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TABLE OF CONTENTS
INSIDE THIS ISSUE
THINKING REALTY 8 Where We’re Thinking Realty in 2017 Exclusive coverage of Think Realty events around the country. 26 Coaches Corner
62 Showing Up at the Table Flipper and wholesaler Shannon White never writes off the impossible. with Shannon White REAL ESTATE & RETIREMENT 60 The Real Estate Leverage Mistake That Can Implode Your IRA Lenders don’t want you to know their nasty habit of making prohibited loans to your IRA. by Bryan Ellis MARKETING 44 3 Keys for Making a Splash in a New Market Don’t let the learning curve in a new market slow 48 5 Keys to Effective Social Media Marketing Domination Truly understanding social media is the first step. by Abhi Golhar NUTS & BOLTS 91 5 Insurance Takeaways from Oakland’s Ghost Ship Inferno What you should learn from Oakland’s tragic warehouse fire. by BreAnn Stephenson 101 2 Extremely Effective Ways to Find and Vet Contractors Build a contracting “bench” you can rely on to work fast and maximize results. by Craig Fuhr you down. by John Tesh
The latest insights from and introductions to Think Realty’s expert coaching team.
THE BIG PICTURE 83 Entrepreneurialism: A Smart Pathway to Success Think Realty’s NASCAR driver reflects on dreaming big. by Jennifer Jo Cobb 86 Net Zero in Costa Rica The RISE development raises the bar on sustainable living and environmentally responsible investing. by Donna Behrens 88 Trendspotting vs. Falling for the Hype Know the signs for a neighborhood truly on the rise vs. the pitfall of a false alarm. by Blake Johnson 90 Commercial Investors vs Zombie Malls Real estate investors win in uncomfortable scenarios. by Linda Liberatore UP CLOSE & PERSONAL 50 The Combat Guide to Real Estate Air Force pilot reveals his flight plan for real estate investing success. with Seth Wilson 52 Case Study: Why Flippers Make the Move to Self-Storage Think Realty’s one-on-one interview with Scott Meyers about expanding into self storage. with Self Storage Expert Scott Meyers
ON THE COVER
PASSIONATE ABOUT THE MISSION: PeerStreet co- founders Brett Crosby and Brew Johnson credit their team with the company’s success in leveling the playing field for real estate investors and private lenders.
LEVELINGTHE PLAYING FIELD: TECHNOLOGY, REAL ESTATE, AND MORE CAPITAL ACROSS THE COUNTRY
by Carole VanSickle Ellis :: photos by Jon Endow & Brian Channell
MEMPHIS, TENNESSEE The Blues City gives local investors all the love.
WHAT’S IN A NAME? Zig Ziglar’s daughter shares her philosophy on reputation
ATLANTA, GEORGIA The “Empire State of the South” is still building strong.
BEAUTIFULLY ENGAGED Public art and private property.
67 So Much More Than Meets the Eye Single-family residential providers reveal best practices and insider secrets.
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FROM THE EDI TOR- IN-CHI EF
PUBLISHER R. Michael Wrenn
The Biggest Deal
PRESIDENT, AFFINITY WORLDWIDE Eddie Wilson | EWilson@AffinityWorldwide.com
EDITOR-IN-CHIEF Carole VanSickle Ellis CEllis@ThinkRealty.com
VICE PRESIDENT OF MEDIA SALES Rodney Halford RHalford@ThinkRealty.com 816-398-4111 x86122
questions she’d written on a napkin. The few minutes he took to help her create an action plan even though she had no money to buy his course changed first her life, then the lives of countless others now in her real estate coaching program. Another sat down at a table with his wife and
eal estate investors, much like fishermen, dedicate a lot of head space (not to mention conversation time)
CONTENT DIRECTOR CariAnn Steward CSteward@ThinkRealty.com
to “The Big One.” Those big deals, the homeruns, so to speak, can dominate not just your networking discussions but, if you are not careful, your investing strategy and your entire business as well. It is crucial to your success in our industry to realize and accept that not every big deal will look big from the outset, and not every trans- action must be a homerun for it to be a big deal for you. In this issue, we talk a lot about big deals. We’ve brought in educators from the Think Realty coaching team who do the biggest of those big deals, multi- million-dollar commercial transactions, on a regular basis. They’re ready to teach you how to transition into that space if you’re so inclined. We’ve inter- viewed investors across the spectrum with hundreds and even thousands of deals, both big and small, un- der their belts. They’re sharing their best strategies, insider knowledge, and all the things that contribute to their big bottom lines. Read closely, however, and you will find that these big guns’ successes were built on things that did not necessarily seem big at first. One investor sat down at a table to be “sold” by an expert at a Saturday seminar, armed with a list of
ASSISTANT EDITOR Heather Elwing
DESIGN CONSULTANTS Rivet | www.WeAreRivet.com
decided a single, relatively small profit margin on their first deal was enough to take the leap and establish what is now an extremely lucrative real estate investing business. That business not only supports the investor’s family, but also betters the lives of employees, distressed homeowners, and multiple southeastern communities. Read closely. Every single investor, educator, expert, and novice featured in this issue has, at some point, taken a mere five or 10 extra minutes to review and adjust their investment strategies in a way that not only improves profits, but benefits their local communities and the broader real es- tate community as well. Sometimes, that five or 10 extra minutes has meant something small, like making an un- usual staging decision that led to fewer days on market. Other times, that extra consideration has reverberated throughout the industry, such as setting the standard for compassionate, community-oriented investing. That, my friends, is a big deal. It may be your big deal. And it’s truly a “real estate of mind.” •
GRAPHIC DESIGNER Emily Bowers
CONTRIBUTING WRITERS Donna Behrens, Jan Britt, Jennifer Jo Cobb, Craig Fuhr, Abhi Golhar, Bryan Ellis, John Hyre, Carmen Inman, Blake Johnson, Linda Liberatore, Bobby Montagne, Julie Ziglar Norman, Jim Paul, BreAnn Stephenson, John Tesh, Abby Tillman, Mike Ventry, Ingo Winzer and Shawn Woedl
INTRODUCING COMMERCIAL REI COURSES
INVESTOR REVIEW: Good Success, Net Worth Realty,
Norada Real Estate Investments, The PIP Group, Real Property Management, Renters Warehouse, Strategy Properties and Streamline Funding
COVER PHOTOGRAPHY Jon Endow
WHAT'S NEW AT THINKREALTY.COM
FOR ARTICLE REPRINTS :: Contact Jeremy Ellis at Reprint Pros, 949-702-5390. www.reprintpros.com. SUBSCRIPTIONS :: The annual subscription for Think Realty Magazine is $28.95 in the U.S. Order online at www.ThinkRealty.com or call 816-398-4085. Provide your full name, address and telephone number. DISCLAIMER :: Think Realty Magazine , its owners, contractors, distributors and their respective representatives do not provide tax, accounting, investment or legal advice and make no guarantee as to the effectiveness or success of any investment or tax strategies discussed herein. Please consult your own independent adviser as to any questions you have or decision you are contemplating. ABOUT THIS MAGAZINE :: ThinkRealtyMagazine isapublicationof AffinityRealEstateMediaLLC.Reproductionoruseofanyeditorial orgraphic,withoutpermission, isprohibited.Wearenotresponsible for thecontentofanypaidadvertisements.Forreprintrights; toob- tainadetailedstatementofourprivacypolicy;and forallsingle-copy requests,addresschangesandothersubscription inquiries:
Meet Think Realty Coach, Pamela J. Goodwin
Think Realty Members can now tap into video education on commercial real estate investing presented by industry powerhouse, Pamela J. Goodwin. Learn as Pamela shares insights from her vast experience in negotiating multimillion-dollar commercial deals across 80 cities and 16 states nationwide. She’s been on all sides of the deal - tenant, landlord, developer, broker, and investor - and is ready to teach you strategies for taking your game to the next level.
Learn more today on page 28 or at ThinkRealty.com.
Think Realty 7509 Tiffany Springs Parkway, Suite 200 Kansas City, Missouri 64153 816-398-4130 ThinkRealty.com Copyright ©2017 Think Realty
CAROLE J. VANSICKLE ELLIS, EDITOR-IN-CHIEF
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estate of mind.” Also, don’t miss the net- working opportunity of a lifetime when you meet the 2017 Think Realty Honors awards finalists at a special awards luncheon. An elite panel of judges and industry influencers will present this year’s winners. Think Realty’s elite coaching team will also have several representatives at the conference. Sonia Booker, “The Wealth Builder,” Abhi Golhar, “The Connector,” and Eddie Wilson, “The Deal Maker” and also president of
THINK REALTY NATIONAL CONFERENCE & EXPO ATLANTA, GEORGIA | OCTOBER 14-15, 2017 THINK REALTY COMBINES THE LATEST TRAINING AND STRATEGIES IN REAL ESTATE WITH NETWORKING TO CREATE “PATHWAYS TO SMART INVESTING.” ing the appropriate investing strategies for their unique situation. Identifying “Pathways to Smart Investing” is one of Think Realty’s strengths. In one venue, meet Think Realty coaches trained to help investors at all levels pinpoint the best tactics to “level up” their businesses and dozens of experienced investors, speakers, and service providers all focused on helping you reach a “real E very investor can achieve real es- tate investing success by leverag- View Think Realty Magazine’s behind- the-scenes pre-conference coverage and interviews at thinkrealty.com. Learn more at thinkrealty.com/ events/treia-raleigh/. Sweet of Carolina Hard Money will also will also present at the event. “Our attendees are learning from what I like to call ‘normal people’ in real estate,” said Jurgens. “Some had credit problems, full-time jobs and families to support, a hard time making ends meet, and even family and friends that hoped they would fail. These speakers will show that you can be successful in real estate no matter your age, gender, race, color, religion, education level, savings in the bank, or location. This event will prove it to you.”
Think Realty parent com- pany Affinity Worldwide will be in attendance. All three coaches recently released new
courses available to Think Realty members at the investor level and will be ready to help attendees build wealth, manage time, and live a life of greater purpose through real estate investing. The event will also fea- ture a panel of local industry experts, a keynote detailing the five most common mistakes real estate investors make, and multiple training sessions with prac- tical, action-oriented information on topics relevant to landlords, flippers, wholesalers, passive investors, and in- dividuals using real estate to build their retirement portfolio. Don’t miss this chance to define and refine your pathway to smart invest- ing with the help of some of the most influential investors from all sectors of our industry.
Eddie Wilson networks and strategizes with attendees at a Think Realty event.
WhereWe’re Thinking Realty in 2017
speaker’s roster includes nationally-rec- ognized real estate expert and trainer Ron LeGrand (this issue’s Investor Spotlight on p. 62 features an Atlanta-ar- ea investor with a very interesting story about LeGrand’s role in her real estate investing), Brian and Lynette Wolff, also known as “The Wolff Couple” and “Men- tors to the Mentors,” Jay Connor, who is known for his creative methods for buying and selling properties at very low risk levels, and nationally-recognized seller-financing expert Larry Harbolt. Educators Sam Kaddah of Liquid Logics, Steve Down of Financially Fit, Merrill Chandler of CreditSense, and Wendy
TREIA CONFERENCE & EXPO, POWERED BY THINK REALTY RALEIGH, NORTH CAROLINA | AUGUST 27-28, 2017 INVESTORS THROUGHOUT NORTH CAROLINA’S TRIANGLE REGION JOIN FORCES THIS AUGUST.
he Triangle Real Estate Investors Association (TREIA) is hosting an exciting two-day event powered by Think T
Realty for new and experienced inves- tors. “We’ve brought together some of the top real estate experts in the world to
show attendees how to start and expand a profitable real estate business,” said Chuck Jurgens, TREIA president. The
Learn more and reserve your spot at thinkrealty.com/events/atlanta.
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Good staging decisions can save you time on market and improve your deal’s ROI.
COLOR PALETTE: A color palette is the color scheme that you use in the home. It can change from room to room or flow throughout the house. Most designers recommend color palettes that vary, but do not clash. STAGING: The act of improving a property’s appeal to buyers using art, accessories, lighting, greenery, carpet, furniture, and other home- décor items to create an attractive first impression of the home.
3 Strategies for Staging Investment Properties STAGING CAN MEAN THE DIFFERENCE BETWEEN A BIDDING WAR AND SLOW DEATH ON THE MARKET.
by Jan Britt
any real estate investors believe that staging is unnecessary for their properties. They could not be more wrong! Whether you are hoping to sell for top dollar or rent out a buy-and- hold property, a few economical staging investments will give your property that “special something” that attracts buyers or renters eager to pay top dollar for the privilege of living in your investment. Here are three things you will soon find you can’t afford not to do before showing a property: M NO. 1 BE SMART ABOUT YOURRUGS Area rugs show off hardwoods and help pull the color palette into the room while preventing echoing. Invest in a carpet remnant that has a high knap, not quite a shag, but close. Cut it to the need- ed size and hot-glue the edges to prevent unraveling. Inexpensive to make (about
$30), but a key addition to any room with hardwood floors. PRO TIP: If you have carpet, don’t put a rug down! It doesn’t matter how pretty and expensive that rug is, it looks like you are covering something up. Fur- thermore, doubling up makes the room look smaller. NO. 2 STAGE THE MASTER BEDROOM Even if you do not stage any other room, minimally stage the master bedroom with a nice bed and bedspread (solids, no florals, so you get a larger, cleaner-looking room and bed) and some nice-but-generic art on the walls. I hang all my art with monkey hooks, which do not mess up the wall and will hold up to 100 pounds. PRO TIP: If the master bedroom is not
on the same level with the rest of the bed- rooms, stage the house so it is clear that upstairs bedrooms are still easily acces- sible to parents. Parents may shy away if they think they won’t be near their babies. NO. 3 HANG SOME CURTAINS A lot of times when you walk into a house and there is minimal staging, you encounter a terrible echo. Absorb that echo with staging curtains made from
> Continued on :: PG 112
Jan Britt is an award-winning interior designer, redesign specialist, and staging specialist based in Atlanta, Georgia. She may be reached at
email@example.com or www.janbrittinteriors.com.
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GETTING STARTED WITH PUBLIC ART
raising property values in the process. “This property had a really bad reputa- tion before we bought it. We wanted to not just bring the building up to standard; we wanted to completely reposition it so that it would have an updated look that would appeal to Millennials,” Halm said. She and her husband, Peter Halm, have more than a decade of real estate investing experience in single- and multifamily properties and mobile home parks under their belts and specialize in using community-oriented processes to raise the value of their invest- ment properties. Once the Halms and their co-investors decided upon a mural as the outward-facing indicator of the building’s new interior, Halm got to work. “There is a huge wall on the side of the property that has great visibility. You can see it from the freeway and several major streets,” she said. “We really wanted to have locals involved in the project so that we did not just have a mural, but a com- munity event that would create interest and engagement.” Halm partnered with We Are This City, a local Albuquerque arts organization that specializes in com- munity art projects, and selected a local Native American muralist named Cloud Face to design the mural, which features a young girl holding a flower and a large hummingbird on a colorful background. The entire community came together to kick the project off, with Halm and her group providing fire extinguishers full of paint and paint-filled water balloons that the crowds used to create the colorful background for the mural. “We invited the local schools, the residents, everyone in the community engaged,” she said. “The wall is 60-by-40 feet, but we did not even have to use ladders to get the background done. Fire extinguishers have quite the range and we were able to keep all of our artists other than Cloud Face on the ground!” After the initial event, Cloud Face immediately got to work painting the finer features of the mural over its bright new background. Halm and her investors expect to see long-term payoffs from the project in
Think that your investment properties could benefit from a public art project? Here are a few things to consider before you start creating:
WHO WILL SEE THE PROJECT? Your project should be positioned in such a way as to attract as many eyes in your target market as possible. WHO WILL PARTICIPATE? Community art requires community participation! You will get the best results if you incorporate local arts organizations or other groups that will not only assist you in the artistic process, but will also publicize the event and help you select an appropriate design for your goals and the local area.
DO YOU HAVE THE RIGHT PERMISSIONS? You will likely need to work with the city govern- ment to get permission to paint, and in some cases you may need to check in with a homeowners’ association or chamber of commerce as well. You may need to submit de- signs in multiple locations for approval or follow a predetermined set of guide- lines for your design.
Locals painted the mural’s colorful background, then Native American muralist Cloud Face filled in the details.
Beautifully Engaged: Public Art and Private Property WHEN PUBLIC ART MEETS REAL ESTATE, COMMUNITY AND EQUITY GROW.
by Carole VanSickle Ellis | photos by Chris Rush and Max Baptiste
Community art requires community participation. Halm brought in a local organization to generate local buzz and involvement the day of the project.
hat do you do when you purchase an investment property with a nasty reputation in a great location? If you’re Monick Halm, managing partner of Vineyard Investment Partners, you give it a literal makeover and, just as in any other makeover, the “face” plays a huge role in the process. Last spring, Halm, an attorney and real estate developer in addition to being a self-described “real estate investor goddess” (she recently authored a book by the same name), took an Albuquerque multifamily investment property and gave it some permanent makeup in the form of a mural that brought the entire local com- munity together to beautify the building while showcasing interior upgrades and W
BENEFITS OF PUBLIC ART
area, the Apple Store, the movie theater, all sorts of shops, boutiques and restaurants. It was just that no one had touched the inside [of the property] since probably 1977 and the outside wasn’t much better. Now, we’ve made beautiful upgrades and the art event really highlighted that we have a new prod- uct and a new community.” •
the form of increased rental rates and pop- ularity of the living spaces, but they also en- joyed some immediate benefits. “We held an open house the day of the event and leased three apartments that day,” she said, adding that the event showcased how desirable the area around the building has become and that in the two months following, occupan- cy rose from 60 percent to 90 percent. The new tenants are, as Halm predicted, in the coveted Millennial demographic that values the advantages her building offers. “It is walking distance to the Uptown shopping
in • tan • gi • ble aesthetic beauty, community pride, education, inspiration considered “soft” benefits because they cannot be measured. tan • gi • ble Occupancy (Monique raised occupancy nearly 30 percent), publicity (news coverage is nearly always positive, free advertising), can be used to attract additional publicity and licensing opportunities, gratitude from “fans” of public art which leads to publicity etc. Note: this is all highly subject to your specific community and target market .
Carole VanSickle Ellis is the editor of Think Realty Magazine. She can be reached at firstname.lastname@example.org.
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RENOVATION ROCK STARS
offer fantastic ROI and are likely to attract more serious buyers (USA Today found that more than half of home buyers stated that they were willing to pay more for hardwood flooring on sight), but they are substantially more expensive than laminate flooring. “My main consideration for flooring in the kitchen is the price point of the home. If you’re dealing with a high- er-end home, you have to go with tile or hardwood for sure,” Tesh observed. How- ever, she added, “Mid- to lower-end homes can do well with a really great vinyl that looks just like tile at about one-third the price.” Similarly, kitchen countertop choice is of vital importance when it comes to rehabbing since investors must balance high-end looks like marble and granite with their bottom line. Tesh has a hard rule about when to replace countertops: “If I change out the cabinets, I always replace the countertop with granite and a tile backsplash. If the budget allows, I select a higher-grade granite for a ‘wow-factor’ when you imme- diately enter the kitchen [see images for examples].” Speaking of cabinets, Tesh looks to comparable sales in the area to make a final decision between replacing and refinishing, and she has some tips for updating old 1: Not every renovation requires wall removal, but many investors opt to do so thanks to the popular- ity of open floor plans. 2 & 3: Granite counters and tile backsplashes create a “Wow!” factor in any kitchen makeover.
Renovation Rock Stars: Kitchen Edition THINK REALTY LAUNCHES AN EXCITING NEW OPPORTUNITY FOR READERS.
by Think Realty :: photos by John Tesh
ver watched one of those “reality” real estate shows and thought to yourself, “I could do so much better, for so much less! And why are they hanging that hideous wallpaper in a rental prop- erty anyway?” If so, you’re not alone. In fact, at every Think Realty event, we meet hundreds of real estate investors doing incredible renovations and rehabs fully worthy of a television feature. While Think Realty Magazine does not have its own reality show just yet, we have managed to do something reality-television worthy: E
We’ve settled the great “kitchen vs. bathroom debate” once and for all…or at least until next quarter’s data comes in. Most real estate investors agree that kitchen and bathroom rehabs and make- overs are among the most valuable play- ers in the equation when allotting your renovation dollars. However, the return on investment (ROI) for the two rooms tends to swing back and forth depending on style and design trends, local market, and the cost of various materials. For 2017, both major and minor kitchen remodels beat immediate ROI
for bathroom remodels according to Re- modeling Magazine’s 2017 Cost vs. Value report. Furthermore, kitchen “face-lifts,” which involve painting, refinishing surfaces, and upgrading appliances, often yield higher returns than full redesigns. In a recent renovation (Kitchen 2 in this feature), Corinne Tesh, a profes- sional interior designer as well as full- time real estate investor and co-owner of Citygate homes, elected to use hardwood floors as part of her remodel even though they were more expensive than her other alternatives. Hardwoods
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The Good Success Mastermind A mastermind for passive and active investors
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You don’t always have to replace cabinets in a kitchen makeover. New hardware, fresh paint, and crown moldings can work wonders.
cupboards without replacing them. “If I paint the existing cabinets, I always paint inside and out, replace the hard- ware, and install crown molding,” she said. “But if the budget allows, I always replace. In today’s market, most people love open concepts. I have been known to knock down a wall or two or three to make that happen!” Your kitchen remodel could be the next Renovation Rock Star. Visit ThinkRealty. com/contest for full details on contest participation, judging, and what you could win! Your kitchen remodels will be posted on Think Realty’s social media platforms for a two-week voting period. The top three remodels will be featured not only on the website, but also in the next issue of Think Realty Magazine . •
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Learn more about the details of this and future contests at https://ThinkRealty.com/contest.
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Through Technology and Real Estate LEVELING THE PLAYING FIELD
A High-Tech Lending Ecosystem Frees Up Capital for the Industry as a Whole.
BYCAROLEVANSICKLE ELLIS PHOTOS BY JON ENDOW
Brett Crosby (L) and Brew Johnson (R) founded PeerStreet just four years ago. The marketplace lending environment has already yielded big results, with more than 1,000 deals funded to the benefit of the local communities.
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ing decisions were driven by the Wall Street securitization machine, financial engineering, and crazy risk-taking with other people’s money.” PeerStreet strives to take the advan- tages that private lenders have over “mega-banks” and institutional lenders, namely nimbleness, flexibility, and com- mon sense according to Johnson and Crosby, and create a large-scale market- place for lenders and loans. Inside that marketplace, everyone involved under- stands the risks, rewards, and collateral involved in the deals. “We connect small local lenders to a national capital market so that together they can compete with larger institutions. We use technology and capital to empow- er those local lenders and sell their loans to our investors. Overall, transparency is key to serving the needs of both lenders and investors,” said Johnson. WHERE IT ALL STARTED: MAKING COMPLEX THINGS EASY Johnson had the idea for PeerStreet while working at one of the top real estate firms in the country, where he practiced real estate law during both the housing boom and at the beginning stages of the subsequent bust. Johnson left the firm in 2005 to move into other aspects of real estate law, includ- ing estate planning. While working with his brother on a new tech business, John- son saw clearly how the inherent flaws in the pre-crash lending environment could be addressed by pairing the right technolo- gy with the right lending platform. “I realized if you could create the right platform, you could literally create effi- ciencies and value for the real stakehold- ers in the market,” said Johnson. “There are a lot of unnecessary intermediaries in the market that are really just leeches and provide no benefit to anybody or anything but themselves,” he added. When applied to private real estate financing for investors, this revelation
than on a borrower’s likelihood to repay the loan, future appreciation of the collateral, or any other intangible factor, Crosby was hooked. “One of the beautiful things about technology is that it levels the playing field. We wanted to use technology to give a lot of people, real estate investors and private lenders in particular, oppor- tunities to do something that previously could only be done by people or entities with access to certain information or
would be groundbreaking because removing the unnecessary pieces of “the system” for private lending meant that far more investors and private lenders would be able to work together to fund and do deals. “Taking complex things but making them easy to use, taking things that are not necessarily intuitive or obvious and making them as simple as possible, that is what we believe the real estate and lend- ing industries need from our platform,” Crosby added. Johnson knew his college friend,
Crosby, would be the perfect business part- ner. Crosby had spent the previous decade working at Google as a director of product marketing after his pioneering web analytics compa- ny was acquired by the search behemoth in 2005. In fact, Crosby’s analytics company served as the foun- dation for what is today’s Google Analytics. While at Google, Crosby helped launch the inaugural format for Google Mobile Ads, Google Drive, and many other products. When Johnson explained what he was hoping to create, a lending platform based on the solid value of the real property collateral behind the loan rather
The two founders and their team constantly refine the PeerStreet marketplace to make transactions smoother, safer, and more profitable for participants.
modest set of goals for a high-powered real estate attorney and a former Google mar- keting director and software developer.
well, that’s great. But when someone can access the funding to make it happen 50 times in a community, then the entire community is lifted up. Local jobs are created; money goes to local stores and local businesses, and, over time, there’s the potential to uplift many participants in the community. This could impact the state of the entire U.S. housing stock.” The two founders and their team believe they are providing a far greater service than just improving the nation’s housing stock, however. PeerStreet believes its mission is to provide transparency to a historically opaque industry: finance. “Let’s go back 50 or 60 years. Lend- ing was very local,” explained Johnson. “Banks lent in their communities to constituents they knew. They made loans in the community that changed the community, hopefully for the better. Then, securitization came into play, which started out positively by pro- viding more capital for banks to make more loans in their communities, but, over time, lending became totally de- tached from the community and lend-
WHEN BREW JOHNSON AND BRETT CROSBY, co-founders of Peer- Street Lending, first joined forces, the old friends never once thought about their private lending project on a small scale. Nor do they think on a small scale today. “We have created a technology plat- form to empower lenders to make loans to borrowers in their communities. It’s about developing a more efficient way to provide capital to real estate industry participants,” said Johnson. He added, “Our idea was to create a platform where high-quality lenders of any size could access both cutting-edge technology and capital in a way that allows them to compete with major financial institutions and truly level the playing field. And those lenders, in turn, provide capital to real estate entre- preneurs and investors that enable them to buy, build, and fix up properties.” Crosby chimed in, “When people invest in loans on PeerStreet, they help borrowers improve communities one house at a time.” All things considered, it is a relatively
REAL ESTATE BACKED LOANS
UNPRECEDENTED TRANSPARENCY IN A MISSION THAT MATTERS
YIELD OVER 12 MONTHS (FOR EXAMPLE)
The technological platform that John- son and Crosby created has done more than 1,000 loans for a value of hundreds of millions of dollars in just about four years. While the numbers are impressive, the pair believes that the real benchmark for the company is the opportunities it provides to every entity involved in a real estate transaction, from the lender and investor to the eventual buyer and the community at large. “Even if you’re not a direct participant in our platform, you benefit,” said Crosby proudly. “We are enabling more houses to be improved, which positively impacts communities throughout the country. Our lenders fund projects that turn ne- glected homes into respectable residenc- es. If that happens once in your area,
Any accredited investor can sign up with PeerStreet and use the website to start investing in loans. “As soon as they’re part of the marketplace, they can start essentially being the bank,” said Crosby. Real estate investors can send in the details on projects and get in front of multiple lenders that might partner with them on a deal. “At our core, we’re not a lender. We partner with a network of existing lenders with local knowledge to underwrite in their local areas,” said Crosby. Accredited Investor: an investor who has a net worth of at least $1,000,000 excluding the value of their primary residence or an income of at least $200,000 each year for the last two years ($300,000 if married) and has an expectation that they will make the same amount this year.
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EQUITY, DEBT, AND LOAN-TO-VALUE (LTV)
DISASTER 101: WHAT HAPPENS WHEN THE WORST HAPPENS THE “METH LAB RENTAL” CASE STUDY A s an investor, can you imag- ine anything much worse than
EQUITY Equity = borrower’s investment and a cushion that she “protects” the debt investment.
icals, including battery acid, drain cleaner, lantern fuel, and antifreeze. These “labs” are generally not con- tained or sterile, and the substances, toxic alone and worse in combination, tend to permeate the entire living area. “There’s chemical waste, remediation, all sorts of potential issues,” said John- son. “The poor landlord did not know what to do.” However, because the group spotted the problem early, as soon as the red-tag went into effect, the PeerStreet teamwas able to leap into action. “We have an active internal manage- ment team for each loan,” explained They remediated; the borrower kept making loan payments, and we found a new tenant. Our investors actually got more money out of the deal than they originally anticipated while our due diligence also saved the property for the landlord as well.” “I can’t think of a worse scenario than finding out you loaned money on a meth lab,” said Johnson. “The fact that everyone involved, includ- ing the landlord and the neighbor- hood that is now meth-lab free, ended up in a good place makes us really, really proud.” Crosby. “We were able to notify the insurance company, and the entire issue was covered by the in- surance policy because we had the right policy in place.
finding out the tenant to whom you rented your property had installed the latest in meth-lab technology in the basement of that rental? Once you’ve recovered from the cold chills you are probably now experiencing, take things one step further. Can you imagine owning the property years later and turning a healthy (non-drug-related) monthly profit on it? If you can imagine this kind of success coming out of a potential disaster, then you are likely already working with PeerStreet. Brew Johnson and Brett Crosby cite “the meth-lab rental” as one of the worst potential disas- ters they have ever encountered. “We had a client who had made a loan to a landlord so that she (the land- lord) could purchase a rental property. About six months into the loan term, we received a notice that the house had been ‘red-tagged’ because there was a suspicion of a meth lab in the basement,” recalled Johnson. Illegal drug manufacture and distri- bution of any sort is bad enough news, but the installation of a methamphet- amine lab is particularly nasty. Meth is manufactured using common cold remedies and a number of toxic chem-
DEBT Debt = Your investment on PeerStreet.
with an extremely large amount of capi- tal,” Crosby said. In 2013, the pair teamed up to build what would eventually become the PeerStreet platform. Johnson and Crosby emphasized that PeerStreet is not a lender, but a mar- ketplace for people with private money to fund real estate deals and for people with real estate deals to find funding [see graphic on pg. 21]. “Our lenders tend to know their space very well, which gives our borrowers a big advan- tage because not only do their loans get underwritten faster, but the lender on the project likely has knowledge of other factors that may be specific to the location of the project,” said Johnson. The company secures its loans with first liens on the collateral, which means that if a loan does go into default, PeerStreet investors will have first priority when it comes to repayment on the loan. LTV is calculated by dividing the loan amount by the value of the collateral property. Lenders use LTV to assess risk in a loan. Typically, higher LTV is seen as higher risk because there is less equity “cushion” for the lender if the borrower defaults.
The PeerStreet community, just like the communities it strives to serve, is highly dynamic, unique, and intent on nurturing the success of its employees, clients, and the broader industry.
PeerStreet loans are attractive to all types of real estate investors, whether they are borrowing to do deals and need relatively short-term loans, from six to 24 months, or are interested in making private loans with their own money. The company also offers an “automated investing” service that will automat- ically submit orders on loans up to a specified investment amount whenever a loan that meets a private lender’s cri- teria enters the system. AMAGIC COMBINATION: INTENSE SCRUTINYAND LOCAL EXPERTISE For lenders who want to personally evaluate risk and make loans rather than rely on PeerStreet’s automated system, Johnson and Crosby believe the platform’s dedication to truth and transparency on all sides of the lending
tors; funding an inherently bad deal is a disservice to the borrower as well.” PeerStreet’s in-house team of cross-industry experts follows each loan from start to finish, making sure that investors’ interests are protected at every stage of the process from under- writing to pay-off or, on rare occasions, default and foreclosure. The combination of live, breathing expertise – more than 97 years’ in real estate, 52 in law, and 12 in regulatory, the co-founders pointed out proudly – and the insight provided by the technological platform maximizes PeerStreet’s ability to identify loans that are a good fit for mem- bers and that are most likely to yield fruit. PeerStreet’s large and diverse team yields big benefits not only when under- writing loans at the start of a project, but also when it comes to dealing with what other companies might simply write off as disasters [see sidebar]. Thanks to the
equation is crucial. They are willing to ask hard questions and read a lot of fine print in order to make sure that both a borrower and lender are qualified to do the deals in which they are invested. “I think a lot of real estate investors and private lenders that get into the space do not realize the number of factors involved in the real estate mortgage business, from underwriting the economics and risk to proper legal review and documentation,” said Johnson. He explained the PeerStreet system hinges on a multi-layered vetting process that evaluates not just the physical real estate and the investors borrowing to fund their projects, but the lenders making loans as well. “There are certain operators out there, both online and offline, that do not take underwriting and due diligence as seriously as they should,” added Johnson. “That is not just a potential risk for a private lender and their inves-
22 | think realty magazine :: october 2017
thinkrealty . com | 23
We take the hassle out of real estate investing.
extensive in-house community, generally the group is able to avert major problems even when projects run into snags.
SEO ADVANTAGE: WHEN A SEARCH ENGINE EXPERT IS ON YOUR SIDE B rett Crosby spent a decade at Google before co-founding PeerStreet with Brew Johnson, and even before that he was on the very leading edge of search
ALL PLAYING ON THE SAME TEAM
“One of the most important things I learned during my time at Google is that you need to be mission-focused and ensure that the mission matters to the people working for and with you,” said Crosby. For PeerStreet, the mission revolves around making the financial industry transparent, profitable, and beneficial for everyone involved. That kind of passion is a critical component to the company’s success thus far as well as their hiring process. “We feel like PeerStreet could ultimate- ly be one of the most important financial businesses of all time if we do things right,” Crosby said. “Our team members are really the unsung heroes here (and so are our fabulous wives). There are literally dozens of examples of really incredibly talented people working with us.” “Trying to do big things with a mis- sion results in attracting the right kind of people to your business,” Johnson added. “There is this interesting network effect when the more people you bring in who are attracted to your mission and dedicated to it, the more people are interested in be- ing involved. We want to have a profound, positive societal impact so that at the end of the day, our impact is the reward and the dividends are the cherry on top.” Johnson concluded, “One of the big- gest reasons that PeerStreet is experienc- ing so much success is our team and our united belief in what we are doing. We want to bring transparency and the par- ticipation of the community back to the real estate and financial industries.” •
technology. “I was one of the co-founders of Urchin Software Corporation, the company that was acquired to build Google Analytics. I then stayed on at Google for nearly ten years launching products and growing them,” he said. He provided Think Realty Magazine readers with some key insights on keyword marketing: Keyword marketing involves purchasing advertising that will appear along with the results of a keyword search on the results page of a search engine or using search engine optimization (SEO) in order to achieve high page rank- ings for specific terms. For example, a real estate investor in Omaha, Nebraska might want their website to appear on the first page of results whenever some- one searches for the phrase “Omaha real estate.” Crosby said that there is a big difference between “keywords that you show up for organically and the ones you should be paying for.” He recommended going into the Google’s Adwords Keyword Planner to determine howmany people are actually searching for any keyword that you believe is relevant to your website. “You may find out that no one is searching for a word after all,” he said, meaning that you probably should not spend time or money trying to rank for it. Crosby also recommended that real estate investors be “hesitant to try to rank for extremely general terms like “real estate.” Those terms are likely to be extremely challenging to rank for and not generate the traffic you want anyway. “Try to find something niche, but not so niche that it gets no traffic,” he said. Build content on your website about your niche not just to raise search engine rankings, but to be extremely helpful to the people who visit your webpage. There are also several things that may not feel like a big deal but that can be detrimental to your search engine rankings. “For example, 404 errors on your site, duplicate content, failing to give your images proper names, and not using H1 tags on your website to tell the search engine what is important can all hurt your rankings,” Crosby said. H1 tags are headings within a webpage that stand out to search engines in a page’s HTML code. Crosby also warned that buying search traffic can be a great short term strategy, but that it may be more difficult to convert purchased leads and benefit from them over the long term. Spending time getting an organic search strategy in place can pay dividends. “Of course, just when you think you’ve got it all right, Google will update their algorithm and you might not be ranking highly anymore,” Crosby laughed. He said that the best way to avoid this is follow SEO best practices: keeping content fresh, relevant, and linked to other authoritative sources.
“Our goal is to deliver the best risk-adjusted returns possible to investors.” Brew Johnson, Founder and CEO
Historic Loan Terms
ATTRACTIVE RETURNS 6–12% Yield
CONSERVATIVE LTV 75% & under
SHORT DURATION 6 to 24 months
Invest as little as $1,000 in a single loan or diversify by building a portfolio of investments across property type, region, maturity date, and loan originator.
*For illustration purposes only, does not reflect actual loans available for investment.
thinkrealty . com | 25 The Information is not an invitation, offer or inducement to acquire or dispose of, or deal in, any interest in security, or to engage in any investment activity. Strategies or investments of the type described herein involve risk and the value of such strategies or investments may be volatile. Such risks include, without limitation, risk of adverse or unanticipated market developments, risk of counterparty or issu- er default, risk of adverse events involving any underlying reference obligation or entity and risk of illiquidity. In certain transactions, in- vestors may lose their investment or incur an unlimited loss. This brief statement does not disclose all the risks and other significant aspects in connection with transactions of the type d scribed herein.
PeerStreet does not guarantee the accuracy or completeness of the Information which is stated to have been obtained from or is based upon trade and statistical services or other third party sources. All opinions and estimates are given as of the date hereof and are subject to change without notice. The value of any investment may fluctuate as a result of market changes. The Information is not intended to predict actual results and no assurances are given with respect there- to. There is no guarantee that the past investment results of Peer- Street will be repeated in the future and no representation is made or implied that they will be. Other methods of calculating returns may produce different results.
This notice is issued with and forms an integral part of information supplied in the form of a printed document (“Information”) and should be particularly noted in connection with that Information. This docu- ment has been prepared by Peer Street, Inc. (“PeerStreet”) for infor- mational purposes only and without regard to the particular needs of any specific recipient. All Information is indicative only and may be amended, superseded or replaced by subsequent summaries and should not be considered as any advice whatsoever, including without limitation, investment, legal, business, tax or other advice by Peer- Street. Any such advice should be sought from an appropriately qual- ified and/or authorized professional.
Carole VanSickle Ellis is the editor of Think Realty Magazine. She can be reached at email@example.com.
24 | think realty magazine :: october 2017
NUTS & BOLTS COACHES CORNER
STRATEGIES: REITs Think Realty Coaches
PAM GOODWIN , The Power Broker Expertise: Commercial Investments S ometimes fear is really an indica- tor that it is time to break out of a
Adding More Pieces to the Puzzle
early every real estate investor out there, from the greenest “newbie” to the most experienced industry veter- an, has one thing in common: they know about fear. Think Realty Coaches Eddie Wilson, Sonia Booker, and Pam Good- win have very different perspectives on what fear can do to an investor and how to leverage it to make your leap into real estate as profitable as possible. Here, they explain in personal detail how they overcame their fears to create successful real estate investing careers. N Panel in Print: “Timing Your Leap” THINK REALTY COACHES DISCUSS OVERCOMING FEAR AND SUCCESSFUL INVESTING.
banks to get financing for a $1.6-mil- lion project that I was working on. “I had presented it to several in- vestors I knew already and they had turned it down. In the past, I would have probably assumed they knew something I didn’t and given up on it, but I had run the numbers myself and I knew it was a great investment
so I did not. That in itself was scary. “I ended up partnering with a friend who is also in commercial real estate. When we sold that property last year it was the most profitable property I have ever sold. Furthermore, it was one of my proudest moments because I didn’t give up. I knew it was a good deal, and it was really one of the best.”
comfort zone. Of course, that’s scary! One of my proudest moments and best deals came as a result of getting into something that I was not comfortable with: the financial fine print on the deal. I wanted to learn that angle of commer- cial real estate, so I went to a variety of
THINK REALTY’S COACHING PROGRAM IS CONSTANTLY GROWING TO BETTER SERVE INVESTORS.
by Carmen Inman
SONIA BOOKER , The Wealth Builder Expertise: Wealth Building I t’s incredibly important to start off right in real estate, but you can- not let the fear of starting off wrong
his month, I am so excited to introduce Pamela J. Goodwin! She brings yet another dimension to the coaching program with her commer- cial real estate expertise. For many residential investors, once they have hit a rhythm, commercial real estate feels like the next step. Pam does a great job of laying the groundwork for someone that’s ready to progress from residential to commercial investing. She even provides the guidance for starting off on the commercial side with no residential experience. T
of industry voices and teachers have tried to place them in. “For example, if you’re the type of person that doesn’t want to do fix- and-flips and you don’t want to learn about them but everyone tells you that is how you get started, you are probably going to be afraid to take the leap. Really, you probably just should be looking at something else, an option that might let you do some long-term buying and holding. You just need the right plan.
“I see so much failure and frus- tration in this business, and it does not have to be that way if you will just take time on the front end to map out what you want to accomplish and what investing strategy will fit you and your goals. We’re all investing for an end result, be it legacy-building, wealth-building, or just replacing an income or paying the bills. Self-dis- covery of who you are and what you want to accomplish will go a long way toward eliminating that initial fear.”
prevent you from taking action! My focus as a Think Realty coach revolves in large part around getting people started in real estate correct- ly, looking at the industry and digging in to find the path that fits your goals, your budget, and your lifestyle. I think that people fear real estate mainly because they cannot visualize themselves in the molds that a lot
I can see Pam’s coaching providing a lot of momentum for active investors wanting to break into commercial invest- ing, and I really admire her approach to developing and keeping good working relationships with past, cur- rent, and potentially future contacts in her network. That practice essentially helped bridge the gap for her when she left corporate America. As the Think Realty coaching program develops, we are continuously rolling out new courses from existing coaches as well as adding new coaches to the team. This continuous building process is a piece of the coaching program that makes me very proud and makes our program profoundly unique. Our coaches not only provide Think Realty members with the essentials for solid investing, but they also offer guidance on building a strong personal foundation. We are thrilled to release new coaching courses from Abhi
EDDIE WILSON , The Deal Maker Expertise: Private Lending & Lead Generation S o often, people miss opportuni- ties that they should be jumping
COACH PAMELA J. GOODWIN
huge opportunities on the table for asset-based lenders thanks, in large part, to regulations that were placed on banks after the housing crash. However, that huge opportunity means that there is more demand, and that means that private lenders are having to get more competitive with their rates. “Before 2008, a hard-money loan might have earned you as much as 20 percent. Now, there are groups lending to real estate investors at
seven percent, which, by the way, is still an incredible rate of return on a really safe, highly-collateralized investment. “Don’t be afraid to get into the action at a competitive point rather than holding out for a home run like that 20 percent loan that may never come your way or that really might be too risky anyway. At the end of the day, fear of missing out can be as real a threat to real estate inves- tors’ success as fear of failure.”
Golhar and Eddie Wilson this quarter. Abhi continues to provide wholesaling insight while Eddie introduces the topic of marketing strategy for investors. Together, our team is assembling all pieces of the puzzle investors can use to design and align their processes with their goals. I look forward to seeing more Think Realty members putting this training into action! •
to take because they are afraid of missing something better. Real estate investors who are completely equipped for success end up sitting on the sidelines their entire lives instead of getting into the action. “For example, a lot of private lenders will pass on great loans be- cause they are afraid that once they deploy their funds, a higher rate of return will come along. There are
The first episode of each course from each coach is viewable at the free, introductory level of
Carmen Inman works closely with the Think Realty coaching team, membership, and educational programs at all tiers of the organization. She may be reached at firstname.lastname@example.org.
Think Realty membership at www.thinkrealty.com/coaches .
26 | think realty magazine :: october 2017
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