bank can hold a wire transfer indefinitely while it investigates the situation. I have seen several cases where delays in fund transfers have lasted months, resulting in lost deals. There are important and necessary ‘know your customer’ (KYC) and ‘anti-money laundering’ (AML) checks that should be done with any investor, and the Treasury Department has a mission and a right to investigate. But for money transfers done by wiring funds, the incentive for the Treasury Department is to take as long as it wants and

by Steve Streetman

T here are numerous challenges to investing in real estate outside your own country. Many things that we take for granted in the U.S. (e.g., strong property ownership protection, the ability to get a mortgage) are not true in other countries. In addition, there are language barriers, differences in currency and differ- ences in laws, taxes, and property operating norms. However, the benefits of investing internationally can be tremendous. International investing is the ultimate in diversification, and the differences — as long as you take proper account of them — can be advantageous. Plus, investing beyond your boarders comes with perks like visiting exotic destinations, meeting new people, and experiencing different cultures. Cryptocurrency is inherently international. It exists

on the internet, which is essentially global, and crosses boundaries effortlessly. As cryptocurrency is used more and more in real estate, it helps the entire process of buying real estate internationally, whether you are in the U.S. and want to invest elsewhere or if you are else- where and want to invest in the U.S. There are numerous potential ways that cryptocurrency will aid in interna- tional investing. Title is recorded on a blockchain in several countries, making it easily searchable remotely. When that process becomes worldwide, it will be easy to check title for any property from wherever you are. Similarly, there are new listing services that are already listing properties from multiple countries and making sales in different parts of the world. A prime example is I was able to put in an offer on

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