3WAYS TO MAXIMIZE PRODUCTIVITY IN THE NEW YEAR
5 HOTMARKETS FOR INVESTORS IN 2018
ZILLOW CHIEF ECONOMIST SVENJA GUDELL SHINES A LIGHT ON 2018 HOUSING PAGE 20 When Data is Power
RENOVATION ROCK STARS: INTERNATIONAL EDITION BEAUTIFUL SURPRISES WAIT IN HISTORIC FAMILY HOME
THE ROBOTSARE COMING: HOW REAL ESTATE INVESTORS SHOULD REACT TO A.I.
SPECIAL SECTION: STARTING OUT RIGHT IN REAL ESTATE
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TABLE OF CONTENTS
INSIDE THIS ISSUE
THINKING REALTY 8 Think Realty News & Events 9 Think Realty Member Benefits Custom design centers bring consistency, scale to kitchen and bath renovations.
THE BIG PICTURE 38 Good Deals in Hot Markets are Getting Old, Literally The trick to snagging solid returns in hot markets is century-old houses. by Blake Johnson 40 The Five Biggest Threats to Your Rehab Budget An expert contractor reveals the worst things you could possibly overlook. by Susan Dupont HOUSING NEWS REPORT 54 Overcoming the Superfund Stigma Hazardous waste sites, property values, and public health. by Russell Bartlett
COACHES CORNER 10 Gary Harper Lessons in leadership. 14 Panel in Print Insider insights on wholesaling. INDUSTRYVOICES 16 Don't Run the Race Alone How will artificial intelligence affect real estate investing? by Kathy Fettke SPECIAL SECTION: STARTING OUT RIGHT 30 The Importance of Systems The greatest real estate strategies fail without scale. by Gary Harper 33 A Dangerous Assumption Resist the temptation to do it all. by Jenna Heneghan 18 The Robots are Coming
57 Grocery Store Wars The best grocery stores for homebuyers and investors. by ATTOM Data Solutions
NUTS & BOLTS 92 Getting Your Real Estate License as an Investor Getting (or foregoing) your license should fit with your overall real estate strategy. by Darren Soares 96 3 Steps to Making Money on Inherited Properties Working profitably with buyers who almost always want to sell. by Gaylene Rogers Lonergan
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COVER FEATURE
Above: Zillow Chief Economist SVENJA GUDELL shines a light on 2018 housing.
WHENDATA IS POWER
by Carole VanSickle Ellis :: photos by Smokescreen Media
About Your Real Estate Assets This false belief creates huge pitfalls for your portfolio. by Carole VanSickle Ellis 34 Solving a Nightmare Scenario for IRA-Based Real Estate Investing Expedite your deals while protecting your profits. by Bryan Ellis 36 3 Best Practices to Maximize Your Team's Productivity Start out right and returns will follow. by Douglas Skipworth
BYTHE NUMBERS 110 A Tale of 10 Markets
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64
84
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10 markets with strong price gains and several possible futures. by Ingo Winzer
MARKETING
FINAL THOUGHTS
MARKET BREAKDOWN
DESIGN POINT
INVESTOR REVIEW 67 Turnkey Real Estate Investing
BUILDING THE BEST NETWORK FOR 2018
INVESTING AT ITS BEST Investors see property and life with different eyes.
SPOTLIGHT: CHICAGO, ILLINOIS Market poised for strong growth, but there’s a caveat.
UNEXPECTED DESIGN TRENDS FOR 2018 "Do-not's" becoming "must-have's" this year.
Taking turnkey to the next level with premium products, services, and profits.
A good network is the key to great returns.
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FROM THE EDI TOR- IN-CHI EF
PUBLISHER R. Michael Wrenn
PRESIDENT, AFFINITY WORLDWIDE Eddie Wilson | EWilson@AffinityWorldwide.com
Building Great Things in 2018
EDITOR-IN-CHIEF Carole VanSickle Ellis CEllis@ThinkRealty.com
VICE PRESIDENT OF MEDIA SALES Rodney Halford RHalford@ThinkRealty.com 816-398-4111 x86122 NATIONAL SALES MANAGER Teresa Stanton TStanton@ThinkRealty.com 816-398-4111 x86224
he words every property owner dreads hearing: “You’re going
they represent a constant threat to your investing success whether you are brand-new to the industry and have yet to wholesale a house or have spent five or six decades in the business. You might have realized by now that we’re not just talking about literal founda- tion problems. We’re also talking about the figura- tive foundation of your real estate investing career: your education. Fail to set a firm foundational knowledge base, and, yep, you’re pretty unlikely to know how to get funding for your real estate deals. Neglect the finer points of due diligence, and you could face budget-breaking repairs. Fall short in establishing a working, functional, actionable set of systems and guidelines for your real estate business, and yes, your loved ones’ hearth and home could be in peril. As the New Year begins, Think Realty finds itself proudly standing on one of the broadest, firmest foundations in real estate. Think Realty Magazine is proud to offer you access to that knowledge base, and we are honored, as always, by your readership. American author and religious leader Gordan B. Hinckley, who was known for prolific and ambitious construction, once observed, “You can’t build a great building on a weak foundation.” In 2018, let’s build great things together. •
T
to need to do some foundation repairs.” Sure, if you hear that before you buy the property during the due diligence period when you have time to adjust your cost esti- mates, it’s not so bad. Hear it after your plumber uncovers a nasty looking crack under the basement car- pet, however, and the shivers start to run up your spine. Why do threats to our physical properties’ founda- tions strike us so viscerally? As real estate investors, we know foundation is everything. A previously unde- tected foundational flaw can cost us the farm, literally. Think about the ramifications of owning a proper- ty with foundation problems: • You will face nonnegotiable, often bank-breaking repair costs • The structure of your entire house may be compromised, making your family and loved ones unsafe where they sleep • The topography of the land around the building could actually change (sinkholes, anyone?) Foundation problems are bad, bad news. For real estate investors, they’re the worst, and, furthermore, • You may not be able to get financing
CONTENT DIRECTOR CariAnn Steward CSteward@ThinkRealty.com
ASSISTANT EDITOR Heather Elwing
DESIGN CONSULTANTS Rivet | www.WeAreRivet.com
GRAPHIC DESIGNER Emily Bowers
ON THE AIR: THINK REALTY RADIO
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 in the U.S. Order online at www.ThinkRealty.com or call 816-398-4085. Provide your full name, address and telephone number. DISCLAIMER :: Think Realty Magazine , its owners, contractors, distributors and their respective representatives do not provide tax, accounting, investment or legal advice and make no guarantee as to the effectiveness or success of any investment or tax strategies discussed herein. Please consult your own independent adviser as to any questions you have or decision you are contemplating. ABOUT THIS MAGAZINE :: ThinkRealtyMagazine isapublicationof AffinityRealEstateMediaLLC.Reproductionoruseofanyeditorial orgraphic,withoutpermission, isprohibited.Wearenotresponsible for thecontentofanypaidadvertisements.Forreprintrights; toob- tainadetailedstatementofourprivacypolicy;and forallsingle-copy requests,addresschangesandothersubscription inquiries: CONTRIBUTING WRITERS Jack Bosch, Aimee Breeden, Jennifer Jo Cobb, Susan Dupont, Bryan Ellis, Kathy Fettke, Rodney Halford, Gary Harper, Jenna Heneghan, Blake Johnson, Linda Liberatore, Gaylene Rogers Lonergan, Julie Ziglar Norman, Richard Sarkis, Douglas Skipworth, Darren Soares, BreAnn Stephenson, John Tesh, John Trautman and Ingo Winzer. COVER PHOTOGRAPHY Smokescreen Media
WHAT'S NEW AT THINK REALTY
Investing in real estate is more than action—it’s a real estate of mind! Set your strategy and set your dial to Think Realty Radio, now broadcasting nationwide every weekday. Our radio show is designed to keep investors - like you - up to date on the most effective and efficient methods of real estate investing. We’ve secured one of the best and most dynamic personalities in the real estate industry as our host: Abhi Golhar.
Tune in, turn up, and get pumped, because this is going to be your best year yet.
Check for stations in your area or listen now at ThinkRealtyRadio.com
Think Realty 7509 Tiffany Springs Parkway, Suite 200 Kansas City, Missouri 64153 816-398-4130 ThinkRealty.com Copyright ©2018 Think Realty
CAROLE J. VANSICKLE ELLIS, EDITOR-IN-CHIEF
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THINK REALTY NEWS
THINK REALTY BENEFITS
84 LUMBER
Think Realty Partners with ATTOM Data Solutions n November, Think Realty announced a new partner- ship with ATTOM Data Solutions, the curator of the ATTOM Data Warehouse, a multi-sourced national property database that blends property tax, deed, mortgage, foreclo- sure, environmental risk, natural hazard, health hazards, neighborhood characteristics and other property charac- teristic data for more than 150 million U.S. residential and commercial properties. The relationship allows Think Realty Magazine to feature data-driven articles and infographics from ATTOM Data Solutions’ award-winning publication, Housing News Report. Raw data will also be available to Think Realty to inform reporting and educational content. The partnership ensures Think Realty’s audience and membership have access to the latest real estate market information, data and trends. “For investors to make good decisions, they must be knowledgeable,” said Eddie Wilson, president of Think Realty. “The insight ATTOM Data provides is fundamental for real estate investors that make a practice of aligning strategy with markets and trends." • Think Realty Expands Membership Benefits Through Latest Acquisition I hink Realty members will now be able to access significant savings on a vast array of real estate-related goods and services thanks to the company’s recent acquisition of Commu- nity Buying Group (CBG), a 60,000-strong membership program founded in 2012. CBG, now known as Think Realty Benefits, connects real estate investors, contractors, and property managers to members-only savings at nearly three dozen relevant retailers, including Sherwin-Williams Paints and Sunbelt Rentals. “It’s important for real estate investors to keep costs in T
check. The benefits we provide help do just that,” said Eddie Wilson, “This is one more way we can add value for Think Realty Members.” Ben Rao, CBG’s former president and a current Think Realty coach and executive vice president, added, “This ac- quisition gives us more resources to better serve members. It is great to be involved with a forward-thinking company like Think Realty.” Rao hinted that three new retailer and supplier partners would soon be revealed. You can learn about one of these new members on page 9. •
84 Lumber's kitchen design consultants work with investors to scale beautiful kitchen projects at all price points to expedite work and maximize returns.
CONNECT FOR SUCCESS IN 2018 AT THINK REALTY CONFERENCES & EXPOS
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ix-and-flip investors know better than anyone just how important the kitchen is to overall investment returns, but knowing how and at what level to do the right kitchen remodel is vitally important. According to Remod- eling Magazine , minor kitchen remodels return roughly 93 percent at resale in a home, making them imperative for many investors flipping to retail buyers, particularly in hot markets where investors are compelled to purchase and renovate older properties to make their deals work consistently. “More and more, we’re seeing inves- tors on all levels, from homeowners to home-flippers to multifamily builders, coming into our design centers and asking for not just one set of prices and materials, but at least three: good quality, better quality, and best quality,” said Mark Reginelli, director of world trade at 84 Lumber, a building supply company with 260 locations nationwide. Reginelli said that in recent years, 84 F
Lumber has found its services in kitch- en design, consultation, and scaling projects in increasingly high demand as the minor kitchen remodel becomes a major factor in real estate investments. “We started out as a cash-and-carry company that dealt mostly with roofers and remodelers, but we also stocked kitchen cabinets at that time. As our company and client base grew, we dis- covered that they needed consistency, we became a trusted source for multi-state and multi-market projects, ” Reginelli explained. The 84 Lumber Kitchen and Bath Design Studios spread quickly across the country and are still growing. Reginelli noted local remodelers and contractors will often do between 15 and 20 projects a year, and real estate investors on the same scale may do between one and two dozen. “These companies need as much consistency in their models as possible to make good investment decisions. They will often come in with a blueprint for a kitchen
and want to replicate it across the board every time they take on a new project, much the same way that a developer will when they build a new subdivision. We found that the studios are equally attractive to these really large clients and individual investors,” Reginelli said. 84 Lumber’s studios offer three-dimen- sional modeling so that investors can view their designs and swap out different looks and price points to reach a combination that meets the demands of both their markets and their budgets. “The same basic kitchen might add $1,500 worth of value in one market and $15,000 in an- other,” Reginelli said. “It’s vitally import- ant investors have the ability to translate that from market to market.” •
April 14-15, 2018 | The Marriott Inner Harbor at Camden Yards
July 14-15, 2018 | The Marriott Irvine Spectrum
September 22-23, 2018 | The Westin Buckhead Atlanta
DID YOU KNOW? Investor-Level Think Realty members receive free or discounted access to national and regional networking, learning, and deal-making events as part of their membership privileges. Learn more at https://thinkrealty.com/membership.
84 Lumber was founded in 1956 by Joe Hardy, Sr. and is owned and managed by his daughter, Maggie Hardy. Learn more at https://thinkrealty. com/membership/.
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NUTS & BOLTS COACHES CORNER
STRATEGIES: REITs Think Realty Coaches
HARPER GARY LESSONS IN LEADERSHIP
ful and to what extent. “Those six things are the key to real freedom in any entrepreneurial endeavor,” he explained. “I’m passionate about my business, but I also have the freedom to spend time with my family, to be a Little League baseball commis- sioner, and to help my local church. Those things would not be an option if my business did not generate good returns using effective systems that do not require me to spend every waking moment making sure they are working.” WHY HE’S HERE “My purpose is helping business owners with leadership, vision, peo- ple, processes, data, and communica- tions. Real estate investors and entre-
preneurs often struggle with leading their teams of people who participate in their investing processes because we tend to work really hard and equate that hard work with success. Hard work definitely plays a role in successfully generating returns, but if you are just winging it with the people you work with and in your processes, then you are going to end up working yourself to death. Working yourself to death is not why most real estate investors get into business!” Harper believes that his six focal areas are the missing link for most investors, which leads him to passion- ately reach out to the real estate sector with information and insight in every way possible. “My whole drive in life "WORKING YOURSELF TO DEATH IS NOT WHY MOST REAL ESTATE INVESTORS GET INTO BUSINESS!"
TITLE AND AFFILIATIONS President and founder of Sharper Business Solutions, Founder and CEO of Monster House Deals LLC, Area Manager at Canon Business Process Services, National Accounts Manager for the Army Research Office (ARO), and Integrated Account Manager at IKON Office Solutions.
THINK REALTY COURSES Personal Growth: 5 lessons
Vision: 6 lessons Goals: 6 lessons EXPERIENCE
Gary Harper spent nearly 17 years in management for Fortune 500 compa- nies in the Chicago area before getting into real estate full-time, but he always knew that his heart was called to en- trepreneurs. “My desire to help others came through investing in real estate myself,” he explained. “I started out buying rental properties in 2004, and around the time I had 15 in my port- folio, I started a property management company. In 2012, I partnered with my brother-in-law to buy and sell proper- ties throughout five Midwestern states. We were part of a team that did more than 1,000 real estate transactions be- tween 2012 and 2015, and we did more than 300 transactions just last year. “Throughout that success, though, I realized that I really wanted to reach out to other real estate investors and help them with their businesses so that they could scale and grow properly. From the beginning, my heart has been knitted into real estate.” During Harper’s own evolution as a real estate investor, he brought his experience in management and busi- ness systems to bear on his investing processes. Harper believes that all successful entrepreneurial endeavors, real-estate-related and otherwise, may be reduced to six main areas of focus that determine if the project is success-
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is to be able to give back, and being a Think Realty coach is a great oppor- tunity to reach real estate investors in a way that can help them in their lives and in their businesses,” he said. BACKGROUND CHECK Harper and his wife, Susan, both work for Sharper Business Solutions. “We help companies and organizations clarify, simplify, and achieve their visions through those six areas that we talked about earlier,” he said. Harper started out in corporate America as a specialist in business outsourcing and was a national manager of business initiatives and development for his
Business Solutions in 2016 with Susan, and describes her as “not only my partner in life, but also my partner in business. I can’t be more thankful for what God has provided for me and my family, and that is why I am so driven to give to others,” he said. GARY HARPER ON “THE RIGHT SUCCESS” “If you’ve spent any time in the real estate market, then you know that there are a lot of educators out there. It seems like everyone who has done a deal wants to teach others how to do it the same way that they did. You must be careful; just because they had
think of to do this is based around breaking the word ‘life’ down into an acronym: Labor, Influence, Finances, and Experience. Everything I do is based around giving of those four things to help others experience the same success in business that I have.” GARY HARPER ON “MAKING THE SWITCH” “One of the things that people often ask me is what made me switch from being a successful person in the cor- porate world to being an entrepreneur and investing in real estate. It comes down to one thing: “At the age of 35, I was bitten by a tick and came down with Lyme dis- ease. I became very ill. We spent nearly a year and hundreds of thousands of dollars searching for a solution. I found myself sitting on the edge of my bed after nine days of no sleep, looking back at my life after being told I was probably not going to make it because the infection had gotten so bad. “I thought to myself, ‘What have I really done?’ I had done nothing but become successful for me, I realized. I had done nothing to help others. From that moment on, I flipped a switch and I committed to making it through, coming out on the other end, and spending the rest of my life giving to others and helping them. Every day since then, that has been my goal and what I’ve worked for.” •
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success in real estate does not mean that it was the right success for them or that it will be the right process for you. They may have the best intentions but do something that is horribly ineffi- cient or that just is not the right path for you even if it worked for them. “The best way to learn real estate is to spend a little time investing in yourself and your processes to make
“THE BEST WAY TO LEARN REAL ESTATE IS TO SPEND A LITTLE TIME INVESTING IN YOURSELF AND YOUR PROCESSES TO MAKE SURE YOUR REAL ESTATE STRATEGIES ARE DIALED IN THE WAYS THAT ARE BEST FOR YOU. THE PEOPLE WHO DO THIS ARE THE ONES WHO HAVE THE HIGHEST SUCCESS RATES IN THE INDUSTRY NO MATTER WHO THEY LEARNED FROM TO START WITH."
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employer by the age of 22. “I enjoyed that early success,” he recalled, noting that the company was eventually bought out by a Fortune 500 company. “I spent the next 11 years as an executive for them, and through that time I became an expert in business systems and process management,” he said. Harper also began buying real estate on his own in 2004 and eventually started investing full-time in 2012. He founded Sharper
sure your real estate strategies are di- aled in the ways that are best for you. The people who do this are the ones who have the highest success rates in the industry no matter who they learned from to start with.” GARY HARPER ON “THE LIFE ACRONYM” “I talk about my ‘why’ a lot, and it comes down to being able to give of my life. One of the best ways I can
COACHING PROGRAM Check the coaches page for updates from Gary, his latest course offerings, and training from other Think Realty coaches at thinkrealty.com/investor- education/coaches.
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NUTS & BOLTS COACHES CORNER
STRATEGIES: REITs Panel in Print
SONIA BOOKER
Courses: Investment Criteria • Market Research • Investment Planning • Creative Real Estate Investment • How to Fund Real Estate Deals
“I did my very first transaction while I was still running my insurance agency. I part- nered with another agent. My job was to find the property and buy it. Then, he financed the repairs and oversaw the construction crew. So you can see, I started out fixing-and-flipping instead of wholesaling, but the lesson I learned there applies to wholesaling as well. “I’m always telling people who want to get started in real estate that the best way to do it is to find someone who has something you don’t have, then offer them something that they don’t have. I have had so much fun and so much success identifying my own strengths and learning about the different strengths that people around me bring with them. “It’s so important to approach someone with whom you want to partner with a clear vision of what you are willing to put into their business and their success. To go to the next level, whether it is starting at nothing and doing your first wholesale deal or going from a couple single-family investments to major construction where you are building multifam- ily developments from the ground up, you have to be able to show that you are willing to have skin in the game and get your hands dirty. If you want help wholesaling, it’s out there waiting, but you have to show that you have a level of willingness to work and learn.”
Think Realty coach Abhi Golhar breaks down the wholesaling process in the Think Realty studio.
Insider Insights on Wholesaling he process of wholesaling houses is one of the most popular ways to get started in real estate investing because
and successfully scale the strategy, others use it as a stepping stone to other real estate tactics. In this month’s Panel in Print, three Think Realty coaches discuss how they would recommend real estate investors leverage wholesaling as part of a larger real estate strategy. •
ABHI GOLHAR
it requires very little overhead, offers a fast exit with expedited returns, and is fairly easy to navigate for beginners. While some investors stick with wholesaling for their entire investing careers
Courses: Wholesaling • Finding Buyers • Finding Wholesale Deals • Navigating Wholesale Paperwork • Building Your Dream Team • Executing the Wholesale Deal
“What’s interesting about wholesaling – and really attractive to real estate investors at all levels from completely new to extremely experienced – is that wholesale deals offer massive benefits and could be one of the only strategies to see the highest upside in real estate with very little financial risk. Even more importantly for investors who are new, wholesaling presents a wonderful opportunity to find their unique investing mindset, to really learn who they are as an investor, network with players in the market, and identify which angles of real estate really work for them. “Of course, a lot of people might ask: • Why not just jump into a fix-and-flip? • Why not a single-family rental or even a commercial building that will cash flow? • Why not just buy and hold long-term? “Well, it all goes back to that high upside and that mindset, and wholesaling might be just the perfect fit for you. Even if you move on to other things eventually, it is a great way to generate the extra cash you need to start investing using other strategies. For some investors, wholesaling is a perfect fit and they never do move out of this niche into other areas because
GARY HARPER
Courses: Personal Growth • Vision • Goals
“Having been a real estate investor since 2004, I would have to say that wholesaling is probably my favorite real estate strategy. That surprises a lot of people, but for me, whole- saling is one of the cleanest real estate transactions when done right. Not only does it have the least moving components of any type of real estate transaction, but when you do a wholesale deal correctly a lot of people win. “I have done a lot of real estate in rentals, property management, and other techniques. I like the benefits that come with these types of investments as well, but getting in and out of a deal is always just about my favorite. “I would tell someone who has not yet done any wholesale deals and is trying to get started they should first get with a real estate coach or even intern in an office with someone who is already wholesaling. That will help them really understand the different ways that people do this type of deal. For example, you have to decide if you want to do assignments or if you want to actually close on assets and then resell them. You need to know how to work with real estate attorneys and title companies, and you need to network so you are involved with the best people around you. “Finally, I would say that wholesalers should find a good real estate agent. Wholesalers tend to avoid agents, and I don’t understand that! A real estate agent will bring you a ton of value: broker price opinions, repair estimates, their network, etc. Everyone can play in this game together.”
they create thriving, flourishing wholesaling businesses. Take it from me, my team and I still wholesale deals. “Would you believe that there are a lot of investors out there who have no idea that you can have a legitimate, profitable, large- scale wholesaling business? You build a business structure and investing strategy with buyers on one end, sellers on the other, and then you connect the dots. Even better, you can wholesale from anywhere, at any time, which makes wholesaling ideal for investors seeking freedom in 2018.”
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INDUSTRY VOICES
TEAMWORK FOR SUCCESS
run), I did not know exactly how to make that completed race happen. I sought help from people in my community who had completed many triathlons: people who were training for Ironman races, who had experience and knowledge to share with me. With their assistance and insight, I successfully trained for that triathlon and completed the race. Without them, I could never have put all the pieces together. I would have frozen, just for starters! When you are new to real estate or looking to take things to the next level, doing the same kind of research and prep work will enable you to get where you want to go much quicker. Follow these three steps to become a master investor, not a jack of all trades and master of none. 1 Seek out people who know what you don’t You need advice and guidance from people who know more than you, espe- cially in areas that might be weaknesses for you. Surround yourself with people who can help in areas that aren’t your expertise. Are you great at finding deals or knowl- edgeable on how to get the best funding, but don’t know how to repair the roof of
a house to save your life? That’s okay. You don’t need to be the best at all things real estate to be successful. Truth be told, you shouldn’t be. You want to zone in on your niche, then build a successful team around you to fill in the blanks. Stick with what you know, then go to your local Real Estate Investment Association (REIA) and find people who know what you don’t to work with you. 2 Never stop getting better at what you do know Being knowledgeable about a certain topic doesn’t mean you should stop learning. When training for my tri- athlon, I didn’t stop running because I knew I could complete that portion. That would have been silly. Instead, I worked harder during the run portions of my training. I challenged my body and mind to get better at this while learning the other activities. In real estate, and in life, you can’t settle for staying in place or you will eventually slip downward. Fail in this, and you’ll no longer be the expert at all. 3 Surround yourself with people who are better than you
There is a reason the expression “you become like the 5 people you surround yourself with, so choose carefully” is so popular: It’s true. Being around athletes who were juggling a family while putting in hours of training in running, biking, and swimming challenged me constantly. I wanted to emulate their nutrition, their tricks for transition, and their mindset. I was nowhere near their level, but I knew that even if I never reached their level of success I’d be much further along as a per- son and an athlete by training with them than if I had tried to train alone. As you are building your real estate team, you want to also be sure you are finding a mentor or a group of people who know more about real estate than you do. If your niche is fix-and-flip, for example, I promise you there is someone who knows more about that than you do. Find this person and learn from them. Imitate what they’re doing to create suc- cess with their portfolio. You’ll be sure to find more success yourself by learning from others who are succcessful. THE RESULTS ARE OBVIOUS AND EVERYWHERE IN OUR INDUSTRY I see these effects first hand as I work daily in property management. The inves- tors who are most successful focus on the acquisition of properties or maybe just whatever their 9-5 job is and leave the op- erations of the business to someone else. Investors who are going to REIAs and constantly connecting with people with more experience in the industry imple- ment strategic changes when necessary. You must do the same. Seek out knowl- edge. Build a team of people with similar goals but different strengths and you won’t worry about trying to do it all anymore. •
Jenna Heneghan (R) and her mother, Linda Liberatore (L), work together as a team at the office and in life.
Don’t Run the RaceAlone RESIST THE TEMPTATION TO DO IT ALL.
by Jenna Heneghan
W
and I knew I could complete the 10k run portion of the Olympic-distance triathlon I had chosen. However, swimming in open water for almost a mile and biking 26 miles was completely foreign to me. Yes, I knew how to swim and was proficient at riding a road bike. But did this mean I knew how to clip into the pedals of a bike? Was I aware that you had better wear a wet- suit when swimming in Lake Michigan? I certainly was not. Although I knew that although I knew what to do in order to complete a triathlon (swim, bike, and
accept that sometimes you need help.
hat’s it like to be a jack of all trades? I wouldn’t know, and
you shouldn’t either. Often as entre- preneurs, investors, and small business owners, we feel like we need to do it all: be everything to everyone, a jack of all trades, if you will. We believe that if we simply educate ourselves enough, we will be able to do everything related to our real estate investing on our own. Let me be clear, here: There’s nothing wrong with knowledge. Knowledge after all, is power. However, to become the most successful version of yourself, you need to
KNOWINGWHAT TO DO AND KNOWING HOWTO DO IT ARE DIFFERENT When I am tempted to spread my resources too thin by dabbling in differ- ent activities, I instantly think back to training for my first triathlon. A triath- lon consists of 3 activities: swimming, biking, and running, performed in that order. When I first started training, I had just completed my first marathon
Team members with individual strengths and specialties build each other up so that no one is forced to go it alone.
Jenna Heneghan is the director of business development at Secure Pay One MLH. She may be reached at jennaheneghan@gmail.com.
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INDUSTRY VOICES
ROBOTS & REAL ESTATE
workers’ jobs. When the company announced plans to build a huge dis- tribution center in Moreno Valley, it promised to bring jobs to the area. But by the time it was open and operational, five other facilities in Ontario were shut down and the workforce of 1,200 was cut in half. Most of the people who kept their jobs sit behind computer screens and monitor the activities of the new workforce, robotic machines. David Weinberg, the company’s CFO, said “You have to become more efficient. It’s the only way to upgrade. You can’t al- ways be looking for cheap labor.” Weinberg added that Skechers has never been more productive or profitable than it is today. AI IS CHANGING EVERYTHING AI will also potentially affect buyers’ and tenants’ ability to make mortgage or rent payments. People who have been fighting for a higher minimum wage may be unpleasantly surprised to see their pleas could fall on deaf ears. Robots don’t need wages. Should you be afraid that robots will take over the world? Maybe. But there’s nothing you can do about it, so you had better be ready for it. Learn to be irre- placeable, even by automation, and your livelihood and investments will be safe. For example, investors who prefer commercial real estate should consider strip malls that offer services that can’t be outsourced to the internet or robots - at least not at this time. Restaurants, hair and nail salons, spas, and local medical services are thriving. One thing that probably won’t change: People will still need housing. I think it’s a safe bet that landlords won’t likely go out of style soon. •
The Robots are Coming HOW WILL ARTIFICIAL INTELLIGENCE AFFECT REAL ESTATE INVESTING?
who can sit by your bedside and read you stories, sing songs, and massage your feet while monitoring your heart- beat and vital statistics. AI is accelerating its learning every day, and it’s learning on its own. WELCOME TO THE FUTURE The coming changes will transform life as we know it, and no one can stop it. If robots can learn to do things better than humans at a much lower cost, businesses will choose what’s best for the bottom line. Even if President Trump succeeds in bringing factories back to the U.S., he may not be able to bring jobs back - at least not to humans. This brings us to a crucial question: Since real estate is so closely tied to jobs, how do we protect ourselves as investors? Since real estate is so closely tied to jobs, how do we protect ourselves as investors? We must stay current on the changes, or investors will get left in the dust. Think about this: Those who didn’t
see online shopping as a threat are no longer in business. That’s why so many shopping centers and big box stores are closing. Any one of them could have been an Amazon competitor if they had seen the change coming. Warehouses have taken the place of retail stores to meet the demands of online shop- ping. Amazon alone has built 20 new fulfill- ment centers in the last three years, but most warehouses don’t needmany human work- ers. Instead, 30,000 robots have been added to the workforce, which is sure to affect the 879,000 warehouse workers nationwide. Amazon, of course, is one of the bus- iest online retailers today. The company owns most of the advanced robots in the industry after buying Kiva Systems back in 2012. Kiva Systems makes the 320-pound robot that automatically retrieves items in the warehouse, knows exactly where those items are and is strong enough to carry even the largest and heaviest items (3,000-pound pallets) off the shelves and to the exit. Two years ago, Amazon had 15,000 of these Kiva ‘bots, but today they have more than 45,000. Skechers is another example of a company innovating for the benefit of customers at the expense of human
by Kathy Fettke
he most important factor affect- ing real estate is the job market. Job growth drives population growth, which drives demand for housing and commercial real estate. The unemployment rate is low right now, and the economy appears to be booming. But savvy real estate inves- tors must always be looking ahead for potential threats. ENTER THE ROBOTS As an employer, would you consid- er hiring someone who never needs a break, never gets sick, and never needs a bonus, but gets the job done right every time? If your answer was a resounding “Yes,” you are not alone. We’ve all heard that fast food compa- nies like McDonalds are gearing up to replace many workers with automation. T
for itself in only two years.
We’ve already seen airlines replace peo- ple with check-in kiosks, and more and more hotels are now issuing room keys from a computer screen. We’re hearing a lot about driverless cars that will take jobs from taxi, Uber and truck drivers, but white-collar jobs are also now in jeopardy thanks to automation and artificial intelligence (AI). For example, Fukoku Mutual, a Japa- nese life insurance company, announced it would replace 34 insurance claim workers this year. The company planned to spend $1.7 million for IBM’s Watson software, which is a question-answering computer system capable of answering questions posed in natural, conver- sational language, and expects to pay $128,000 per year on maintenance for the computer and program. According to Quartz, that equates to $1.1 million in annual savings. The move should pay
“NO OFFICE JOB IS SAFE.” Sebastian Thrun, CEO of the Kitty Hawk Corporation and a renowned innovator, recently said, “No office job is safe. Lots of lawyers, accountants, and even surgeons will be automated away.” Yes, even medical professionals are at risk. In just a few years, you may be asking your robot doctor for a prescrip- tion. Robots currently can get through medical school in less than two years and retain everything they learn during that period. They can know everything about your medical history and your current health. In fact, studies show that robots have had a 90 percent success rate of accurate diagnoses while human doctors hover closer to 50 percent suc- cess. There is even talk of robotic nurses
Kathy Fettke is the co-founder and co-CEO of Real Wealth Network. She may be reached at www.RealWealthNetwork.com.
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COVER STORY
SVENJA GUDELL ZILLOW
IS POWER WHEN DATA
Zillow Chief Economist Svenja Gudell Shines a Light on 2018 Housing.
BY CAROLE VANSICKLE ELLIS PHOTOS BY SMOKESCREEN MEDIA
2018 IS GOINGTO GETESPECIALLY INTERESTINGFOR INVESTORSBECAUSE WEARE LIVING IN AWORLDWHERE, ATTHIS POINT, IT IS VERYHARDFORA LOTOFPEOPLETO BUYAHOME.”
SVENJAGUDELL ZILLOW CHIEF ECONOMIST
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COVER STORY
SVENJA GUDELL ZILLOW
kind of information has such a tremendous effect on a homeowner’s life,” she said. Six years after that initial project, Gudell is fully committed to Zillow’s stated mission of shedding light on the dark places in housing and helping homeowners, real estate investors, and housing professionals make informed decisions about their personal interests in real estate. “Everyone has an interest, whether they know it or not, in real estate. Everyone has to live somewhere. To me, the more and better access everyone has to information about real estate, the better the market will perform and the better off consumers will be,” she said. “As economists, we sometimes talk
about these things in ‘nerd fashion,’” she laughed, “but really, it’s so important to get as much information from as many reliable sources as you possibly can. Whether you’re buying a home or buying an investment property, a real estate purchase is likely one of the biggest purchases you are going to make. You shouldn’t just be crossing your fingers. You should know what you’re dealing with. Data, information, and analysis help you do that.”
2011, the company was well-established but not necessarily well-known. “When I applied for an economist position here, I actually thought, ‘Oh, what a funny name,’” she recalled. Today, the real estate data giant tracks the value of more than 110 million homes using its trademarked Zestimate and is ubiquitous in real estate circles, although some real estate professionals certainly utilize the website and its data more than others. For Gudell, however, the main point is not providing ammunition to a buyer or a seller, as is so often recounted with chagrin by those who are not necessarily avid fans of the company, but to shed light on all of the information and data available so that consumers, investors, and policy- makers have as much information as possible at their disposal when they are making decisions that affect their lives, their families, and their constituents. “Zillow is a great starting point for information, but it’s a starting point,” she emphasized. “For example, the human element is really important. I think pretty much everyone, homebuyers and investors alike, should be talking to their local agents. Not just talking about home values and how fast they can buy or sell, but also about what winning strategies might be working in a specific area.” She added, “In today’s market, it is so hard to buy a home. Never before have we seen such high levels of demand being met by such low levels of supply in the housing market. That is meaningful for everyone involved in a real estate transaction because if you do not do your due diligence, if you fail to conduct enough research into your market and your purchase, you will leave money on the table. “We are seeing so many problems in markets where people cannot make the math work anymore. They cannot ‘catch
the train’ and become a homeowner because home values are just racing away from them. The values are moving upward too fast, and incomes aren't keeping up.”
be expensive and not necessarily defined. These things can make a market function less smoothly and create an inefficiency that an investor can fill.” Gudell cited Detroit, Michigan, as one such market. According to the New York Times, Bank of America and JP Morgan Chase, both of which can trace their roots back to Detroit and financing its legendary auto industry, made a total of 24 home mortgage loans in Detroit in 2016. Quicken Loans, known for founder Dan Gilbert’s passionate support of the Motor City, made 170, more than any other lender. Detroit has a population of about 637,000. Analysts blame the massive lack of traditional mortgage lending in the city on
SVENJA GUDELL started at Zillow in 2011 with her first project of calculating negative equity, and she’s probably one of the few homeowners in the country who would tell you that the topic has “a special spot” in her heart. However, that special spot, such as it is, is one of the driving forces behind the Zillow chief economist’s passionate dedication to housing data, both the expansion of the available volume and its accurate, in-depth, accessible analysis. “It was shocking to me at that time to do that research and find out how many people were underwater at the height of the housing crisis and to then realize how many people were still underwater. That
OPPORTUNITIES IN INEFFICIENCY
Due to the rate at which many desirable housing markets are appreciating, Gudell said that real estate investors, whose primary strategies tend to rely heavily on the ability to buy at a discount, add value, or sell at a premium, will find the most opportunity in 2018 in markets with what she labeled “inefficiencies” in their housing markets. These inefficiencies create gaps in the buying and selling
DIGGING FOR DATA (AND DETAILS) When Gudell started at Zillow in
low home values, cash-poor buyers, and difficulty getting loans to fix up properties to habitable standards. “In Detroit, the appraisal process is not working. It’s hard enough to get the bank to cover the initial purchasing price which, realistically, is often probably not more than $30,000 for many homes, and then you need a construction loan for $200,000 on top of that to make the home livable,”
process, and can include inventory shortages, flawed appraisals, a lack of construction materials and labor, difficulties with financing, and homes that will require a great deal of work to make them livable. In any of these instances, Gudell
I ALWAYS WANTMORE INFORMATION AND BETTER ACCESS TO INFORMATION
NEGATIVE EQUITY: The debt or potential debt associated with a property when the value of the property falls below the outstanding value of the mortgage note on that property. For example, if the debt on a property is $120,000 and the property is valued at $80,000, then the property has negative equity of $40,000 or may be described as “$40,000 underwater.”
AND DATA.” - SVENJAGUDELL
said, investors may find an opportunity to place themselves in the gap thanks to specialized knowledge, unique connections, or access to resources that others simply lack. “There are a lot of markets that are unaffordable because of limited inventory, so an investor who can access or create inventory is filling a need, addressing an inefficiency in the market,” she said. “Obviously, in many markets with limited inventory they would be building more homes if they had cheaper access to labor and lumber or if they could get lower land prices. Sometimes the issue is also that the regulations around new construction may
Gudell explained. “That is the kind of friction the homebuyers need to be working their way through or around by getting all of the information that they can about a market, including how to get a loan creatively or conventionally, and that real estate investors need to be watching closely so that they can create solutions to these problems and build their businesses.” She concluded, “I always want more information and better access to information and data. We’re making big strides toward this all the time. Zillow is just one group pushing in that direction.
Svenja Gudell's first project with Zillow focused on negative equity. She has had a soft spot for the topic and the homeowners it affects ever since.
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