TM I N FORM . I NS P I R E . E DUCAT E . EMPOWE R .
JORGE ABREU CALLS MULTIFAMILY INVESTING A ‘TEAM GAME’ AND COACHES OTHERS ON HOW TO PLAY Strategy for Success
Tenant Credit Scores Should FICO scores determine an applicant’s worth? FUNDAMENTALS Home Price Tsunami Could overpriced markets indicate a looming crash? MARKETS & TRENDS
NOVEMBER 2021 $5.95 U.S. :: $6.95 CAN
2 | think realty magazine :: november 2021
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PUBLISHER & CEO Eddie Wilson
EDITOR-IN-CHIEF Kelli White
SALES MANAGER Rodney Halford RHalford@ThinkRealty.com
FULFILLMENT COORDINATOR Blair Pierce
DESIGNER David Rodriguez
CONTRIBUTORS Katie Bean Daniel Berlind Charlie Einsmann
David Jacobs Jeremy Kloter
Bruce McNeilage Kathleen Richards Damon Riehl Marla Roberds Brian Snider Eric Stewart Steve Streetman Michele Van der Veen Ingo Winzer Michael Zuber
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Are you following Think Realty on social media? Things move pretty fast in real estate. Don’t miss out on the latest trends, tips, insights and news from your trusted resource for all things real estate investing! Follow. Like. Love. Share. Comment. You can do it all with Think Realty’s social media channels. Join the conversations in Think Realty social communities and connect with like-minded members who range from first-time to seasoned investors. Check out all of our social media channels and connect with us - and other investors - today!
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FROM THE EDI TOR- IN-CHI EF
Improvement for All
ommunity is one of the often-over-
there. That is hap- pening with Abreu’s properties. Read more about his investing ventures on page 14. Also in this issue, Char-
looked building blocks of real estate. One part of Think Realty’s mission is to empower real estate investors with the mindset and
lie Einsmann shows how to analyze subdevelopments in certain markets, Marla Roberds tackles the gentrification debate, and Michael Zuber shares his latest creative approach to improving community within his group of investors. That’s just a hint at what’s inside this issue. As this year is wrapping up, the Think Realty team has already out- lined plans for next year. Read about some big changes coming to Think Realty Magazine on page 9. If you have story ideas or want to write for us, please reach out. In the mean- time, keep being kind to one another and keep building better communities through your investment strategies. •
knowledge to build and rehab commu- nities. Think of all the people you can help and home values you can raise through your real estate deals! Still, community is a cornerstone of REI that often remains in the background of the industry. And so, this month’s theme is Community Development. Cover person, Jorge Abreu, is busy making waves in the multifamily space but also has a construction company, which helps him build com- munities, literally and figuratively. His goal is to build better communities, not just better properties. It says a lot when residents like where they live so much that they tell others to move
KELLI WHITE, EDITOR-IN-CHIEF
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INSIDE THIS ISSUE
Jorge Abreu calls multifamily investing a ‘team game’ and coaches others on how to play
STRATEGY FOR SUCCESS
by Katie Bean
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8 News & Events
56 Loan Assumptions Assume existing debt to make a deal work by Eric Stewart, a Think Realty Resident Expert 60 Technology for Sustainable Communities Addressing infrastructure needs in an environmentally friendly way by Steve Streetman 62 Which Type of Lender Is Right for You? An article series on navigating the private lending world by Damon Riehl 66 Tenant Credit Scores Should FICO scores be a determinant of a rental applicant’s worth? by Daniel Berlind
INVESTOR STORIES 10 Community Impact Measuring the positivity that you make through REI by Michael Zuber
12 Presidents’ Circle
Featured Member: Aaron Chapman
24 The Subdivision Market How to determine if the subdevelopment market is rising or falling by Charlie Einsmann
68 Gentrification vs. Revitalization
26 A Mastermind Mindset
A long-time controversial approach to investing in communities by Marla Roberds
Accelerate your business by making a different kind of investment by Ellis Hammond
28 Invest for Cause and Community Property managers and investors can promote growth within their communities by Jeremy Kloter 32 Grow Your Property Management Business How showing appreciation goes a long way by Kathleen Richards
DESIGN POINT 70 Heart of the Home
Fire up your flip by updating this focal point by Michele Van der Veen
MARKETS & TRENDS 76 Home Price Tsunami Could overpriced markets indicate a looming crash? by Ingo Winzer
35 Investor Review
52 Wholesaling Integrity
How wholesalers can overcome negative stereotypes by Brian Snider
MINDSET 82 Community Investment
54 Property Development Is About People Maintain your vision by fostering relationships by David Jacobs
Creating stronger opportunities for developers and builders by Bruce McNeilage
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NEWS & EVENTS
Are you an expert in a certain niche of real estate investing who likes to write and are passionate about educating other investors? Then we want to hear from you! Think Realty is looking for more contributors to join our list of valued real estate professionals who want to produce quality articles that inspire, inform, educate and empower our readers. See your name in print and online! Your content will also be shared across our social media platform. Email email@example.com to share your ideas!
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More Think Realty Content is on theWay!
Next year, we will deliver six larger bi-monthly issues starting in January. Instead of one smaller issue each month, each of the six issues will be packed with even MORE pages of real estate industry trends, investing strategies, business tips, success stories, market updates, entrepreneurial insights, and more! In addition to the bi-monthly Think Realty Magazine, we will deliver several supplemental publications throughout the year. Targeted toward specific niches within the REI space, these will be hyper- focused publications packed with market analyses, lending advice, multifamily strategies, and so much more. This change means you will receive MORE content over the course of the year! Think Realty will continue to provide trusted resources to help you, the savvy real estate investor, grow your REI business and learn how to create generational wealth through real estate.
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Community Impact MEASURING THE POSITIVITY THAT YOU MAKE THROUGH REI
by Michael Zuber
ave you ever thought about your positive impact on your community or perhaps going to the next level and measuring it? As someone who is motivated to help others see the power in “One Rental at a Time,” I find myself continu - ously asking, “How am I doing? Am I helping anyone take positive steps forward? What is my positive impact on my worldwide community?” H
Last year, I estimated that I had helped my community of followers close at least 185 rental properties. I was originally pleased with this result but after thinking about it for a few days I thought we could do better. So on June 1, 2021, I created a contest that I call The 500. The 500 contest means I am looking to track how many in my community close their first or next rental property.
The contest runs from June 1, 2021 – May 31, 2022. At the end of Sep- tember, my community had already closed over 170 properties, and we are on track to exceed our target. As my community closes trans- actions, they simply send me their address and then I mail them one of these cards (pictured). On top of this card, I have commitments to do some very cool things when
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we hit 500 as a community. Once we hit 500 closed rental proper- ties, I will be sending a $10,000 check to the local Food Bank and I will also be dying my hair pur- ple, which should be a lot of fun! The contest has sparked a lot of interest and activity in my commu- nity and is having a tremendous impact on activity, questions, and deal closure. In fairness, I now believe more deals were closed last year, but I never learned about them as I wasn’t asking to hear about them. At this point, we are averaging 10 or more deals a week across my community and it is a great feeling to see us tracking to exceed our target. A surprise upside of this contest is that it keeps me motivated. It is a tremendous rush to get almost daily emails and direct messages about deal closings and that “One Rental at a Time” is helping. I find it a lot easier to continue to create daily original content when I know my efforts are producing a posi- tive impact on my community. I find that I am seeing three con - sistent themes in the messages I have received in the last 15 weeks. NO. 1 Focus: Most of the people attracted to “One Rental at a Time” are full-time employees who are also raising a family like my wife Olivia and I did all those years ago. This is why I preach Focus and the Creation of a specific Buy Box. I believe most investors fail as they are doing too much, they are looking at too many markets, and they are simply confusing themselves. I want my community to create a Buy Box in a single city or zip code that pro- duces a list of 20-40 active listings. Then I ask them to look at that Buy Box every day for 60-90 days.
routinely hear from investors who were stuck in over-analyzing deals and that “One Rental at a Time” simplified the entire process and allowed them to move forward. I now know that my daily effort is paying off because I am hearing from my community that they are taking action and they are clos- ing on their first or next invest - ment property. I am so confident in them that I bought 1,500 cards as I want to blow away our goal of 500. It is exciting to anticipate what will happen next year! •
NO. 2 DailyDiscipline: I preach daily discipline that
should boil down to 15-20 minutes of reviewing the focused buy box from Step 1. The daily activity is rath- er simple but will build confidence as you continue it. As days tick by, you will be noting additions and price changes and removing list- ings that fall away. The daily activity is meant to eventually answer only one question: “What is an average deal in my chosen buy box?” I want my community to answer this pow- erful question because once they know the average for their buy box, they can go about securing good or great deals. To be clear, I do not believe investors should settle for average deals and should strive for either good or great deals. NO. 3 Confidence: Perhaps the greatest thing I have heard is that “One Rental at a Time” has given an investor the confi - dence to write their first offer after being frozen by fear for years. I also
Michael Zuber worked in the Silicon Valley since graduating from Santa Clara University 20+ years ago. After wasting time and money in his 20s, he began
investing buy and hold rental properties and never looked back. Michael grew his rental property portfolio from a single rental house to financial freedom in 15 years. Now that he no longer has a day job, he shares his story via his self-published book and YouTube Channel, both called One Rental at a Time.
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ALike-Minded Circle MEMBERS WHO INFORM, INSPIRE, EDUCATE, AND EMPOWER
The Think Realty and AAPL Presidents’ Circle is a select group of top-performing executives and entrepreneurs from both the private lending and real estate investing industries who gather several times a year at exclusive events to network, learn, and encourage each other in a confidential setting.
e asked one of our original members, Aaron Chapman, loan originator extraordinaire and experienced real estate investor, how the REI industry can benefit communities: “Real estate investors have revitalized many neighborhoods and communities with their own private capital. I have heard many indicate that their neighborhoods have become safer and more family friendly because of the personal risk taken by the real estate investment community. I am blessed to work alongside investors in a conventional lending capacity.” W
Chapman said this of the Think Realty Presidents’ Circle:
“All we leave this life with is relationships and experience. It is tough to get either one by keeping to yourself. It is a necessity to align yourself with the best people in the most thought-provoking atmosphere possible.”
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Where will your network take you?
The top echelon of the real estate investment and private lending industries meet in one place: the Presidents’ Circle. Circle members build deep connections across the REI landscape, learn tomorrow’s trends from leaders driving the industries, and step into the spotlight via Think Realty and the American Association of Private Lenders’ powerful media outlets. Will you be there? aaplonline.com/presidents-circle
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Jorge Abreu calls multifamily investing a ‘team game’ and coaches others on how to play Strategy for SUCCESS
BY KATIE BEAN PHOTOS BY: SARAH BLAZE PHOTOGRAPHY
L ike many real estate investors, the 2008 were likely not the same as the path forward for others: He moved halfway across the country with his fiancée and a lifelong friend, renting a home in Dallas for the three of them that had an office where they could all work on tackling investing in this new market. That decision even- tually led Abreu to his current role as co-founder and CEO of Elevate Commercial Investment Group. GETTING HIS START Abreu discovered real estate investing while he was in college at Florida International University. He was study - ing engineering; he had chosen the major because math was easy for him, but he was quickly learning that he wasn’t passionate about it. He wanted to do something else—but he didn’t know what. He had witnessed business ownership in his family growing up, and starting his own market crash caused Jorge Abreu to re-evaluate his career and his future. His next steps, however,
company appealed to him. By studying successful people and entrepreneurs, Abreu noticed a pattern: Many of them either built or multiplied their wealth through real estate. “I decided to start digging into how do I become a real estate investor,” he said. “And the first thing I came across was single-family homes.” Still in school, Abreu started educating himself on how to invest in single-family properties. He got his real estate broker license to learn more about the industry. At the time, he didn’t have much money to invest, so he got his start doing joint ventures. Working with an investor who had capital, he did the legwork and they split the profits. After a few deals, he had built up enough capital to con- tinue on his own. In a few short years, Abreu had seen enough success that he felt he could quit his day job, an engineering role he had taken after graduation. His enthusiasm for real estate investing had also interested his then-girlfriend, Tasha, who is now his wife, and his longtime friend Eric Bodiwala, now the COO and co-founder of Elevate. The three of them
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I’VEHADALOT OFSUCCESS IN ALITTLEBIT OFTIME, AND
I THINK IT’S BECAUSEOF FOCUS.”
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were working together, investing in South Florida proper- ties, doing wholesale deals and fix-and-flips. Then, in 2008, the market crashed, hitting South Florida particularly hard. “I had to step back and analyze everything—like, do I need to go and try to get another engineering job? Or am I going to keep doing this?” he said. “I decided I wanted to keep being an investor. We had just started doing really well in it.” The prospects for continuing in South Florida, howev- er, seemed dim, so Abreu and his cohorts looked at other markets where they had connections, including Dallas and Phoenix. After a visit to Dallas and talking to a friend who was investing there, they were sold. “When we saw the business that our investor friend was doing and how he was still doing deals—and doing a lot—and then saw the nightlife and the social life, we were sold on Dallas,” he said. “We packed our bags and started fresh in a new city.” They spent a few months networking and learn- ing about the market. Soon, “we were right back at it,” Abreu said. Instead of flipping homes, they began holding more property. That was also his first foray into
I’m a strong believer that the more free content and the more education you can give, it’s going to come back to you.”
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BUILDING THE RIGHT TEAM
multifamily, buying some fourplexes in addition to the single-family properties. Like many investors, Abreu didn’t love the day-to-day aspects of owning rentals. “It wasn’t enough units to hire a third-party property manager, and I wasn’t a big fan of hunting people down for their rent and dealing with that kind of stuff,” he said. As the market improved, he was able to transition back into his preferred deals, fix-and-flips and some whole - sale. But finding contractors was difficult, “and we got burned a couple of times,” Abreu said. To help solve those problems and scale his investing, he started JNT Con- struction in 2010. “My wife thought I was crazy,” he said, “but I felt I could handle it.” As the market continued to heat up, Abreu’s plan was working. He was able to scale the fix-and-flips. They even got more creative with the fixes, he said, adding square footage and sometimes second stories to homes. The con- struction company began working for other investors, too. As Abreu’s businesses grew, so did his family. He and Tasha had three children, now 5, 6 and 8 years old. Mean- while, Tasha was working in the construction business, running the back office and accounting, while also helping with design decisions on the properties. They were get- ting stretched thin. Abreu said he started focusing on how to work on his businesses rather than in them. He worked on build - ing his teams and growing the companies. Laying that groundwork paid off. In 2019, Abreu received an offer to merge JNT with another construction company. That allowed Tasha to leave her role, “so she’s been able to enjoy raising our children and spending more time with them,” he said. He, in turn, has been able to focus on growing Elevate. He sees lessons in what he’s accomplished so far. “I’ve had a lot of success in a little bit of time, and I think it’s because of focus. I decided that this is what I wanted to do and really focused on it,” he said. “I get a lot of different things thrown at me, even different sectors of real estate, and I try to stay focused and really build this out first.” For now, he said, Elevate will continue to specialize in multifamily deals, though he said that in the future he might be open to tackling projects in the commercial sector.
ties. The client opened his eyes to that aspect of multi- family syndications. “I thought the investors buying these hundred-plus multifamily properties were just loaded with money—you know, they had millions and there was no way I could do that,” he said. “But then I got introduced to how syndi- cation works and the fact that you can raise the money from others and have them partner with you. I was very intrigued and started getting educated on how that works and how multifamily in general works. “I was sold. I went all in on it.” Abreu quickly saw that he could scale his returns from one large multifamily property much more rapidly than he had done with his single-family properties over the past decade. When he started investing in multifamily, he initially kept his single-family business going. Again, he found himself being pulled in too many directions. He One of the key lessons Jorge Abreu has learned in his career is the importance of finding the right team members—having the right people in the right seats on the bus, as Jim Collins describes it in his book “Good to Great.” “That is one of the aspects that I highly underestimated, and I feel like it is not stressed enough to people thinking they want to build a company,” he said. “A lot of it comes down to your team and who you bring on.” First, he said, he learned it’s more important for a new hire to fit the company’s core values and morals than just the job description. Next, he said, it’s critical to understand a person’s personality and whether that fits with the type of role they would fill—some people will excel at a job that is highly defined but struggle in a position where they have to create the parameters. It’s all about giving people the right tools to succeed, Abreu said. “In the beginning I hired a lot thinking, you know, ‘I can train this individual,’” he said. “Yes, you can, but some positions require you to hire somebody with more skill sets and more experience. You need to do it, and you need to pay them well.”
SOLD ONMULTIFAMILY Through his construction company, Abreu met a client who was a multifamily syndicator, buying large proper-
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ty-building efforts make Elevate’s properties stand out, Abreu said. For example, he said, at one property Elevate recently bought, renovations included fixing the pool, which had been out of commission for the past four or five years. The property management team hosted a grand re-opening pool party for residents. The goal is to have community events at least once each quarter, Abreu said, and the results have been encouraging: Most new resi- dents to his properties come from referrals. “That says a lot when you have residents that are living there and they like it so much that they are telling others to come and move there,” he said.
Big multifamily investing is definitely a team game, and there’s a lot of partnerships that allowyou to learn from others and get into deals sooner.””
decided to focus solely on multifamily investing, and in 2018, he and Bodiwala started Elevate to do just that. Today, Elevate owns more than 4,300 doors and is quickly closing in on its goal of 5,000 for this year. Next year, Abreu hopes to increase that to 10,000 doors. The company manages about $325 million in assets. He said they look for properties with more than 100 units—with 200-plus being their sweet spot—primarily in “land- lord-friendly states that we can see the growth in popu- lation and the economy.” Texas is Elevate’s main market, and it also owns properties in Georgia, Oklahoma and South Dakota. The team is looking to expand to other markets, such as Florida and the Carolinas, he said. “We’re pretty open to finding the deal wherever it’s at,” he said. Elevate started its business doing Class C value-add properties. Abreu said having the construction company in-house “gives us the confidence to go after some heavi - er lifts and hairier deals. We’ve been able to strike some really good purchase prices by doing that.” It also lever- ages the construction company to build new multifamily properties, he said. Last year, during the Covid-19 pandemic, Abreu said his team realized the value in diversifying to add some Class B and Class A properties to the mix. They continue to pro- vide value-add to each property, but he said these don’t require as much work as other projects they’ve taken on in the past. “Now we do it all, and we found that our investors have the appetite for all of them,” he said.
BUILDING COMMUNITY Elevate aims to add value not only for its investors but for its residents. It makes an extra effort to invest in the communities at its properties, and those communi-
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If somebody’s just looking to invest passively, and they’re not looking to do real estate investing as a full-time job, I think they owe it to themselves and their families to really look into alternative investments [like multifamily.]”
The company’s strong relationships and communication with residents was a boon last year during the Covid-19 crisis and the ensuing eviction moratorium, Abreu said. Elevate was able to create systems for rent relief and help residents understand what they needed to do in order to receive it. The proactive approach led to minimal disrup- tion, he said. “Income-wise and vacancy-wise, it really did not disrupt our business plans, but we did have to be flexible and learn quickly and adapt,” he said. Elevate took the same proactive communication approach with its investors during the turbulent time. Before the pandemic, Abreu said, the team would send updates to investors either monthly or quarterly, depend- ing on the property. To keep them abreast of changes during the pandemic, Elevate shifted to weekly updates covering delinquencies, vacancies and additional infor- mation as the situation changed. “You never want to keep anybody guessing,” he said. Though some distributions were temporarily put on hold to see how the situation would play out, Abreu said investors were supportive and understanding. He sees Elevate’s communication with investors as one of its key differentiators. When he began investing passively, he saw a wide range of approaches to investor relations. “Something I noticed was the lack of communication and the lack of transparency on some of these deals,” he said. “So my goal really has been to make the investors feel more like they’re part of the deal.” To do that, he said Elevate sends a packet to each investor for each property including a binder with the
important information, such as property descriptions, distributions and taxes, plus “trinkets” that will make investors feel more a part of the process. Elevate also hosts property tours, which is rare in the industry, he said. Ongoing communications include photos and videos showing progress and community events. The goal is “really showing them how the deal is looking and what their investment has done for that property,” he said. EDUCATING OTHERS Abreu’s desire to stand out and communicate manifests on Elevate’s website in a substantial education section, which includes an e-book, a checklist for deal sponsors, and dozens of recommendations for reading, from multi- family investing to personal development and more. “Multifamily investing—nobody teaches you that,” he said. “Growing up, everybody kind of knows about your retirement funds and your 401(k)s and stocks. But nobody really teaches about the alternative investments.” Abreu has learned from research and experience about the benefits of real estate investing, particularly mul - tifamily investing. Considering the returns and the tax benefits, “I think there’s no competition” with traditional investments. “If somebody’s just looking to invest passively, and they’re not looking to do real estate investing as a full- time job, I think they owe it to themselves and their families to really look into alternative investments—main- ly, I think, multifamily,” he said. “There’s just so many positives to it, and it really helps you get ahead. Most
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people have a 401(k) or something equivalent where, you know, you may end up with some retirement money, but it’s not going to be anywhere near what you could get from investing in an alternative investment.” For those interested in real estate investing, Abreu said not everyone has to start out in sin- gle-family or small multifamily properties. “That’s a misconception,” he said. “You can get educated and you can find a way to add value to other multifamily investors. Big multifamily investing is definite - ly a team game, and there’s a lot of partnerships that allow you to learn from others and get into deals sooner.” Sharing what he has learned comes naturally for Abreu, and he sees value in evangelizing for his industry. “I’m a strong believer that the more free content and the more education you can give, it’s going to come back to you,” he said. CREATINGALEGACY For Abreu, this line of work isn’t about just tallying dollar signs in his bank account. He aims to build a legacy for his family. The son of Cuban immigrants, he’s a self-made success. His father died when he was three,
and his mother worked hard to raise him and his sister on her own. When he started investing, he “didn’t come from money, didn’t have a lot of money.” But he wants to write a different story for his children. “Generational wealth is really what I’m going after. I’m not looking for quick money,” he said. “It’s all about building something that’s going to last, that’s going to be here when I’m gone, and my children can prosper from it as well.” Abreu said he exposes his children to his work and teaches them about what he’s doing, but he doesn’t try
to push them into the field. If someday they decide to join the business or the industry, that will be their choice. For now, he’s content to spend time with his kids, whether it’s playing with them or watching them in their sports. (Though he said they can’t beat him in basketball yet, he has a feeling it won’t be long.) In the meantime, he aims to continue growing Ele - vate. In the long term, he said he can see stepping back and letting someone else run the business, but for now, he wants to continue his work and “leave my stamp behind.” •
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Long-term Rental Loans HOW TO DETERMINE IF THIS TYPE OF LOAN IS RIGHT FOR YOU
by Nathan Zielinski, RCN Capital
ne of the most important aspects when it comes to
or requirements for each of the different loan programs. At RCN specifically, the loan program that has seen the biggest increase in popularity over the last year is the long-term rental loan. Typically, a 30-year loan program, the long-term rental is the best option for real estate investors seeking passive income. With the long-term rental, there are plen- ty of factors that will work in an investor’s favor and make the loan program more appealing. The prop-
erty must be in rent-ready condition and the interest rate for this par- ticular program will be the lowest of any program that a lender or bank will offer. Having that lowest interest rate for the longest period makes the long-term rental loan very appealing. Currently at RCN Capital, the interest rate is 3.49%. However, you still must make sure that this specific loan is right for you. Just because it has the lowest interest rate for the longest time frame doesn’t
real estate investments is picking the right loan program for your- self and the property. Each lender will offer multiple programs so navigating through the different options and choosing the right one is essential. Don’t be afraid to ask a representative from the lender of your choice. They should have plenty of information regard- ing the products and will answer any questions about guidelines
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borrowers will buy the property, per- form the necessary rehab and then take out the long-term loan when it is precisely right for them to do so. Another thing to consider with certain lenders when determining if the long-term loan is right for you is how long you want to hold on to the property for. On long-term loans, a pre-penalty penalty can come into play. It can differ from lender to lender, but for RCN Capital, the pre-payment penalty period is for the first five years of the 30-year loan. This will only come into play if you want to get rid of the property in the first five years after taking out a loan. Be sure the long-term rent- al loan is what you want so you can avoid paying unnecessary fees and lose out on a money-making oppor- tunity. There are always alternatives such as the short-term rental and the fix and flip loan product as well. There is no doubt that there are advantages to the long-term rent- al but it’s also a big commitment. If you are ready to hold on to the property and make it a rental that serves as passive income than the long-term rental is right for you. For long-term rentals, meeting the necessary guidelines for you to qualify for the loan will also let you know if the long-term loan is right for you. Certain lenders need to see experience and a minimum FICO score so as an investor it is important to keep tabs on what the number is at all times so you can be sure you’ll qualify. You can save yourself a lot of time by being on top of those certain things to know when it is worth applying or not. At RCN Capital, for 1-4 unit prop- erties, the minimum FICO score is 620, however if you are looking for a long-term rental loan on a multifam- ily property (5+ units) then you will need a FICO score of at least 680.
A partner can be brought in with a FICO score that meets those mini- mum requirements if you yourself do not, but they will have to sign on the loan and be a co-guarantor. One of the last important aspects of determining whether the long- term rental loan is right for you is deciding what kind of investor you want to be. There are two main choices as you can go the short- term route with fix and flips and making quick cash post-renovation by putting it back on the market or you can be more of a landlord, be invested in tenants and relationships with them while accruing the passive income over a long period of time. If you prefer the latter than the long- term rental loan would be a strategy that is perfect for you. Acting as a landlord and making sure all your units have tenants, and the tenants are provided for when necessary is all part of the long-term rental strategy. It is less labor intensive but there is still work that needs to be done for those rental properties. Long-term rental properties have so many advantages, but it is a must that investors do their due diligence and find out if the long-term loan is right for them. For any questions on long-term rental loans or any gen- eral questions regarding real estate investment properties, don’t hesi- tate to reach out to RCN Capital! •
mean it is always the best for you and your investment plans. As mentioned earlier, the 30-year loan program is typically a scenario where the lender will not allocate any rehab funds. On a long-term loan having that property ready to be rented out to tenants is a big plus for the lender and minimizes the risk on their end. If as an investor, you know your ultimate plans are to make some renovations on the property and turn a real profit, the long-term rental loan might not be for you ini- tially. On the other hand, one of the most popular times to take a long- term loan is to refinance after a fix and flip loan is completed. This way, you have increased the value of the home through renovations and the amount you can charge for rent. With the security of a 30-year loan and the value of a better property, a lot of
Nate Zielinski, Junior Business Development Coordinator, joined RCN Capital in 2020. He adds his ambition, communication skills, teamwork, and
public speaking ability to RCN’s Business Development team. Nate’s goal will be to recruit new, long-lasting business relationships with brokers and borrowers as well as maintain the strong relationships RCN Capital already has in place. Nate’s prior work experience includes sales, advertisement, copywriting, and social media. Nate graduated from the University of Connecticut in 2015 with a Journalism degree.
thinkrealty . com | 23
The Subdivision Market HOW TO DETERMINE IF THE SUBDEVELOPMENT MARKET IS RISING OR FALLING
by Charlie Einsmann
s real estate investors, we continuously ask what is going on with the market? Is it going up? Is it going down? Are we at our peak? Is it neutral? Well, it depends. It depends not only on which market you’re in, but it depends on what subdevelopment or subdivision you are analyzing. What is a subdevelopment or subdivision? The exact definition of subdivision is the act of dividing land into pieces that are easier to sell or otherwise develop, usually via a plat. If it is used for residential housing it is typically known as a housing subdivision or housing development. These areas could simply be called neigh- borhoods or communities. Some examples of subde- velopments are Dale City in Woodbridge, VA; Congress A
Heights in Washington D.C.; or Tantallon Hills in Fort Washington, Maryland. When analyzing properties on the MLS within a sub - development you must start with similar property types. Consider if the property is a townhouse (rowhouse), detached, duplex (semi-detached) or a condo. How do you know if a subdevelopment is rising, falling or neutral? It depends on the inventory levels within the subdevelop- ment. You need to look at the Active status, Under Con - tract Status (U/C, PND) and of course the Sold inventory. We always go out about 120 days of Sold inventory to get a good idea, but you can do 90 or 180 days. We just feel 180 is too long and 90 days is too short.
NEUTRAL MARKET Townhouses in Woodbridge, VA
ACT ACT ACT ACT
12808 Lockleven Ln 12691 Wimbley Ln 3843 Ogilvie Ct 2625 Jedburg Ln
End of Row
9/10/21 $410,000 1,502
3 Interior Row 9/2/21 $445,000 1,608 3 Interior Row 9/1/21 $405,000 1,360 3 Interior Row 8/31/21 $407,000 1,354
In this example, prices are not going up or down. The reason for this is the number of Active listings and Under Contract listings is very close to the number. The Solds are very similar as well. This is a very healthy market where there is a lot of buying activity but not to where the number of buyers outweigh the sellers.
A/C 8/22/21 $450,000 1,672 PND 12715 Inverness Way 4 Interior Row 8/26/21 $374,900 1,400 PND 4229 Devonwood Way 4 End of Row 8/30/21 $389,900 1,452 PND 4105 Hampstead Ln 4 Interior Row 8/20/21 $429,900 1,718 PND 4113 Plymbridge Ln 3 Interior Row 8/18/21 $425,000 1,620 CLS 12411 Abbey Knoll Ct 4 End of Row 9/6/21 $425,000 1,730 CLS 4107 Plymbridge Ln 3 Interior Row 7/30/21 $425,000 1,608 CLS 12775 Lockleven Ln 4 Interior Row 8/27/21 $399,000 1,366 CLS 12504 Manchester Way 4 Interior Row 8/10/21 $430,000 1,360 CLS 4101 Hampstead Ln 4 End of Row 7/23/21 $415,000 1,452 12659 Wimbley Ln 3 End of Row
24 | think realty magazine :: november 2021
DECLINING MARKET Washington D.C. 2
ACT ACT ACT ACT ACT ACT ACT ACT
1505 Neal St. NE #2 1505 Neal St. NE #1 1503 Neal St. NE #1 1263 Owen PI NE #1 1230 Queen St NE #2 1121 Queen St NE #2 1261 Owen Pl NE #2 1611 Levis St NE #1
3 Unit/Flat/Apt 3 Unit/Flat/Apt 3 Unit/Flat/Apt
8/6/21 $995,000 2,200 8/6/21 $899,000 2,100 8/6/21 $899.000 2,100
3 Unit/Flat/Apt 6/22/21 $664,000 1,284 3 Unit/Flat/Apt 6/10/21 $649,000 750
These are one-level condos in the Trin- idad section of Washington D.C. Notice the number of Pending or U/C units. If you answered 0, you would be correct. What this means is that there are very few buyers looking to buy one-level con- dos right now in Trinidad. These sellers will have to drop prices to lure in poten- tial buyers. This is the very opposite of a HOT market! We saw this consistently in the market crash of late 2008 to 2009.
6/8/21 $350,000 678
3 Unit/Flat/Apt 5/22/21 $719.000 1,100
3 Unit/Flat/Apt 2 Unit/Flat/Apt
CLS 1330 Montello Ave NE #2 CLS 1273 Simms Place NE #2 CLS 1023 16th NE #A CLS 1023 16th St NE #B CLS 1273 Simms Place NE #1 CLS 1120 Penn St NE #4 CLS 1120 Penn St NE #2 CLS 1120 Penn St NE #3 CLS 1120 Penn St NE #1
8/2/21 $835,000 1,522
3 Unit/Flat/Apt 7/19/21 $540,000 1,192
6/4/21 $585,000 1,229
2 Unit/Flat/Apt 6/10/21 $600,000 1,229
7/7/21 $552,000 1,171
2 Unit/Flat/Apt 6/25/21 $620,000 1,349 2 Unit/Flat/Apt 6/15/21 $530,000 942 2 Unit/Flat/Apt 6/15/21 $615,000 1,349 2 Unit/Flat/Apt 6/18/21 $520,000 942
INCREASING MARKET Fairfax Station, VA
6108 Emmett Guards Ct
4 Detached 9/17/21 $884,900 1,944
A/C 10610 Winslow Dr
5 Detached 8/23/21 $999,900 3,401
A/C 6113 Union Camp Dr 4 Detac1ec
8/20/21 $884,000 2,497
When analyzing properties in this current marketplace, you need to have the tools to determine what type of marketplace it is at the subdevel- opment. The market could be heading up, down, or flat depending on where you are in the DMV. This can save you TONS of money in your fix/flip busi - ness or wholesaling business. • This is a total opposite of a declining market (what we have been experi- encing the last year). This subdevel- opment is Fairfax Station in Fairfax Station, VA. If you are unfamiliar with Fairfax Station it is a collection of large single-family houses on large lots. One thing to notice is that there is not one ACTIVE listing. This is what makes it a upticking marketplace. More buyers than sellers!
PND 4 Detached 8/14/21 $1,050,000 4,460 CLS 6203 Simpson Patent Ct 4 Detached 8/12/21 $875,000 2,410 CLS 10603 Winslow Dr 4 Detached 7/19/21 $946,000 2,584 CLS 1202 Robert Carter Rd 4 Detached 8/13/21 $880,000 2,799 CLS 11619 Havenner Rd 4 Detached 7 /21 /21 $865,000 2,131 CLS 11501 Yates Ford Rd 5 Detached 7/30/21 $850,000 2,426 CLS 5718 Jonathan Mitche Rd 4 Detached 8/17/21 $850,000 2,379 CLS 11663 Havenner Rd 5 Detached 7/5/21 $910,427 2,767 6430 Ox Rd
Charlie Einsmann has 25 years of real estate experience, is a licensed real estate agent in VA, and jointly owns holding company Clear Sky Properties LLC (CSP) for residential rental properties that are acquired, resold, or retained in portfolio. CSP has done over 350 renovations/flips and owns 50 residential rentals and some commercial properties. In 2013, Einsmann launched a jointly owned subsidiary of Clear Sky Properties, LLC called Clear Sky Financial (CSF), a hard money lender that does asset-based lending that has done over $150 million in loan volume to date.
thinkrealty . com | 25
ACCELERATE YOUR BUSINESS BY MAKING A DIFFERENT KIND OF INVESTMENT
by Ellis Hammond
traveled all over the country and out of the country to meet with other industry leaders and investors. We typical- ly plan our trips around exotic locations, luxury resorts, great meals, and fun excursions. But why join a mastermind in the first place? Would a successful CEO, investor, or entrepreneur really want to take time away from his or her family and business to spend a few days with folks he or she just met? ANEWMINDSET… Early on, I too thought it was best to just keep my head down and plug away at my business. I didn’t want to be dis- tracted with activities or trips that weren’t directly related to my business and took precious time away frommy family. However, I quickly learned that having access to more relationships actually became an accelerator for my busi- ness. The more time and money I invested in showing up at conferences, events, and masterminds, the more deals
Where two minds exist, a third mind is born.” —Napoleon Hill
Amastermind is nothing new to the world of real estate investing or to business, but the concept has evolved. A mastermind in my father’s era was a mem- bership to the local country club. Even if you didn’t like to play golf, it was a great place to meet and network with like-minded people, typically those with higher net worth. Deals and investment advice were traded over a beer on “hole 19.” But today, the masterminds I have been part of are no longer restricted to the golf course or country club. I have
26 | think realty magazine :: november 2021
I started to see, and the more investor capital started to present itself.
SHOULDYOUPAY FORMASTERMINDS? I won’t join a mastermind unless there is a fee. Yes, you heard me correctly. I won’t join anything that is free to attend. I have found that the quality of the room is much different when everyone sacrifices something to be there. As my number of quality relationships has increased and the trust among them has compounded, the ben- efits have far exceeded any cost. Benefits of a master - mind include: • More quality deals to both invest in person- ally and present to my investor network. • New friendships that will certainly be lifelong. • An improved mindset and deeper spiri- tual faith due to challenging and enlight- ening conversations with new people. • Speaking opportunities that have helped me grow my brand and further extend my network. • New and better business ideas that have made me hundreds of thousands of dollars and certainly saved me thousands of hours. HOWTO FINDAMASTERMIND? There are several great masterminds for real estate investors. I recommend searching for a mastermind inside of a particular niche or practice that you are involved in. For example, if you focus on wholesaling, look for wholesaling masterminds. Do your research on the types of members already inside the group and make sure you align with the core values of its members. When determining if I should join a mastermind, or go to a conference, or even invest in more coaching, I always ask one question… Does the investment I am making into myself and into my network have the poten- tial to return ten times my investment? If the answer is yes, then I move forward. It’s never about price, always about the return. •
Ellis Hammond manages a private network of investors seeking passive investment opportunities in multifamily syndications across the United States. Ellis is passionate about the intersection of faith and capital and hosts a weekly podcast show, Kingdom REI, in order to educate and inspire other investors and entrepreneurs to see capital as a means for greater Kingdom influence. To learn how you can invest alongside Ellis and this community, visit EllisHammond.com.
thinkrealty . com | 27
PROPERTY MANAGERS AND INVESTORS CAN PROMOTE GROWTH WITHIN THEIR COMMUNITIES Invest for Cause and Community
by Jeremy Kloter
engineers, general contractors, plumbers, roofers, electricians, handymen and more. There has been no shortage of work for these trades with many of them expe- riencing record-setting months. Most of the local business owners we interact with are in dire need of workers in all types of fields. I see it on social media at least once a week where someone is trying to fill a position. As property managers we are constantly scouting for new vendors to help with the various projects we come across. As new mixed development and commer- cial properties are remodeled or built, businesses move in creating more demand for small businesses to employ a wide variety of people. OPPORTUNITY ZONES As of late, opportunity zones have been attractive for those looking to place capital in areas with significant upside in lagging markets through tax incentives and distressed prop- erties. Opportunity Zones are aimed at encouraging long-term private investments in distressed communi-
common theme we see with- in the investment communi-
ty is generally around investment opportunities, funding and creating returns that support a certain life- style for everyone involved. One area that doesn’t get discussed as much but is a very important topic is the impact investors have through the implementation of their strategies. Whether someone is buying homes and renovating them or is a landlord growing a portfolio, each has some- thing in common. SUPPORTING THEWORKFORCE Over the last 18 months we’ve all experienced significant chang - es in our lives. One thing that has remained a constant in our mar- ket has been the activity for the construction and design industry. With the supply of new construc- tion homes struggling to keep up with demand, it has pushed even more people looking for remodeled homes and rental units. Investors support all types of trades and professions such as architects,
ties by utilizing a federal tax program with incentives to do so. Opportunity Funds can be used on commercial and industrial real estate, housing, infrastructure, and existing or start-up businesses. For real estate projects to qualify for Opportunity Fund financing, the investment must result in the prop- erty being “substantially improved.” In most markets these invest- ments are eligible to obtain: • A temporary tax deferral for capital gains invested in an Opportunity Fund. • A step-up in basis for capital gains reinvested in an Opportunity Fund.
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