Issuu

A BUSINESS

P U B L I C AT I O N

F O R R E A L E S TAT E INVESTORS

J U N E / J U LY 2 0 1 9

J EF F TE S CH TA K I N G THE REINS AS CEO OF R C N C A P I TA L

28 A LTE R N AT I V E I N V E ST I N G

Emerging Trends in Corporate Housing

4 0 R EGIONAL F O C U S

Raleigh, North Carolina

4 8 P ROP E RT Y M AN AG E M E N T

Setting Rent for Your Investment Property

F I N A N C I A L I N VR EE S IT IIN NG K I

REI INK

FUTURE PROOF YOUR CAPITAL

Investment in medical oﬃce buildings provides excellent wealth preservation and capital growth opportunities for investors. The trend towards decentralized medical care and the disruptive eﬀect new technology is having on health care service delivery, mixed with an aging population, all contribute to the increasing growing value of this category of commercial real estate.

LAUNCHING IN APRIL 2019. CONTACT US TO GET ON THE LIST!

ORBVEST ARE SPECIALISTS IN THIS CATEGORY AND HAVE EARNED A REPUTATION IDENTIFYING FUTURE PROOFED MEDICAL AND SENIOR LIVING CRE FOR INVESTORS. • We prioritize wealth preservation by sourcing stable income-producing CRE with long leases in place and sustainable proﬁtability. • Our track record has been built over 20 transactions resulting in a portfolio of $250m CRE under management. • Investors from the USA and more than 10 countries already enjoy regular quarterly dividends in USD. • Results speak for themselves and 65% of OrbVest capital has historically come from repeat investors. • We aim for a minimum of 8% per annum cash on cash which is distributed quarterly. • You also participate in the capital growth of the project pushing projected IRR to range between 13 % and 17% over the period of the investment. • We provide full transparency and disclosure of the investment opportunity.

Get on the list for the next opportunity! email: info@orbvest.com | website: www.orbvest.com I I J U N E 2 0 19

Martin Freeman, CEO: +1 914 953 7711

WHAT'S INSIDE PERSPECTIVE

FUNDING

R I S K M A N AG E M E N T

GROW YOUR

A LESSER-KNOWN SOURCE

USING INSURANCE

NETWORK, GROW

OF FUNDING FOR REAL

TO PRESERVE

YOUR BUSINESS

ESTATE INVESTMENTS

LENDER CAPITAL

R I S K M A N AG E M E N T

A LT E R N AT I V E I N V E S T I N G

ASSET PROTECTION:

SINGLE FAMILY,

EMERGING

THAT THING YOU

FIX AND FLIP,

TRENDS IN

SHOULD HAVE

MULTI-FAMILY...

CORPORATE

DONE YESTERDAY

PARKING LOTS?

HOUSING

A LT E R N AT I V E I N V E S T I N G

PROFILE

REGIONAL SPOTLIGHT

34 JEF F TESCH

THE KEY TO TURN-KEY NOTES

RALEIGH, NORTH CAROLINA

L E G I S L AT I O N

P R O P E R T Y M A N AG E M E N T

FROM THERE TO HERE

FILLING A VOID IN

6 KEYS TO DETERMINE

MAKING MAGIC:

THE MARKETPLACE

THE RENT FOR

THE SAM

YOUR INVESTMENT

KADDAH STORY

PROPERTY

F I N A N C I A L I N VR EE S IT IIN NG K 1

REI INK

PUBLISHER’S LETTER

SOMETHING GOOD HAPPENS EVERY DAY The old adage, “Your life can change in an instant, and you never know when it is going to happen” could not be more true. Ten years ago, I started working in the magazine industry after my thriving consulting business in real estate development became a victim of the recession. I went from making tens of thousands of dollars each month to working for a $500 a week draw. Indeed, a humbling experience—but one I’ll always cherish!

RO BE RT RA KOWS KI Publisher & CEO

Fast forward 10 years! Now, I am humbled for a different reason—and that is for all the support we are receiving from colleagues and leaders in the industry. To acknowledge just

ROBERT RAKOWSKI Publisher & CEO

MONICA MANSFIELD Managing Editor

JANET MOORE

VP of Marketing/Business Development

EDITORIAL BOARD

2 J U N E 2 0 19

some of that support: Janet Moore assembled a top-notch group of leaders to serve on the REI INK Editorial Board, our print and digital reach has increased dramatically after just two issues, and industry leaders are contacting us for and about opportunities. It all boils down to one key factor: The people who work on REI INK day after day are dedicated and awardwinning professionals. Not a day goes by when something good does not happen. Waking up with a smile and a positive attitude—because you just know you are going to have a great day full of surprises—is a wonderful feeling.

WRITERS Marcus Cohen, Carole VanSickle Ellis,

Sam Kaddah, Kent Kinzer, Erica LaCentra, Janet Moore, Kenneth D. Quiat, Kevin Shortle, Jennifer Stoops, Kraig Strom, Kim Veazey

These surprises greatly dimin-

ish any of the stresses involved in running a magazine—deadline after deadline, bill after

bill, minutia after minutia, etc. As a military officer in a past

life, I got inundated with leader-

ship principles that are applicable to business. The majority of these principles center around trust and respect, integrity,

always taking the blame and never the credit, centralized planning vs. decentralized

execution and, my favorite,

“executing a good plan swiftly

and violently is better than executing a perfect plan slowly.”

Trust and respect make good things happen every day!

visit REI-INK.com/subscribe or email robert@rei-ink.com. Annual subscriptions are $29.95; single-issue copies are $6.95. The views and opinions expressed in this magazine are not necessarily those of Choice Publishing LLC or the

publisher. The articles are intended

part of this magazine may be reproduced

not intended to provide specific

mechanical means without permission in writing from the publisher.

for general information only and are recommendations or advice. Be sure to consult your attorney, accountant and other relevant business professionals

REI INK is a bi-monthly publication of Choice

when considering a new strategy or

single copies, please call (816) 623-0762,

content of any paid advertising.

Publishing LLC. To subscribe or to order

idea. We are not responsible for the

.com .com

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REI INK

ANNOUNCEMENTS

WORLD'S FIRST CLOSING AUTOMATION PL ATFORM FOR LENDERS L AUNCHES

Notarize, the first company to enable an entirely online real estate closing process,

introduced the worldâ€™s first

closing automation platform

on June 5. With the introduc-

tion of this platform, Notarize is pioneering the ability for

anyone to buy, sell or finance their home entirely online.

The platform can accommodate every type of closingâ€”from

fully online to hybrid closings. The first is a fully automated, entirely digital experience

that helps homebuyers close

on their home from anywhere in the world, on any device. Hybrid closings allow most documents to be reviewed

and electronically signed with Notarize before the

closing, but the big day still happens in person.

4 J U N E 2 0 19

SINGLE-FAMILY BUILD-TO-RENT INVESTMENT PL ATFORM L AUNCHES

afayette Real Estate

Lafayette Communities

has teamed up with

opened its first rental

Guardian Residential to

community, the 51-unit

create an investment plat-

Preserve at Pine Grove, in

form that focuses solely on

the Riverview submarket

the acquisition and develop-

of Tampa in early June.

ment of newly constructed

The community consists of

homes for the purpose of

three- and four-bedroom

long-term rentals.

detached homes with

The new firm will be known

modern features such as

as Lafayette Communities.

granite countertops and

It will be led by Thibault

stainless-steel appliances.

Adrien, current CEO of

The company has addi-

Lafayette Real Estate, and

tional communities under

Dennis Cisterna III, current

development in Florida and

CEO of Guardian Residen-

is planning expansion into

tial. Both are long-time

markets in Texas, Georgia,

industry executives in the

North Carolina and Tennes-

single-family rental space.

see before the end of 2019.

SAGENT LENDIN G TECHNOLOGIES ADDS EXECUTIVE

tephanie Durflinger

“I have a

is the new executive

passion for

vice president and chief product officer of Sagent Lending Technologies. She will lead product management and customer support for mortgage and consumer servicing solutions. Durflinger brings more

bringing to the market compelling, innovative mortgage technology solutions that help people achieve and maintain homeowner-

OFFERPAD ADDS DIRECTOR, PL ANS PRODUCT EXPANSION

ship, and I am excited to foster the transformation of solutions in

than 20 years of mortgage

the mortgage and

technology expertise to

consumer servicing

the new role.

market,” she said.

ryan LaFranchi has joined iBuyer Offerpad as its national director of

Homebuilder Alliances. He was previously with Zillow Group for nine years. Offerpad’s Homebuilder Alliance program allows homeowners to coordinate the sale

CAPITAL MARKETS VETERAN JOINS PEERSTREET

eerStreet has

appointed Deepa

Salastekar as the vice president of institutional sales.

experience in capital markets, including with Pacific Investment Management

PeerStreet is a marketplace

Company, Bear Stearns

for investing in real estate

& Co, Inc., and Inveniam

backed loans.

Capital Partners.

Salastekar will lead the

Salastekar is PeerStreet’s

expansion of the company’s relationship base of institutional partners across all

PeerStreet’s investment types. Salastekar has more than 20 years of leadership

latest executive hire to an expanding team of capital markets professionals. In March, PeerStreet surpassed $2 billion transacted on its platform.

of their existing home to coincide with the purchase of a new construction home, eliminating the need to sell the current house before buying. Offerpad pays cash for the current home, and homeowners can apply that toward a new one. Among other responsibilities, LaFranchi is charged with leading the expansion of the program into new cities as well as new product development tailored to buyers of new-construction homes. Founded in 2015, Offerpad is headquartered in Arizona, with markets in Atlanta, Austin, Charlotte, Dallas-Fort Worth, Houston, Las Vegas, Los Angeles, Orlando, Phoenix, Raleigh, Salt Lake City, San Antonio, Tampa and Tucson. REI INK 5

REI INK

IN T RY DATA A NDNUOSU NCE MENTS

U.S. FORECLOSURE ACTIVITY DECREASES 13% IN APRIL 2019 Market Report shows that foreclosure filings—default

notices, scheduled auctions and bank repossessions—were

350K 300K

reported on 55,646 U.S. properties in April 2019. That’s a

250K

marked the 10th consecutive month with an annual decline.

200K

“While overall foreclosure activity is down nationwide,

150K

a close eye on,” said Todd Teta, chief product officer at

100K

ATTOM Data Solutions. “For instance, Florida is seeing a

steady annual increase in total foreclosure activity for the

8th consecutive month, which is being sustained by a constant annual double-digit increase in foreclosure starts.” Lenders started the foreclosure process on 30,524 U.S. prop-

erties in April 2019, down 5% from March and down 10% from

April 2018, the third consecutive month with an annual decline. States that posted annual decreases in foreclosure starts in April 2019 included New York (down 43%), Nevada

(down 36%), Colorado (down 34%), Maryland (down 31%) and Michigan (down 25%).

Metropolitan statistical areas with a population greater

than 500,000 that saw a large annual increase in foreclosure starts from last year included Orlando, Florida (up

90%); Miami, Florida (up 45%); Columbus, Ohio (up 35%); Portland, Oregon (up 31%); and El Paso, Texas (up 22%).

Bucking the national trend, 17 states saw an annual increase in foreclosure starts, including Washington (up 38%), Florida (up

34%), Oregon (up 22%), Louisiana (up 12%) and Georgia (up 11%). Nationwide, one in every 2,433 housing units had a foreclo-

50K 0

PR -0 PR 5 A 06 PR A 07 PR A 08 PR -0 9 A PR -1 0 A PR -1 1 A PR A 12 PR A 13 PR -1 4 A PR -1 5 A PR -1 6 A PR A 17 PR -1 8 A PR -1 9

there are still parts of the country that we need to keep

5% drop from March and a 13% decrease from a year ago. It

TTOM Data Solutions’ April 2019 U.S. Foreclosure

Source: ATTOM Date Solutions

Among 220 metropolitan statistical areas with a popula-

tion of at least 200,000, those with the highest foreclosure rates in April 2019 were Atlantic City, New Jersey (one in

every 702 housing units); Fayetteville, North Carolina (one in every 732); Clarksville, Tennessee (one in every 853);

Columbia, South Carolina (one in every 946); and DeltonaDaytona Beach, Florida (one in every 966).

Lenders completed foreclosures (REO) on 11,078 U.S. properties in April 2019, down 9% from the previous month and down 22% from a year ago, marking a sixth consecutive annual decline.

States that saw a double-digit annual decline in REOs included Alabama (down 45%), Arizona (down 38%), North Carolina

(down 32%), California (down 20%) and Nevada (down 14%).

sure filing in April 2019. States with the highest foreclosure

Counter to the national trend, 10 states posted year-over-

Maryland (one in every 1,218), Delaware (one in every 1,249),

(up 53%), Connecticut (up 22%), Kentucky (up 19%) and

rates were New Jersey (one in every 980 housing units),

Illinois (one in every 1,371) and Florida (one in every 1,415). 6 J U N E 2 0 19

year increases in REOs in April 2019, including Washington New York (up 3%).

F I N A N C I A L I N VR EE S IT IIN NG K 7

REI INK

PERSPECTIVE

GROW YOUR NETWORK, GROW YOUR BUSINESS Why strategic relationships will take your company to the next level BY E R ICA L AC E N T RA

veryone knows the

connections with potential

which potential partners

phrase, “It’s not

partners can involve a great

align with your goals.

what you know, but who you know.” In the

deal of work, when done properly, the benefits easily

mortgage industry, this

outweigh the effort.

is especially true.

Cultivating strong referral

In an industry that

relationships should be a

relies heavily on referrals and word-of-mouth

R E F E R R A L R E L AT I O N S H I P S S H OU L D B E A T O P P R I O R I T Y F O R A N Y CO M PA N Y I N OU R I N DU S T R Y.

most time-consuming parts of this process, but it is a crucial step in finding the right partners.

pany in our industry. It is

Here are some key factors

a highly effective way to your business and grow your customer base without straining your marketing budget.

to consider when seeking out potential partners. What commonalities exist between your company and potential partners? Seek out companies that

W H AT D O YO U WA N T T O AC C O M P L I S H?

offer products or services

For those just starting out,

industry or niche. This

forming strategic partner-

8 J U N E 2 0 19

will typically be one of the

top priority for any com-

increase the visibility of

C U LT I VAT I N G S T R O N G

Researching prospects

that cater to a similar increases your chances of working together because

recommendations, it

ships may seem a bit daunt-

is surprising how often

ing. However, the first step

companies overlook the

is simple: Determine why

a similar customer pro-

importance of developing

your organization is looking

file. They can also easily

strategic partnerships and

to form these alliances.

identify what customer

underutilize existing rela-

Once you figure out what

needs exist in the space.

tionships. Although iden-

you want to accomplish,

When you initiate the

tifying and establishing

you can start researching

discussion of forming a

these companies will have

strategic partnership, they

customers with minimal

things that your competitor

those lenders. These

can tell immediately if this

effort. You are giving

can’t or won’t do, which

pseudo-competitors often

is an opportunity that will

them access to additional

creates a unique opportu-

benefit their clients.

resources they might not

nity for your business.

make the best referral

otherwise have just by

For example, RCN Capital

Another factor to consider is the nature of the business itself. Does this company provide a product or

working with you. This creates a clear advantage over your competitors.

has established referral relationships with numer-

partners because their customer profile is nearly identical to your company’s. Plus, you have an

ous other lenders that, on

additional resource for

service that complements

A final factor to consider is

the surface, seem to offer

customers that may be

your business? For exam-

this: Are the companies you

similar loan programs.

looking for something you

ple, if you are a lender that

perceive as competitors

However, maybe these

aren’t currently offering.

specializes in real estate

truly your competition?

lenders can’t lend nation-

investment loans, partner-

One of the most common

wide and receive loan

ing with a company that

mistakes companies make

requests from states they

provides proprietary data

is overlooking a potential

can’t do business in. The

on foreclosure inventory

referral partner because

lenders will send those

throughout the country

they assume they are a

requests to RCN. RCN will

is a no brainer. Finding a

direct competitor. Much

reciprocate by sending

partner with a complemen-

like your company has a

requests for programs

it’s time to pitch the idea

tary product or service

specialty, a “competitor”

we don’t offer, like loans

of a partnership to your

allows you to provide

also has their established

for small-balance com-

prospects. When drafting

additional value to your

niche. There are often

mercial properties, to

a proposal, clearly outline

A P P R OAC H I N G P O T E N T I A L PA R T N E R S

Once you’ve completed your research and identified potential partners that align with your goals,

F I N A N C I A L I N VR EE S IT IIN NG K 9

REI INK

PERSPECTIVE

the benefits for all parties.

over a longer period. You

It can be easy to focus on

can agree to revisit and

what benefits you want the

modify the partnership

other company to bring

on a quarterly basis once

to the table, but to form a

you know what is and isnâ€™t

long-lasting relationship, you must create a win-win scenario for both sides. Developing a mutually beneficial partnership often starts by initiating an open conversation with your referral prospect. Start by highlighting the synergies that exist between your companies. Discuss the mutual goals a partnership could accomplish. From there, develop a plan of action with clearly defined deliverables. Remember to consider how much effort will be required from each company to achieve these objectives. Potential partners may not be able to devote as many resources as you may think, so itâ€™s important to be flexible with your ask in

10 J U N E 2 0 19

working. It is common for partnerships to start slow and ramp up over time. Finally, once you have come to a verbal agreement, put everything in writing to protect both companies. Putting the agreement in writing also gives everyone one more chance to review the terms of the agreement before proceeding. Things that werenâ€™t taken into consideration in your initial discussions might come to light when other members of the company review the agreement. A written agreement not only solidifies the terms of your partnership but also helps provide future clarity for the relationship. The agreement gives both parties something to refer

these situations. If either

to should there be any

you or your prospect are

question of what needs

concerned the partner-

to be done and when it

ship would tax company

needs to be accomplished.

resources, come up with a

There is nothing wrong

plan that starts with smaller

with including language

deliverables spread out

stating the agreement can

be amended at any time to

an opportunity to discuss

isn’t reciprocating the

allow flexibility and room

progress on any items that

effort. Speak up if you feel

for the partnership to grow.

are in the works, see what

things aren’t in line with

is and isn’t working, and

your agreement. If you

ensures all expectations

have said your piece and

are being met. These touch

offered a solution, there is

points don’t necessarily

no reason why things can’t

need to be time-consum-

be adjusted and resolved.

ing. Something as simple as

Developing strategic

C O M M U N IC AT IO N IS KEY

Once your partnership agreement has been executed, it’s smooth sailing, right? Yes and no. One of the most important things to remember is that communication is key to maintaining a successful partnership. Many referral relationships fail because of lack of communication. Never assume that no news is good news. You took the effort to initiate a partnership, so make the effort to maintain it.

sending an email allowing your partner to review the progress of a project or a brief call confirming that some of the leads you agreed to send were a good fit is usually all it takes to keep things on track. Once you figure out the sweet spot of communication frequency, stick to it.

partnerships and referral relationships is a crucial part of a successful marketing strategy and is critical to growing your business overall. While there is a great deal of time and effort required to initiate and maintain these relationships, the monetary cost is minimal and

Similarly, don’t be afraid

often nonexistent. When

to ask for updates from

done right, these partner-

As your referral relation-

your partner. Strategic

ships are well worth it and

ship gains traction, check

partnerships are more

you never know what other

in with your new partner

likely to end because one

doors may open for your

regularly. This provides

party feels like the other

business as a result.

Erica LaCentra is the director of marketing at RCN Capital. She is responsible for planning, developing and implementing RCN’s marketing plan as well as overseeing the company’s marketing department. Joining

RCN Capital in 2013, Erica’s ongoing efforts have rapidly expanded RCN’s customer base and elevated the company to a national brand.

F I N A N C I A L I N VR EE S IT IIN NG K 11

REI INK

FUNDING

A LESSER-KNOWN SOURCE OF FUNDING FOR REAL ESTATE INVESTMENTS Some real estate investors who have missed out on investment opportunities in the past due to lack of funding are learning they have the moneyâ€”in their retirement accounts. BY KE NT K I N ZE R

hio resident David

He could purchase it in his

(SIMPLE), as well as Health

had grown frustrated

retirement fund.

Savings Account (HSA)

during the past few years after having a couple of potential real estate investments fall through due to a lack of funding. In the fall of 2016, another

Investors can use selfdirected IRAs and other

and Coverdell Education Savings Account (CESA). With a self-directed account, money from an IRA or other retirement

retirement accounts to

account is used to invest

invest in a variety of assets,

in an asset, and all profits

in addition to stocks and

and expenses flow

bonds that most investors

through the retirement

know. Alternative invest-

account. Tax advantages

auctioned off. He knew

ment options include real

may include tax-free

that being able to make

estate, tax liens, promis-

or tax-deferred growth

a cash purchase would

sory notes, private entities

within the account.

increase his chances of

and more.

Though David just recently

Self-directed accounts

learned about the concept,

This time, David was ready.

include the Individual

self-directed investing is

Through research and

Retirement Account

nothing new. Since IRAs

discussions with his finan-

(IRA), Roth IRA, 401(k),

were introduced in 1974,

cial advisor, he learned

Simplified Employee Plan

the IRS has only listed a

that he had the funding

(SEP) and Savings Incentive

handful of items that are

to purchase the property.

Match Plan for Employees

not permitted in an IRA

opportunity presented itself. David learned of a pre-foreclosure property nearby that was being

winning the bid.

1 2 J U N E 2 0 19

B E S T- K E P T S E C R E T F O R R E A L E S TAT E INVESTORS

INVESTORS CAN USE SELF-DIRECTED IR AS AND OTHER RETIREMENT ACCOU N T S T O I N V E S T I N

(the entire list can be found

growth back to his IRA,

in IRS Publication 590).

until the property sold in

S E L F - DI R E C T E D INVESTING GA I N S FAVO R

Like David, other real estate investors are becoming aware of the possibility of self-directed investing. After years of investing in real estate, Lowell of California

December 2015. Between

A VA R I E T Y O F A S S E T S , IN ADDITION TO STOCKS

the rental income and the

A N D B O N D S T H AT M O S T

sale price, the property

I N V E S T O R S K N OW.

generated nearly a 77% return on investment (ROI). An experienced real estate investor, Lowell prefers the idea of using his IRA over borrowing to

investing from her father, who is a real estate agent. She opened a self-directed IRA and partnered her IRA

learned about the concept

fund his investments.

in 2013 and decided to

“Since my IRA now owns

transfer his 403(b) account

each property, I know

into a self-directed IRA.

that even if a property sits

He then acquired a bank-

vacant, I am not losing

owned property for just

money other than the nec-

over $85,000.

essary costs of insurance

Lowell rented the property

and taxes,” he says.

for two years, providing

Laurie of Colorado learned

plans to invest in a prop-

consistent cash flow and

about self-directed

erty 100% in her IRA.

with funds from her nonIRA LLC to buy a condo. Her husband’s IRA partnered with the LLC to buy another condo. As soon as she has enough saved in her IRA from renting or selling the condo, Laurie

F I N A N C I A L I N VR EE S IT IIN NG K 13

REI INK

FUNDING

“I wish I could do more

a 14-month term, the note

from her IRA. The IRA

Only certain custodians

self-directed investments,”

yielded a return of over

receives monthly income

offer self-directed accounts

she says.

$42,000, a 25% ROI.

from room rentals, and

R E A L E S TAT E INVESTING I N DI R E C T LY W I T H RETIREMENT AC C O U N T S

For those who prefer not to directly invest in real estate or other assets, a self-directed IRA’s versatility allows for other possibilities. For example, some investors boost their retirement savings

Susan recalls being delighted to learn about the possibility of investing in alternative investments with her retirement account. “To my surprise, I discovered there were many nontraditional assets such as real estate, tax liens and promissory notes that our retirement dollars could invest in using a self-

by loaning IRA money to

directed IRA,” she says.

other investors.

Self-directed investors

Susan from New York

aren’t limited to only

recently partnered with family members’ IRAs (three total) to loan a real estate investor money to rehab a

investing with other self-directed investors. Christine from California is one of a group investing

Christine expects her IRA to receive a profit of about

because the required reporting and recordkeeping is unique. Equity Trust

25% once the hotel is sold.

Company is one such custo-

H OW T O G E T S TA R T E D W I T H S E L F - DI R E C T E D INVESTING

sor company, Equity Trust

As with any investment, due diligence is key, and you should be sure to consult with a tax, legal or financial professional before making an invest-

dian. Through its predecesbegan offering self-directed accounts in 1983. The above case studies are for

educational purposes only. Past performance is not indicative of

future results. Investing involves risk, including possible loss of principal. Information included in the above

ment decision.

case studies were provided by the

In addition to the list of

sion. Equity Trust Company does not

investments not permitted in an IRA, the IRS provides information in IRS

investor and included with permis-

independently verify all information provided by third parties.

Equity Trust is a passive custodian and does not provide tax, legal or

Publication 590 regarding:

investment advice. Any information

Disqualified individuals

for educational purposes only, and

house. She used a third-

in a hotel being rehabbed

I ndirect benefits

party servicer to structure

in Ohio. She is funding her

Unqualified Business

the promissory note. During

portion of the investment

Income Tax (UBIT)

communicated by Equity Trust is

should not be construed as tax, legal or investment advice. Whenever making an investment decision,

please consult with your tax attorney or financial professional.

Kent Kinzer, senior manager of new business development, provides educational resources to real estate and alternative asset investors. Through years of experience working with self-directed IRA investors and

holding positions in contracting, operations and building management, Kent has developed an educational curriculum that delves deep into the lesser known aspects of IRA investment techniques.

Equity Trust is a financial services company that enables individual investors to diversify investment portfolios hrough alternative asset classes, including real estate, tax liens, private equity and precious metals. Our

tax-advantaged, self-directed investment accounts appeal to entrepreneurial investors who want to take

control of their wealth. We offer clients a robust account management system, and wealth-building education, which enables them to grow their knowledge and complete transactions with ease.

1 4 J U N E 2 0 19

HEARTLAND INCOME

Creating Value In America’s Heartland

P R O P E R T I E S

$25,000,000 Capital Raise Accredited Investors Only

2,500 Units - $10,000 Per Unit

$25,000 Minimum Investment (2.5 Units) IRA Qualified

Projected Annual Return 8% to 14% Paid Quarterly

Strict Underwriting Criteria:

Single-tenant, triple net lease model Existing cash-flowing properties Strong regional and national tenants Corporate tenant guarantee Rent escalators

Below replacement cost No construction or distressed property 8% average portfolio cap rate Tenant profitability Conservative leverage employed

DES MOINES, IA

OMAHA, NE

TWIN CITIES, MN

KANSAS CITY, MO

WICHITA, KS

TULSA, OK

DALLAS, TX

SIOUX FALLS, SD

For More Information and to Receive a Copy of Our Private Placement Memorandum Please Contact:

BILL DEEGAN, CEO

602-601-5293 bill.deegan@heartlandincome.com

This presentation is not an offer to buy or sell a security. Such offer can only be made to qualified persons who have received a copy of Heartland Income Properties, LLC Private Placement Memorandum. Statements in this presentation related to our future business and financial performance and future events or developments involving Heartland Income Properties, LLC (HIP or the “Company”) and its affiliates and subsidiaries may constitute forward-looking statements. These statements may be identified by words such as “expect” “look forward to” “anticipate” “intend” “plan” “believe” “seek” “estimate” “will” “project” or words of similar meaning. We may also make forward-looking statements in other reports, in presentations, in websites, in material delivered to shareholders and in press releases. In addition. our representatives may from time to time make oral forward-looking statements. Such statements are based on current expectations and certain assumptions of HIP management, of which many are beyond HIP control. These are subject to a number of risks, uncertainties and factors, including but not limited to those described in disclosures, in the Annual Report, economic downturns, changes in state and federal legislation and regulations, adverse outcomes of F I None AN C I AofLthese I Nrisks VR EE S IIN NG K 15 any legal, regulatory or other proceeding, settlement, investigation or claim applicable to us and/or the properties, or adverse changes in the markets or industry laws, policies and regulations. Should or more orIT uncertainties materialize or should underlying expectations not occur or assumptions prove incorrect, actual results, performance or achievements of HIP may (negatively or positively) vary materially from those described explicitly or implicitly in the relevant forward-looking statement. HIP neither intends, nor assumes any obligation, to update or revise these forward-looking statements due to developments that differ from those anticipated.

REI INK

R I S K M A N AG E M E N T

USING INSURANCE TO PRESERVE LENDER CAPITAL How much more capital would your investors provide if you exceeded expectations for preserving their capital? BY KE NN E T H D. Q UI AT

arren Buffett, the

should you as a lender try

currently in force? Is the

Oracle of Omaha,

to preserve your capital?

coverage right?

Absolutely yes!

Some borrowers believe

Once your loan is

that a standard home-

closed, will your borrower

owner’s policy is all that is

protect you and your

needed. Yet there is a vast

has a Golden Rule: “Rule No. 1 is never lose money. Rule No. 2 is to never forget Rule No. 1.” The standard investment rule Buffet follows is to preserve investor capital. This seems like a very easy rule to follow, yet most lenders never get past the numbers in their prospective deals. You probably did a great job underwriting the loan. You have the right to foreclose for nonpayment, and you may

no. Once you fund your deal, your borrower’s interest or need in you is over. This makes your borrowers the greatest

difference in builder’s risk coverage and a standard homeowner’s policy. The traditional agent provides a homeowner’s policy that will not cover a typical,

risk to your loan portfolio.

non-owner-occupied prop-

BUILDER’S RISK, WO R K E R ’ S C O M P AND GENERAL L I A B I L I T Y C OV E R AG E

policy this lender needs.

erty. That is not the type of In addition, if this borrower was also the contractor,

Simply put, what can go

as a lender, you should

wrong, will go wrong.

have received a copy of

Consider your typical fix

your borrower’s workers’

and flip borrower. The

compensation policy and

Did you forget something?

borrower provided infor-

general liability coverage

Did you underwrite the

mation that allowed you to

too. Missing any of these

risk in your borrower?

provide funding, including

important coverages could

Buffet tries to preserve

proof of insurance. Is the

result in your borrower

investment capital, so

proof real? Is the policy

being sued and defaulting

have even cross-collateralized against the borrower’s other properties.

16 J U N E 2 0 19

investors? Most likely,

on your loan, leaving you

your initial application is a

mistake. The loan included

and your investors holding

disclosure about your loan portfolio. Consider the dif-

language allowing fore-

an empty bag. F O R C E - P L AC E D C OV E R AG E

Another common mistake for newer lenders is overlooking force-placed coverage. These are coverages for when the borrower’s insurance is cancelled, has lapsed or isn’t sufficient. First, forceplaced coverages are expensive. Second, insurance carriers know that when you as a lender are force placing the required coverages, the relationship between you and your borrower is already in the proverbial toilet. Most insurance carriers

ference between a lender who has only two loans and both loans need to have force-placed coverage and a different lender who has 100 loans with only two properties requiring force-placed coverage. One of these lenders cannot underwrite. Who do you think the insurance carrier will accept? A different force-placed problem happened recently to a “new” lender in Las Vegas. The lender funded a short-term purchase loan. The borrower did initially provide a homeowner’s policy. A few months

closure for nonpayment; however, the note never required the borrower to maintain liability coverage. In this specific case, the lender could not force place the coverage because the contract did not state that as a condition of the loan. Eventually, after multiple court appearances, the lender was able to foreclose. The lender still needed to evict the borrower. Yes, a different court venue was needed to evict. By the time the lender got the house back, the house was missing all copper plumbing and wiring. Rehabbing the house the

want to know about your

into the loan, payments

loan portfolio long before

stopped. Unfortunately,

second time was entirely

a loan is in trouble. Usually,

this lender made a key

on the lender’s dime. F I N A N C I A L I N VR EE S IT IIN NG K 17

REI INK

R I S K M A N AG E M E N T

KEY PERSON INSURANCE

to be paid on “credit”

seek insurance coverage.

alternative source

Insurance cannot be used

policies. Additionally,

The ultimate benefactor of

of repayment.

U.S. Small Business

any insurance on a loan are

Choosing which types of

to guarantee an investment gain. What kind of coverages can a private lender require of their borrowers? Before that question is answered here, a quick review of other lenders is needed. The conventional lending world offers credit-life and credit disability-sickness coverages. You might have heard about that coverage. It is called mortgage protection insurance. Credit life cannot be a condition of receiving a conventional loan. Remember, these policies do not pay the lender “if ” the borrower

Administration (SBA) guaranteed loans above certain thresholds require key person coverage on the borrowers. Key person could be life insurance or disability-sickness policies on the borrower. The lender is the loss payee. Why place key person coverage on the borrower? Statistically, loss of work resulting from an injury or sickness is still

your investors. The bottom line? As lenders, you underwrite the loan, and the insurance solutions you place on the loan preserve lender capital. Why would a private lender require key person coverage when you already have the right to foreclose for nonpayment? The answer is simple: How long do you want

one of the leading causes

to wait before you get

of foreclosure in the U.S.

paid back? Foreclosure

If your borrower cannot

rules vary by state and

work, he or she cannot

municipality. Plus, the

earn income, complete their project or more

borrower’s family could get involved, making

just decides to stop pay-

importantly, pay you back.

ing. The borrower must die

For any risk you see as a

ing and costly. Key person

or get sick for the lender

lender, you may be able to

coverage offers lenders an

foreclosure time-consum-

insurance coverages you, as a lender, should require on your borrowers is based on the risk aversion of your investors. How much more capital would your investors provide if you went above and beyond expectations when preserving their capital? Above all, finding a solutions provider that thinks out of the box and focuses totally on the private lending world is key. Insurance agencies and providers are specialized. Be wary of the insurance partner who merely replies that they too offer that solution. Your question to that insurance agent should be “Why didn’t you tell me about this before?”

Kenneth D. Quiat grew up in the Rocky Mountains and followed his father to tax lien auctions and

rehabbing apartment houses. After college, he obtained his investment licenses and joined Chevron.

While on Chevron’s management program, Quiat worked for Chevron Land & Development Company in Newport Beach, California. While on assignment, Quiat learned the ins and outs of both commercial and

residential property development. These days, Quiat owns and manages Direct Lenders’ Insurance Services. DLIS focuses on protecting private lenders throughout the U.S. using specialized lender agreements and products. Quiat can be reached at (415) 659-8430 or at ken@directlendersins.com.

1 8 J U N E 2 0 19

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F I N A N C I A L I N VR EE S IT IIN NG K 19

REI INK

R I S K M A N AG E M E N T

ASSET PROTECTION: THAT THING YOU SHOULD HAVE DONE YESTERDAY Besides knowing the cost of the insurance, be aware of “gotchas” that can ruin you financially. BY KR A IG ST RO M

here are more than 30

million lawsuits filed in

the U.S. each year. If you own a home with equity, a business, rental income property or have large sums in stocks, bonds and cash, then you have a target on your back.

curve balls, and families

and businesses get hurt.

Wealth is not automatically protected against law-

suit-hungry individuals and companies, which is why

asset protection planning is critically important.

When structuring your personal and business assets, always think defensively

by protecting your wealth,

W EA LT H IS NOT AU TOM AT IC A LLY PROT ECT E D AGA I NST L AWSUITHUNGRY I NDI V I DUA LS A ND COMPA NI ES, W H ICH IS W H Y A SSET PROT ECT ION PL A NNI NG IS CR IT IC A LLY IMPORTA N T.

investments and business intellectual property.

When people hear the phrase “asset protection,” they often assume it’s something that’s necessary only for the ultrawealthy. In other words, they mistak-

It is human nature to think nothing bad will ever happen to us. The reality is that life is full of 2 0 J U N E 2 0 19

enly believe that individuals of more modest means have no reason to

Lawsuits and financial catastrophe can affect anyone, regardless of the value of their assets or their situation in life. G E T T I N G S TA R T E D

Proper asset protection is not as easy as zooming over to a legal do-it-yourself website. Creating defensible legal shields around your financial castle requires a skilled team that specializes in asset protection law. Importantly, remember that asset protection is not an “after-the-fact” solution. You cannot call the insurance company when your house is on fire to ask for

enlist the services of an

more insurance coverage.

asset protection attorney.

Legal asset protection

works the same way. You

protect your assets can be

elsewhere, it is usually too

must get organized when

determined only after a

late to protect assets once

the seas are calm. The

competent asset protection

most prudent course of

planning attorney evaluates

action is to include asset

your situation.

of good asset protection.

protection as part of your

Sometimes, misconceptions

A S S E T P R O T E C T IO N

to a defective handrail

A N D R E A L E S TAT E

A tenant’s child drowns

Nowhere is asset protec-

in a pool that isn’t

big-picture financial plan. You work hard to build your assets. All that effort is a waste if they can be taken from you in one fell swoop. To be effective, proper protection must be in place before you are sued.

and misunderstandings about legal matters can result in people foregoing important rights or jeopardizing the valuable property they have worked a lifetime to obtain. The field of asset protection planning is no

Sometimes, protecting

different. Confusion about

your assets involves acquir-

the work and service pro-

ing additional insurance to

vided by an asset protec-

protect against accidents

tion planning attorney leads

and risks. Other times, a

many people to procrasti-

well-drafted estate plan

nate until disaster strikes

can be used to ensure

and property is threatened

assets are properly pro-

before they seek the help

tected against future claims

of a lawyer. Unfortunately,

against you. How to best

due to laws in California and

an event has taken place. Procrastination is the enemy

of situations where an owner may incur liability for their property: A tenant trips and falls down a flight of stairs due

tion procrastination more

adequately fenced off

prevalent than in the world

A branch on a tree

of real estate investing. While real estate is a great way to store wealth and create streams of passive income, it does come with myriad strings attached. Unlike stocks or bonds, real estate often requires a “hands-on” approach and exposes an owner to significant liabilities. For example, the mailman will never

on your property that hasn’t been adequately trimmed falls on a third party’s car A n environmental survey reveals significant mold or chemical contamination on your property that needs to be remediated These are all situations

slip and fall on your Apple

that could involve a

stock. Here is a sampling

lawsuit or a claim against F I N A N C I A L I N VR EE S IT IIN NG K 21

REI INK

R I S K M A N AG E M E N T

your insurance. In certain

One simple and relatively

benefits to its members.

examples, the liability may

inexpensive way to reduce

estate plan. It is relatively

The primary benefit is that

be so great that insurance

the liability on investment

simple to transfer LLCs

the liability of the owners

doesn’t cover it, allowing

property is to purchase

into a living trust to allow

of the LLC is limited to the

the injured party to come

an umbrella policy. An

your loved ones to man-

assets of the LLC and does

after your investment prop-

umbrella policy provides

age things in the event

not extend to the personal

erties or even your per-

additional coverage above

of your death or incapac-

assets of the owners.

sonal assets. The question

and beyond your primary

ity. Furthermore, as you

here is “How do you reduce

policies. For instance, if

Let’s say a tenant falls

acquire more assets and

this risk?” Working from an

you have insurance on your

estate planning context,

investment property for

the goals for investment

$300,000 and an automo-

real estate would be to:

bile policy with limits of

P rotect ourselves from liability while we are living. P reserve our assets to maximize what we pass on to our children or other beneficiaries. M ake it as easy as possible for this transfer to occur upon our passing.

$500,000, a $1,000,000 policy will increase those limits $1,300,000 and $1,500,000, respectively. This provides a greater cushion in case you incur a significant judgment. Another way to protect yourself is to create a limited liability company (LLC) to hold your real estate. An LLC is a legal entity

down a flight of stairs, suffering severe injuries. In that case, the tenant can only go after the property held in the LLC. He can’t get at your personal home or other investments that you have outside of the LLC. If you have multiple properties, you can create multiple LLCs to maximize the amount of protection you have. Another benefit of LLCs is that they can be seamlessly

build your net worth, you may want to start transferring some of your assets to your children to reduce your estate tax liability. Transferring fractional shares of your LLCs is not only an easy way to make gifts to your children without losing control of your real estate, but it also allows you to qualify for significant valuation discounts from the IRS when calculating your estate taxes.

blended into an existing

that provides significant

As a paralegal and Certified Financial Planner®, Kraig Strom assists clients with the growth and protection of

their assets. Kraig’s team at Barth Calderon LLP use a financial-planning approach to protect clients against the ramifications of lawsuits, foreclosure and aggressive creditors. At Barth Calderon LLP, the goal is to help each client protect the assets they have worked hard to obtain.

2 2 J U N E 2 0 19

A BUSINESS PUBLICATION FOR REAL ESTATE INVESTORS

Taking a deep dive into the entire inves tment life c ycle from acquisition to disposition, rather than jus t a single s tage, REI INK is the mos t comprehensive real es tate inves tment publication on the market. It covers all t ypes of real es tate $29.95/year rei-ink.com/subscribe

inves tment s, ranging from single-family residences, to multi-family dwellings to commercial proper ties. F I N A N C I A L I N VR EE S IT IIN NG K 23

REI INK

A LT E R N AT I V E I N V E S T I N G

SINGLE FAMILY, FIX AND FLIP, MULTI-FAMILY… PARKING LOTS? Regulatory changes open up more investment opportunities in parking lots. BY M A RC US C O H E N

eal estate investors

That doesn’t mean there

enough money to own a

seem to be enamored

is anything wrong with the

large lot is now available

by the latest trend. It’s

real estate that’s currently

essentially a game of buy

under your management.

to any accredited inves-

low, sell high—and what‘s

That fix and flip deal is

everyone else doing?

probably great once you

You may have a REIT in your portfolio, or you may be hands-on with your properties. But, you probably don’t have a parking facility generating income for you. In fact, most people don’t. For the longest

And, single-family will also accrue in value while someone else pays the mortgage on it. The multi-family opportunity? It lets you live for free while you can save a little more money for your

time these structures have

next investment.

only been available for

But parking lots? You

pensions and hedge funds. WHY THE NEW INTEREST IN PA R K I N G L O T S ?

Thanks to changes in investment laws and

2 4 J U N E 2 0 19

get it back off the market.

know—the ones with paint on the pavement? And fencing to keep the deer out? With the little hut that holds all the keys to your vehicle? Yes, those. Those

tors under Regulation D 506(c) through the issuance of shares. What does that mean in layman’s terms? T he recent changes allow SEC-compliant private equity funds to broadcast the sale of shares for a project. These changes happened last year, which is why many haven’t heard of ways to get more involved. PA R K I N G L O T A DVA N TAG E S

To be frank, parking is boring. There are no sledgehammers piercing

provisions, more “retail”

are sexy.

investors can get a piece

What has always been

drama and chaos that

of the action.

available to investors with

comes when marital issues

walls. There’s none of the

T YPICALLY, PARKING LOTS AVOID M AN Y OF THE POTENTIALLY CATASTROPHIC prevent the rent from being paid. There are no phone calls to slow down your day. It’s parking. There’s a lot. And there

ISSUES TH AT PL AGUE MULTIFA MILY BUILDINGS, OFFICE BUILDINGS AND OTHER TENANT-DEPENDENT MODELS.

are cars. As an investor, your parking investment is pretty “dummy proof ” in various senses. Typically, parking lots avoid many of the potentially catastrophic issues that plague multifamily buildings, office buildings and other tenant-dependent models. Issues like nonpaying tenants, large

businesses and agents

estate play. Such a location

pricing in your parking lots

who impose countless fees

helps to ensure the land

and meters will be just as

can be very costly.

will keep and appreciate

happy to raise as well.

There are four key reasons

in value over time.

for considering parking lots as a commercial real estate investment. 1) Land Appreciation. You want a park-

3) Low

2) Inflation

Overhead,

Resistance.

High Margin.

Parking pay-

What is there to maintain

ments when leaving

with parking lots? There’s

your car in a lot are flex-

a couple of attendants

ible. When the price of

in a hut. You may have to repave the lot every so often. You may even have

upfront costs for fashion-

ing lot in a high-trafficked

milk increases, you can bet

able improvements and

area to hedge your real

your bottom dollar that the

F I N A N C I A L I N VR EE S IT IIN NG K 25

REI INK

to charter a driver to bring

can’t pull their car out of

investment might look

consistent returns when

everyone to the front door

the lot until the invoice is

attractive. With parking

compared to almost any

if you have an off-cam-

paid. This is a real beauty,

lot investments structured

pus lot from the selected

and it’s why funds love

through shares of the

venue. Overall, the over-

parking lots. They always

company, your investment

head is low.

have cash on hand.

can be both hands off and

4) Cash Flow.

If you’re a hands-off inves-

Not every

tor who would rather sit

business has the

back and let your money

ability to be paid upfront

work for you, an invest-

for the year or to take in

ment in a parking lot might

money each day. With

be the right choice for

parking lots, customers

you. If you don’t enjoy the

income generating. The big take away here is

other investment class. What’s even better is that you don’t need to look very hard. Parking lots have been in front of you the whole time.

this: If you can combine these four items with any real estate investment, you can achieve unbeatable

drama of chasing people for rent, a parking lot

Marcus Cohen, sales director, manages and oversees all sales activity at U.S. Parking Investments,

including project pipeline management, project delivery and hiring all sales-related staff and support staff. He has a background ranging from corporate advertising and media sales to overseas real estate sales.

Cohen has also managed and directed global agent distribution networks ensuring investment projects

are distributed in compliance with local and offshore regulations. Cohen can be reached at (917) 464-5571 or info@usparkinginvestments.com.

2 6 J U N E 2 0 19

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F I N A N C I A L I N VR EE S IT IIN NG K 27

REI INK

A LT E R N AT I V E I N V E S T I N G

EMERGING TRENDS IN CORPORATE HOUSING Private equity and venture capital funds are investing heavily in all types of furnished monthly rentals. BY KI M V E AZE Y

nd Address, a rental

platform for furnished

monthly rentals, just

received an additional

$10 million in additional funds to continue to

expand their service area providing a transactional platform for private

property owners offering

furnished monthly rentals.

and offering a standardized furnished residential hospitality product, has now

raised more than $47 mil-

H AS EMERGED AS MORE TH A N JUST AN ESSENTIAL BUSINESS SERV ICE FOR RELOCATED OR TR AV ELING BUSINESS EXECU TIV ES.

Whatâ€™s going on here? Layered under this massive

Sonder, another company

rush to provide managed

competing with Airbnb in the world of hospitality and private rentals, has raised more than $135 million to build out their program. corporate housing, Reside Worldwide, has raised hundreds of millions of dollars in an attempt to

residences as a hospitality option is the growing demand for the properties. Corporate housing has emerged as more than just an essential business service for relocated or traveling business executives. Today, corporate housing is a full-fledged

purchase multifamily

lodging solution for every-

buildings exclusively for

day individuals who need

furnished monthly rentals

short-term furnished and

and to consolidate smaller

even unfurnished housing

corporate housing provid-

that has the space and

ers under the larger brand.

2 8 J U N E 2 0 19

25 local by 2020.

lion in investment dollars.

In the industry segment of

CORPOR ATE HOUSING

rentals, is on track to have

convenience of a home on the road. Some examples

Stay Alfred, a company

AvenueWest Global

trying to add profession-

Franchise, a firm that pro-

of todayâ€™s corporate hous-

alism to Airbnb by leasing

vides real estate manage-

ing tenants are included in

thousands of apartments

ment of corporate housing

the chart on page 30.

MAKING SENSE O F T H E O P T IO N S

property owners/manag-

property management

market will last. As a result,

Long before there was

ers to connect and trans-

companies that manage

individuals are getting

act a rental agreement.

properties owned and

Airbnb, the multibillion dollar corporate housing rental industry existed. These fully furnished and managed residences were—and still are—available for monthly lodging needs. Traditionally, these properties were rented by the experienced business traveler on assignment or as part of a corporate relocation. Today, the options have multiplied—and can be confusing. Here are several of the options available in today’s market. A ggregators/online

S ervice companies.

furnished by individual

These companies rent

real estate investors.

apartments, furnish and

B y owner properties.

equip them and then offer the apartments as corporate housing rentals. They may buy or lease the furniture for these properties. A partment companies.

These are real estate

investors who provide their individually owned and furnished properties as furnished corporate housing rentals.

These companies own or

T WO T R E N D S

manage large apartment

Across the country, two

complexes. They use

trends are emerging. The

some of their inventory

first is 401(k) roll over invest-

as furnished corporate

ment. The other is investing

housing units. They may

in retirement properties

buy or lease the furniture

before retirement.

for these properties.

With the stock market

smarter with their retirement dollars. By taking 401(k) investments out of stocks and rolling them into traditional real estate rentals, investors are able to gain more control over their money compared to the volatility of stocks. The second trend is investors deciding to buy their retirement home 10 and even 20 years before they need it. For example, someone who is looking to retire in Phoenix, Arizona, may purchase that property now, locking in low interest rates and giving the investors the peace of

platforms. These are

M anagement

again hitting high levels,

mind of knowing exactly

analysts are concerned

what their retirement

allow tenants and

panies are real estate

about how long this bull

property will cost.

online platforms that

companies. These com-

F I N A N C I A L I N VR EE S IT IIN NG K 29

REI INK

A LT E R N AT I V E I N V E S T I N G

POTENTIAL CORPOR ATE HOUSING TENANTS

W H AT T O K N OW BEFORE INVESTING

If you’ve decided that corporate housing is right for you, here are some important considerations BUSINESSES

traveling executives, relocating professionals, attorneys, auditors, consultants

INDIVIDUALS

extended vacations, family visits, divorcees

to make before you purchase a property specifically for use as a corporate housing rental. Evaluate price per bed, not square foot. Evaluate the price per

EDUCATION

visiting professors, graduate students, students abroad, interns

INSURANCE

families displaced due to flood, fire, mold or natural disasters

bed, not price per square foot. While some people think more space or a bonus room is a great perk for their own home, keep in mind that

ENTERTAINMENT & SPORTS pro athletes, traveling musicians, actors, movie crew, photographers, event coordinators, reporters

MEDICAL

traveling nurses, visiting doctors, extended medical visits, families traveling for specialized treatment

those features are just added liability in a home you plan to rent. Purchase the least square footage with the greatest number of bedrooms. Just like a

hotel, when you rent out GOVERNMENT

legislators, lobbyists, consultants

MILITARY

individuals and families on military assignment

a corporate rental, it’s priced per bed, not by square footage. Avoid first-floor units. If you’re purchasing a

condo as a rental propHOME REMODEL

homeowners doing extensive remodels on their primary residences

3 0 J U N E 2 0 19

RELOCATION

over 40% of corporate housing tenants are in the process of corporate relocation

erty, avoid first-floor units. People who don’t know the city may not

feel as safe in a first-floor

properties. Sometimes

Keep these things in

to get only $700 or $800 a

unit, which can nega-

a property that appears

mind when choosing

month for it.

tively affect your rental

to be a poor long-term

a desirable corporate

success. And, often people will use a firstfloor rental to advertise a business that they may conduct in the unit. L ocation matters.

Location. Location. Location. Location can single-handedly ensure your property is rented continuously. Look for homes in urban areas, near train stations and airports, and close to universities and hospitals.

home is a perfect shortterm, furnished rental home. For example, homes with tiny closets or outdated kitchens make ideal furnished rental properties because a corporate renter may not need all

rental property. RETURN ON INVESTMENT

What can you expect in terms of ROI? That is the question of the century. There are a lot of moving parts, and each market is

the space or features.

completely different.

Moreover, these prop-

In a market like Fort

erties are usually less expensive to buy and provide good cash flow.

Collins, Colorado, which you normally would consider a quieter market,

V iews and amenities

you might be able to buy

are visiting a new city

$175,000. Then, you may

Corporate housing rentals are an essential part of an investor’s portfolio diversification. For example, if you are a full-time investor and you watch your properties 100% of the time, then sure, make your whole portfolio corporate housing if that interests you. But normally you will see a strategy more like this: An investor with 10 units might rent seven of them unfurnished, get consistent rent on them, and

matter. When people

a two-bedroom condo for

for business or pleasure,

be able to turn around

they want to enjoy all

and rent that property

Functionally obsolete

that city has to offer.

as corporate housing for

homes can make good

Corporate tenants like

$3,500 a month, whereas if

high-growth assets, just as

city views, covered park-

you were renting it unfur-

they might buy internet or

functionally obsolete

ing and free gym access.

nished, you might be able

technology stocks.

Typically, these locations rent well and have the best resale value.

rentals. Don’t rule out

use three of the properties as corporate housing. These three properties would be the investor’s

Kim Veazey is the business development manager for AvenueWest Global Franchise. Founded in 1999,

the company provides high-quality condominiums, townhomes, lofts, single-family homes and apartments to meet the extended-stay executive housing demand by professionally servicing a unique niche of

business travelers with investment owners’ properties. AvenueWest Managed Corporate Housing and now AvenueWest Global Franchise, LLC were built to provide monthly lodging options and increased opportunities for individual real estate investors.

F I N A N C I A L I N VR EE S IT IIN NG K 31

REI INK

A LT E R N AT I V E I N V E S T I N G

THE KEY TO TURN-KEY NOTES Turn-key notes could be a valuable addition to your investment portfolio. BY KE VIN SH O RT LE

t’s hard to dispute this quote from Robert

Kiyosaki: “To obtain finan-

cial freedom, one must be

either a business owner, an investor or both, generat-

ing passive income, particularly on a monthly basis.”

takes to analyze a stock.

If it passes the initial due

diligence phase, investors can lock up the deal and finalize it after a second-

ary level of due diligence

such as appraisal, external

property inspection or title

Passive monthly income

report before financing or

the real estate market today in

If you close a deal this

investments are available in the form of “turn-key notes.”

closing the deal.

month, you get paid next

Record inventory levels of

month and every month

created in the years follow-

ments that you purchased.

created as a result of a

sometimes auto debited,

were created to sell newly

then forward the payment

of that inventory has now

and high yielding.

or more. In addition, prop-

WHAT TO LOOK FOR

performing notes (PN) were

thereafter for as many pay-

ing the crash. Some were

The payments are collected,

loan workout, while others

by servicing companies that

renovated property. Much

to you—passive, secured

been seasoned for six years erty values have increased

what you have in it. In addition, the loan will already be third-party serviced, and you will be buying

from a note seller who has

a vested interest in getting the income stream back at some point in the future. The graphic on page 33

illustrates this investment. Just over two years ago, a real estate investor pur-

chased a property. After

renovating it, she decided to sell it with seller financing. She had a mortgage

residential mortgage loan

originator (RMLO) facilitate a seller-financed note by qualifying the potential

buyers and handling the

paperwork. The borrowers

Without a doubt, the best

have been making payments

to buy short term, two- to

includes principal, interest,

that with a minimal amount

Your yield will typically

payments are collected,

their initial due diligence

and your investment will

by ABC servicing company.

nationwide, making these

turn-key notes technique is

for two years. The payment

The beauty of these notes is

five-year, partials on PLs.

taxes and insurance. The

of effort, investors can run

be between 7% and11%,

escrowed and accounted for

be backed by a property

[In another scenario, she

notes an outstanding value.

in about the same time it 3 2 J U N E 2 0 19

worth two to three times

could have just purchased

You can purchase the

investment company.]

seller price of $42,400.

the note directly from a note This investor decides

next 60 payments for the

that she needs to raise some

SIZING IT UP

ment. Instead of borrowing

provide more information

capital for another invest-

Even though sellers will

money, she decides to sell

than this, if this is all you

a part of her note. Here is

what you found on just the

surface level due diligence: T he note has two years of seasoning.

A ccording to the pay-

ment history, the pay-

ments are auto debited

on the first of the month. Property taxes are current. A ccording to Realtor. com and other free

sources, the property value appears to be around $130,000.

T he loan was written

$130,000 VALUE YOUR COLLATERAL

PAYMENTS ALREADY MADE

PURCHASE THE NEXT 60 PAYMENTS

360TH PAYMENT

know, does it seem to

NEXT MONTHLY PAYMENT

make sense of the surface? Well, six months of sea-

soning is considered OK

You pay $42,400 for the next 60 payments of $880/month 9% annualized return backed by a property worth 3X what you paid!

and this has two years of

verifiable payments, so we are good there. The house is worth about $130,000 and was renovated just

over two years ago. We

will have only $42,400 in

the deal, so we are good there. If we invested

$42,400 and received

$880 per month for 60

months back, we would be making 9% yield per year,

IRA or other tax preferred

U tilize third-party

retirement accounts.

verification.

You could partner with another investor. These income streams can be: Done from any place with an internet connection.

You donâ€™t need to travel or canvas neighborhoods, and the payments are automatically deposited every month while you sleep. This is a secured passive monthly income

for 360 months, and

so we are good there.

A nalyzed in 20 minutes

pointed out, enables

$880 per month.

You could invest using

(including document

cash on hand or your

verification).

financial freedom.

the payments are

that, as Robert Kiyosaki

Kevin Shortle is an author, podcaster, national trainer/speaker and consultant. Since 1985, he and his partners have purchased hundreds of properties and closed tens of millions in real estate note transactions. His detailed industry research and unique training methods have brought him industry recognition and awards such as 2019 Note Educator of the Year. His latest book, Real Estate Without Renters, will be published in June or July 2019. This forward-thinking book combines the best of real estate investment techniques with the best of real estate note techniques. For more information and book pre-orders, visit www.KevinShortle.com and listen to The Kevin Shortle Show podcast on the website or wherever you subscribe to podcasts.

F I N A N C I A L I N VR EE S IT IIN NG K 33

REI INK

PROFILE

UNDER MY LEADERSHIP, RCN CAPITAL WILL CONTINUE TO TAKE GREAT PRIDE IN SETTING THE HIGHEST ETHICAL STANDARDS IN THE PRIVATE LENDING INDUSTRY AND MOVING OUR SPACE FORWARD AS A WHOLE. JEFF TESCH 3 4 A P R I L 2 0 19

JEFF TESCH TAKES THE REINS AT RCN CAPITAL BY JA N E T M O O R E

TO ACH IE VE CONTIN U E D SUCCE S S , HE ’ LL RE LY ON THE SA M E PRINCIPLE S TH AT H AVE E STA B L IS HE D H IM A N D THE FIRM AS IN DUSTRY LE A DE RS .

t was early 2010. Jeff

Tesch received a phone

call from Don Vaccaro,

co-founder of RCN Capital. Vaccaro wanted Tesch to

help him run a new private lending company.

He believed the newly formed company would be a place where his money was secure, and he could control the return on his investment. And he knew he wanted Tesch, an old

Nearly four million fore-

acquaintance, to be part

the year before, due to

invited Tesch to become

Institutional lenders had

“I knew Jeff. He had man-

closures had been filed

of the new venture. So, he

the 2008 housing crash.

managing director.

responded by tightening lending requirements.

With traditional funding

restricted, private capital

was becoming increasingly more important.

agement experience with his Subway franchises, had invested in real estate and had some prior banking experience,” said Vaccaro. “Jeff makes decisions

Vaccaro recognized the

based on empirical data,

a successful software com-

He can simplify a discus-

to lend to fix and flippers.

and I like that.”

opportunity. He had built

rather than assumptions.

pany and had the money

sion into a few key words,

F I N A N C I A L I N VR EE S IT IIN NG K 35

REI INK

PROFILE

TA K I N G T H E R E I N S

promote people to an area

Fast forward nearly a

of responsibility, make them

(originally named Rehab

the ability to make their own

Tesch as its new chief

decade, and RCN Capital

empowered and give them

TESCH HAS ESTABLISHED

Cash Now) will welcome

decisions,” he said.

RCN AS A NATIONAL BRAND

Aside from hiring the right

IN PRIVATE LENDING

executive officer on July 1. Vaccaro, will officially

resign as CEO, leaving the

company in Tesch’s hands.

people, Tesch knew it was

equally important to ensure a great customer expe-

rience—another lesson

From the beginning, Tesch

from his days as a franchi-

national brand in private

marketer in the world, but if

industry-wide best prac-

repeat customers, that

approach to lending.

Years later, Tesch would

has established RCN as a

see. “You can be the best

lending while creating

you don’t have those great

tices and a customer-centric

would be a real problem.”

Tesch learned the importance of maintaining a

company brand right out

transfer all these skills to the lending world.

of college, when he pur-

S U BWAY L E A D S T O R E A L E S TAT E

while still in his early 20s.

Tesch eventually owned

chased a Subway franchise

WHILE CREATING INDUSTRYWIDE BEST PRACTICES AND A CUSTOMER-CENTRIC APPROACH TO LENDING.

Tesch said. “How would you be treated when you went and applied for a loan?

How would you be treated when you got a commitment letter? How would

you be treated at the vari-

ous points in the process of

“I won’t say it was turnkey,

seven Subway franchises.

figured out for you,” said

restaurants, he began to

Tesch used the answers to

about you marketing your

borrower of money, Tesch

the RCN customer experi-

dealing with the company?”

but they had everything

With the profits from his

Tesch. “So, it was really all

invest in real estate. As a

these questions to structure

business, hiring the right

learned what not to do.

ence models. That custom-

employees and painting the brand.”

“What I realized was using private lending or hard

er-centric approach distin-

guished RCN in the private lending space, he said.

transactions and send payoff letters in a timely fashion. “All those different items are how a customer grades the lender experience,” Tesch said. “If our prices aren’t competitive and we don’t treat our customers the right way, they will

Tesch said the No. 1 thing

money was a very unsatis-

about business was the

we went to start RCN in

deliver excellent customer

A CONFERENCE MEETING

"None of that was really

of how to treat customers

they offer the same pricing

During the first year, the

how we were going to build

on time, distribute rehab

ing loans in and around

drive on down the road.”

college did not teach him

fying experience. So, when

Tesch ensures his employees

human resource element.

2010, I took that knowledge

service at every point—that

taught to me in college. I

and made that the basis of

they quote, close loans

company was mostly mak-

this lending company,”

draws quickly, expedite wire

the Northeast, where

kind of learned that on the fly. ... I figured out how to 3 6 J U N E 2 0 19

Mike Tedesco played up Tesch’s young, vibrant

energy: “Jeff has all these

multiple facets to him. He is a successful business-

man, but he likes to have

fun. He knows more about techno music than my 22-year-old son.”

T R E M E N D O U S E N E R GY

Mike Tedesco said Tesch brings “tremendous

energy” to his relationships. He’s a master at establishing key partnerships and

believes they are essential to growing a business.

Tesch credits close friend

JEFF TESCH & JON HORNIK

expansion. Tesch needed

laws can be restrictive for to scale the company, he

needed to be able to close loans nationwide.

The first issue he had to

an expert in private lending through their mutual love of

We provided a conduit to

ACC basketball.

gain access to other markets,

“From there, Mike went on to explain what they do as

and Jeff helped us grow the private lending space.”

a company,” said Tesch.

Strong friendships devel-

“And that was how we

oped between Tesch and

solved our first big prob-

both Tedesco brothers,

lem, which was getting

including John Tedesco,

valuations and in every

senior vice president of

county across the nation.”

Appraisal Nation.

Tedesco said the synergy

“Jeff has a high level

Appraisal Nation, Mike

between the two created a

of integrity, vision and

valuable partnership. “For

leadership,” said John,

an immediate connection

us, Jeff was a huge advocate.

the older Tedesco.

solve was how to get valua-

tions on multiple properties around the country. Tesch found the answer shortly afterward at a mortgage

conference in Las Vegas, when he met the CEO of Tedesco. The pair found

for resolving the second hurdle on RCN’s path to

antiquated real estate

investors. Tesch knew that

and attorney Jon Hornik

who would ensure proper execution of the loan

documents and adhere to

the laws in each state. While attending a hard money lending conference in

Florida, Tesch met Hornik. “He was well-versed in the nationwide legalities of

private lending and what

we needed to do to expand, and I knew I had to meet

this guy,” said Tesch. Hornik had the systems in place,

including the state-specific F I N A N C I A L I N VR EE S IT IIN NG K 37

REI INK

PROFILE

language needed to exe-

Hornik, the company was

Once again, the solutions to

Hornik was quick to meet the

Rehab Cash Now evolved

attending, you guessed it—

tory advice and executing

that helped make the com-

met the owner of Bridge

tional. Tesch credits Erica

marketplace portal in the

marketing, for successfully

Tesch decided to acquire

ing the company.

system offered the basic

cute the loans nationally.

well-positioned nationally.

challenge, offering regula-

into RCN Capital, a name

conferences. When Tesch

closings across the nation.

pany sound more institu-

Loan Network, an online

LaCentra, RCN’s director of

asset-based lending space,

rebranding and transition-

the fledgling company. Its

“When I joined RCN over

six years ago, Jeff gave me

the direction and guidance I needed to be successful as I was starting out, but he also

gave me enough autonomy to grow and run with new ideas,” said LaCentra. “Jeff’s greatest quality is that he values his

DONALD VACCARO & JEFF TESCH

employees and the ideas and input they present to him.”

N AT I O N A L E X PA N S I O N

“I love doing deals with him. Jeff has the ability to get to the bottom line and underwrite quickly. And that’s why RCN has grown tremendously,” said Hornik. “I close for 60 originators nationwide and think RCN is top of its class in terms of underwriting and the ability to close. That’s all due to Jeff’s leadership.” Once RCN aligned with Appraisal Nation and 3 8 J U N E 2 0 19

both obstacles came while

structure required to build out the much-needed

technology that would allow RCN to run its operations

internally. Vaccaro, with his background in software, credits the company IT

department for developing the automation that expe-

dited the loan processing,

which was fundamental for rapid expansion.

The most significant

Successfully rebranded,

conference connection

procedures in place, the

crossed paths with a

national expansion. From

bank in California who was

doubled in size every year,

lenders. The investment

nations. The rapid growth

more operating capital.

such as discovering addi-

signing the deal October

finding new, robust tech-

moment had arrived.

came into the market.

closed on our first facility

with key staff and essential

happened when Tesch

stage was set for RCN’s

representative from a

2012 to 2016, the company

looking to finance private

and so did its loan origi-

gave RCN significantly

brought new challenges,

Tesch vividly remembers

tional credit sources and

30, 2013. He knew his

nology as other lenders

“That was the day we

that allowed us to borrow

possible, depending on the

landscape from a product

and travel companions as a

customers,” he said. “Up

ronment, whether it be oil

meaning there just aren’t

riencing the local restau-

just lending out a rich

number of macroeconomic

signed that credit facility,

dips in housing, but overall,

we got the brand, we’ve

my humble opinion, any-

money—away we go!”

to what we went through in

money to relend to our

overall economic envi-

until that point we were

prices, interest rates or any

guy’s money. When we

statistics. You might see

then I was like, all right,

you’re not going to see, in

got people, now we got

thing even remotely close

In April 2019, RCN Capital had a record-breaking

2007-2008. The numbers don’t add up,” he said.

diversification standpoint—

as many houses in disrepair that need to be rehabbed

and kept for a profit. Recent numbers released by the

U.S. Census Bureau show that while housing starts

rose unexpectedly by 0.6% in April 2019, permits for

single-family housing fell for a fifth straight month,

month, which resulted in

What Tesch does see

suggesting a decline in

$1 billion in loan origina-

family homes being built

the months ahead.

the company hitting

trending is a lack of single-

housing construction in

“foodie,” who enjoys experant fare and ordering the signature cocktail. From

the bright lights of a Vegas nightclub, to a private

dinner party in Old Town

San Diego, to a dingy piano bar in Austin, Texas, people gravitate toward Tesch’s

dynamic personality and genuine nature.

“What you see with Jeff is what you get,” said Mike Tedesco.

tions since inception.

in the United States to

O N T H E H O R I ZO N

demand. According to

As Vaccaro anticipates

monumental one for Tesch

capital being poured into

he says his departure

company celebrates 10

struction, which is why last

decisions more quickly. He

Tesch leans his ladder of

to address that need.

Tesch pays close attention to the economy and its

effect on private lending. “The industry has evolved tremendously. While Jeff

and I are out there speaking, we are also listening to what’s going on in the space,” said Hornik.

The two friends collaborate weekly to stay ahead of the constantly evolving private lending business. Tesch

said he is often asked about

the chance of another housing collapse, something he does not see happening.

“Now, will there be minor

price corrections? Well, it’s

keep up with the high

W H AT ’ S N E X T ?

The coming year will be a

Tesch, there isn’t enough

stepping down in July,

and RCN, too, when the

new single-family con-

will allow Tesch to make

years in private lending.

year Tesch positioned RCN

trusts Tesch completely.

success directly on his team.

“Jeff has the intelligence to

“It’s my employees that have

effort to give that single-

ligence to make logical

success and have made RCN

much weight in our port-

decisions. But Jeff also

As Tesch guides RCN into

and-flip model, and started

that make people want

long-term rental financ-

those win-win deals are

fully-amortized loan for our

Those closest to Tesch

nerships, hire key people

change him one bit. He

empower them, but most

described by his friends

customer experience.

“We began a concerted

run it, as well as the intel-

contributed to the company’s

family rental product as

entrepreneurial, business

what it is today,” he said.

folio as we do with our fix-

knows how to craft deals

marketing a product, called

do business with us, and

ing, which is a full 30-year,

everything,” he said.

customers,” said Tesch.

Tesch believes the industry overall needs to keep up with the changing

its milestone anniversary year, he will continue the

same business practices he learned long ago: maintain the brand, cultivate part-

say that being CEO won’t

who share your vision and

will always be the guy,

importantly, focus on the

F I N A N C I A L I N VR EE S IT IIN NG K 39

REI INK

REGIONAL SPOTLIGHT

RALEIGH, NORTH CAROLINA DE DIC ATE D TO A N U PWA RD TR A J EC TORY BY CA R O L E VA N S IC K L E E L L I S

4 0 J U N E 2 0 19

aleigh’s real estate

“The last 20 years, in

market is the product

particular, there has

of careful and strategic

been a lot of growth

planning—227 years of it,

in Raleigh,” said John

to be exact. The capital of

Tedesco, senior vice

North Carolina, Raleigh

president of business

was designated such in

development at

1788 in the wake of the

Appraisal Nation.

Revolutionary War and incorporated shortly after.

Tedesco cited several examples of what

At that time, the city was

enables Raleigh to remain

laid out in a careful grid

planted so firmly at the

pattern that remains

top, while other cities

intact, in large part, to this

tend to “pop in and out”

day. One of the first exam-

of such lists. Among those

ples of a planned city in

examples are carefully

America, Raleigh’s current

placed and planned

market clearly indicates

infrastructure projects;

the municipality remains

a well-curated public

popular with scientists,

school system boasting

analysts and academics.

175 schools and a board

For real estate investors,

with both a $2 billion

the results are both positive and long-term. The overall trajectory in the Raleigh real estate market

budget and the accolades to indicate the money is well spent; and a growing, strategically designed

has remained positive and

highway system.

upward for the better part

“Raleigh is often over-

of three decades.

shadowed by the larger F I N A N C I A L I N VR EE S IT IIN NG K 41

REI INK

REGIONAL SPOTLIGHT

Charlotte market, but it

market is much larger than

is the second-largest city

this, with the metropolitan

in the state, the capital

area alone (the city and its

of North Carolina, and

suburbs) accounting for

home to roughly half

about 1.5 million people.”

a million people,” said

“We’re one of the smartest

Marco Santarelli, president of Norada Real Estate Investments, a national

cities in the country when measured by percentage of the population with

provider of cash-flowing,

bachelor’s degrees,”

turnkey real estate. “What

Tedesco added. He noted

people do not realize

the high concentration

is the Raleigh housing

of academics and tech professionals is largely maintained by Raleigh’s position in the heart of the Research Triangle, an area that includes North Carolina State University, Duke University and UNC Chapel Hill. The high concentration

Since hitting a nadir in 2012, Raleigh home values have trended steadily upward for the past seven years, and they appear poised to continue to rise. Even in 2012, Raleigh values were relatively strong, nearly $30,000 higher than the national median home value. From that point, values have risen nearly $100,000 in the area. What makes this market so attractive? In addition to the many social, cultural and financial advantages associated with living and working in the Research Triangle, Raleigh is sitting

of these professionals

in a geographic sweet

is one of the main rea-

spot. Part of the south-

sons for Raleigh’s market

eastern United States,

steadiness and growth.

the climate is pleasant

Because of the area’s relatively high median income and steady job sectors, Raleigh was one of the last major metro areas impacted by the housing

4 2 J U N E 2 0 19

SIT TING IN THE SWEET SPOT

with short, cool winters and hot, humid summers. Perhaps most important, however, is the city’s proximity to other major metropolitan areas on the

and financial meltdown in

East Coast.

the mid-2000s—and one

“Raleigh is dead center,”

of the first to come out on

Tedesco said, “ just a little

the other side.

over an hour flight to New

RALEIGH BY THE NUMBERS 63.4%

$26,000

1.21M

3.4%

1.7%

$1,010

Increase in flipping volume year-over-year in the past year

Median sales price in Raleigh (Jan-Apr 2019)

Population of the Raleigh metropolitan statistical area

Raleigh population growth (one of the fastest per-year)

Homeowner vacancy rate

Median Raleigh monthly rents

3RD

2ND

4TH

Globally for quality of life

Most familyfriendly cities

Best big cities to live in

“Fastest internet speeds in the U.S.”

( NUMBEO )

( HOMES.COM )

( MONEY.COM )

Best cities for businesses and careers

( WR AL TECH WIRE)

( FORBES )

York City and a little over

properties for sale to

quarter of 2019, analysts

Barnett noted that

an hour flight to Florida.”

retail buyers or for use

warned sales volumes

nearly all his investment

as Airbnbs.

would likely continue to

properties are coming

really strong right now

“At present, our primary

fall, even as prices rose

to him through leads

and has been for quite

strategy is rehab-and-sell,”

across the board because

generated from his

“For us, the market is

there are fewer and

network rather than

fewer homes available

through more traditional

few more properties in our

below $300,000.

(and less personal) meth-

Investment Company.

portfolio long-term.”

“Under $300,000, there

The Barnetts have been

Garner Investment

[are] going to be multiple,

some time,” said Neal Barnett, co-owner with his brother Cory at Garner

active investors in Raleigh

said Barnett, “but we are always looking to put a

Company is active mainly

competitive offers,” local

ods of lead generation that are reliant on publicly available inventory.

agent Sharon Webb of

“There are a ton of

the Raleigh-area mar-

Webb Realty told Raleigh’s

investors in this market

housing crash using short

ket, which many analysts

News & Observer in March.

right now and a lot more

sale strategies and, in

describe as prohibitively

“There [are] a lot of people

jumping in,” he said. “We

more recent years, focus-

low on available inven-

looking [in that range] and

find most of our deals

ing mainly on rehabbing

tory. At the end of the first

not a lot of inventory.”

off market. They come

for more than a decade, working through the

in the sub-$250,000 tier of

F I N A N C I A L I N VR EE S IT IIN NG K 43

REI INK

REGIONAL SPOTLIGHT

through relationships

access to potential deals,

within our network as

said Daren Blomquist, vice

well as referrals.”

president of market eco-

It is easy to see why

nomics for Auction.com.

Barnett opts to rely on his

“More of our buyers are

network for deals these days. Competition for distressed properties

FLIPPING THE CONVERSATION

n any market with rapidly rising home values, investing trends eventually shift heavily toward flipping. That is

certainly the case in Raleigh, where a report from

Realtor.com indicated at the beginning of this year that

the city had the greatest year-over-year increase in flip-

ping volume of any market in the country at 63.4%. Fur-

thermore, unlike many cities with high flipping rates, the overall margins in Raleigh remain solid at about 63.4%. However, as more individual investors, particularly

in traditional venues is becoming increasingly fierce. For example, while properties certainly are still going for deep discounts at auction,

leveraging technology to gain a competitive edge at the foreclosure auction. The Foreclosure Interact feature on our mobile app... reached a new record for single-day views in April,” Blomquist said.

sometimes as much as

R ALEIGH I-BUYERS

21% less than their as-is

Another factor in the

value at time of purchase and much farther below after-repair retail value, the volume of inventory at the auctions is relatively low in the Raleigh area.

those new to the industry, and corporations enter the

According to data from

properties, real estate investors must be aware of how

those properties sold at

bine with novice-level bidding to drive prices upward.

about $160,000 in April

Raleigh market and begin competing for flip-worthy

Auction.com, although

corporate-scale spending and acceptable loss com-

foreclosure auctions for

As the Realtor.com analysts warned, “[In Raleigh], all

(compared to a median

these new flippers are bidding up the prices.”

monthly sales price of

With reality real estate television playing an increas-

$260,000 on the retail

bidders’ beliefs about what types of profit margins

brought to auction at all.

scenario with a skeptical eye for the repair budget

successful will develop flipping strategies that enable

Raleigh market that will affect every heated market in the country over the next few years is the emergence of i-buyers like OfferPad, OpenDoor and Zillow. These companies make “automated” offers on homes that are often far higher than individual investors can afford to accommodate and, in many cases, can close even faster than the tradi-

ingly dominant role in buyers’ expectations and

market side), only 26 were

flipping offers, savvy investors will go into any bidding

This steep competition and scarcity of inventory

heated markets, but they

and a willingness to walk away if necessary. The most

makes it imperative that

will probably have a per-

investors leverage every

vasive presence in nearly

them to outmaneuver the competition.

advantage to gain early

every market by 2030.

4 4 J U N E 2 0 19

tional cash-buyer investor. They tend to emerge in

T H E OV E R A LL T R A JECTORY IN THE R ALEIGH REAL “We are seeing a lot of competition [from i-buyers and individual investors]

E S TAT E M A R K E T H A S REMAINED POSITIVE AND

in the marketplace right

U P WA R D F O R T H E B E T T E R

now,” said Keith Murray,

PA R T O F T H R E E D E C A D E S .

owner of Home Offer Team, an investment company

margins across the board for everyone, not just in the Raleigh area but in other parts of the country.” Barnett agreed: “[i-Buyers] definitely affect the market because they are

sector has grown 33%

interest in downtown living

since 2008 and shows no

just inside the city limits

in the area, as developers

signs of slowing. Inc.com

but also in Cary, Clayton,

build high-rises to accom-

predicted at the end of

Apex and Dunn. They

modate demand for rel-

last year that Raleigh

are not just investing in

atively affordable, urban

would be the country’s

previously owned prop-

living in Raleigh proper.

“next startup hub.” Fol-

erties either. Developer

Tedesco noted that both

investors] pay. However,

Partners LLC, recently

they are not affecting

ramped up his company’s

our business too much

activities in the Raleigh

Where an i-buyer may come in, paint, replace carpet and put the home back on the market, we target properties that tend to need more work and allow us to create huge value and a good spread.” Other investors are expanding their geographic target areas in response to increasing

3,000 jobs to the area.

market, investing not

and co-founder of Kinloch

better shape [than we do].

center projected to bring

Triangle’s life sciences

money than [individual

to buy newer homes in

Amazon operations

is spurring a revitalized

Bruce McNeilage, CEO

specific criteria and tend

pending arrival of a new

competition in the Raleigh

going to pay a lot more

because they have very

recently announced the

Additionally, the Research

based in Cary, North Carolina. “It is hurting

In fact, the city of Garner

area, near Clayton.

investors and retail buyers are snapping up “historically small, single-family homes [of] about 1,500 square feet.” Once the purchase is complete,

lowing that projection, Raleigh tech company Pendo announced it would spend $34.5 million over the next five years to expand its local headquarters in the area.

the new owner may

“It really is a gem of a

spend $300,000 or even

city,” said Tedesco. “It’s

$400,000 to renovate

the best place in America

renting them out,” he said.

the property.

to raise a family, start

Because these homes

A BRIGHT FUTURE

“We are buying brand new houses at discounts from regional builders, then

are currently worth a

a business and have a beautiful quality of life in

With all this heat in the

a moderate climate and in

market, it is inevitable that

an educated community

both investors and ana-

with a diverse workforce.

lysts will begin to question

You will be hard-pressed

just how long Raleigh’s

to find anywhere in

upward trajectory can last.

America that will support

The good news for Raleigh

this the way Raleigh will,

Tedesco also said resi-

real estate? This could go

and that is why it will stay

dents’ willingness to rent

on for quite a while.

such a hot spot.”

premium thanks to the new construction and relative affordability of the monthly rent, McNeilage said they tend to rent quickly.

F I N A N C I A L I N VR EE S IT IIN NG K 45

REI INK

L E G I S L AT I O N

FILLING A VOID IN THE MARKETPL ACE The NPLA serves as a full-time advocate for private lenders. BY CA RO LE VAN SIC K LE E LLI S

rivate lenders play a

of “conventional” lend-

Rosen’s new organiza-

vital role in the health

ers due to time frame or

tion, the National Private

and growth of our national

perceived risk, they play a

Lenders Association

housing market and the

crucial role in revitalizing

(NPLA), will fill what he

local communities, pre-

described as “a void in

venting and ameliorating

our marketplace” by

neighborhood blight, and

providing private lenders

creating new opportuni-

with “a strong, full-time

ties for homeownership.

voice in Washington D.C.

Despite their vital place in

and on a state level.” He

the financial ecosystem,

added, “It is the NPLA’s

private money lenders

job, our function as an

have historically held a

association, to educate,

near-invisible place in the

inform and lobby for the

lending industry.

growth of our industry and

broader economy. By making B2B (business-to-business) loans to real estate investors on deals that do not fit the standards

Leonard Rosen, CEO of the Pitbull National Hard Money Lending Conference, has plans to change that.

4 6 J U N E 2 0 19

LEONARD ROSEN

provide valuable information to legislators.” AN ORGANIZ ATION UNLIKE ANY OTHER

Rosen is passionate about

“Private lenders are a

the need for “full-time

valuable part of the

advocacy for the protec-

economic infrastructure

tion of our industry.” He

of the United States, but

described legislators as

they are largely misunder-

generally “confused” about

stood and even mis-

private lending, which

trusted,” he explained.

leads to well-intentioned

but adverse policy deci-

tive that those individuals’

shifts looming in 2020

inghouse for legislation

sions that hurt private lend-

interests be protected

could bring in a new crop

that comes up on state

ers’ ability to deploy capital

from a legislative angle

of legislators uneducated

levels will provide that

safely and productively in

just as any other lenders’

on how the private lend-

education, create positive

the real estate sector.

interests would be.

ing community functions

partnerships between

“99.9 percent of our

“There is a whole food

and erroneously equat-

lawmakers and private

industry is making busi-

chain that begins with the

ing the industry with the

lenders, and, ultimately, fill

ness-to-business loans.

deployment of capital

check-cashing and pay-

that void,” he said.

Lawmakers must under-

from an investor,” he said.

day-loan sectors.

stand how we work and,

“These investors deploy

“People have good inten-

further, that we are not

billions upon billions of

tions when they want to

dollars into the market-

regulate the private lend-

place every year, whether

ing community. They want

usurious in our efforts to deploy capital,” he said. “NPLA’s educational goals focus here.” THE FOUNDATION OF THE FINANCI AL FOOD CHA IN UNDER FIRE

Rosen noted private lenders are often self-directed

it be for the investor rehab market, the small-balance capital market, or midsize and large commercial projects. Support for all of these comes from private investment because traditional banks simply do not

to protect the consumer. However, those good intentions adversely affect our industry when the legislator is uneducated about how private lending really works [in the real

NPLA’s first meeting will be October 27, 2019, in Scottsdale, Arizona. To learn more about the NPLA private lending think tank—which will assemble leaders in the industry, including hedge

estate sector],” Rosen said.

funds, hard-money lenders, private

“NPLA’s strong, national

of panels dealing with legislative

investors using money in

have the appetite for it.”

their individual retirement

Rosen, like the majority of

accounts (IRAs) to fund

the private lending pop-

tation in Washington, D.C.,

deals, making it impera-

ulation, worries electoral

and its role as a clear-

voice, full-time represen-

lenders and investors in a series issues, education and ethics—visit NPLAOnline.com. You’ll find details on the association’s agenda and how to be involved.

Carole VanSickle Ellis is the editor-in-chief of Self-Directed Investor Magazine and news editor for

The Bryan Ellis Investing Letter, a digital newsletter providing independent financial and political news for savvy individual investors. Learn more at SelfDirected.org or email Ellis at carole@selfdirected.org.

F I N A N C I A L I N VR EE S IT IIN NG K 47

REI INK

P R O P E R T Y M A N AG E M E N T

6 KEYS TO DETERMINE THE RENT FOR YOUR INVESTMENT PROPERTY The rental market is hot, but be realistic when setting rental prices. BY J E N N I F E R STO O P S

t’s no secret that the rental market in the

U.S. has seen incredible growth in the past decade. Rental prices have steadily increased 3-5% annually, with an average increase

6 FACTORS THAT IMPACT R ATES

There are a number of factors to consider besides the popular “Rent Zestimate” as you determine your rental rates.

COMMUNIT Y/

NEIGHBORHOOD

AMENITIES INCLUDED

(e.g., pool, fitness center, walking trails, recreation room, laundr y facility)

across the last decade of about 3.11% year to year.

NUMBER OF BEDROOMS

From millennials to

AND BATHROOMS

retirees, more and more people are choosing to rent rather than to buy. The steady growth of the rental market tempts some owners to think they can

case. The market may be hot, but you still need to take several factors into consideration to arrive at a fair market rent value for your property. 4 8 J U N E 2 0 19

(e.g., refrigerator,

microwave, dishwasher, garbage disposal,

PROPERT Y AMENITIES INCLUDED

appliance age and color, elec tric or gas)

(e.g., utilities, lawn maintenance, internet/ cable, trash ser vice, etc.)

charge top dollar. But that’s not necessarily the

APPLIANCES

PETS

(e.g., are they accepted,

how many allowed, breed PARKING (e.g., no parking, 1-car garage/2-car garage, covered parking, assigned/ designated parking, number of spaces)

restric tions, weight, age)

WALK ABILIT Y SCORE

In addition to these six key factors, another factor that affects rental rates is a property’s “walkability

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For your free custom insurance proposal, visit

CoverYourInvestment.com F I N A N C I A L I N VR EE S IT IIN NG K 49

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REI INK

score.” A walkability

tioned previously (these

How do you find the rent

the area, in general, will

score is determined by the

are also key items you’ll

prices of comparable

impact the rent value of

property’s proximity to

want to mention when

homes? Several online

your property.

such things as shopping,

marketing to tenants) will

resources can help you

parks, schools, restau-

be helpful as you evalu-

find comparable property

You can also consider

rants, nightlife/entertain-

ate your property against

rental rates. Websites

ment and transportation.

comparable properties in

such as Trulia, Zillow and

your area that have rented

Rentals.com are valuable

recently or are available

resources for conducting

for rent. Understanding

your research. The old-

which properties are

school, but proven, way to

currently for rent (i.e., your

do research is to go out

competition) is as import-

into the field and research

Knowing the answers to

ant as knowing what has

the area yourself. The

the six key factors men-

recently rented.

surrounding homes and

RESE ARCH OTHER PROPERTIES

Finally, don’t forget to research comparable properties.

using a local professional property manager. Self-managing your rental property may seem like it will save you money, but it could easily result in unnecessary frustration, wasted time and lost revenue.

Jennifer Stoops began working with Park Avenue Properties in 2007 and is currently the senior vice

president. Park Avenue Properties operates in Greater Charlotte, Atlanta, Raleigh (Triangle), Winston-Salem (Triad), Myrtle Beach, Jacksonville and Memphis. Jennifer holds the Master Property Manager (MPM) designation. She currently serves on several NARPM national committees and serves on the board of

governors for the North Carolina Association of Realtors. She is a recipient of Business Today’s Top Woman in Business Award. Stoops may be reached at Jennifer@parkaveproperties.com.

5 0 J U N E 2 0 19

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F I N A N C I A L I N VR EE S IT IIN NG K 51

REI INK

FROM THERE TO HERE

MAKING MAGIC: THE SAM K ADDAH STORY BY SA M K AD DAH

grew up in Damascus

of Disney World and the

leave Syria and seek better

tion was goalie. In and of

ber thinking that it was a

From that point on, I

loving soccer. My posi-

itself, that was a challenge! In Damascus, unlike in the

Epcot center. I remem-

place out of this world!

Something unattainable

opportunities in this world. aspired to leave. It was

only natural for me to look

U.S., the fields I played on

and unimaginable.

were dirt and concrete. I

Having been born to

options. My dad was an

English teacher and an ele-

guage teacher, after all. It

in a suburb of Damascus,

up with the English proper

ONCE , WHEN I WAS V ERY

modesty and thoughtful-

accent. Now, however,

YOUNG, I SAW A PICT URE

that picture. I knew that

my accent is from, I quickly

EPCOT CENTER . I REMEMBER

out there, life was better.

So, when the time came

THINKING TH AT IT WAS A

THE FA IRY TALE UNFOLDS

loved swimming too. And, of all things, volleyball was

OF DISNEY WORLD A ND THE

PL ACE OU T OF THIS WORLD!

a modest family of an

English literature and lan-

mentary school principle

is kind of funny that I grew

I was grounded with

composition and the British

ness. But I never forgot

when people ask me where

someplace, somewhere

reply ARKANSAAA.

Although I spent much of

my youth on athletic fields, a favorite (we wonâ€™t mention my height handicap). So, letâ€™s just say I had a lot of imagination and heart! WISHING UPON A STAR

Once, when I was very young, I saw a picture 5 2 J U N E 2 0 19

to England or the U.S. as

enjoying life, the atmosphere in Syria was changing.

After my dad was detained by the regime when I was in the 10th grade for his peaceful political dem-

ocratic views, my oldest

brother planted a seed in us. He suggested that we

for me to choose between my college transcripts for

my electrical engineering degree or a passport to study at either MIT, the University of Maryland

or Wichita State (where

Boeing, Cessna, Learjet

and Beach aircraft were

all founded), there was no

question about what I would do. I decided to travel to the U.S., the home of that pic-

ture from my youth. A place

that had seemed unimaginable and unattainable.

At Wichita State, I found

my undergraduate studies boring, so I added com-

puter science as a second major. I also earned an

MBA with a focus on infor-

mation systems, an area of

study where I felt at home. I graduated with a 4.0 grade point average … the fairy tale was becoming real. IT’S A SMALL WORLD (AFTER ALL)

Out of school, I stayed

In 2001, I transitioned to

recruited me to lead their

in lieu of my seven-figure

ogy and productivity group

and sales systems. I took

A few days after joining

leading the global technolfor GE Transportation/

Global Signaling. During my tenure at GE, I oversaw 13

sites that spanned four continents. I was dealing with multiple cultures, waking up at 6 a.m. to communi-

cate with India, followed by phone meetings with asso-

ciates in Italy, Germany and the UK a couple of hours

later. East Coast to the West Coast … I sandwiched calls throughout the day. I fin-

in Wichita working for

ished the daily globe trot by

Raytheon. But, due to a

and the Chinese teams.

defense contractor

family member's terminal

illness, I moved to Kansas

speaking with the Australian

BELIEVING ALL THE WAY

City, Missouri, where I

Truth be told, I never imag-

director of the upper

operations into the financial

security and e-commerce

takes a funny turn.

formerly Ernst & Young.

experience, Microsoft

landed a position as the

ined moving from global

Midwest practice for e-

industry, but life sometimes

implementation at EY,

Because of my global

internal global marketing

60 days off between jobs. During that transition

period, a friend asked

me to review a national

lending platform that was being built and that had challenges after more

than $2.5 million had been invested in it. The rest

is history—or destiny—

depending on your point of view. No matter what

happened after that, the

lending industry just kept sucking me back into it.

I spent a couple of weeks at my friend's company,

discovering the issues and the challenges and imple-

menting corrective actions.

executive position.

Microsoft, the bank decided to outsource that software development to be sold back to them for a mid-

eight-figure number over

five years. That agreement made it worthwhile for me

to start Liquid Logics (originally named bFocused for "business focused" to set

us apart from techno empty slogans like fintech).

I remember vividly sitting in one of my first meet-

ings and asking what an

LTV was. I’ll never forget seeing the president of that lending operation, who had just signed an

agreement with me, turn

My task complete, I left

red. It was obvious he

Microsoft, thinking that

going to able to save this

ing bank was not something

try” knowledge. The proof

to start my new job with

was wondering if I was

working as a CTO for a lend-

endeavor without “indus-

I could practically consider

came a few months later F I N A N C I A L I N VR EE S IT IIN NG K 53

REI INK

FROM THERE TO HERE

when we released our first version online, where 801 loan officers or the 12,000

With collaboration from

a Boston-based industry

leader, we built the private

Origination Software (LOS) primarily for private/hard

marketing story.

money lenders. Our system

Although loan origination

brokers could fill in an

lending platform based on

get auto underwriting in

had already built.

At the time there was no

ered that the industry was

We continue to remain

ware as a service (SaaS).

hensive system. The old

private lenders improve

an online lending appli-

antiquated and built on

lining the loan process.

prequalification to accom-

I vividly remember their

lending products with

ging that their reports had

That group generated over

thought, “You are a dino-

application, run credit and

the $10 million platform we

was built around the borrower experience, with an emphasis on simplicity and

Shortly after, we discov-

speed for the loan officer.

in dire need of a compre-

passionate about helping

We simply referred to it as

dominant software was

their businesses by stream-

cation, pre-approval and

old PC-based technology.

From humble beginnings

less than 3.5 minutes.

such thing as fintech or soft-

modate niche residential

sales vice president brag-

to building a national lending platform and transforming it to a private

complex underwriting rules.

not changed in 15 years. I

$3 billion of loans annually.

saur in the industry.”

As the economy turned

Our strategy of ever

became a private-labeled

stayed current, relevant

organizations originating

full understanding of the

a year. In 2014, we stum-

Today, Liquid Logics

experience to become the

and commercial lending.

tion cloud-based Loan

in content, capability and

in 2008, we retooled and

evolving paid off. We

lending platform for smaller

and keenly focused on a

$500 million to $1.2 billion

lending life cycle.

bled across private funds

provides next-genera-

substance and not just the

lending platform, I learned that ever-evolving change, listening to what the market needs and, more importantly, listening to your team's expertise and

software is our bread and butter, it only describes

something we do—it does

not define who are. At our

core, we are a business solutions company dedicated to facilitating growth, minimizing workloads and making

businesses the best they can be. It is humbling to be able to provide others with the

tools they can use to make their dreams happen. If a short kid from

Damascus who played

soccer on concrete and

was inspired by a photo of Disney World can achieve something of this magni-

letting them do what they

tude, anyone can.

do best, is the key to suc-

In the words of Walt

cess. It is truly a humbling leading national platform

Disney himself, “When you believe in a thing, believe in it all the way, implicitly and unquestionably.”

Sam Kaddah is the president and CEO of Liquid Logics, a business process and technology company

focusing on mortgage automation. Liquid Logics provides next generation cloud-based Loan Origination Software (LOS) primarily for private/hard money lenders. The Liquid Logics system was built around the borrower experience, with an emphasis on simplicity and speed for the loan officer. Liquid Logics

is headquartered in the Kansas City, Missouri, metropolitan area. For more information, contact Kaddah at Sam@liquidlogics.com.

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strong capital growth over the 5-year

maintaining an occupancy record

opportunity is a well located 98%

investment period. Our local property

of 95% of the 4 million square feet

leased high-tech office campus in a

partner and sponsor has an outstanding

they have already developed. We are

strategic location where we will add

43-year track record of developing

confident in their ability to transform

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I N V E S T M E N T OV E RV I E W The equity investment of $5 million in

neighborhood’s including Chastain

the real estate called Glenridge, located

Park, Capital City Club/Brookhaven,

in the central perimeter of Atlanta,

and High Point/Meadowbrook. Central

United States, is available to investors

Perimeter is widely known for its popu-

from as little as $5,000.

larity among large corporate tenants.

The two mid-rise 5-story buildings

The location also benefits from its

were built in 1972, and have received

proximity to the Medical Center

$1.3 million renovations in 2017 that

MARTA station, less than ½ mile east

included replacing the roofs, HVAC’s

of Glenridge. This MARTA station is

and elevators. The buildings are

in the heart of “Pill Hill,” the South-

185,402 square feet in total, positioned

east’s largest concentration of medical

on 10.05 acres, adjacent to the South-

facilities and services, which consists

east most strategic interchange at the

of three major hospitals and is

intersections of I-285 and Georgia 400,

Glenridge’s neighbor to the east.

which carry 400,000 cars each day.

The building's commercial tenants

As Central Perimeter’s closest office

will be replaced over time for medical

node to Buckhead, this distinctive

service providers, and the long-term

quadrant is walking distance from a

strategy is to expand the lettable square

long-list of dining options, several

feet by adding a newmedical wing on

hundred high-end multi-family units

the unutilized land.

and established executive single-family

5 6 J U N E 2 0 19

K E Y FAC T S & F I G U R E S

E XC E L L E N T LO C AT I O N Great accessibility from the Georgia-400 and I-285 in Atlanta, GA, USA. Neighboring the Southeast’s largest concentration of medical facilities and services, which consists of three major hospitals

T WO M I D - S I Z E M I X E D OFFICE BUILDINGS 185,402 square feet

M A R K E T OV E RV I E W

RETURNS

AT L A N TA - S A N DY S P R I N G S M A R I E T TA , G A M E T R O A R E A

levels of demand and limited develop-

Atlanta enjoys growth in population,

from over 15% to less than 9% today. This

jobs, and income. Atlanta’s economy

has given rise to healthy rent growth and

continues to outperform the nation, and

gained the attention of investors, who

its unemployment rate is at its lowest

see Atlanta as a strong market in which

point in more than a decade. The metro

to deploy capital. More development is

area continues to attract relocations

likely to begin in the coming months,

from workers and businesses, and

and the market can certainly benefit

Atlanta is one of the nation’s fast-

from additional product in high-demand

est-growing MSAs as a result.

neighborhoods. In 2019 we expect to see

This is reflected in Atlanta’s medical

continuing rent growth, a rise in new

office market, which continued to enjoy

construction and a vacancy rate that will

low vacancy levels and rising rental

continue ticking downward.

rates, along with limited construction.

We are seeing Cap Rates moving high-

Demand was very strong in Atlanta’s

er, predominantly due to the past years

medical office sector during 2018, and

of increases in the interest rate. With

healthcare continues to be a growth

the construction activity slowing and

driver in the local economy.

the Fed increasing dovish sentiment,

For the past several years, the Atlanta

we anticipate that the Cap Rates will

medical office market has seen steady

stabilize in 2019.

ment, which has brought vacancy down

Forecasted quarterly dividend of 8% annualized with a targeted IRR of 15.03%

COST $43.4 million in total of which $38.8 million is the buildings and $4.6 million transaction fees and working capital

FUNDING $6.8 million equity raise including $1.8 million equity from sponsor $20.1 million bank loan and $16.4 million ground lease

VA L U E C R E AT I O N The rent roll will be improved by changing the tenant mix to medical office tenants with long-term leases

HOLDING PERIOD

F I N A N C Iperiod A L I NisVplanned R EE S IT IIN Nfor G K 557 The investment years

R SE PIO N S O R E D C O N T E N T INK

M A R K E T OV E RV I E W CO N T.

M E D I C A L O F F I C E B U I L D I N G S R E N T A N A LYS I S E N D I N G Q 4 -2 01 8 GEOGRAPHY

TOTAL SF

SF AVAILABLE

BASE RENT RANGE

AVG . RENT (NNN)

RENT GROWTH Y/ Y

(SAMPLES)

Atlanta

24,916,747

2,467,245

$12.00 - 45.00

$20.10

1.50%

(160)

Top 50 Metros

727,236,815

51,636,474

$6.23 - 108.00

$23.78

1.90%

(3,880)

% 98

TOP 50

YOY GROWTH

2 .50%

R E N T G R OW T H O F AT L A N TA VS TO P 5 0 M E T R O S

4Q2016

1Q2017

2Q2017

3Q2017

4Q2017

1Q2018

2Q2018

3Q2018

4Q2018

2 .00% 1.50% 1.00% 0.50%

3% 6

% 5.

% 9 6

4 .3 6

7.50%

400

C A P R AT E

PURCHASE PRICE/SF

0.00%

2015

2016

2017

2018

7.00%

300

6.50%

200

6.00%

100

5.50%

5.00% 2015

SOURCE: Revista 5 8 J U N E 2 0 19

2016

2017

2018

N E I G H B O R H O O D OV E RV I E W One of Atlanta’s first major suburban

professionals who desire a suburban

2 8 5 @ 4 0 0 P R O J E C T: $800 million

submarkets, the Central Perimeter

location with an in-town feel in proximity

reconstructing of the interchange

office submarket is situated between

to all of the urban amenities. The market

to be completed by 2020, already

the North Fulton submarket to the

has experienced an “urban renaissance”

progressing on time.

north and Buckhead to the south. This

with the creation of executive housing,

“ N E X T T E N ”: S A N DY S P R I N G S ’

high-profile office location is entered

quality mid- to high-rise residential

M A S T E R P L A N : Is a comprehensive

on the intersection of Interstate 285

complexes, restructured streetscapes,

land use plan that provides a long-

and Georgia Highway 400 and extends

and ongoing infrastructure improve-

range infill development and densifi-

north to the Chattahoochee River.

ments. As such, the area exhibits a true

cation growth strategy for the area.

The nucleus of the Central Perime-

live-work-play environment that today’s

E X T E N S I O N O F M A R TA over the

ter submarket remains in the imme-

business professionals demand.

diate vicinity of Perimeter Mall on

The immediate three-mile radius encir-

popular destinations such as Avalon,

Ashford-Dunwoody Road where the

cling the property boasts a population

Verizon Wireless Amphitheatre and

submarket originally evolved. Other

that totals 98,272 and is projected to

Northpoint Mall.

office nodes have developed in the

grow by 11% towards 2023.

The hospital systems with a major

Within the area, the Perimeter Commu-

presence in the area include:

Central Perimeter area as the submarket’s center of gravity has shifted to become more balanced along the GA 400 corridor. The area possesses a mature amenity base of hotel and retail development to support a large base of white-collar office employees.

nity Improvement Districts (PCIDs) are self-taxing districts that use additional property taxes to help accelerate transportation and infrastructure improvement projects. The PCIDs are leading the charge to implement vital trans-

The Perimeter Center district is one

portation enhancements coupled with

of the largest, employment and retail

land use and zoning strategies that will

districts in Metro Atlanta and offers

enhance mobility and improve access

approximately 200,000 jobs. The jobs

throughout the entire Central Perimeter

are in high-paying industries, such as

submarket. Their mission statement

healthcare, technology, and finance/

and tag line are simple: to create the

insurance and have led to nearly 82%

Southeast’s “Premier Liveable Center.”

of residents possessing white collar jobs and average household incomes of nearly $134,000 per annum.

An estimated $101.4 million is expected for Sandy Springs during the next fiveyear term towards improved mobility.

Central Perimeter is the location of

Some of the most impactful projects to

choice for many of Atlanta’s business

Glenridge Medical 22 include:

next 6-12 years GIVING access to

N O R T H S I D E H O S P I TA L with

551 beds has more than 120 outpatient facilities, 2,500 doctors and consultants see more than 2.5 million patients annually. C H I L D R E N ’ S H E A LT H C A R E O F AT L A N TA largest pediatric provider

in Georgia and one of the largest in the country, with 561 licensed beds; 24 neighborhood locations, and more than 8,900 employees. E M O RY S T. J O S E P H ’ S H O S P I TA L

the 410-bed, acute-care facility is comprised of more than 750 physicians, with extensive research services and the most advanced technology available.

F I N A N C I A L I N VR EE S IT IIN NG K 59

R SE PIO N S O R E D C O N T E N T INK

F I N A N C I A L S U M M A RY

P R OJ E C T C A P I TA L S T R U C T U R E

38,800,000

Purchase Price Partner Acquisition Fee

400,000

OrbVest Due Diligence Fee

400,000

Tenant Installation & Leasing Commission Reserve

996,103

Structure Cost

164,000

CapEx Reserve

944,000

Closing Fees (includes temporary loan costs)

1,762,580 43,466,683

Total Investment Amount Financed | LTV: 46.46%

20,196,103

Ground Lease

16,470,580

Equity Contribution

6,800,000

Retail Investors Contribution

5,000,000

Sponsor Contribution

1,800,000

P R OJ E C T PA R A M E T E R S

Project Internal Rate of Return

21.38%

Hurdle Rate

7.00%

Going In Cap Rate at Purchase Price

6.75%

Forecasted Exit Cap Rate

6.25%

Investment Holding Period (years) Minimum Investment Amount

5 $5,000

Equity Carry Profit Split Investor

50%

Sponsor

30%

OrbVest

20%

6 0 J U N E 2 0 19

I N V E S TO R R E T U R N F O R E C A S T

Year 1

USA Investors 1. Investment

Year 2

Year 3

Year 4

-$10,000

2. Cash Flow (pre-tax) Cash Flow % Return (pre-tax)

$766.05

$809.12

$818.38

$812.63

$828.70

7.7%

8.1%

8.2%

8.1%

8.3% $4,717

3. Capital Gains Flow (pre-tax)

47.2%

Capital Gains % Return (pre-tax)

$18,752

4. Return on Investment (pre-tax)

87.5%

Return on Investment % Return (pre-tax)

1.88x

5. Equity Multiple (pre-tax)

15.03%

Investor Internal Rate of Return (pre-tax) Year 1

Foreign Investors 1. Investment 2. Cash Flow (after-tax) Cash Flow % Return (after-tax) 3. Capital Gains Flow (after-tax) Capital Gains % Return (after-tax) 4. Return on Investment (after-tax) Return on Investment % Return (after-tax) 5. Equity Multiple (after-tax) Investor Internal Rate of Return (after-tax)

Year 5

Year 2

Year 3

Year 4

Year 5

-$10,000 $766.05

$809.12

$818.38

$812.63

$828.70

7.7%

8.1%

8.2%

8.1%

8.3% $3,469 34.7% $17,504 75.0% 1.75x 13.35%

DISCLAIMER: These figures are forecast on the best information available at the time of publication. The figures can change prior to closing and during the course of the investment. Past performance is not indicative of future results. This information is provided as general information and OrbVest disclaims any liability for any loss, damage which may be suffered as a result of or which may be attributable to the use of or reliance on any information provided.

F I N A N C I A L I N VR EE S IT IIN NG K 61

R SE PIO N S O R E D C O N T E N T INK

S P EC I F I C R I S K S

P OT E N T I A L R I S K S

M I T I G AT I O N S / E X P O S U R E

Tenant Risk

Tenant can default on lease payment Tenant credit checks Reputable tenants Solid financial position of tenants Long term leases in place

Interest Rate Risk

Interest rate could move upwards in the USA The interest rate is proposed to be fixed

Valuation Risk

Market condition can influence the timing of the exit Lower gearing DCR averaging 1.55x of Net Operating Income Using strong capitalized lenders Objective to Reduce Capital Call Risk for Investors

6 2 J U N E 2 0 19

M O B P O R T FO LI O S N A P S H OT ( A S O F D EC E M B E R 3 1 , 2 01 8)

A B O U T O R BV E S T OrbVest is a global real estate

T H E S O LU T I O N

company that invests in US income

We make investing in global real estate

producing commercial real estate

simple for small to large investors to

generating strong cash dividends on

invest from as little as $5,000. Clients

a quarterly basis for our clients and

use an online platform to invest into

assist with long-term wealth creation.

low risk commercial assets, primarily

THE PROBLEM Everyone aspires to achieve financial freedom and the ability to earn annuity income in first world currencies. Most people agree that real estate is a great stable investment; however, until recently, it was just too complicated to

in the Healthcare niche. These investments generate regular dividends (Âą8% per annum) that are distributed on a

NUMBER OF B U I LD I N G S

862,531 S Q UA R E F E E T O F G L A

quarterly basis creating annuity income and long-term wealth over the period of investment. (Targeted IRR of 12% to 17% over the investment period).

invest in good commercial real estate

O U R T R AC K R E CO R D

in the USA and it required significant

$250 million real estate under

amounts of capital to get going.

management in the USA.

Important note: The content and information herein contained and being distributed by OrbVest are for information purposes only and should not be construed, under any circumstances, by implication or otherwise, as

94.7

P E R C E N T LE A S E D

93.36

PERCENT OF P O R T FO LI O I S W I T H I N T H E TO P 1 0 M SA

( M e t r o p o l i t a n S t a t i s t i c a l A r e a)

advice of any kind or nature, or as an offer to sell or a solicitation to buy or sell or to invest in any securities. Past performance does not guarantee future performance. Returns are taxable and will be taxed as ordinary income or capital gains, unless the investment is held in a tax-deferred arrangement. Investments through tax-deferred arrangements may become taxable upon withdrawal from such arrangements. OrbVest is not a tax and/or legal advisor. Owing to the complex tax reporting requirements associated with private equity and private real estate opportunities, viewers should consult with their financial or tax advisor or attorney before investing. For members investing via the secure site, the particulars of the investment is outlined in the property supplement, a private placement memorandum and subscription agreement, which should be read in their entirety by the proposed investor prior to investing.

ORBVEST 106, First Floor Waterside Building Eden Island, Seychelles +27 (0) 21-948-2130 info@orbvest.com www.orbvest.com

F I N A N C I A L I N VR EE S IT IIN NG K 63

R IN E ID U S T RY S P O T L I G H T ISN KN S O R E D C O N T E N T PO

Baldwin Advisory Group W H AT W E D O Baldwin Advisory Group (BAG)

investment services. BAG coordinates

growing profitability. We are your

provides a fast, professional

all the vendors needed to serve your

“go to” provider with one BAG for

turnaround for a variety of real estate

investment needs, so you can focus on

all real estate services.

WHO WE ARE Dickie Baldwin, the CEO of Baldwin

branching operations. Leveraging the

Advisory Group, has 35 years of real

long-term business relationships he’d

estate experience as a realtor, loan orig-

built with all his service providers over

inator, mortgage wholesaler, mortgage

the years, Baldwin created Baldwin

correspondent and mortgage ware-

Advisory Group to provide real estate

house professional. In addition, he has

investors with a “One Stop Shop” for

set up multiple national mortgage net

all their investment needs.

MARKET NICHE Baldwin Advisory Group is full service. We’re a one-stop shop.

• RMLO (Residential Mortgage Loan Officer)

Property preservation companies in the Baldwin Advisory Group network provide

What essential services do we coordinate

For example, if you are a seller or buyer of

services such as evictions, cash for keys,

for real estate investors?

REOs or Notes, Baldwin Advisory Group

debris and personal property removal,

will connect the two parties. If you are the

lawn maintenance, winterization, repairs

• BPO (Broker Price Opinion) • Title and Escrow • Collateral Review

seller, you simply complete a form on our

to plumbing, electric and gas, roof repairs

website to let us know what you have to

and replacement, snow removal, securing

sell. If you are the buyer, simply complete

and boarding and code violation abatement.

• Record and Document Retention

the form and let us know what you want

• A Nationwide Attorney Network

to buy. If there is a match, then we will

• A Nationwide Realtor Network

connect the two—the seller and the buyer.

• Self-Directed IRAs

So, we offer a very simple and time-saving

• REOs and Notes

process to real estate investors.

• Various Money Lenders

With regard to property preservation,

• IRS Tax Attorney

Baldwin Advisory Group can save real

• Mortgage Servicing

estate investors time by connecting them

• Property Preservation

with the companies already in the network.

6 4 J U N E 2 0 19

BALDWIN ADVISORY GROUP Dickie Baldwin, CEO 20821-D Eva Street #2 Montgomery, Texas 77356 (936) 447-4170 or (713) 825-4365 dbaldwin@baldwinadvisorygroup.com www.baldwinadvisorygroup.com

IMAGINE YOU SEE YOUR FUTURE CLEARLY... A real estate entrepreneur, working for yourself, on your own terms. Imagine the possibilities with a lender who understands your vision and has the knowledge and experience to help you attain it. YOUR VISION IS WITHIN REACH Walnut Street Finance is a leading private lender serving MD, VA, DC, DE, PA, NC, SC and GA. Weâ€™re helping investors like you realize their vision, one deal at a time. walnutstreetfinance.com

F I N A N C I A L I N VR EE S IT IIN NG K LXV

(703) 543-9215

Listen and Earn REI INK

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Norada

REAL ESTATE INVESTMENTS Are you looking for actionable steps to create wealth and passive income? If you are wanting to get your foot in the real estate investment game, then we have just the podcast for you. As a top-ranked business and investing podcast with over 800 5-star reviews, the Passive Real Estate Investing show is packed with strategies and insight for adding money to your pocket. Marco Santarelli, from Norada Real Estate Investments, brings his expertise and knowledge on both passive and turnkey real estate investing, and he provides listeners with helpful tools and tips to create the wealth theyâ€™ve always wanted.

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