INVESTOR REVIEW HOT SPOTS FOR REAL ESTATE INVESTING
Dominion’s Dynamic Duo PAIR’S VARIED SKILL SETS ARE KEY TO COMPANY’S GROWTH
Q &A: PEERSTREET A NEW AVENUE FOR REAL ESTATE LOAN INVESTING TRENDS CHINESE INVESTORS LIKE STABILITY OF U.S. MARKET
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TABLE OF CONTENTS
INSIDE THIS ISSUE
THE BIG PICTURE 16 Lawn Care ‘Headache’ Relief
NUTS & BOLTS 38 Digging into the Details
Ken Davis and TaskEasy empower investors to focus on other outside maintenance necessities. by James Hart 24 Indicators You Should Monitor Investors need to be educated on how to watch and evaluate trends and conditions. by Abhi Golhar 26 Deep Discounting Slowdown in commercial sector is part of the natural market evolution. by Dawn Erling 28 5 Fix-and-Flip Tips To succeed, you need to recognize limitations, do your homework and have a detailed plan. by Bill Green
Five things you need to know before investing in your first piece of land. by Dr. Slim Feriani 40 Investors, Take Note You can make a living brokering notes. But you can get wealthy by owning the. by Tracy Z. Rewey 48 Casting for Leads Try probates as another option for finding the elusive investment property. by Leon McKenzie 100 Defeating Defaults Owner-financing specialist Mitch Stephen has some advice for others contemplating the strategy. by Mitch Stephen BYTHE NUMBERS 114 Labor Shortage Ahead Slowing of jobs growth will impact housing, other aspects of the economy. by Chris Porter
UP CLOSE & PERSONAL 86 A New Avenue
ON THE COVER DYNAMIC DUO
FRED LEWIS (center) and JACK BEVIER (left) bring unique skill sets and a ‘tripod approach’ to The Dominion Group.
PeerStreet’s leaders have it on a one-way course: forward. by Susan Thomas Springer
116 Focus on Foreclosures
by Robert Springer :: photos by Greg Dohler
Midyear market report shows foreclosure filings down from a year ago. by RealtyTrac
90 Global Connections Street-Smart panel tells how to evaluate foreign investing partners. 92 Get in the Game Are you watching rather than participating in real estate investing? by Kevin Guz 94 Building a Power Team The proper foundation for your investing business starts with the right team. by John and Corinne Tesh
118 Where the Action Is
Job growth in retail sector is good news for resi- dential rental properties. by Ingo Winzer
THE BIG PICTURE
NUTS & BOLTS
INSIDE 51 Investor Review Think Realty’s list of top real estate markets, plus industry perspective.
CHINESE LIKE STABILITY OF THE U.S. MARKET
GO AHEAD, GET CRAZY! Out of the ordinary marketing techniques
TWARTING BREAK-INS Protecting properties during renovation.
Chinese enamored of U.S. real estate.
RealtyShares connects investors, deal sponsors
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FROM THE EDI TOR- IN-CHI EF
PUBLISHER R. Michael Wrenn
Unselfishly Sharing Information, Insights Will Lift This Industry
PRESIDENT, AFFINITY ENTERPRISE GROUP Eddie Wilson | EWilson@AffinityEG.com
EDITOR-IN-CHIEF Linda Wienandt LWienandt@ThinkRealty.com
VICE PRESIDENT OF MEDIA SALES Robert Rakowski RRakowski@AffinityMediaServices.com 913-599-2020
hile measuring success in business, by definition, involves competitors
utors like Carter Froelich, CPA, who pro- vides valuable information about “under- standing the numbers” and applying them, which is so basic to succeeding in any business. He and Ingo Winzer, president of Local Market Monitor, have been regulars in
SENIOR STAFF WRITER James Hart
and competition, a camaraderie and sharing of resources can and should co-exist if the industry niche itself is to develop and prosper. That’s what Think Realty is all about, as
DESIGN CONSULTANTS Rivet | www.WeAreRivet.com
GRAPHIC DESIGNER Emily Bowers
PRODUCTION & TRAFFIC MANAGER Carolyn Addington
Affinity Enterprise Group President Eddie Wil- son described in a recent post on our website, www. ThinkRealty.com, in which he called for more true thought leaders in the real estate investing industry. This magazine, as part of Think Realty and AEG, our parent company, always has espoused that prin- ciple. Our mission since the very beginning has been to advocate high standards, ethical business practices and collaboration so the industry can develop and mature into a respected niche. To that end, we offer a forum for both investors and vendors who are pas- sionate about and committed to those ideals. Abhi Golhar is one, and Eddie highlighted him in particular in his website post. “Ahbi is a true thought leader,” Eddie wrote. “He gives information based on his investing success without a monetization hook. … His information is invaluable to an investor. And he has never clouded his message by trying to push an agenda.” Abhi is one of this magazine’s regular contributors for those reasons. He also regularly writes blogs for our website and speaks at our educational events. And he is not the only one. We have longtime contrib-
this magazine from its very earliest days. Other ongoing contributors I want to spotlight and thank include Kevin Guz, John and Corinne Tesh and Kelly and Chris Edwards. Kevin addresses a part of our audience—the beginning, part-time or “weekend inves- tors”—whose success is critical to helping the industry grow and thrive. John and Corinne are husband-and- wife investors who are unselfish in sharing “how-to” details of their projects. And brothers Kelly and Chris Edwards, too, have written about their rehabbing efforts and as their business has grown and branched into oth- er areas, they have expanded their message. And then there are more-recent regulars, like Lawrence Fassler, Engelo Rumora, Dawn Erling and Mitch Stephen, who give insights into varied areas and investing strategies beyond the mainstream. As the magazine has evolved, the list has grown, so there are many, many more names than we have room to list here. We appreciate them all and welcome any others who also want to share their expertise—not sell it—so that more individuals can participate and succeed in real estate investing. •
CONTRIBUTING WRITERS Rick Abell, Teresa Bitler, Lee Blackburn, Scott Carson, Clint Coons, Eric Dean, Carole J. Ellis, Dawn Erling, Lawrence Fassler, Slim Feriani, Carter Froelich, Judy Goldberg, Abhi Golhar, Bill Green, Kevin Guz, Will Hardy, Tim Herriage, Steven Hickox, Will Holly, Michael Jordan, Carly Lambert, Leon McKenzie, Steve Olson, RJ Palano, Chris Porter, Tracey J. Rewey, Marco Santarelli, Robert Springer, Susan Thomas Springer, Mitch Stephen, John and Corinne Tesh, Brandon Thompson, and Ingo Winzer FOR ARTICLE REPRINTS :: Contact Jeremy Ellis at Reprint Pros, 949-702-5390. www.reprintpros.com. SUBSCRIPTIONS :: The annual subscription for Think Realty Magazine is $28.95 for six issues 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. ABOUT THIS MAGAZINE :: ThinkRealtyMagazine isapublicationof AffinityRealEstateMediaLLC.Reproductionoruseofanyeditorial orgraphic,withoutpermission, isprohibited.Wearenotresponsible for thecontentofanypaidadvertisements.Forreprintrights; toob- tainadetailedstatementofourprivacypolicy;and forallsingle-copy requests,addresschangesandothersubscription inquiries: COVER PHOTOGRAPHY Greg Dohler
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represented by the brand. Cohen has more than 20 years of experience in marketing and management, including 10 years as CEO for $1.3 billion, NASDAQ-listed company Caesarstone USA. Previously, he held key leadership roles at Paz Oil Co. Ltd. and Strauss Marketing Ltd. Cohen received his B.A. in management and political science from Tel Aviv University and studied executive retail and marketing studies at Oxford University. Cohen has been recognized as Outstanding CEO by Dun & Bradstreet, Best Marketing Executive by the Israel Advertising Association and won a prestigious Effie Award for Most Effective Advertising Campaign in 2005, in recognition of his work promoting Paz’s Yellow convenience stores.
years, first as president and chief operating officer in June 2010 before becoming president and CEO in January 2013. Young returns to the Coldwell Banker brand after serving as president and CEO of ERA Franchise Systems LLC since 2009. Prior to that, Young spent five years in senior execu- tive leadership roles with Coldwell Banker Real Estate. Both franchise brands are subsidiaries of Realogy Holdings Corp. SUSAN YANNACCONE succeeds Charlie Young as pres- ident and CEO of ERA Franchise Systems LLC. Yannac- cone moves up from ERA’s chief operating officer, bring- ing two decades of experience in real estate franchising and sales. Prior to joining ERA, Yannaccone served in a number of senior executive leadership roles at competing national and international real estate franchise brands with responsibilities ranging from network servicing to operations. She began her career in commercial real estate sales before moving into residential real estate. Recently, Yannaccone earned recognition as a 2016 Woman Worth Watching by the Profiles in Diversity Journal, and in 2015 was named as a Woman of Influence by Housing Wire. She is a graduate of Clemson University, with a bachelor’s degree in financial management. • MOBILE APP BILLEDAS ‘DISRUPTOR’ TO COMMERCIAL REAL ESTATE INDUSTRY Eastern Union Funding, a leading U.S. commercial mortgage company, has introduced a free mobile app de- signed to be a welcome disruptor to a side of the real estate industry that has lagged in embracing technology. The free app—available in the Apple App Store and via Google Play for Android—gives industry
NATIONAL TENANT NETWORK OPENS MEMPHIS OFFICE
WHAT REAL ESTATE INVESTORS HAVE KNOWNALLALONG Results of a recent national survey by Bankrate validate what real estate investors have always known: that real es- tate is a great wealth-building tool, pre- ferred over stocks and bonds, CDs, gold and other precious metals. In late July, when Bankrate’s Finan-
National Tenant Network recently opened a Memphis office, from which all of the company’s Tennessee operations will be overseen. Asia and Marc Mason will manage the new office. NTN is a national tenant screening company with more than 35 years of experience in tenant selection that serves real estate investors and property managers from 20 regional offices. For information about its services or NTN’s suite of secure products, go to www.ntnonline.com or call 800-228- 0989. NTN Tennessee may be contacted at NTNTennessee@ ntnonline.com or by calling 1-888-767-7386. •
cial Security Index asked, “Which would be the best way to invest money you wouldn’t need for more than 10 years,” 25 percent of respon- dents chose real estate, followed by cash investments (23 percent), gold or precious
SOURCE :: National Tenant Network
CARTER MURDOCH , Ph.D., has been appointed to the newly created role of senior vice president of operations by the Realogy Franchise Group (RFG), a global leader in real estate franchising. Murdoch will oversee RFG’s Centers of Excellence, which provide expertise, support and solutions for Realogy-af- filiated brokers across all of its brands
metals (16 percent), the stock market (16 percent), bonds (5 percent), none of these (6 percent) and no answer (9 percent). As real estate investment firm Holdfolio’s co-founder Ster- ling White told Bankrate.com: “Houses are tangible. You can physically see and feel the product. So you know where your money is going: It’s going into that house. With stocks, you have no clue where your money is going.” The caveat is that an investment property cannot be turned around overnight if the owner needs cash. Plus, Avani Ramnani, CFP and director of financial planning and wealth management at Francis Financial, told Bankrate.com, “When you need the money, you don’t know what the real estate market is going to do.” So due diligence should always be a part of any investor’s strategy. Other findings by the Bankrate Financial Security Index— which gauges respondents’ feelings about debt, savings, net worth, job security and their overall financial situation—include: • An improving sense of financial well-being • A slight decline in feelings of job security • Some indication of investors’ uncertainty about the future • BLACKSTONE TO TAKE INVITATION HOMES PUBLIC, REPORTS SAY Media reports indicate that investment firm Blackstone Group LP may go public with its Invitation Homes unit in the first half of 2017, although Blackstone isn’t saying. Bloomberg cited “two people familiar with the matter” in its report. Speculation is that Invitation Homes, the country’s larg- est single-family rental landlord, would go public as a real estate investment trust. Invitation Homes was born out of SOURCE :: Bankrate.com
PEOPLE IN THE NEWS Longtime commercial real estate industry executive ERIC PAULSEN has joined Ten-X as senior vice president of business development. In his new role, Paulsen will oversee
Ten-X Commercial’s Private Client Group, a growing division within Ten-X, which is focused on the community of private investors buying and selling commercial properties on the company’s innovative online transaction platform. Paulsen has nearly three decades of experience in commercial real estate, including more than 11 years as an executive at CBRE
in the specific areas of business development, data, learn- ing and technology deployment. Murdoch most recently held the role of senior vice president, strategic growth and industry relations at Century 21 Real Estate LLC, which is part of the Realogy Franchise Group. He also has more than 20 years of operational management experience in the mortgage and banking industries. First Capital Real Estate Investments, LLC has hired ROBERT BURKE as executive vice president of sales and Miguel Aguilar as regional vice president of sales for the Midwest region. Burke will be responsible for oversee- ing sales nationwide for the firm, which is the sponsor of commercial real estate investment programs including the public nontraded REIT, First Capital Real Estate Trust In- corporated. He has more than 13 years of experience within the financial services industry across product development, product management, wholesale distribution, investment banking and financial planning. CHARLIE YOUNG takes over as president and CEO of Coldwell Banker Real Estate LLC on Sept. 1, 2016, as Budge Huskey retires after 18 years with the Coldwell Banker system in both franchising and brokerage executive roles. Huskey led the Coldwell Banker brand for the past six
Group, 12 years as vice president of national acquisitions at LNR Property and a three-plus year stint at Ten-X (then Auction.com), where he played a critical role in growing the company’s commercial business before departing in 2014. He most recently served as senior vice president at Prism Realty Corporation in southern California. Paulsen has been directly involved in the buying, selling or asset managing of over $10 billion in commercial real estate in all product types across the United States.
professionals access to proprietary data; sophisticated, real-time trans- action tools; and a curated newsfeed.
The information will include “the same calculators, vendor contracts and detailed data that our brokers have at their fingertips when advis- ing clients,” according to Ira Zlotowitz, president and co-founder of Eastern Union
SAGI COHEN recently took over as chief executive of the Peak Corporate Network, which oversees a group of companies providing a comprehensive set of real estate services nationwide. As CEO, Cohen manages the organization’s support, sales and marketing units as well as the operations of all the entities
Funding. “Other information, such as interest rates from particular banks, is typically only available by calling brokers or lenders themselves.” For more information, visit www.easternuc.com. •
SOURCE :: Eastern Union Funding
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the housing crisis in 2009 in response to the massive demand for rentals that occurred after homeowners lost their homes and could not obtain credit for a replacement purchase. •
REBOUNDING NEIGHBORHOODSWORTHA LOOK BY INVESTORS Many down-and-out neighborhood housing markets across the country are on the rebound, thanks to a confluence of market forces working in their favor. And that could lead to some great deals for real estate investors. RealtyTrac (now an ATTOM Data Solutions company) analyzed housing market and neighborhood quality data in 3,561 U.S. ZIP codes with a combined population of 124 million to select the 35 best “bad” neighborhoods in which to buy a home. Leading the list were East St. Louis, Missouri; Baltimore, Mary- land; Charlotte, North Car- olina; Jacksonville, Florida; and Plainfield, New York. An interactive visual chart of the 35 best “bad” neighbor- hoods can be accessed at http://www. realtytrac.com/news/real-estate-investing/ best-bad-neighborhoods-to-buy-a-home/. “The underperforming school scores and inflated rates of underwater homes in these markets demonstrates they are lagging the housing recovery seen across much of the rest of the nation,” said Daren Blomquist, senior vice presi- dent, ATTOM Data Solutions. “But it is clearly evident from this data that many individuals and institutions are betting on these hyperlocal housing markets to still bounce back. Home-flipping returns are substantially above the national aver- age, indicating strong buyer demand for fixed-up homes; construction loans are increasing, indicating increased develop- ment often at a large scale; and the share of Millennial population is increasing, indicating that the pool of new renters and homebuyers is growing.” •
SEPTEMBER 7-8 6th Specialty Finance Summit Sponsored by iGlobal Forum New York, New York www.cvent.com/events/6th-spe- cialty-finance-summit/event-sum- mary-b738171632294e2bb- d12210a547b41aa.aspx SEPTEMBER 11-14 2016 Five Star Conference and Expo Dallas, Texas www.thefivestar.com/fsc/ Private Equity Summit (West) Sponsored by iGlobal Forum Los Angeles, California www.cvent.com/events/15th-re- al-estate-private-equity-sum- mit/event-summary-836f45d- 2149b4144a58ddde36565a30f.aspx SEPTEMBER 19 Cap Intro: L/S Equity – Event Driven Alternative Investing Sponsored by Catalyst Financial Partners New York, New York www.catalystforum.com/events/ls- equity-event-driven-investing/ OCTOBER 15 Think Realty Expo Sponsored by Think Realty Atlanta, Georgia www.thinkrealty.com/events/atlanta/ OCTOBER 24-27 ULI 2016 Fall Meeting Sponsored by Urban Land Institute Dallas, Texas www.uli.org/events/fall-meeting/ SEPTEMBER 14-15 15th Global Real Estate
SOURCE :: The MReport
FANNIE MAE OUTLOOK HOLDS STEADY FOR ECONOMIC GROWTH Fannie Mae’s economic growth outlook for the second half of the year remains unchanged from the
prior forecast at about 2 percent, according to its Economic & Strategic Re- search Group’s July 2016 Economic and Housing Outlook. Consumer spending is expected to drive growth for the rest of 2016, Fannie Mae says, as busi-
nesses face headwinds from shrinking profits, weak productivity and rising labor costs in the face of uncertainty stemming from Brexit and the U.S. presidential election. Highlights of the report include: • Government spending and residential investment should be positive con- tributors to economic growth in 2016. • Nonresidential and inventory invest- ment and net exports are expected to drag on growth. • Moderate housing expansion is ex- pected for the remainder of 2016. • Housing inventory is expected to remain tight, boosting home prices and constraining affordability. • No interest rate hike by the Fed is foreseen until mid-2017. • Brexit is seen as having only slight impact on the U.S. economy. •
SOURCE :: RealtyTrac.com
SOURCE :: Fannie Mae
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THE BIG PICTURE
TRENDS & ISSUES
the sudden influx of Chinese capital into the U.S. real estate market:
Chinese buyers invest in U.S. real estate. “The average budget that our buyers tell us they have for property in the U.S. is about $2.6 million.” Juwai’s survey of its users who made inquiries on properties showed the following motivations for purchasing property in the United States: Immigration is a main driver of Chi- nese real estate investment, according to Hsu. “We’ve been seeing a big wave of people doing the EB-5 Program, immigrating to the U.S., and the main reason that they are doing that is be- cause the U.S. has better education and a better living environment,” Hsu says. The EB-5 program allows a quota of foreign investors to immigrate to the United States if they purchase real estate. Hsu says the Chinese have really taken advantage of the program and use it to get green cards and buy second homes to stay part of the year in the States. Many initially use the homes to be close to their children who are attending college in the United States, and then either live
• The United States is viewed as more so- cially and politically stable than China. • The Chinese government does not allow direct ownership of real estate by its citizens. Instead, buyers get a long-term lease on the property from the government. Well-heeled Chinese buyers are increasingly showing an appetite for direct own- ership of real estate. • The erratic performance of the Chinese stock market and the yuan’s fluctuations have led Chinese in- vestors to seek the stability of more developed markets, including the United States. • “China has more billionaires than any other country in the world, and nearly as many millionaires as the U.S.” says Charles Pittar, CEO of Juwai.com, a company that helps
SOURCE: Juwai Survey
in them or let their kids use them. Chinese are not very fond of renting, according to Hsu, as it doesn’t provide a return, and they view it as “basically money down the drain,” she says. Real estate is viewed as an investment and as a place to live, Hsu says. Chinese prefer new developments or condos over other property types, adds Hsu. BUYING AMERICAN Pittar says that “all levels” of well-off Chinese are purchasing U.S. investment properties, from upper middle class families to wealthy families purchasing $100 million luxury estates. Property developers and large corporations are buying homes as well. Although the ultra-wealthy are key to the “billionaire towers” being built in Manhattan, there are many more buyers able to spend only up to about $1.5 million, according to Pittar. Despite the fact that Chinese prefer “name brand” real estate in places like Manhattan, “The New York borough of Queens is actually the most popular destina- tion for Chinese buyers in the Big Apple,” Pittar says. Pittar says that 69 percent of Chi- nese investors buy in cash, as using financing would lead to concerns “about having to pay a U.S. dollar mortgage that would get much more expensive if the yuan were to fall in value.”
Staying Power CHINESE INVESTORS ARE CONTINUING TO PUT THEIR DOLLARS IN A MORE-STABLE U.S. REAL ESTATE MARKET.
by Robert Springer
hinese investors, like those from other foreign countries, found deals aplenty in U.S. real estate at the height of the recent financial crisis here. Now that the U.S. economy has regained strength, the pickings aren’t as easy, but the Chinese remain as enamored of U.S. real estate as ever, even overtaking perennial leader Canada in 2015 as the largest foreign buyer of single-family homes in the United States. This development was made even more startling by how swiftly it oc- curred: Chinese investment in U.S. real estate was “negligible” prior to 2010, according to a recent report by the Asia Society and Rosen Consulting Group. “Breaking Ground: Chinese Invest- ment in U.S. Real Estate” states that “between 2010 and 2015, Chinese buy- ers spent at least $93 billion on homes, including condominiums, for occupan- cy and investment.” Spending increased
at a 20 percent annual rate and helped some markets that were severely im- pacted by the real estate downturn. The report adds that Chinese buyers also pay significantly more for U.S. housing than do other international buyers because they tend to buy in ex- pensive markets like New York City and California. (Texas and Florida are also popular with Chinese investors.) The trend was foreseen by members of the Association of Foreign Investors in Real Estate (AFIRE) in the organiza- tion’s 23rd Annual Survey, released ear- ly last year. Two-thirds of respondents said they expected China to become the largest source of capital into the United States in 2016 and beyond, and 72 percent predicted Chinese investment will be a long-term, permanent inflow. AFIRE’s 24th Annual Survey, out this past January, says foreign investor confidence in the U.S. real estate market
remains strong, and that for the Chinese and others, this is the safest destination for their investment dollars. Wen Hsu, a broker with City Con- nections Realty in New York City who helps Chinese clients buy condos in Manhattan, agrees with the timing of the Chinese investment push. “Chinese buyers have really taken off around the 2011-12 timeframe, and because I speak and read Chinese, that has been a main focus for my client base,” she says. Why have the Chinese become so interested in U.S. residential real estate? It turns out that Chinese investors view the United States—especially its major markets—as some of the best places in the world to park their yuan.
AFFINITY INVESTMENTSALLOWS CHINESE TO BUYAMERICAN
mong the companies catering to Chinese investors interested in the U.S. market is Affinity Investments, a global investment solutions firm with Asian headquarters in the Shanghai World Financial Center and additional offices in the United States. A part of Affinity Enterprise Group, parent company of Think Realty, the firm provides top-of-the-line investment opportunities to Chinese investors by simplifying acquisitions while maximizing returns.
Affinity’s leadership team originates from a culture of innovation and service that goes back more than a century. Affinity Investments has access to over 25,000 U.S. real estate investors. This combination allows Af- finity to bring a full range of investment opportunities, specifically real estate projects in all asset classes, to Chinese investors. For more information, contact Kirk Miles, president, at 913-302-5938, or email@example.com.
WHYAMERICA, ANDWHY NOW? Experts point to several reasons for
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Your Retirement Account Your Way TM
crisis, it went up slightly above 2 percent, but gener- ally, it has been very, very low compared to other places,” she says, making it easy to rent out a condo. GOVERNMENTS MAKING BUYING MOREDIFFICULT Hsu says that the Chinese and American governments are now making it more difficult for Chinese clients to buy U.S. real estate, putting a crimp on Chinese pur- chases. Chinese investors have traditionally been able to transfer $50,000 per year out of China to buy real estate. To buy a million-dollar property, 20 people would transfer their $50,000 allotments into one account. After years of lax en- forcement, both govern- ments are strictly en- forcing the policy. “Since that started last year, it’s definitely a little bit more challenging for a Chinese buyer whose money is not already out of China
COUNTRYPROVIDING THE MOST STABLE SECURE REAL ESTATE INVESTMENTS
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SOURCE: Juwai Survey
American developers have noted the trend and are actively marketing to Chinese investors. In 2015, Extell Development exclusively marketed The One Manhattan Square condo tower to Asian buyers. The 800-unit building has condos priced from $1 million to $3 million. U.S. buyers were told to wait until this year for their chance to buy. Chinese investors love New York, especially Manhattan. Not only is it “the” name brand in American real estate, properties hold their value on Manhat- tan. Even though it’s a very expensive address, Hsu says Chinese investors find value on the island. “The vacancy rate in Manhattan has been below 2 percent for the past 10 years. During the financial
to buy in the U.S. There’s a way it can be done, but it’s generally a lot harder compared to before,” says Hsu. That said, Hsu thinks that “the U.S. is still a very good investment. The law mainly targets the politicians and mon- ey laundering, so since the majority of people are not politicians, my feeling is that it will work out. It’s just a matter of time. The need is there, so I still believe that this market is still very strong.” •
ASIA SOCIETY www.asiasociety.org | 212-288-6400
CITY CONNECTIONS REALTY www.lp-nyc.com | 917-902-6489
JUWAI www.juwai.com | 646-281-7322
ROSEN CONSULTING GROUP www.rosenconsulting.com 510-549-4510
Robert Springer is a regular freelance contributor to Think Realty Magazine. Contact him at firstname.lastname@example.org.
Call (800) 248-8447 today or visit www.iraservicestrust.com/RE
©2016 IRA Services, Inc. All rights reserved. All trademarks are the property of their respective owners.
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THE BIG PICTURE
The Tech Startup Curing the Lawn Care Headache KEN DAVIS AND TASKEASY EMPOWER INVESTORS TO FOCUS ON OTHER TASKS.
by James Hart
en Davis had a problem. About eight years ago, the Utah man started building a portfolio of rental properties—more than a hobby, but not quite large enough to justify hiring his own team. So, for a long time, Davis was on the hook for lining up vendors to mow his lawns and remove snow. And that was a giant pain in the neck. “One of the big struggles I had over and over again was getting services dispositioned,” he said. For example, one of Davis’ properties was more than 4.5 hours away from his home. Whenever a tenant moved out, Davis had to take a road trip to line up a vendor to handle mowing during the vacancy. “It would be really hard to go meet a contractor to get a bid,” Davis said. Another time, he paid several months’ worth of invoices to a vendor for mowing—only to receive a warning letter from the homeowners association. Turns out, the vendor hadn’t done the work after all. A lot of investors have faced similar problems. But Davis’ background is a little different. Before he became a real estate investor, he was the founder of Oakley Networks, a cybersecurity firm purchased by defense contractor Raytheon in 2007. Davis realized there might be a big business opportunity for a company that could help property investors quickly and effi- ciently schedule reliable maintenance. That led to the creation of TaskEasy, a Salt Lake City-based startup that allows customers to hire vendors online as easily as they would send a package through FedEx. Davis and his team have vetted a network of 5,000 snow-re- moval and lawn service providers, each of whom is insured. TaskEasy also has a system for verifying that work is actually done. If there’s a problem, the company offers a 100 percent money-back guarantee, and their customers aren’t billed until they’re satisfied and the service is approved. In the past three years, TaskEasy’s partners have mowed more than 500,000 lawns, and it now facilitates more than $10 million
in mowing. Investors have put more than $24 million into the company, which employs about 150 people. There are a handful of companies that offer similar services, but they tend to be regional operations, or they mostly employ their own mowers. None of them has a reach like TaskEasy, which serves more than 4,800 communities. “We’re doing it at a scale that nobody else comes close,” Davis said. HOWTASKEASYWORKS Over the last several years, entrepreneurs have created a string of online services for real estate investors. If you have an Internet connection, you can advertise properties for sale, run back- ground checks on prospective tenants and apply for financing for your deals. But there wasn’t anything exactly like TaskEasy available for investors, Davis said. TaskEasy’s specialty is individual, relatively small properties. That includes single-family residences, but also gas stations and some other commercial real estate. These are situations where it doesn’t make sense for the property’s owner to have a full-time maintenance team. If a customer needs service in a community where TaskEasy doesn’t have a vendor, the company makes a good-faith effort to find and recruit one to their network. If a customer needs service in a community where TaskEasy doesn’t have a contractor, the company makes a good-faith effort to find one. TaskEasy only handles exterior maintenance, and only lawn care and snow removal, though power washing, gutter cleaning, tree trimming and other services could be next. Interior maintenance and improvements aren’t part of the company’s business model. There are too many variables involved in, say, a bathroom remodel to come up with stan- dardized pricing. “But there are some services, like lawn mowing and snow clearing, that are really well understood,” Davis said. “They’re
easily measured, especially with modern technology.” When vendors visit a property, they launch a smartphone app on their phones, showing they’re on the clock and physi- cally at the property. Vendors also use the app to take before and after pictures. They have to do this, Davis said, or they don’t get paid. “Then all that information is packaged up neatly and delivered to the customer via email and a dashboard,” Davis said. The investor gets a couple days to vet the work and approve payment. TaskEasy then disburses funds to the vendor almost immediately. TaskEasy takes a percentage of the payment, but the service also offers a great deal of value to vendors. They don’t have to spend as much as time drumming up business or managing their paperwork. “We do about half the contractors’ job, and we charge a small fee for that,” Davis said. Davis and his team spend a lot of their time thinking of ways to make life easier for their vendors. A big part of TaskEasy’s suc- cess depends on them, after all. Service providers who do a great job are rewarded with more business. TaskEasy also offers an equipment-financing plan for contractors who handle more than 10 or more properties. “I’m doing this now because I really, really believe in the services economy, and I believe there’s a way to make it work for people who are willing to work hard,” Davis said.
ments all the time,” he said. Clients can use TaskEasy to schedule one-time or recurring visits. The company also has divided the country into a series of climate zones, and it’ll make recommendations for service based on seasonal and weather conditions. Orlando properties, for example, need lawn care practically all year long, but in Chicago, nobody’s going to touch a lawnmower in January. In cities with harsh winters, TaskEasy also can remind cus- tomers to have their sprinkler systems blown out so they won’t freeze and burst during colder months. “By managing that prescriptively,” Davis said, “we’ve saved the customers a lot of money, time and hassle.” The bulk of TaskEasy’s systems are already in place, but there are still curveballs the team has to handle—like explaining to a customer why it costs $300, not $35, to mow a 4-foot-tall jungle of a lawn. In some cases, the company has eaten the cost of a job that was more expensive than originally budgeted. The goal is to always do right by customers, and that’s paying off. About 30 percent of TaskEasy’s new business is from referrals. And that’s paying off. About 30 percent of TaskEasy’s new business is from referrals. Davis still uses TaskEasy to handle exterior maintenance at the 89 properties he owns. In fact, they were the first in the system and served as the startup’s “guinea pigs.” That bought TaskEasy a huge amount of credibility with customers. “It was the only way we could get started,” he said. Plus, he was thrilled to have an easier way to find vendors. “Frankly, I needed it for my own sanity.” •
SAVING CUSTOMERS MONEYAND HEADACHES Davis is a data guy by training, and TaskEasy reflects that. “We look at the data and try to make incremental improve-
James Hart is senior staff writer for Think Realty Magazine. Contact him at email@example.com.
16 | think realty magazine september :: october 2016
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With their unique skill sets, Dominion Group’s Fred Lewis and Jack BeVier find ‘tripod model’ makes sense.
BYROBERT SPRINGER PHOTOS BY GREG DOHLER
I’VE MADE EVERYMISTAKE I CANMAKE, PROBABLY SIX TIMES, ANDWE’VE LEARNED FROM ALL OFTHAT”
FRED LEWIS (LEFT), FOUNDER AND MANAGING PARTNER OF THE DOMINION GROUP
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We did about $40 million in T-shirt sales in 1998,” Lewis says. Itching to do “something different,” Lewis sold his interest in his T-shirt business in 2000 and started Domin- ion Financial Services in 2001 and Dominion Properties soon afterward. Ivy Leaguer BeVier, on the other hand, took the more traditional route and studied real estate at the Uni- versity of Pennsylvania. He interned at Dominion while attending Penn. After working in commercial real es- tate for a couple of years after college, he talked to Lewis about rejoining Dominion to handle acquisitions, coming back aboard in 20007. “I went the more traditional school path and didn’t start my own busi- ness, but when I interned at Domin- ion, I really liked that environment and liked kind of the rope that Fred gave me even as an intern,” says BeV- ier, now a partner at Dominion. “I was actually really involved in moving the business forward and making decisions, and so I really kind of fell in love with that environment and en-
joyed it a lot more than a big-business hierarchical structure.”
at this point, so we enjoy it.” BeVier is more of a “deal junkie,” as he likes buying houses and helping other investors buy property as well, “because you can’t buy every single house. It’s a way to be involved in oth- er real estate transactions and work toward other real estate investors’ suc- cess, and I enjoy the personality type of the borrowers that we work with and the business model that they’re doing, so what’s not to like?” he says. COMBINING SUCCESSFUL TRAITS TO HELP INVESTORS Dominion has about 30 houses that it’s buying, renovating and then selling, and this “translates very well in conversations to other investors” who are looking to do the same thing, Lewis says. Both he and BeVier have expertise in different aspects of Dominion’s business, allowing the duo to become more than the sum of their parts. BeVier’s primary responsibility at Dominion is underwriting real estate for its property division to purchase. He
A PRODUCT-DRIVEN APPROACH
Starting a private lending compa- ny after running a successful T-shirt business might not seem like a natural next move, but it made perfect sense to Lewis, who calls himself a “prod- uct-driven guy.” Whether the product is T-shirts or rehabbed houses, Lewis enjoys the challenge of creating something that customers will choose over the com- petition. “What I really enjoy about real estate is it speaks to our creativity as to how we like to renovate houses, making sure we pick the right paint colors and the right design and the right layout,” he says. The explosion of fix-and-flip television shows has created a class of real estate investors “starving for learning those skills,” Lewis says. “They want to know how to do that. It’s something that Jack and I have kind of a deep understanding
“It’s investors to investors,” says Fred Lewis, left, with Jack BeVier.
to investors,” says Lewis, Dominion’s founder and managing partner. Rehabbing and selling homes and private lending are two legs of Dominion’s tripod. The third leg is property management. The firm owns 560 rentals in the Baltimore area, and its management company manages more than 700 houses. “We have a very experienced man- agement arm that’s focused on kind of an owner mentality first,” Lewis says. “The fact that we have the three arms of the business really makes us very well rounded as a company. It really adds to our knowledge base when we’re work- ing with a borrower who’s struggling with management issues or struggling with real estate issues. And on the real estate side, our lending company pro- vides us insights. It’s a very synergistic group of entities; our tripod approach has really been the right way to go.”
The company initially focused on its backyard: Baltimore and the surrounding counties in Maryland and Washington, D.C. In 2011, the company started lending on the East Coast and is now a national lender.
LOAN OPTIONS FOR INVESTORS who rehab and flip houses are pretty straightforward. Private lenders, banks and crowdfunding sites can all be good options, depending on the borrower’s credit and funding needs. But what if there were a funding source that also had a fix-and-flip division in addition to being one of the nation’s top five largest private lenders? There is. Fred Lewis and Jack BeVier of The Dominion Group love to talk plumb- ing and design almost as much as they like to lend money. Their success and unique skill sets make them Think Realty Magazine’s Master Investors for September/October 2016. “We’re investment experts in a sin- gle-family real estate space, so we kind of view ourselves as real estate experts lending money to investors who seek to be experts themselves. It’s investors
ENTREPRENEURSHIP SHOWED EARLY
Pennsylvania native Lewis showed his entrepreneurial chops as a young man by starting a T-shirt company while only a freshman at George Washington University. He steadily built the business through his college years and eventually got into licensed apparel. The money from the T-shirt business helped pay for his schooling. “We got licenses from whatever was the popular culture at the time, and at one point, we were the largest gross- ing T-shirt company in the country.
Bevier, left, and Lewis love to talk design.
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spends his mornings purchasing houses and then dons his underwriting hat in the afternoon, underwriting
Lewis says that “nothing really went wrong” from the company’s founding until 2007. Up markets have a way of doing that, he says. Then the real estate downturn hit, and despite their best efforts, the calm seas suddenly became very choppy. “As much as we tried to put in place to protect us from the downside, we learned from the down market what happens when you do make errors in judgment and what happens when you extend to the wrong people,” Lewis says. “I would say the down market taught us a hell of a lot, and the stabilizing of the market really taught us a whole lot, too.” Since his arrival at Dominion coincid- ed with the start of the downturn, BeVier experienced an “extremely steep learning curve. I never thought I’d see a lot of the stuff that happened to us directly during that period of time, but we were able to make it through that, which provided the environment for a lot of opportu- nities for the growth of that lending business,” he says. As bad and as nerve-wracking as it was watching competitors go out of business, Dominion’s leaders learned valuable lessons from the down times. For one, they realized they needed to be much more selective about recip- ients to whom they loaned money. The difficult times taught them the most enduring lessons. “We learned a ton from that environment, and that really shaped our approach to under- writing,” BeVier says. The downturn made such a pro- found impression on Lewis and BeVier that they changed their lending style. “One of the main ways that our style of lending has changed over the years is through the focus on the borrower,” Lewis says. “One of the main lessons that we learned as a result of 2007 and 2008 was that ‘skin in the game’ matters, and the financial strength of the borrower matters as much as the quality of the deal.”
PERSONNEL FILE NAMES: Fred Lewis and Jack BeVier
loans for the lending side of the business. His experience in evaluating single-fam- ily real estate provides a unique perspective when he underwrites loans. “I’m able to kind
COMPANY: The Dominion Group
of bring some skills to the table in speaking with our borrowers that I’m really speaking their language, and I really enjoy that because that’s a core part of our busi- ness. When I see one of our borrowers getting a great deal on a house, we get really excited about that,” says BeVier. “We like talking to these guys. We enjoy speaking to flippers because we are flippers.” Lewis’ forte is real estate construction and his knowledge of the real estate business in general, which he says helps investors who are “trying to buy a prop- erty with the goal of holding it for rental and then building a rental portfolio.” He says Dominion “knows ev- ery single nuance of turning an old scratch-and-dent property or beat-up property into a quality rental.” The knowledge is hard won, as Lewis says he has personally been involved with a “couple of thousand” renovations since 2001. “I’ve made every mistake I can make, probably six times, and we’re learned from all of that,” he says. This level of experience allows him to field questions and put out fires in all areas of the business, from the lend- ing side to the fix-and-flip division. SCHOOL OF HARD KNOCKS Even Master Investors get knocked sideways sometimes; the real estate downturn of the late 2000s made sure that BeVier and Lewis weren’t excep- tions to the rule.
HOMETOWN: LEWIS Philadelphia, Pennsylvania BEVIER Annapolis, Maryland EDUCATION: LEWIS The George Washington University BEVIER University of Pennsylvania FIRST REAL ESTATE DEAL: LEWIS “Lending funds to investors purchasing and selling houses in Baltimore.” TECHNOLOGY YOU CAN’T LIVE WITHOUT: BEVIER “We’ve customized Podio to be our operational software. Love that product.” BEST ADVICE EVER RECEIVED: LEWIS “Always strive to create value and a win-win environment.” BEVIER “A rowhouse rental property that I got at the Baltimore City courthouse steps.”
BeVier, left, and Lewis check on one of their Baltimore properties.
and national private lenders enter the space. He says that the new players offer “a bit more professional platforms and certainly lower costs of capital” than previous lenders. Hedge funds are starting to enter the market as well. Any additional new entrants to the market will “have a hard time as a new lender in this environment competing with those entities, including us, from a cost capital point of view,” BeVier says. “It’s not your 15 percent interest in five points business anymore, which is what a lot of people get excited about. I think if you do that, you’re really doing a sub-private investor lending, and you might find yourself more likely in a workout scenario than in getting repaid.”
Having a uniquely multifaceted pri- vate lending business has served Lewis and BeVier well, especially during the downturn, and allowed them to take it nationwide after many of their com- petitors had exited the business. “At the end of the day, what makes us different and makes us leaders in business—and we really enjoy being leaders—is that we don’t have any interest in not providing value,” Lewis says. “It’s all about providing value to our clients, and I think that’s how we approach everything.” •
PRIVATE LENDING IS NOT FOR THE FAINT OF HEART Pressed for advice for those consider- ing entering the private lending space, Lewis and BeVier have two words of ad- vice: Don’t bother. Private lending may seem like a simple business from the outside, yet Lewis says it’s anything but. “It is more akin to brain surgery than it is to general practice. There’s so much nuance in understanding how to under- write the borrower’s exit strategy, the real estate itself, the age of the real estate, how it really sits and does it really fit into what the strategy is for the borrower,” he says. The private lending space has changed in the past 18 to 24 months, according to BeVier, as larger regional
WHATMAKES YOUGET UP IN THE MORNING:
LEWIS “The desire to be the best at our core businesses and to continue to build on the strong foundation established over the years.”
BEVIER “I’m a deal junkie. I can’t wait to buy the next house or make the next loan.”
Robert Springer is a regular freelance contrib- utor to Think Realty Magazine. Contact him at firstname.lastname@example.org.
22 | think realty magazine september :: october 2016
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