The Ultimate Risk Management Playbook FUNDAMENTALS

MARKETS & TRENDS Rolling the Dice on Risky Rental Markets

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PUBLISHER & CEO Eddie Wilson


SALES MANAGER Rodney Halford


DESIGNER David Rodriguez

CONTRIBUTORS Lorraine Beato Joe Dyton Jason Engelman Ellis Hammond Richard Hart

Fred Heigold III W.J. Mencarow Greg Slaughter Steve Streetman Andrew Syrios Michele Van der Veen


Don Wenner Ingo Winzer Michael Zuber

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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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The Safest Bet


into real estate success by taking one risk after another, but doing so

ou’ve heard the adage, “nothing

ventured, nothing gained,” but when it comes to risk in real estate, your rewards are determined by how well you mitigate that risk. One way we less- en risk is by preparation and education. After all, investing in real estate can be risky in any market, but as Think Realty’s CEO Eddie Wilson says, “educated inves - tors can make money in any market.” The theme this month is risk manage- ment and the articles and investor sto- ries in this issue illustrate not only ways to manage risk, but the different types of risk to watch out for. For example, cover person Ryan Robson, owner of Rocket Lister, has launched himself

with caution. Read his sto- ry and how he is changing the industry on page 16. Also, this month marks the

second volume of Think Realty’s Commer- cial Review, a special publication focused solely on commercial real estate invest- ing. See what experts are saying about markets and trends in the commercial space on page 35. As savvy real estate investors, your risk IS your reward—if you invest intelligently. When you arm yourself with education and the right support team, you set yourself up to make the safest bet, time and again.•

Keep Going!


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Ryan Robson and Rocket Lister soar into real estate success by Joe Dyton


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STRATEGY 56  How to Scale to 100+ Units

8  News & Events

Getting off the plateau to reach new REI heights by Andrew Syrios


10  Contributor Corner

58  The Risks You Didn’t Consider Assessing all layers of risk in real estate investing by Steve Streetman

Meet Michele Van der Veen

12  Presidents’ Circle

Featured Member: Arianne Lemire

60  Real Estate: A People Business Minimizing risk means understanding human emotion by Greg Slaughter, A Think Realty Resident Expert


24  3 Critical Areas of Risk Management How to avoid killing profits and crushing real estate dreams by Michael Zuber

64  Proactive Investing

Protect yourself by understanding risks in real estate investing by Lorraine Beato

26 Vetting Deals

DESIGN POINT 66  Backyard Beach

A due diligence checklist to invest with confidence by Ellis Hammond

How landscaping can grow profits by Michele Van der Veen

28 The Ultimate Risk Management Playbook Navigating the new real estate landscape by Don Wenner 32  Managing Rental Properties of Foreign Owners The IRS further targets foreign owners of U.S. real property by Richard Hart 35 Commercial Review: A special Think Realty publication for CRE, vol. 2

MARKETS & TRENDS 72  Market Spotlight: Boise, ID

Hunting for treasure in Treasure Valley by Fred Heigold, III

78  Rolling the Dice

More risk and more opportunity in these rental markets by Ingo Winzer

MINDSET 82  Purpose for Success

54 Noteworthy Risks

Real estate notes offer you numerous options to mitigate risk by W.J. Mencarow

How your vision will keep driving you in the right direction by Jason Engelman

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Last Call for Nominations!

E ach year, Think Realty honors leaders in the industry who exemplify the best in real estate investing. Not only have the winners achieved great success in their own right, but they also demonstrate Think Realty’s mission of being trusted resources within the real estate investing industry. Know someone who fits this description? Nominate them today! Winners will be featured in Think Realty Magazine, on social media, and celebrated at a special awards ceremony with Think Realty CEO Eddie Wilson.

Nominations are open for the 2021 Think Realty Honors through June. Go to now and enter your picks!

What Is RE-Focus? Think Realty is excited to announce a new benefit exclusively for our premium members. Each month, CEO Eddie Wilson hosts RE-Focus, a video presentation in which he shares business tips and strategies followed by a Q&A session. You can ask Eddie anything! If you haven’t joined this call, you’re missing out on REI info that could propel you to the next level. It’s your chance to have a one-on-one experience with Think Realty’s CEO where you will be inspired and empowered on your REI journey! Visit and click on RE-Focus under the Education tab for registration details!

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Experience what the Think Realty Conference has to offer:

Network with top-tier real estate professionals at the Cocktail Reception. Meet 30+ exhibitors offering real estate investment tools, products and services. Attend sessions and specialty workshops on a variety of investment strategies. Access deal-making opportunities with the biggest names in the business.

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The Contributor Corner Meet Michele Van der Veen An investor and designer living in the gorgeous Historic Gold Country of California, Michele Van der Veen has a knack for transforming run-down investment properties into beautiful works of art that are just as breathtaking as their natural surroundings. For the past couple years, she has shared many of her innovative design tips and fix-and-flip investment strategies with Think Realty readers. We are fortunate to have Van der Veen’s expertise in the pages of Think Realty Magazine and recently she divulged that she is enjoying contributing more and more, so of course we asked why.


A: When people find out I am an investor/designer and that I renovate homes for a living, I find myself ending up in deep, yet informative conversations with them about the renovation process and the real estate industry. I have found that because of home renovation shows on television, a majority of Americans have one major question: “How does one get started in investing in and renovating real estate?” Since writing for Think Realty Magazine, I have come to realize I have a passion for sharing my years of knowledge, not only through conversations but through writing now as well! It has become incredibly rewarding to be able to share with so many readers who are enthusiastic about learning something that I am so passionate about. •

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The Think Realty Paint Program Think Realty is excited to announce a new supplier offering members perks! The Think Realty Paint Program launches in June, and kicking it off is Benjamin Moore Paints. Now, Think Realty members will receive discounts and more when using Benjamin Moore paints on your rehab projects! The Benjamin Moore® National Accounts Partnership Program makes it easier to buy and manage paint, color and coatings. The program offers online access to all Benjamin Moore products at consistent, negotiated pricing. It also provides project management from planning through completion. Aimed to help you reduce the total cost of ownership of any painting project, the National Accounts Partnership Program combines tailored service with online efficiency.

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O ne of Think Realty’sWomen to Watch this year, Arianne Lemire is proving she is worth watching in the real estate investment industry. In our March issue, she shared her REI journey Featured Member: AR I ANNE L EM I RE and that although she has amassed wealth from her investment strategies, her passion is educating others on how to be not only financially secure, but able to “retire” on their terms earning passive income from real estate. You’ve heard the saying “You are the average of the five people you spend the most time with.” Well, that is one of the reasons Lemire decided to join the Think Realty/AAPL Presidents’ Circle this year. “I want to spend more time with truly good human beings who are the leaders in the Real Estate and Private Lending industry so that I can learn from them and be more like them. The members of the Presidents’ Circle truly care about people and our industry as a whole and it’s an honor to be able to learn from them and contribute as well,” she said.

The Think Realty and AAPL Presidents’ Circle is a select group of top-performing executives and entrepreneurs from both the private lending and real estate investing industries who gather several times a year at exclusive events to network, learn, and encourage each other in a confidential setting.

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Here is more of the get-know-session with one of the newest members of the Presidents’ Circle: QUESTION  WHAT IS YOUR PREFERRED NICHE OF REI AND WHY? HOW WOULD YOU DESCRIBE YOUR INVESTMENT STRATEGY? A: My preferred niche is Multifamily investing because of economies of scale and the ability to partner with others. I can spend a lot of time and effort buying one single-fam- ily house or spend the same amount of time and effort buying 50 multifamily units. Also, because the pie is larg- er in multifamily, I get to partner with other investors. It’s harder to do that in single family. My investment strategy in multifamily is to buy and hold for long term and share the cashflow and long-term wealth creation with our investors. QUESTION  WHAT WAS YOUR VERY FIRST JOB AND WHAT DID YOU LEARN FROM IT? A: My very first job was formatting IDs for my uncle. It taught me the importance of the time value of money and to also value money more because I was exchanging my time for it. Now, I focus on making money work for me verses trading so much time for money. QUESTION  WHAT ADVICE DO YOU HAVE FOR BEGINNERS IN THE REAL ESTATE INDUSTRY? A: Find a real estate group, peer group, support group, mentorship group so you can learn from others who have gone before you. Don’t do it alone! You can avoid so many mistakes by learning from others. Think Realty is a great place to find those people.

Some Fun Favorites of Arianne Lemire’s

Places you’ve traveled: Coron, Palawan in the Philippines. The water, beaches, and islands are abso- lutely beautiful. It’s not super touristy so there is still that pristine natural beauty, and the food is amazing! Movie: The Greatest Showman. I love the way it portrays the entrepreneurial journey. Book: Right now it’s The One Thing by Gary Papasan. I keep rereading it to nar- row down my focus. In a world full of opportunities, the most important thing we can do is choose THE oppor - tunity we need to focus on. Food: Setteveli. Once Italy opens back up, I’m going there to have this!


Podcast: The Brian Buffini podcast

A: I have invested in my own education and hired business and personal coaches to help me learn from those with more experience than I and also for my coaches to help me see my blind spots. One of the most important things I learned is to always keep cash reserves. I typically have six months of reserves and that allows me to operate from a position of power instead of a position of fear. No matter what happens, I have time to figure it out and ask for help if I need it. •

Quote: “You should enjoy the little detours to the fullest. Because that’s where you’ll find the things more important than what you want.” —Yoshihiro Togashi

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RealtyTrac publishes the nation’s largest, most comprehensive database of properties in all three stages of foreclosure – pre-foreclosure, auction, and bank-owned homes. And all the information investors need to decide whether a property meets their ROI requirements. Property details like beds, baths, square footage, year built, and lot size. Loan and transaction history to determine the outstanding debt. Sales data on properties in the neighborhood to help assess the property’s value. And, of course, information on the foreclosure itself – including the lender, and the homeowner’s name and address. No other foreclosure website offers the kind of national coverage and in-depth, up-to-date information that you’ll find on RealtyTrac. That’s why RealtyTrac has been the go-to source of foreclosure information for investors, real estate agents, government agencies and the media since 1996. f national coverage and in-depth, up-to-date information that you’ll find on RealtyTrac. That’s why RealtyTrac has been the go-to source of foreclosure information for investors, real estate agents, government agencies and the media since 1996. So it’s important to find “hidden gems,” the properties that can make the difference between a winning investment and a losing proposition. Those “hidden gems” are often foreclosure properties. And there’s no better place to find great deals on foreclosures than RealtyTrac. RealtyTrac publishes the nation’s largest database of foreclosure properties – pre-foreclosure, auction, and bank-owned homes. And the information investors need. Property details like beds, baths, square footage, year built, and lot size. Loan and transaction history to determine the outstanding debt. Sales data on nearby properties to help assess the property’s value. And, of course, information on the foreclosure itself – including the lender, and the homeowner’s name and address. The Country’s Leading Source for Pre-Foreclosure, Auction, and Bank-Owned Properties Real estate investors today are faced with two major problems: lack of inventory and rapidly- escalating home prices. Even if you find a property to buy, the costs are so high that it’s hard to generate the kind of profits you need for a successful fix-and-flip or rental investment. No other foreclosure website offers th ki

Find the foreclosure property you’re looking for at

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Foreclosure Properties: Which One Is Right for You?


by Rick Sharga, RealtyTrac

uying a foreclosure property often delivers greater returns


Bank-owned homes are less risky than auction properties and may offer slightly better returns than pre-foreclosure homes. Lenders sometimes sell these properties as/is or do a minimum amount of repair work. These homes are priced to sell but do carry some extra risk. Some can be financed, oth - ers require cash, depending on the lender. Investors should ask wheth- er the property will be conveyed with a Grant Deed, which offers certain implied warranties, or a Quitclaim Deed, which does not. Investors can find all types of foreclosure properties at www., which publishes the largest, most comprehensive database of foreclosure properties in the country. •

like a second mortgage, tax liens and mechanics liens. Also remember that financially-distressed homeowners often let maintenance slide, so hav- ing an inspection done is critical. Auction properties represent the highest potential returns – but come with the highest degree of risk. Lend - ers sometimes offer these homes for the amount owed on the default- ed loan, plus fees and fines, in order to avoid having to take possession. An auction property is rarely sold at full market value, since most bid- ders are investors who need to buy at below-market prices in order to make a profit. Auctions are very efficient as well – events where an investor bids, wins, pays (usually cash or a cashier’s check), and sometimes takes owner- ship the same day. Property condition is probably the biggest risk with auction properties. There are no internal inspections available on these properties, since they’re occupied. Investors can get an idea about the home’s condition by taking a look at the exterior, but there are often hidden issues to account for when estimating repair costs.

than buying a traditional property. But not all foreclosure properties are alike. Which one makes the most sense for your investment strategy? Pre-foreclosure properties— homes in the earliest phase of the foreclosure process—are the least risky but have the lowest discounts. Investors negotiate directly with the homeowner, and while cash pur- chases are fine, these homes can often be purchased with traditional mortgage financing. These homes are purchased for less than sim- ilar homes on the MLS, since the owner needs to close a deal quickly in order to avoid losing everything to a foreclosure auction. Usually, the investor and homeowner settle on a price that covers what’s owed to the lender, is below full market value, and still leaves the homeowner with some cash as they exit the property. Investors need to find out how much is actually owed to the lender before agreeing to a sale—a prelim- inary title search will usually turn up other encumbrances on the property,

Rick is the Executive Vice President of RealtyTrac, a leading foreclosure search and discovery website used by real estate agents and investors.

One of the country’s most frequently-quoted sources on real estate, mortgage, and foreclosure trends, Rick has appeared on CNBC, CBS News, NBC News, CNN, ABC News, FOX, Bloomberg and NPR.

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Ryan Robson and Rocket Lister Soar into Real Estate Success



ypically, the terms “risk taker” and “cautious” are not applied to the same person, but Ryan Robson had made a career out of assuming both of these traits when it comes to his real

Purchasing Rocket Lister is the latest of many big swings Robson has taken since he entered the real estate industry. It’s the risk-taker part of his persona. He doesn’t just throw cash at new ventures, however. Robson takes a thoughtful and calculated, although fast, approach to his real estate decisions. The cautious side of his brain stems from the years he spent sharpening his accounting skills. See, where Robson is, and plans to go, is the direct result of where he has been. AREAL ESTATE FAMILY Robson saw the good, bad, and ugly sides of the real estate industry well before he went to college. He grew up with his mother, who was a real estate agent. They saw ups and downs when it came to income and spent time living in various places and avoiding creditors. Meanwhile, Robson’s father was a very successful real estate devel- oper. So, Robson got the real estate experience and edu- cation watching his mom as an agent, and saw what was financially possible from his dad’s success.

estate career and business decisions. Robson has owned Rocket Lister since November 2020. The multi-state company provides real estate agents with services such as photography, videography, sign and lockbox installation, and more. Rocket Lister’s mission is to provide agents a high quality, consistent product and an out-of-this-world customer experience. “We have 13,000 agents using our service, and we shoot 40,000 homes a year,” Robson said. “If you look at the total number of listings in a year for a market, 10 percent of the agents in the market do 80 to 90 percent of the listings. And those that have figured it out know that they should not be doing their own real estate photography with their own camera or a cell phone. We are speaking to the agent that has already figured out that real estate photography is important, but may not be getting the best experience or results from the photographer they’re working with.”

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I got to experience the pain of not having money; that’s where a lot of my drive came from.”


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“In my mind, I had this idea that being successful was possible and it’s in my genes,” Robson said. “My dad did it; why can’t I do it? I did not want to be poor because I saw my mom being poor and the struggles [that came with it.] I got to expe- rience the pain of not having money; that’s where a lot of my drive came from.” At 18, Robson had made up his mind. He wanted to go into real estate like his parents. His dad convinced him to learn how to walk before he could run, however. Rather than jump into the real estate arena feet first, Robson’s dad suggested he study accounting or finance. Then if he wanted to work in real estate later, he could learn about that industry in the future. “That was hard for me because I was a young entrepreneur and visionary,” Rob- son said. “I wanted to go out and rule the world—just go out and take over. At a young age, my dad convinced me to build a founda- tion first and then expand on it. So, I studied accounting in school. Avoiding real estate right out of school was perhaps some of the best advice Rob- son could have received. His other pre-real estate activities included serving a two- year mission for his church, which Robson said helped him mature and develop more emotional intelligence. He lived in Spain for two years and spent some time doing out- of-the-box sales. Meanwhile, his accounting education and work helped him slow down and understand the importance of spread- sheets, structure, and skills he didn’t have beforehand. Working in accounting also gave Robson a better idea of what he didn’t want to do. “I did accounting for four years and it wasn’t a long-term fit for me,” Robson said. “My personality is in the sales, marketing, and the real estate world, accounting did not fit well with that.”

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THE IMPORTANCE OF PLAYING IT SAFE It didn’t take Robson long after he left the accounting world to learn why sometimes it’s best to be conservative with money. He started his post-accountant life as a hard money lender. One of Robson’s roles was to underwrite loans and make sure what the borrowers were asking for and their property valuations were accurate. Unfor- tunately, Robson was hired in 2007, right before the real estate crash. “From 2007 to 2009, I was watching a lot of really suc- cessful people lose money left and right,” Robson said. “I was getting paid $80,000 a year and all of my friends that had done really well had all gone bankrupt. I was under- writing hundreds of deals a month, which was a great experience for me because it forced me to be conserva- tive since we were in a falling market.” The combination of the job experience and being con - servative with his money paid off for Robson. In 2009, Arizona’s Department of Financial Institutions shut down his boss’s company due to a filed lawsuit. Robson’s boss was cleared of any wrongdoing, but in the six months it took to sort out everything, he was forced to find another job. Fortunately, Robson had put away a fair amount of money ($40,000) to buy himself a little time. But, it only took a week or two for him to get bored and want to get back to work. “I felt like I had to do something with life; I could not just retire with $40,000,” Robson said. AREAL ESTATE CAREER IS BORN Robson’s fortunes changed when he met a friend who had just lost $1 million in the market crash and started doing short sales. “I thought for sure this would be the way to go,” Robson said. “I joined up with him because he had the experience and I had the vision.” Robson and his friend took the $65,000 they had between them and did their first flip in 2010. They pur - chased a house for $50,000 and sold it for $70,000. They did 38 flips that year, 70 the following year, and from 2012 to 2018 averaged over 100 flips a year. When people ask Robson which career path they should take, he asks them the same thing—what are they pas- sionate about? He recognizes that people might want to get into the most lucrative real estate arenas, but he understands that the true reward comes from not only enjoying the work one does, but also to liking the people that they serve.

“If you find yourself complaining about homeowners all day long, and you’re not really passionate about helping homeowners, you probably shouldn’t be a real estate agent,” he said. “If you find yourself complaining about this, that, or the other, or not feeling a passion to serve these people, you might be in the wrong industry.” Robson practices what he preaches. In 2018, he branched out from his house-flipping business and start - ed a real estate brokerage. Robson built his brokerage and in two years it was handling 30 listings a month, and he managed to sell it for seven figures. “Not only did I figure out the house-flipping world, where we’re doing hundreds of deals a year, I proved to myself that I could build a brokerage of agents and generate 30 listings a month and then sell the company,” Robson said. “That was a cool accomplishment for me. I love serving people, and going out of my way to build rap- port. House flipping really does not provide that feeling.” THEART OF RISKMANAGEMENT Putting every dollar he had into a house-flipping ven - ture and building a real estate brokerage from scratch were just two of the risks Robson has taken in his real estate career. Purchasing Rocket Lister is also on that list, but Robson perhaps made an even riskier move lead- ing up to the acquisition—breaking off from a long-time partnership. Robson and his business partner worked almost exclu- sively with handshake deals for years. Then in late 2017, his wife mentioned how one of her mentors said in every relationship, one should always leave more than they take. The notion stuck with Robson because he realized he was putting in more than he took from his business relationship. “The business was so much more important to me than how much I was gaining financially from it,” he said. “[My thought was] what could I do to grow the business, which was helping him out, putting in more time and sacrific - ing? At some point that started to weigh on my wife.” Robson was not concerned at the time that he was put- ting in more time than his business partner. However, his wife convinced him the only way for him to move further ahead was to do so on his own. She reminded him of all of the different businesses he wanted to do and the ideas that he had—and that he’d always have to bring his part- ner in 50/50 if he stayed with him. “She convinced me to break off that partnership, which was a hard decision for me because loyalty is one

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of my core values,” Robson said. “I’m a very loyal person to the extent that I don’t even have to have something in writing with you. If I shake your hand, I’m going to follow through with it.” After being a Rocket Lister customer for 10 years, Robson expressed interest in purchasing the company. He spoke to the previous owner about the ins and outs of the business, the process and the challenges that came with it. Despite all of this, Robson still saw an opportunity. For Robson, seeing the company operate up close for a decade, made it feel like less of a risk to buy. But over the years, Robson has developed a few other safety nets to help him minimize his risks. One of those safety nets is people. Robson believes if he brings in the right people, his business can thrive, wheth- er it’s the brokerage he built and sold, his thriving cabinet company (Cabco Cabinets), his online mastermind for real estate investors (Next Level Mastermind), or an acquired enterprise like Rocket Lister. “I live in the future, which is a dangerous place to live,” he said. “But I love what the future could bring. I have to

I love serving people and going out of myway to build rapport.”


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ask myself if I have it in me, and if I can find the right peo - ple, which is the most important key to success that I’ve had. I had the right partner in the real estate brokerage that I bought and sold.” Robson also acknowledged how critical a real estate agent’s first hire is. When he first started his brokerage, Robson’s initial hire was a transaction coordinator and executive assistant. They were able to handle all of the tasks that Robson could not. It’s the same sales approach he takes when trying to get real estate agents to hire Rocket Lister. “Let us handle your listing and marketing services by doing photography and content for your listings,” he said. “From a risk perspective, you get to take more risks when you’re not tied down handling details for things you’re not good at.” Money is another effective safety net Robson has employed to help him minimize risk. When he wasn’t flip - ping houses, creating a mastermind group, starting a bro- kerage, or acquiring Rocket Lister, Robson built a 100- unit portfolio of rental properties. Those properties bring him approximately $50,000 a month in passive income. “What that allows me to do, as far as risk management, is to take on a lot more risk because that money is com- ing in whether I like it or not,” Robson said. From a risk management perspective, I think passive income is prob- ably one of the most attractive subjects for real estate investors and real estate agents. If you want to take big risks and buy companies like I did with Rocket Lister,

and start a cabinet company and take these risks, then real estate, in my opinion, is less risky than a business because there’s collateral.” No matter how many safety nets one builds, there’s still likely to be some risk involved in any big career or business move. Those who are willing to take those risks will increase their chances of having success. One of the biggest mistakes Robson has seen is people take too much time between coming up with their idea and then putting it into action. Their risk tolerance is so low that they stay in the “idea” phase for too long and never get to the execution part. “I think my superpower is going from idea to execution very quickly,” Robson said. “There’s this amount of time that exists between your idea and execution, and my goal is to be super fast at that. That doesn’t mean that you don’t look at the data—that’s the accounting part of my brain.” “Very few people have what it takes to swing the bat at the fast ball of entrepreneurship—it’s a really short list. That’s a problem, don’t get me wrong, but really the big problem that people have is knowing what to do after they hit the ball.” •

Rocket Lister plans to be in every major market within the next two years. Real estate brokerages that are currently doing 15 to 20 listings a month and could use Rocket Lister’s services can reach Ryan on Instagram at the handle, @therealryanrobson.

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3 Critical Areas of Risk Management


by Michael Zuber


sk a real estate investor about risk management and you are

and bought everything site unseen for list prices; it was crazy and a clear sign the bottom was in. I also remember the wave of inventory hitting the market and daily price drops as others insisted “there’s no problem here.” It is far better to understand and recognize the top than it is to catch the bottom where bankruptcy looms. INTEREST RATE RISK: For the last 20 years we have been spoiled as the 30-year mortgage rate has generally trended lower with only short-term upticks. This recognition is important because I believe we are about to enter a three- to seven-year period where interest rates generally increase,

they have looked at their market nearly every day for two decades, I can tell you without question my market has cycles just like yours has cycles. Market cycles are determined by supply and demand imbalances but can be exacerbated by outside forces like government incentives, historically low interest rates, or tight lending standards. Understanding where you are in the cycle means you can lower your risk of being caught over-lev- eraged as many flippers did in the last crash when prices kept falling. All cycles eventually change, and you never see it coming unless you are in your market every day. For example, I remember the day that hedge funds came into my market

likely going to get a long discus- sion about entities, land trusts, and other vehicles to protect oneself from the potential liabilities of being a housing provider or an investor. While these are critical topics, I believe they miss the most important aspects of risk management in real estate investing. I break down risk management into three critical areas that any investor should acknowledge to mitigate risk in their own business: Market Cycles, Interest Rate Risk, and Operational Turnover. MARKET CYCLES: As a 20-year vet of real estate investing and someone who can say

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and that means some real estate has new risks that were not consid- ered before. For example, did you know that most commercial and multifamily (over five units) carries interest rate risk as you only have three-, five-, or seven-year fixed rate periods? This fact tied to rising interest rates, flat rents in multifamily, and rising cap rates could mean multifamily invest- ing suffers some real pain in the next few years. In addition to rising interest rate risk, I believe the single-family market and builders might need to change their product type. The past 20 years have been very kind to move-up buyers as they were able to sell their home and buy a big- ger, nicer one while also getting a better interest rate. It is far easier to buy a house that is $100K more than your first house when the interest rate is down one percent in five years, and you have great appreciation. However, what happens to the move-up buyer if they want a house at $100K more and the interest rate

is one percent higher than their first mortgage? I suspect most people will see payment shock and decide to stay put. Interest rate is a huge part of payments, which all real estate is based on, and if we have five years of increasing rates, we could see real pain as the move-up buyer decides to stay put. OPERATIONAL TURNOVER: Did you know landlords have some control over the one thing that can bring the largest profit or loss after acquisition? That one thing is unit turnover. Turnover is expensive and it can kill all your profit in a single year if you are not careful. That is why I rec- ommend landlords look at their ten- ants and try and find the great ones. Too many people talk about horror stories of being a landlord. Why not instead talk about the family that paid on time for 12 months straight? Why not celebrate that? Why not reward that? Too many new landlords would rather focus on the process to remove problem tenants. Instead,

I say focus on implementing pro- cesses to keep the great ones. The rules to remove a problem tenant are clear, but what are your rules to celebrate a great tenant? Also, why would you raise rent $25 on a tenant that has paid rent on time for 12 months and has not been an issue? Every rent increase causes families to question whether they want to live there. Never be penny wise and a dollar foolish. As a real estate investor, you must think about the risks of market cycles, rising interest rates, and turnover as each can crush your dreams quickly. •

Michael Zuber worked in the Silicon Valley since graduating from Santa Clara University 20+ years ago. After wasting time and money in his 20s, he

began investing buy and hold rental properties and never looked back. Michael grew his rental property portfolio from a single rental house to financial freedom in 15 years. Now that he no longer has a day job, he shares his story via his self-published book and YouTube Channel, both called One Rental at a Time.

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by Ellis Hammond

he public market provides liquidity, but the private market builds wealth. There is a lot of truth in this


statement. Alternative assets, like real estate, have been a pillar to the wealth creation process for millions of Americans over the last century. The problem, however, for many investors is that there are fewer regulations and more oversight in the private market so the need for greater personal due diligence is required. Here is an easy due diligence checklist to use when vet- ting deals so you can invest with greater confidence and keep putting more and more money in your pocket. KEYAREA#1: THE SPONSOR The best real estate deal in the country can quickly turn into a bad deal if you are dealing with an incompetent or shady operator. That is why my first area of due diligence begins at the sponsorship level, or the person(s) putting together and managing the deal.

Here are a few red-flag questions you might ask during this phase:

• Is there an increase in population and job growth year over year for the last five years? • Does one sector of the job market control more than 25 percent of the employment market? • What is the crime rate in the area? • What is the median income of the surround- ing area? Will the tenant base be able to af- ford the services this property provides? KEYAREA#3: PROPERTY SPECIFIC So now that the sponsor and market check out, it’s time to move onto the deal. Based on your risk tolerance, cashflow needs, and return expectations, the answers to these questions could green or red light the deal. It’s important to assess first what you need your money to do for you! Only then, can you really assess if this is the perfect deal for you. Here are a few red-flag questions you might ask during this phase: • When was the last time the roof, plumb- ing, and electrical were replaced? • What percentage of the cap-x budget is go- ing to renovations directly tied to rent yield? • How does the property compare to its competitors? • What is the class of this property? Does it serve a more affluent or lower income tenant base?

Here are a few red-flag questions you might ask during this phase:

• What does their reporting look like? • Can they pass a background check? • Will current management stay in place and if so, what is their capacity to take on new units? • What does your gut tell you about this person or persons? KEYAREA#2: THE MARKET “A rising tide lifts all shifts.” The tide in real estate is the appreciation and growth or lack thereof of your mar- ket. A decent deal can become a great deal if you buy in a great market. The opposite can also become a reality. It’s important to not just understand what’s happening at the macro level, but also to focus on what’s happening one, three, and even five miles around your property. Just like in your hometown, one street can make all the difference.

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KEYAREA#4: THE FINANCING If you are a passive investor, the likely case of you being an expert in real estate finance is slim. That’s why it’s so important to know you are working with competent sponsors. However, understanding some basic assumptions the sponsor is making and also the level of risk they are taking on in terms of lever- age can help you make a final decision if this is the correct investment for you. Here are a few red-flag questions you might ask during this phase: • How much leverage is being used to purchase the property? • What is the duration of the loan term? • What is the breakeven occu- pancy for this project? You might notice that these are NOT yes or no questions. One man’s trash can truly still be anoth- er man’s treasure. Use these questions as a guide to help you more accurately decide if your next investment is a good deal for you! •

Ellis Hammond manages a private network of investors seeking passive investment opportunities in multifamily syndications across the United States. Ellis is passionate about the intersection of faith and capital and hosts a weekly podcast show, Kingdom REI, in order to educate and inspire other investors and entrepreneurs to see capital as a means for greater Kingdom influence. To learn how you can invest alongside Ellis and this community, visit

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The Ultimate Risk Management Playbook


by Don Wenner

n the real estate market, many rightfully worried the COVID-19

of non-essential businesses led to tremendous economic uncertainty. We had never seen disruption like this, as even residential housing construction was halted in states like Washington, Michigan, and New York. To navigate that unpredictable landscape, many lenders and inves- tors wisely adopted a more conser- vative approach. While there’s much more reason for optimism now, that doesn’t mean you should abandon the risk mitiga- tion practices that got you through the pandemic. Because risks do remain. QUESTIONS ABOUT THE STRENGTH OF WORKFORCE HOUSING An eviction ban, expanded unem- ployment benefits, and billions in rental relief helped prevent a full- blown eviction crisis. However, the continued economic fallout of the pandemic has caused higher unem- ployment to persist. Rental housing investors should be aware of risks once stimulus money and protec- tions curb in the future. AN EVOLVING COMMERCIAL REAL ESTATE LANDSCAPE COVID-19 led to a remote work boom, and office space and retail stores suffered greatly. Global com- mercial real estate deal volume dropped 36 percent in 2020, accord- ing to Deloitte. Some cities were hit

worse than others. For instance, San Francisco had office vacancy rates near 20 percent in the first quarter of 2021 (versus six percent in 2020). Considering the pandemic will lead to long-term changes in how we work, shop, and live, commercial real estate still has a unique set of risks to consider going forward. MORE EXPENSIVE FINANCING Interest rates were incredibly low during 2020, and that helped prop up the residential housing market and made it cheaper for investors to buy properties. While average mortgage rates still remain low from a histori- cal standpoint, investors should keep


pandemic would lead to another crisis. But we didn’t see the 2008 housing collapse play out again, as some predicted. From January 2020 to January 2021, CoreLogic research shows the average home price jumped 11.21 percent, with total home sales reaching their highest level since 2006. Thanks to the vaccine rollout, unprecedented federal stimulus, and gradual reopening, the broad- er economy has great momentum too. Economic growth is expected to skyrocket in 2021, with some experts calling for eight percent plus growth. So, we’re well past a year into the COVID-19 pandemic. Not only is the real estate market still standing strong, but we have more clarity on what to expect on the road ahead. There are a myriad of opportuni- ties and market fundamentals that remain solid, but risks do remain and there are weak spots. In this article, we’ll touch on the new reality in the real estate sector. And we’ll give you a risk manage- ment playbook to put you in a strong position going forward. THREATS REMAIN! STAY COMMITTED TO RISK MITIGATION At the onset of the pandemic, social distancing and the closing

a close eye on rate rises. RISING LUMBER PRICES

The price of lumber has increased by over 200 percent from a year ago. Experts predict pre-COVID lumber prices may never return. This will make renovations and new construc- tion more expensive than before. HAVEACONSERVATIVE, RESEARCH-ORIENTED CAPITAL PLAN Given these risks, and others, we still advise real estate entrepreneurs to keep a conservative capital plan, even as we come out of the pandem- ic. As we tell our clients at DLP Real Estate Capital, the main reason we

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you need for renovations and pad the numbers a little so you have enough cash on hand. • Be aware of other common mistakes investors make. These include only getting one bid for renovation projects, mis-analyz - ing as-is and after-repair values, expecting quick dispositions, etc. Additionally, make sure to do your market research. Read reports from firms like ATTOM Data Solu - tions, House Canary, and Collateral Analytics to learn about investment trends, get accurate valuations, and find out what investment strategies will be most successful (new con- struction, fix-and-flip, etc.) Analyze both macro data, which will help with understanding national and regional market trends, as well as micro data,

see deals fail is because of under- capitalization. You must prepare for every phase of the investment. That means you should: • Use conservative numbers when analyzing deals. Don’t assume market values will accelerate, even as the economy reopens. • Have ample cash reserves. This ensures you have enough money to buy, reposition, and exit. Too often, we see inves- tors spend too much on the acquisition, which leaves them undercapitalized for the next phases of the investment. • Focus on value creation. Take control of what you can control — your deals and properties. Accurately calculate the capital

which will help with deal-level deci- sions in local markets.


So, we’ve talked about risks and the need to stay conservative, even as the worst of the pandemic is behind us. With that said, there are lots of opportunities out there. As long as you stick to a conservative, research-focused approach, now’s the time to hop on these opportuni- ties. We’ve listed some below. RESIDENTIAL NEW CONSTRUCTION Housing supply remains historical- ly low. As of February 2021, it would only take 4.8 months to sell all exist- ing homes on the market. (Federal Reserve chart below).














f red. s t lou i s

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FIX-AND-FLIP PROPERTIES With supply low, fix-and-flip

Real estate entrepreneurs should take note of this inventory issue. If you have experience in residential construction, there are lots of oppor- tunities. As you know, prices are a function of supply and demand. Right now, supply isn’t keeping up with demand. Those who invest in increas- ing the housing supply through new construction stand to gain. INDUSTRIAL AND E-COMMERCE REAL ESTATE Online shopping rose 44 percent in 2020, and while that growth rate may slow, e-commerce will still grow overall. This has impacted the real estate game. It’s why we’re see- ing all types of properties turn into industrial warehouses, from old golf courses to office buildings. In 2020, demand for industrial warehouses, such as distribution centers, rose 25 percent. Investors would be wise to capitalize on this bright spot in com- mercial real estate.

FINDARELIABLE CAPITAL PARTNER We saw lenders tighten require- ments during the pandemic as they sought to mitigate risks. For real estate entrepreneurs, that meant lower leverage, a higher cost of capital, and a need for more cash reserves. As we have more clarity on the road ahead, such requirements may become less strict. However, one thing remains true for borrowers: You need a lending partner you can count on. Traditional banks may offer great terms, but take longer to process applications. If you spot a great opportunity, the deal won’t last long in this market. That’s why you also need a lender who can execute fast. WINNING INTHE NEW REALITY There’s no one-size-fits-all approach to risk management in real estate. In 2021 and beyond, those who stick to their best risk mitigation practices and leverage their exper- tise will win. As you look for deals, have a conservative capital plan and do your market research. This will ensure you can be opportunistic when the time comes. Finally, don’t forget to always have a reliable lend- ing partner at your side. By sticking to that playbook and having the discipline to execute, you’ll propel ahead as we emerge from the pandemic. And that will put you in a position for long-term success. •

remains a bright spot for investors too. As data from ATTOM shows, home flipping profits reached a new high in the third quarter of 2020. Given that home prices are expected to increase in 2021, home flipping profits should continue to be impressive. REOPEN PLAYS The COVID-19 pandemic was tough on hotels, restaurants, and other service-oriented businesses (and therefore tough on those who owned that sort of real estate). As vaccine distribution continues and it becomes safe to fully reopen, good investment deals may present them- selves. For instance, a PwC report predicts a rebound for the hospitality sector in the second half of 2021. If you discover a good deal, it makes sense to get out ahead of such reopen plays.


Gross Profit

Gross Profit















DonWenner is Founder and CEO of DLP Real Estate Capital.



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