Financial Freedom with Real Estate Investing

You may have heard the prediction that unemployment in the US could reach 30%, and that does sound scary. But what do those numbers really mean? And how would that worst-case scenario impact collections? What should we be concerned about as investors in affordable housing?

Damian Bergamaschi is the cofounder of Damris Capital, a money management firm that leverages data analysis to help its investors achieve financial freedom sooner. Damian leads Damris’ optimization research for all investment models and algorithms and serves as the portfolio manager of the firm’s real estate acquisitions.

On this episode of Apartment Building Investing, Damian joins me to explain how his obsession with data led to investments in commercial real estate. He discusses why affordable housing has been insulated from COVID-19, breaking down what the unemployment rate really means and how government subsidies have had a positive impact in the space. Listen in as Damian calculates projected collections in a worst-case scenario and find out why he is bullish on affordable housing as a reliable long-term investment.

Key Takeaways

The Damris Capital origin story

  • Idea to organize data, info from white papers
  • Test different asset classes by numbers

How Damian’s research led him to affordable housing

  • Devaluation of dollar = consistent long-term trend
  • Residential real estate most tax efficient way to invest indirectly in inflation
  • Add framework of Inflation Harvesting (layer on debt)

What we don’t understand about the unemployment rate

  • Many people have income despite being unemployed (e.g.: retirement, disability, etc.)
  • At 30% unemployment, 60% would still have income vs. 80% in normal circumstances

Why affordable housing is insulated from COVID-19

  • Government safety nets (stimulus checks, unemployment benefits)
  • More likely to pay for housing than discretionary expenses
  • Even in worst-case scenario, 70% collections projected

The adverse short-term impact COVID may have on affordable housing

  • Reductions for prepayment
  • Slightly lower collections
  • Credit card processing for online payments
  • Won’t raise rents for 12 to 18 months

Damian’s promising long-term outlook for affordable housing

  • Opportunity to raise rents at accelerated rate in 18 to 24 months
  • Consistent supply and demand in residential real estate
  • As cap rates contract, value of properties will expand

The cyclical nature of delinquencies and being paid up

  • Most caught up after tax return
  • Most delinquent after holidays

Why multifamily investors need to be thinking about September

  • Unemployment will start to hit caps (safety net goes away)
  • Renters may owe on taxes, not realizing UEB taxable

Connect with Damian Bergamaschi

Damris Capital

Resources

Join Michael’s Investor Incubator Mentoring Program

Register for Deal Maker Live

Join the Nighthawk Equity Investor Club

Damian’s Blog Post on Unemployment

Damian’s Blog Post on Mobile Home Park Investing

Damian’s Blog on Mobile Home Park Investing Performance Post-COVID

Inflation Harvesting

The Case-Shiller Home Price Index

US Bureau of Labor Statistics

Subprime Auto Loan Delinquency Statistics

Podcast Show Notes

Michael’s Website

Michael on Facebook

Michael on Instagram

Michael on YouTube

Apartment Investor Network Facebook Group

Direct download: ABI_220.mp3
Category:Commercial Real Estate -- posted at: 1:00am EDT

No one knows exactly what will happen in the multifamily real estate market as the Coronavirus pandemic continues to unfold. But the heavy-hitters who have been in the game for a long time can predict, with relative certainty, which markets will thrive, when we’ll see new deal flow, and what the capital markets will look like over the next 12 months.

Michael Becker is a Principal at SPI Advisory and Senior Director of Mortgage Origination at Old Capital Lending. A 15-year veteran of commercial real estate banking, Michael has originated and managed portfolios in all the major asset classes. In the six years since he started investing in multifamily, Michael has acquired 10K units and currently manages a portfolio of 6K doors. He also serves as the Cohost of the Old Capital Podcast.

On this episode of Apartment Building Investing, Michael joins me to discuss the post-COVID new normal in multifamily real estate. He explains how the pandemic is impacting his business and offers insight around what the recovery might look like—and what that means for us as multifamily investors. Listen in for Michael’s predictions on multifamily capital markets and deal flow in the next twelve months and learn what you can do to be ready when the market turns!

Key Takeaways

How Michael’s career has evolved over the last several years

  • From 1K to 10K units in Dallas-Fort Worth and Austin
  • Start in workforce housing then sold old, bought new

How Michael was able to scale so quickly

  • Access to capital (JV with HNWI, shift to syndication)
  • Leverage technology for efficiency in raising equity

The biggest challenges Michael faced as he built SPI Advisory

  • Raise money + find deals while managing portfolio
  • Stay organized as scale (e.g.: send 1,200 K-1 forms)

Why Michael’s uses a third-party property management team

  • Geographically concentrated in certain area
  • No interest in accounting, HR or construction

How the pandemic is impacting Michael’s business

  • 5% delinquency on rents (4X normal rate)
  • Leasing only down by 15%

Michael’s predictions around the post-COVID recovery

  • Multifamily product used more than ever
  • Rent softening (how much depends on market)
  • Supply will constrict, new construction unlikely
  • Increase rental pool as people lose homes
  • Accelerating economic migration to Sun Belt

Michael’s predictions around post-COVID multifamily deal flow

  • Few deals in Q3, trickle in Q4
  • Steady stream of distressed deals starting in 2021

What the capital markets will look like for the next 12 months

  • No hard money, financial contingencies available
  • Challenging to get Fannie/Freddie loans
  • No bridge loans, personal guarantees required

What work Michael is doing on the acquisitions side right now

  • Active participant but don’t expect to buy until Q4
  • Aware of real-time data, ready when market turns

Where Michael sees his company going in the next five years

  • 10K units, continue transition to newer assets
  • Team runs day-to-day so Michael can travel

Connect with Michael Becker

Old Capital Real Estate Investing Podcast

SPI Advisory

Resources

Join Michael’s Mentoring Program

Register for Deal Maker Live

Join the Nighthawk Equity Investor Club

Michael Becker on ABI EP064

The Real Estate Guys Summit at Sea

Ken McElroy

Podcast Show Notes

Michael’s Website

Michael on Facebook

Michael on Instagram

Michael on YouTube

Apartment Investor Network Facebook Group

Direct download: ABI_219.mp3
Category:Commercial Real Estate -- posted at: 1:00am EDT

Those of us who enjoy success in the real estate business are typically introduced to a model, an investor operating at a scale we never considered, who gives us an idea for what’s possible and a vision for the future. And if we’re smart, we can learn from their mistakes and leverage their knowledge and experience as a springboard, affording us a more direct path to our own financial freedom.

Jacob Blackett is the Founder and CEO of Holdfolio, a platform that connects investors with high-yield investments in the real estate industry, and Syndication Pro, a software company that helps syndicators raise capital and manage investors online. Jacob got his start doing fix-and-flips as a 19-year-old sophomore in college, and today, he has placed over $50M into income-producing real estate, building a portfolio of 600+ units (as the lead sponsor) and a network of 3K registered investors.

On this episode of Apartment Building Investing, Jacob joins me to explain how an infomercial inspired his interest in real estate and share his journey from fix-and-flips to wholesaling to SFH rentals to multifamily. He walks us through the steps he took to scale his real estate business, describing why it’s beneficial to have an in-house property management team and how the technology he built to raise capital online became Syndication Pro. Listen in to understand how Jacob overcame losing $40K on his first deal and learn how to avoid his mistakes by joint venturing with an experienced team early on!

Key Takeaways

What attracted Jacob to the real estate space

  • Free fix-and-flip seminar (sophomore in college)
  • Up to $80K for single flip vs. CPA starting salary

Jacob’s experience with his first fix-and-flip

  • Picked up deal on MLS with grandma’s capital
  • Didn’t go as planned, ended up losing $40K

Why Jacob pivoted from flipping to SFH rentals

  • Very transactional, no tax benefits
  • Growing portfolio = monthly income stream

Jacob’s first AHA moment around scaling his business

  • Create partnerships with investors
  • Build portfolio of 150 SFH rentals quickly

What inspired Jacob’s transition to multifamily

  • All rentals in one place with staff onsite
  • Banks/lenders prefer multifamily

Jacob’s first multifamily deal

  • 46-unit with fire damage at 50% occupancy
  • Leveraged investor network for capital

What surprised Jacob most about multifamily

  • Breath of fresh air (power of all in one place)
  • Had to learn a lot about asset management

Jacob’s background working in property management

  • Met investor through wholesale deal
  • Managed all his acquisitions within 2 years

The benefits of using in-house property management

  • Generates revenue once reach 500+ units
  • Control and consistency in best practices

Jacob’s first steps for scaling his real estate business

  • Implement use of Propertyware software
  • Hire talented leasing agent and COO

How Jacob scaled his capital raising efforts

  • Crowdfunding sites caught eye early on
  • Built website to raise money online

How Jacob bounced back from losing $40K

  • Resolve to fix mistakes
  • Determined to pay grandma back

Jacob’s advice to his 19-year-old self

  • JV on first flips to hedge risk
  • Job at multifamily private equity company

Jacob’s advice for aspiring multifamily investors

  • Get on experienced team, see where you fit
  • Think creatively, don’t be afraid to take job

Connect with Jacob Blackett

Syndication Pro

Email jacob@syndicationpro.com

Resources

Join Michael’s Mentoring Program

Register for Deal Maker Live

Access Michael’s Syndicated Deal Analyzer

Enroll in Michael’s Deal Maker Mastermind

Download Michael’s Free Report—What’s the Best Investment: The Stock Market or Real Estate?

Join the Nighthawk Equity Investor Club

Propertyware

Podcast Show Notes

Michael’s Website

Michael on Facebook

Michael on Instagram

Michael on YouTube

Apartment Investor Network Facebook Group

Direct download: ABI_218.mp3
Category:Commercial Real Estate -- posted at: 1:00am EDT

Some real estate investments are riskier than others, especially in an economic downturn. Class A multifamily developers, for example, are likely to lose their tenant base in a recession. So, what can developers do to forecast what the world will look like at the end of a build cycle and make decisions accordingly? And what can we ALL learn from this approach that will help us prosper through multiple market cycles?   

Scott Choppin is the Founder of Urban Pacific, a real estate development company out of Long Beach, California. With 35-plus years of experience in the business, Scott has led the development of nearly 1,700 units throughout the Western United States. He is also responsible for a recent innovation known as Urban Town House, a middle-income, multigenerational housing product that serves urban families in California. Scott’s work has been featured in Forbes, The Los Angeles Times and Builder Magazine, among many other media publications.

On this episode of Apartment Building Investing, Scott joins me to explain how he got his start working for a large development firm, describing the wide range of skills and knowledge he picked up before striking out on his own. He discusses how he leveraged joint venture partnerships in the early days of Urban Pacific, what the company is doing to mitigate risk in a recession, and why he is optimistic about the current circumstances. Listen in for Scott’s insight on transitioning from a W-2 to real estate development and find out what YOU can do to survive and thrive in an economic downturn.

Key Takeaways

How Scott got into real estate development

  • Family background in industry
  • Work for large firm to learn on job

Why Scott chose another firm over the family business

  • No coddling
  • Gain broadest, deepest experience

What Scott learned in working for a big developer

  • Fill in broad framework of knowledge
  • Exposure to every aspect of business

How Scott transitioned into entrepreneurship

  • Build network of capital contacts
  • Joint venture with other developers

The structure of Scott’s early joint venture partnerships

  • Let me manage day-to-day operations of deal
  • Defer to senior partner as guarantor

Scott’s advice for shifting out of a salaried position

  • Save 2 to 3 years of monthly income in cash
  • Build developer fees into deal (overhead coverage)

The challenges around doing development as a side hustle

  • Best to learn by working in industry
  • Even small, local deal requires daily oversight

What kinds of deals Urban Pacific has done

  • Urban infill, residential development
  • From duplex to 453-unit multifamily

How Scott thinks about mitigating risk in a recession

  • Watch market signals to avoid oversupply
  • Focus on workforce housing for stable tenant base

Why Scott is optimistic about the current circumstances

  • Accelerated leasing velocity + rents holding
  • Lower costs for construction and land
  • Greater availability of labor from shutdown

Connect with Scott Choppin

Urban Pacific

Scott on LinkedIn

Resources

Join Michael’s Mentoring Program

Register for Deal Maker Live

Download Michael’s Free Report—What’s the Best Investment: The Stock Market or Real Estate?

Join the Nighthawk Equity Investor Club

‘6 Ways to Build a Career in the Real Estate Development Business’ by Scott Choppin

Podcast Show Notes

Michael’s Website

Michael on Facebook

Michael on Instagram

Michael on YouTube

Apartment Investor Network Facebook Group

Direct download: ABI_217v-2.mp3
Category:Commercial Real Estate -- posted at: 1:00am EDT

How do you become a successful multifamily syndicator when you’re not old enough to order a beer? What does it take to overcome objections around being too young and too inexperienced—and raise more than half a million dollars in capital for your very first deal? What’s it like to achieve financial freedom before you turn 21?

Kyle Marcotte is an entrepreneur and multifamily real estate investor with a 119-unit portfolio valued at $5.5M. He was a pre-med student and Division I soccer player at UC Davis when Kyle learned about the potential to generate passive income with real estate. At the age of 20, he raised $600K and closed on his first deal in just four months. Now, Kyle is on a mission to help others become financially free with multifamily investing—regardless of age or experience.

On this episode of Apartment Building Investing, Kyle joins me to explain why he burned the boats and quit college to pursue real estate full time. He discusses how he got brokers and investors to take him seriously despite his lack of experience, sharing what gave him the confidence to keep moving forward through hundreds of no’s—until he finally got a YES. Listen in to understand why Kyle went for such a BIG first deal (a joint venture on 107 units!) and learn what he is doing now to build a personal brand and scale his multifamily syndication business.

Key Takeaways

What inspired Kyle to get into real estate

  • Read Rich Dad Poor Dad, got educated about passive income
  • Quit college to devote energy to multifamily

How Kyle realized he had the personality of an entrepreneur

  • Never able to accept being told what to do
  • Always trying to figure out best way

What financial freedom means to Kyle

  • Cover expenses with cashflow, residual income
  • Control over what day looks like

How Kyle got investors to take him seriously at the age of 20

  • Own inexperience but sell on grit
  • Deal pitch deck with multiple scenarios in story form

The specifics of Kyle’s first joint venture deal

  • 107-unit in Louisville (value-add play)
  • Raised $600K of $1M for $4.5M purchase price

Why Kyle kept going after hearing hundreds of no’s

  • Burned boats and had no other option
  • Commit to outcome, eventually someone says YES

Why Kyle went after such a large first deal

  • Need 75 units to achieve economies of scale
  • Acquisition harder but affords more control of time long-term

The nature of Kyle’s first joint venture partnership

  • Partner focused on underwriting
  • Kyle worked on raising capital

How things changed for Kyle after his first deal

  • Silenced critics, feeling of peace and ease
  • Credibility with investors who see as phenom

What Kyle is doing to build his investor base

  • Serve as guest on podcast circuit
  • Show up consistently on social media

How gave Kyle the confidence to keep moving forward

  • Relationship with higher power for guidance
  • Voice inside stronger than outside resistance

Connect with Kyle Marcotte

Kyle’s Website

Own Your Time with Kyle Marcotte

Kyle on LinkedIn

Kyle on Facebook

Kyle on Instagram

Resources

Register for Deal Maker Live

Join Michael’s Deal Maker Mastermind

Join the Nighthawk Equity Investor Club

Join Michael’s Mentoring Program

Michael’s Ultimate Guide to Buying Apartments with Private Money

Rich Dad Poor Dad by Robert T. Kiyosaki

Financial Freedom Summit

The Miracle Equation: The Two Decisions That Move Your Biggest Goals from Possible, to Probably, to Inevitable by Hal Elrod

Divi

Mailchimp

ActiveCampaign

Podcast Show Notes

Review the Podcast on iTunes

Michael’s Website

Michael on Facebook

Michael on Instagram

Michael on YouTube

Apartment Investor Network Facebook Group

Direct download: ABI_216.mp3
Category:Commercial Real Estate -- posted at: 1:00am EDT

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