FUNDING Inflation Reduction Act Impact

MARKET TRENDS Quarterly Rent Trends

Transitioning Generational Wealth INVESTMENT STRATEGY

Special Sponsored Magazine Insert ALSO IN THIS ISSUE


GRC’s Day on the Hill Update


LUKE BABICH Clever Real Estate

GARY PINKERTON Wealth Strategist





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thinkrealty . com | 47

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CONTRIBUTORS Luke Babich Lorraine Beato Daren Blomquist Michaela Boahlke Jenifer Calandra Grant Cardone Kurt Coleman Kori Covrigaru Mackenzie Felt Logan Freeman Suni Goff David Jacobs Will Keyser Zack Lemaster Derreck Long Ben Lyons Susan Naftulin Romney Navarro Kevin Ortner


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

Gary Pinkerton Chris Ragland Jeff Roth Aaron Rudenstine Eric Stewart Steve Streetman Garrett Sutton Michele Van Der Veen Ingo Winzer

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!

SUBSCRIPTIONS :: The annual subscription for Think Realty Magazine is $39.99 in the U.S. Order online at or call 816-398-4130. Provide your full name, address and telephone number. DISCLAIMER :: Think Realty Magazine , its owners, contractors, distributors and their respective representatives do not provide tax, accounting, investment or legal advice and make no guarantee as to the effectiveness or success of any investment or tax strategies discussed herein. Please consult your own independent adviser as to any questions you have or decision you are contemplating. ABOUT THIS MAGAZINE :: Think Realty Magazine is a publication of Affinity Real Estate Media LLC. Reproduction or use of any editorial or graphic, without permission, is prohibited. We are not responsible for the content of any paid advertisements. For reprint rights; to ob- tain a detailed statement of our privacy policy; and for all single-copy requests, address changes and other subscription inquiries:



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4 | think realty magazine :: november – december 2022


Collaboration Begins with Conversation

he real estate investing space is vast. During my years in this industry, I’ve T

housing and essentially represent “housing providers.” It’s a great way to encourage collaboration. On Sept. 20, Think Realty and the American Association of Private Lenders (AAPL) held their annual

discovered that people who don’t participate in it day to day often misrepresent it with no malicious intent. Simply put, they don’t know what they don’t know. Because of these misconceptions (as well as other reasons), it became clear that the real estate investing industry needed advocates, especially for smaller, non-institutional investors. In response, Think Realty created a designated arm that focuses on legislative efforts to support our industry. Think Realty is a place to be part of the solution rather than the problem. Let your voice be heard through collaboration and education. Together, we can create a movement for positive impact in the real estate investing space, a space where we collectively create housing for those who need it. As a passionate advocate myself, I can assure you that we cannot simply talk about what the problem is over and over again. Instead, we must educate those in positions of power about the positive impact of real estate investing on

Day on the Hill. The purpose of Day on the Hill is to explain what housing providers and private lenders do for the real estate industry and to voice the impacts proposed legislation would impose. GRC members from both organizations met with members of the Senate and House committees to talk through some of the issues we feel misrepresent the real estate investing space. Overall, we considered it a successful day. We fostered numerous relationships and have scheduled additional follow-up. To learn more about the issues we addressed and our proposed next steps, turn to page 16. Think Realty and AAPL is committed to continuing these conver - sations with legislative officials about issues that can directly impact our businesses. Together, we can—and will—continue to raise the standards in our industry. Here’s to your investing! •


thinkrealty . com | 5






6 | think realty magazine :: november – december 2022


34  Follow the Money These 12 markets saw a big increase in total income during the past three years. by Ingo Winzer 36  Quarterly Rent Trends in 10 Major U.S. Metros

58  What It Really Means to Be a Real Estate Advocate

8  The Effects of the Inflation Reduction Act on Real Estate Investment Strategy It is best to be on alert and prepare as you consider your next real estate investment. by Susan Naftulin 10  What Does the Cooling Real Estate Market Mean for BRRRR Investors? by Ben Lyons

Only you can decide the real estate investing path that’s the easiest, requires the least amount of time and energy, and gives you the most freedom.

Due diligence and assessment of current market conditions is critical to making successful real estate decisions. by Will Keyser

by Grant Cardone

60  Generating More Than Wealth Education and investment are key to building and transitioning generational wealth.


by Kurt Coleman


38  What the Heck Is Lead Generation, Anyway? … and how should investors really use it? by Suni Goff 42  How to Leverage Social Media to Promote Rental Properties Curate a professional online presence to attract quality tenants. by Jenifer Calandra

62  Trends Impacting Single-Family Rental Here’s what the changes in the housing market mean for investors.

12  Extreme Makeover: Creativity Is a Must! Although everyone loves an extreme home makeover, there are real tricks to completing

by Kevin Ortner

one successfully. by Michele Van Der Veen

64  Millennial and Senior Trends: Why Renting Is a Lifestyle Choice The reasons for major home-buying shifts among these generations extends beyond high home prices and limited housing supply.


24  Empathy As Advocacy Empathy plays a role in business success and in achieving positive outcomes for the people you serve and work with. by Jeff Roth

44  Property Manager Due Diligence

by Kori Covrigaru

Make sure you understand the role of a PM and how to select a reliable one. by Zach Lemaster

66  Needed: Women Real Estate Investors Women must get a seat at the table—even if it means bringing their own chair!



40-page Special Insert

by Lorraine Beato

28  Sizing and Timing the Pandemic Backlog of Foreclosures Sizing the backlog and when it will hit the housing market is important because those distressed sales represent both opportunity and potential risk for real estate investors. by Daren Blomquist 32  Local Connections Aid Successful Development It is always wise to reach out to those with local knowledge and connections to effectively set yourself up for success, no matter the size of your development project. by David Jacobs


68  Four Methods You Can Use to Beat Rising Mortgage Rates You can still make a profit investing in a rising rate environment.

50  A Relevant Cliché for a Changing Market If you are tough, you need to get going in the current market. by Romney Navarro 54  Investing in Real Estate During a Recession Real estate investing can be a smart play when the market cools. by Luke Babich 56  The Government Can Pierce Your Veil Follow the corporate formalities to stay protected. by Garrett Sutton

by Mackenzie Felt

70  Emerging from Crisis What will the next stage in our history bring— and how will real estate investors shape it?

by Steve Streetman

thinkrealty . com | 7




The Effects of the Inflation Reduction Act on Real Estate Investment Strategy IT IS BEST TO BE ON ALERT AND PREPARE AS YOU CONSIDER YOUR NEXT REAL ESTATE INVESTMENT.

by Susan Naftulin

all Street and lenders should be on high alert since the passage of the 2022 Inflation Reduction Act (IRA), with an earmark of $46.5 billion for enforcement activity. The question on everyone’s mind given the allocation of funds to the Internal Revenue Service is: “Will IRS audit rates increase?” The answer is “yes,” but how will that impact private lending? Over the last few months, we’ve all watched closely as Federal W

Reserve actions to control inflation have affected the housing market. Increased interest rates have slowed housing sales, and homes on the market are much less affordable than they were just three to six months ago. As a result, housing affordability has been reported as the worst in 37 years. The challenged market has caused a deceleration in home values, leaving homeowners and real estate investors in limbo about

the best timing for considering a sale or refinance for cash out. The good news for some investors is that rental demands are still at an all-time high due to the already existing housing shortages. DIRECT AND INDIRECT IMPACTS Real estate investors are seeing both the direct and the indirect impacts of these market

8 | think realty magazine :: november – december 2022

shifts, notably decreased profit margins, less cash available from refinancing, and tightened lending criteria on both short-term and long-term loans. Investors are challenged with balancing cash liquidity options (i.e., selling or refinancing with decelerating values equals less cash out) or refinancing and continuing to rent with higher monthly payments. The flip side is rental rates are increasing across the board, making those higher monthly payments possible. The fact remains, however, that lenders and investors cannot forget that stated income (e.g., non-income verified) loans contributed to the real estate crash and financial crisis of 2007-2008. The tightening lending criteria and underwriting guidelines are there for a purpose: to protect both lender and borrower. The implications of these new rules may hit you as an investor, so it is best to be on alert and prepare as you consider your next real estate investment. New IRS auditors hired to improve the tax monitoring system will seek enforcement if you are delinquent or commit fraud in paying your taxes, which could result in a lien on your owned properties and any properties that you subsequently purchase. Anecdotally, we have seen an increase in REIs who have become used to non-income verified loans and have been slower to pay taxes, and some have not filed taxes at all. CHECK THE BOXES As of the last report in 2018, only 32% of self-employed borrowers underreport on their taxes, and a whopping 36% choose not to file at all. You will need to be able to provide filed tax returns and show income/cash flow consistent with

those returns in order to be approved for a real estate investment loan. Below is a checklist of what you should keep in mind: Stated income is still a very popular path, but lenders will be much more conservative with the items listed below. Some lenders who require tax returns, proof of income, or cash flow will offer more aggressive terms. Ultimately, most lenders are not as worried about your reported income as they are that you filed. Credit score will always be the most important indicator of whether you can afford your next real estate investment. You can be sure lenders will be stricter on minimum FICO scores and outstanding delinquencies. Many lenders will argue that the second most crucial requirement besides credit score is experience. Lenders want to see that you have invested successfully before. Lenders who offer loans for those without experience may require proof of income or cashflow and more equity in the transaction (i.e., lower ARV/LTVs).

Lenders want skin in the game. Most lenders will increase what you will need for your down payment or required cash at closing and other reserve requirements. LTV, or ARV, will continue to be reduced. Ultimately, lenders are hedging or anticipating decreased values in the market, requiring more cash at closing to protect them more. When choosing a private lender, weigh your options. Look for a partner who keeps your success balanced with their own and has the flexibility to tailor a product that is right for you. Find the lender that can help you navigate the post-IRA, inflationary environment we are currently experiencing. •

Susan Naftulin founded RFG with partner Jeffery Goldberg in 2009. In addition to serving as president of RFG, Naftulin serves on the American Association of Private

Lenders’ Ethics Advisory Committee, where she continuously upholds the real estate industry’s values and supports professional conduct in private lending. Prior to becoming president of RFG, Naftulin held several senior management positions in the mortgage industry, including general counsel, managing attorney, chief operating officer, and senior vice president for both privately and publicly held mortgage lenders. Before entering the mortgage industry, Naftulin was a creditors’ rights attorney with the Philadelphia law firm of Fox Rothschild LLP.

thinkrealty . com | 9




What Does the Cooling Real Estate Market Mean for BRRRR Investors?

of Business Development Jarrod Ellis. “This demand creates opportunity for real estate investors looking to grow their rental portfolios. And, while relaxing modestly month over month, single-family rent prices remain at record annual highs.” According to CoreLogic, the national Single-Family Rent Index (SFRI) is up more than 13% from a year ago (compared to the 2%-4% annual average maintained for the prior decade). THE UPSIDE TO RENOVATING RENTAL PROPERTIES Aiming to acquire distressed homes to fix up, investors focused on renovating typically are not competing directly with traditional home buyers or potential renters looking for move-in ready housing. Given that two-thirds of existing homes across the country are at least 30 years old and 40% exceed half a century, those with an appetite to rehab properties in need of improvement have the numbers on their side. As LYNK Capital CFO Matt Brothers explained, “Even with increased borrowing and supply costs, rent returns on updated homes can realize positive cash flow more quickly than in prior market cycles. The imbalance between supply and demand would indicate little chance of a dramatic dip in rental prices for the near future. This paired with the slow rate of housing starts, the current opportunity to capitalize on improving distressed housing cannot be understated.”

by Ben Lyons

nvestors looking to build value beyond simply purchasing


PENT-UP DEMAND FOR HOUSING Even as the pace of real estate price growth slows and home sales are impacted by affordability concerns, a fundamental lack of housing inventory remains. Freddie Mac estimates a shortage of 3.8 million homes (including both rental and ownership) across the United States, and the Department of Housing and Urban Develop- ment’s August report indicates single-family housing starts in July were more than 10% below the June figure. Although the Fed is expected to initiate additional rate increases and mortgage applications recently reached the lowest levels this millennium, the fundamentals of the real estate market are very different from the dislocation that occurred in 2008, because mortgage lending standards are now more robust. Given the pent-up demand and slowing supply, few expect real estate prices will fall by any significant amount.

turnkey properties (i.e., those already rehabbed, tenant occupied, and generating positive cash flow) can be rewarded with significantly higher cash-on-cash returns. And, as a renovated property becomes a seasoned rental, investors repeat the process with a cash-out refinance, building a high-return residential rental portfolio with low to no out-of-pocket expense. Considering the recent and significant market shift away from historically low interest rates, the frenzied flow of home sales, and ever-increasing property values, a question is on the minds of many real estate investors: “Is there still opportunity for BRRRR investors in the cooling real estate market?” In a word, yes. Professional real estate investors continue to Buy, Rehab, Rent, Refinance, and Repeat. Although real estate investors always face challenges, the current environment can hold promise for experienced professionals looking to build a rental portfolio by renovating distressed or undervalued homes. The leaders of LYNK Capital share some important market indices and trends that support the potential upside and ongoing need for renovations-to-rentals in the housing industry.


“As the cost of home ownership continues to rise, many Americans are choosing to rent rather than buy a home,” noted LYNK head

10 | think realty magazine :: november – december 2022


• BUY BRRRR investors are not seeking a property that has already been fully renovated; instead, their goal is locating the right value-add property that checks all the boxes: an attractive location for future tenants and requires enough improvements to bring out its value. Accurately calculating the After Repair Value (ARV) is a critical step in determining how successful the process will be. When evaluating properties to renovate, investors have the option to buy properties that don’t qualify for traditional financing (i.e., major roof damage, inoperable kitchen, damaged drywall) or those that are less appealing than the local inventory (either too small, not enough bedrooms, or lacking expected amenities such as upgraded bathrooms). These can provide opportunity to update a home and outfit it with specific features to attract and retain an ideal tenant, providing the investor doesn’t bite off more than they can chew. • REHAB Beyond making a home habitable and considering wishes of future tenants, numerous considerations should be factored when developing a renovation plan—from cost and availability of materials, access to and affordability of skilled labor, and timeline to complete the property. Experienced real estate investors, even those who have strong connections to suppliers and tradesmen, will readily acknowledge every plan should have some contingencies built in for cost and time overruns. Projected rental value is important in deciding which improvements to make, but if you’re planning to rent the renovated property, it’s important to factor in the after-repair value (ARV) the home will reasonably sell for following rehab. • RENT A properly rehabbed home will attract strong tenants and typically require fewer expenditures for future maintenance. Rental properties are long-term investments. Although some investors gain early equity through their improvements, and some realize positive cash flow from the get-go, most rental properties see the bulk of their profit over time.

Ben Lyons is the co-founder of LYNK Capital, a private equity fund providing capital to real estate investors and builders, and leads the LYNK Capital Mortgage Fund. With nearly 40 years in the mortgage banking and real estate industries, Lyons’ experience includes the founding, building, and selling of several mortgage banking platforms. Having been a founder or co-founder of a commercial bank, a title company, a consumer finance company, and several mortgage banks, Lyons has sponsored countless residential and commercial real estate projects. An avid supporter of education, Lyons has served on multiple school boards and currently sits on the board of a private leadership and college preparatory school. He volunteers teaching personal finance and has authored “Be the Bank” and “From Worry to Wealth.” • REPEAT Leveraging the learnings and equity earned through the process, investors can re, building a portfolio of properties and wealth. Experienced real estate investors often find that repetition offers advantages. Knowing which contractors to count on, how to navigate local processes such as permitting, and projecting potential pitfalls and windfalls. • Typically, projected cash flow is simply what’s projected at present and doesn’t account for future rent increases, appreciation, demand, and inflation. If financed with a fixed-rate loan, cash flow spread will continue to grow over the life of the rental property. • REFINANCE Once a rehab project is complete, investors looking to retain the property can often secure a rental property loan from the private lender who financed the renovation. Debt Service Coverage Ratio (DSCR) loans are qualified using the property’s income (rent) rather than Debt to Income (DTI) loans, which require proof of employment income and borrower’s tax returns. Investors looking to repeat the process by reinvesting a portion of the property’s equity will refinance the property with a long-term fully amortized loan that can provide a cash-out option. Although there is often a required seasoning period in which rentals need to have tenants before being eligible to refinance for a long-term rental loan, a short-term bridge loan with a cash-out option can be an optimal solution through the seasoning period.

thinkrealty . com | 11





by Michele Van Der Veen

lmost all extreme makeovers require one thing: creativity. How creative you can ultimately be determines whether you can pull off a project as large and as complex as an extreme makeover! Getting creative means more than coming up with great designs, however. It also means being able to work outside your comfort zone, which some people may not be able to tolerate. But, if you can push yourself through A

and stay creative, you’ll inevitably realize a greater profit. Let’s look at the particulars of one extreme makeover.

homes. You could say it was a diamond in the rough. But with only two bedrooms

and one bathroom, the first issue that needed to be addressed was the square footage. Adding more bedrooms and more bathrooms would help justify investing large sums of money to make the home pencil out on paper for a profit. The home’s construction materials sent up some definite red flags as


This home was a drug house for more than 10 years. On the positive side, it was located in a neighborhood of newer custom-built

12 | think realty magazine :: november – december 2022

well. Because the house was built out of cinder block, making changes to it would be difficult and more costly. Then there was the overall appear- ance of the home. It had absolutely no curb appeal and lacked style of any kind. It was going to take some serious creativity to overcome this hurdle. Houses with as many issues as this one are perfect for an extreme makeover. Because of their many issues, these homes sit on the market longer and offer an opportunity to be purchased for a much lower price. Given the number of things wrong with the home, buyers and investors stayed away from purchasing it. PUT YOUR IDEAS ON PAPER FIRST Taking on any extreme makeover almost always starts on paper. Seeing the additions on paper first will help you visualize the possibilities. It is much easier to erase a bad idea on paper than it is to stand back, see it in full form, and realize you really just made an expensive mistake! By putting your ideas on paper, you’ll be able to better determine whether you can realistically carry them out. Your creative juices will flow as you apply your ideas to paper. Seeing them in front of you will help you in the overall creative process. The more hands on and involved you are, the better chance you’ll have of turning out a beautiful product. Don’t worry that you’re not a drafter or a talented artist. You just have to be able to play with and get creative with some ideas on paper. Once you come up with a floor plan you think will work, you can have it professionally drafted and engineered, if needed.


areas had ample square footage for adding a large laundry room and an extra-large master suite with a giant master bathroom and walk-in closet. Because the home sits on more than two acres, there was plenty of room to add a separate garage to the side of the house. Working around the cinder blocks. With the square footage problem solved, the cinder block issue need- ed to be addressed—there’s always concern when renovating a home built out of cinder block. There’s an even greater concern if you’re planning to do an extreme makeover on the home. Every kind of work you need to do to renovate a home built out of cinder block is much harder. Think about adding new electrical, new plumbing, drywall, moving walls, or adding a window with cinder blocks as your walls. Even hanging a picture becomes that much harder! Anything is possible with a little ingenuity, and this is where creativity plays a role. Working around and through all these hurdles takes thinking outside

BRINGING THE IDEAS TO LIFE With extreme makeovers there is no cutting corners. If you are not all in, you shouldn’t take the project on. Increasing the square footage. A big part of getting a return on your investment on a property like this rests with increasing the home’s square footage. Increasing the size, even if it’s only 500 square feet, will benefit you. To bring in more buyers to justify the work and effort for this project, the home needed at least three bedrooms with two bathrooms. It also needed a laundry room to compete with other homes for sale in the area. Trying to find this additional square footage required some creativity. A large walk-through breezeway connected the garage to the house and led to a creative solution. The garage was on the smaller side and the breezeway served no real purpose, so they were the perfect areas to rework. The two

thinkrealty . com | 13





the box to do the renovation and to keep costs down. Being creative is not just about coming up with a good design, it’s about finding a way to make that design work within reason. Creating curb appeal. Curb appeal has a big impact on buyers these days. An extreme makeover such as this one needed to be eye-catching, memorable, and a must see! This home had a low-pitched roof, cinder block walls, and outdated aspects all around. Real creativity was needed to come up with an exte- rior to entice people to want to come visit this home in person. With a new higher-pitched roof and a porch, this lifeless, styleless cinder block home quickly became a country chic dream home. The higher-pitched roof added interest and made a more distinct statement. The porch gave the home a welcoming, country feel. The paint’s brownish-red tones made the home memorable and warm, lending it an almost barn-type feel. Defining the style of a home in this way helps give it an identity buyers can relate to and fall in love with! Batt and board siding was used to address the cinder block on the exterior, enhance the overall look and feel, and play up the “country

opportunity for any home renovator willing to face those challenges, brave the unknown, and sacrifice sleepless nights to pull off the project! An extreme home makeover will take you on an incredibly rewarding and creative ride—one you’re sure to never forget! •

chic.” Because of the cinder block, there was no way to attach the siding in the typical way, nearly creating a dead end to the whole design idea. However, where there’s a will there’s a way. With some ingenuity and help from a local hardware store, the contractors were able to apply the siding quickly and with no struggle at all! Remember, getting creative comes in different forms, not just with design. Adding shutters and exterior lighting added detail and helped to create a designer look and highlighted the “country chic” look even more. Not all homes are candidates for an extreme makeover. Finding the perfect house that checks all the boxes is not as easy as it seems. But taking on such a project is a thrilling adventure for anyone willing to let themselves go and be creative! From beginning to end, every step of the way, an extreme makeover is a creative adventure with a new challenge every day. It offers a grand

Michele Van Der Veen is host of Good Day segments, including Flip It, Decorate Like a Designer, and Stage to Sell. She started her career in real estate

investing more than 30 years ago. A published author, Van Der Veen has been recognized and featured in international magazines for her unique approach to interior design. Acquiring a formal education from the Interior Designers Institute of California, her experience stems from building custom homes to flipping more than 100 homes and working in commercial real estate development alongside her father at a young age. Not afraid to push the limit on her own designs and investments, Van Der Veen will often be heard reassuring her team about her decisions by saying “Don’t worry, we are the comps!” For more on Van Der Veen’s work or to contact her, visit

14 | think realty magazine :: november – december 2022


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16 | think realty magazine :: november – december 2022

GRC PUSHES TWO ISSUES DURING DAY ON THE HILL The committee focused on eviction moratoriums and HOA oversight.


hink Realty’s Government Relations Committee (GRC) advocates on behalf of real estate investors, professionals,

on the Hill campaign, meeting with staff members from the offices of congresswomen Maxine Waters, current chairperson of the House Financial Services Committee, and Nydia Velazquez, chairperson of the Small Business Committee. Each meeting allowed GRC members to express concerns and build awareness for the real estate investment community, particularly for investors and housing providers. The group exchanged ideas and positions, and several GRC members were invited to share additional feedback and perspective. Future input from the Think Realty and AAPL committees on these issues was recognized to be beneficial for all stakeholders.

and associated service providers. This year the committee focused primarily on these two topics: eviction moratoriums and homeowners association (HOA) oversight. The committee paid particular attention to instances in which those in power exercised new or rarely utilized authority to exert control or limit powers of an individual or business. The committee was joined by members of the GRC from the American Association of Private Lenders (AAPL), an affiliated organization. Together, the committees participated in their annual Day

EVICTION MORATORIUM Representatives from Congresswoman Velazquez’ office were eager to hear feedback on the unintended consequences of the eviction moratoriums, particularly how they led to increased costs of housing for tenants. They quickly agreed and asked if there were other ways we could work together, particularly to support small businesses owners. They recognized that real estate investors are small business owners and agreed to discuss our interests in the future.

HOMEOWNER OVERSIGHT Representatives from Congresswoman Waters office were amenable to the challenges facing real estate professionals, particularly with what we felt was overreach on behalf of HOAs and their recent interest in restricting investors and housing providers from purchasing homes in certain neighborhoods. After several ideas were discussed, the representatives steered the conversation to housing vouchers, one of Representative Waters’ current priorities.

thinkrealty . com | 17


by Chris Ragland

18 | think realty magazine :: november – december 2022


n March 2020, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act to


alleviate burdens caused by the pandemic. One of those measures was to issue a 120-day eviction moratorium. When Congress did not extend the ban, the Centers for Disease Control and Prevention (CDC) took measures to do so. Ultimately, the Supreme Court struck down the measure, saying the CDC lacked the authority to issue the injunction and invited Congress to enact eviction moratoriums through proper legislation. UNINTENDED CONSEQUENCES OF THE EVICTION MORATORIUM Although Congress and the CDC were quick to protect renters, there was little to no discussion about the impact of eviction moratoriums on housing providers. The consequences of the moratoriums have led to increased costs, more burdensome processes, and often an untenable environment to conduct business, especially for small business owners. Here are some specific issues facing housing providers during an eviction moratorium: 1   RENTAL ASSISTANCE PASSED DIRECTLY TO THE RENTER. Rental assistance often went directly to the renter. In many cases, that assistance never made its way to the housing provider and was instead pocketed by the renter. 2   BURDENSOME DOCUMENTATION AND PROCESSES. Governing authorities’ processes created significant friction between renters and housing providers. These processes often led to the renter refusing to communicate or participate in the process altogether. 3   HOUSING PROVIDER CARRYING COSTS CONTINUED, DESPITE MORATORIUMS. Housing providers are still paying insurance, taxes, management, maintenance, and often mortgages. These costs are substantial, especially for small business owners who may have only one or two properties. 4   LACK OF DUE CARE BY THE RENTER. Armed with an eviction moratorium, many renters refused to make repairs for damages they created or even notify the housing provider about issues that needed to be resolved on the property.

To illustrate the micro-margins small business owner housing providers face, let’s look at an example of a single-family home investment property with a cost basis of $140,000. Note the expenses that continue through an eviction moratorium. For this example, we have also removed any vacancy assumptions.

Annual Income (Rent): Property Tax (0.67%)



Insurance (0.95%) Maintenance (3%)

($1,330) ($4,200) ($1,400) ($1,260) ($9,120)

Improvements (1%) Management Fee (7%)


Annual Net Income


In this example, the housing provider is losing $248 per year and is counting on long-term appreciation. This is a poor investment, but one that is too common. To make ends meet, this housing provider may cut back where possible, typically on capital improvements or maintenance. This obviously has a long-term negative impact on the property and, therefore, the renter’s experience. Or, the housing provider may choose to self-manage the property. But if the provider is not equipped to do so properly, the renter may have a poor experience. The housing provider cannot choose to forego property tax, insurance, or the mortgage (the largest expense). Any interruption in the income stream (rent) is devastating and often results in the turnover of the property (at a discounted price) to another investor who increases rents and passes the expense to the renter. Eviction Moratoriums interrupt this income stream, putting the housing provider in a position to exit the business and sell the property. This action results in housing stock that is less affordable for the next renter. Eviction moratoriums increase the costs for housing providers and raise the cost for renters.

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Chris Ragland has managed real estate-related businesses for the past 20 years. Ragland has exposure to all aspects of real estate, including brokerage, disposition, insurance, management, finance, and development, but his favorite role to play is investment mentor. An active investor and principal in several real estate-related ventures, Ragland continues his mentoring mission through his investment firm, Ragland. In addition to real estate, he serves on several nonprofit boards and is active in the startup community in Austin, Texas. NEXT STEPS The Government Relations Committee will meet at its next quarterly meeting to discuss ways we can take advantage of recent inroads created with representatives from Congresswoman Velazquez’ office. Real estate investors and housing providers are indeed often small businesses, and these connections with members of Congress will act as a solid foundation for discussions in providers need renters. Our mission is to provide a safe and healthy home for our customers, while operating a successful business for ourselves. If we work together, we can protect renters without placing an undue burden on housing providers. In the end, we can prevent costs from being passed to renters. Here’s how: 1   RENTAL ASSISTANCE SHOULD GO TO PAY RENTS. Housing providers should be able to apply for and receive rental payments directly. The renter should not be burdened with the process. 2   SIMPLIFY THE DOCUMENTATION AND APPLICATION PROCESS. The process to obtain rental assistance was and is incredibly burdensome. This process should be simplified and streamlined. 3   EXTEND RELIEF TO HOUSING PROVIDERS IN THE FORM OF TAX INCENTIVES. Housing providers cannot shoulder the entire cost burden. That is not an equitable solution. Maintenance, insurance, management—these are all services that must continue even during a pandemic. Tax incentives should be provided to housing providers facing an eviction moratorium. Housing providers are often small business owners doing their best on small margins. They provide a valuable service for the American people and should be supported in any way possible so that more housing stock can be preserved, expanded, and serviced properly for renters who deserve a safe and affordable place to call home.

THE REAL IMPACT OF THE EVICTION MORATORIUM Here are some of the “consequences” of the eviction moratoriums: 1   PUT SMALL BUSINESS OWNERS OUT OF BUSINESS. Perhaps the biggest impact of the eviction moratorium in the housing market was its direct hit on small business owners. The eviction moratorium caused many small business owners to rethink the business and exit. The homes in their portfolios were often acquired not by homeowners but by larger institutional hedge funds that do not improve the home but seek to maximize rents. Eviction moratoriums put small business owners out of business and increase costs for renters. 2   INCREASED ADMINISTRATIVE EXPENSES. For housing providers able to stay in business, it became more expensive to operate. Those expenses are repackaged and passed to the renter. Eviction moratoriums make it more difficult to provide housing, and they raise the cost for renters. 3   INCREASED REPAIR COSTS. For some renters, destroying property was an emotional outlet against housing providers during the pandemic. Now that housing providers are gaining access to these units again, they are incurring additional expenses to repair the unit. These costs are passed to the next renter. Eviction moratoriums remove the incentive of due care by the renter and raise the cost for renters. 4   COSTS OF REFINANCING AND RECAPITALIZING. For housing providers who needed to make repairs, pay late mortgages or other fees, or even cash out their equity to make ends meet, refinancing a mortgage on the property may have been the only choice. This leads to mortgage fees, higher interest rates, and additional carry costs that are passed on to the renter. Eviction moratoriums increase the costs for Housing Providers and raise the cost for renters.

OUR ASK IS SIMPLE Please engage with housing providers to create better ways to help renters in the future. Housing

20 | think realty magazine :: november – december 2022


by Derreck Long

the future. ecently, a prestigious outlet published an article that made claims about disputes between the Homeowners’ Association and investors buying property in their neighborhood. Unfortunately, while there is some truth to the claims, the article lacked the proper nuance about the reality of the situation. This incident was not between the HOA and all real estate investors; rather, HOAs are battling hedge funds. R

The problem stems from massive hedge funds with billions of dollars in capital coming into these residential neighborhoods and buying out as many properties as they can get their hands on. The original article did use the term “hedge fund,” but a later edit changed the term to “real estate investor.” This change may have been for the sake of accessibility, because the average non-investor might not fully understand the difference between a hedge

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If investors are unable to purchase properties in certain areas, then ultimately you could see the decline of the “small business” in the area.

the undesirable “eye sore” properties in order to rebuild and make them better, which ultimately increases the value of the overall neighborhood.


Time takes a toll on all things. As neighborhoods age, more improvements are needed to maintain a proper standard of living. Situations like these usually cause a mass exodus of current residents into newer developments because the average homeowner lacks the resources and the desire to revitalize aging property. Additionally, these houses will remain vacant— prospective homeowners will not waste their money on properties that will cost them extra due to repairs and maintenance. Investors are the ones that ultimately pump life back into these neighborhoods. Rehabbing old properties is not the only perk investor-owned property provides: Investors also possess the ability to provide unique sources of financing to people who otherwise could not afford to become a homeowner. SMALL BUSINESS THREATENED If investors are unable to purchase properties in certain areas, then ultimately you could see the decline of the “small business” in the area. Real estate investors go above and beyond to find, improve, and maintain these properties through small businesses in the local community that know the area. Consider how many lending companies or property management companies are out there. Remember all the contractors and construction-related companies too. These industries are dependent on investors, and without them, all of these industries would be drastically changed forever. HOA REVENUE According to the Greater Houston Partnership, 8,730 new homes have been added to the Houston market alone since the beginning of July. Remember, more than 94% of all properties located in Houston fall under HOA jurisdiction. If investors own only 50% of those homes (most likely they own more), investors would be bringing to HOA neighborhoods 4,400 new people a month that will be paying HOA fees. That’s more money in their pocket. HOAs run on the capital they receive from

fund and a regular property investor. But by using the broader term, they have inspired homeowners’ associations across the country to pass provisions to limit investment into their communities. One HOA group took this to the extreme, attempting to pass provisions so that no investors could buy any properties in their neighborhood. They seemed to be leading the charge and were able to get an interview published with the Wall Street Journal a second time, which was also rereleased on This ultimately led to other HOAs trying to follow suit. The HOA communities believe non-homeowners will not maintain the property as well as a homeowner, directly decreasing the values of the homes as a result. This is truly their only concern. You can see this in multiple articles written on these topics. Frankly, this information is misleading. Today we are here to debunk some of the current myths and provide more insight on what is actually taking place. WHERE IT STARTED The issue stems from hedge funds buying vast amounts of properties in neighborhoods. Given their immense capital, hedge funds have a unique ability to buy hundreds, if not thousands, of homes. Although they have the leverage to buy all these properties, they do not have the resources to maintain them sufficiently. They profit off the sheer number of properties they can turn over, not the value they create by rehabbing. For the average investor, the intent is different. Average investors see properties as individual projects, extracting value from these investment homes so they can either sell it at a higher value or keep good tenants in there and build passive income. Historically, HOAs welcome these types of investors because they will buy

22 | think realty magazine :: november – december 2022

homeowners. If an investor can bring in new people to buy or rent any of these homes, that is more money in their pocket directly. This means more capital for things like parks in the neighborhoods, group activities, pools, etc. From the right perspective, those HOA groups should want investors in there to help increase their capital. CAPITOL HILL EVENT Given all of the information provided here, it comes as a shock to some to hear that Congress still does not see the problem at hand. As a member of the Government Relations Committee, Quest Trust Company spoke to Congress on Sept. 21, 2022, at the recent Day on the Hill event in Washington, D.C. When we met with Congresswoman Maxine Waters of California and her staff, their team expressed they felt no need to act on any of these topics. This might be a reflection of a short-term desire to help their campaign. Needless to say, the meeting did not prove successful, and opposing stances remained. However, Quest representatives also had the chance to meet with Senator Sherrod Brown of Ohio and his staff, finding they were much more receptive to the information. As we spoke about problems that could arise in the near future, Brown’s staff asked our opinion on possible solutions, providing a unique opportunity to work with staff members that are trying to be proactive in their community. As Self-Directed IRA investors, we can help improve neighborhoods by increasing property values for everyone, driving up business for small business owners, and keeping the money in our communities where it belongs. It is clear that the harm stems from the giant hedge funds that are buying up properties in bulk, and it isn’t fair to put “the little guy” in the same category. It’s crucial that each one of us does what we can to protect our investing freedoms and our wealth, so consider how you can get involved in making a difference. • Derreck Long, senior IRA Specialist CISP at Quest Trust Company, served in the military from 2010 to 2014. He then attended Northern Arizona University, where he received a degree in global marketing. After graduating college, Long worked with the FBI but quickly started looking for additional ways to make money. He discovered note investing and has been a private lender ever since. Long has experience with a large range of notes, ranging from equity appreciation tosecond-lien notes to the traditional first lien, and more. Long is a member of Think Realty’s Government Relations Committee, where he researches tax code, new bills, and law changes at the congressional level.

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