All Forum Posts by: Ali Jamal

I won't even try to convince anyone who wants to own a multimillion-dollar real estate portfolio that they can easily do so within a few years. In the process of acquiring a multimillion-dollar investment portfolio over the last nine years, however, I've developed the unshakable conviction that following these guidelines can optimize any real estate investor's chances of success.

1. Have a strong vision.

Before setting your eyes on the prize, understand what the prize is. Decide what asset class and type of property you're looking for. At the very least, commit to a diversification ratio that's realistic. For example, I have a 60/20/20 rule that breaks down into 60% of the company's investment dollars for multiunit residential properties, 20% for vacation rentals and another 20% for private equity real estate funds.

2. Gain lots of grit.

Understand that any multimillion- or billion-dollar venture is a 24-hour deal. I used to think that being successful in the hospitality industry would allow me to sit back and simply reap the rewards. I was dead wrong. As the expression goes, more money, more problems — or, in this case, more responsibility. Be prepared to be on call for issues that arise, and understand that no one will have more incentive to handle them than you.

3. Get connected.

Relationships are the key to success in real estate. When you've targeted and gained a strong network of professionals to whom you can also provide value, they will gladly keep their eyes out and help you find the best deal. Consider either starting or joining a mastermind group. This is where a group of individuals committed to helping each other succeed meets on a regular basis to discuss their goals and challenges. It's a simple concept that carries powerful results.

4. Filter your search.

If you want to have the right network of people spreading out their tentacles, putting out feelers and perhaps even investment dollars out there for you, be clear on what you're looking for. Similarly to when you conduct an online search, filter out the ambiguity. At a minimum, decide what location, price range, property class and usage you're looking for.

5. Consider all financing options.

Often, we make the mistake of thinking one must be inherently well off before initiating this type of venture. Remember that most of the millionaires or billionaires we know of established themselves with the help of others. And now that you've gathered the mental and social stamina to reach your goals, it's time to really hustle for those dollars. Fortunately, when investing in real estate, there is a range of options available for garnering capital, which include equity and debt financing, investing with family or friends, joint ventures, starting a blind pool fund, and seller financing. Investigate all these avenues while becoming zealous about investing other people's money (OPM) responsibly.

6. Acquire with prudence.

When you're investing on behalf of other investors, do so prudently. Once you find a deal that piques your interest, thoroughly research the appropriate market value for that deal. Ask yourself what economic factors are at play that may or may not allow the seller to obtain their asking price, and then use that as a bargaining chip. Thanks to the internet, all the information about a property is not only available to a real estate agent or the seller. You owe it to your private investors, and your own pockets, to take advantage of this access.

7. Stay out of trouble.

Although we don't intend to expose our assets to liability issues, the risk is always there. This is another area in which establishing relationships with a business network is important. My own network of professionals, for example, introduced me to my company's legal counsel, who, in turn, helped me understand what type of insurance we need to be covered for any liability issues that arise. Our counsel also guided us on what security measures we need for our asset class and helped us stay out of a number of risky ventures that would have quickly become pitfalls.

8. Manage operations efficiently.

From an investment perspective, establishing efficient operations is not only about having a good management team; it's about saving enough money to put away for the next deal, especially when your goal is to grow your portfolio. This means delegating operational duties so that you have enough time to grow the business, rather than run the business. It also means ensuring that staff members are guided in a unified direction and everyone is held accountable for mismanagement that ultimately eats into the company's profit margin.

9. Leave a credible footprint.

Whether you've acquired one property or 10, there are many ways in which your business can make its mark as a credible brand. Partner up with nonprofits that support causes that align with your company's mission. For example, one of the gaps that my company aims to fill is providing affordable housing to those who may not have access. To date, my company has been awarded recognition by various local authorities, which is not only humbling for our team, but also builds a brand worth investing in.

10. Think outside the box.

I've learned that the chances of success with real estate investing improve when we don't rely on conventional means. Can't raise enough capital for your first investment? Try subleasing and hosting a few short-term rental properties. Can't find any good deals for multiunit properties? Invest in a mobile home park. Can't find the right staff or clients? Partner up with nonprofits that share your company's mission.

The point I'm trying to drive home here is that if you want to reach for the stars, don't rely on NASA to get you there. Like Elon Musk, figure out a way to create your own transport.

Thank you both. I spoke to live Oak and for this deal they are looking for a minimum loan amount greater than what we currently need. I will take a look at some local lenders but will definitely have Live Oak in the back pocket for future endeavors. Thanks again!

Hello Everybody,

I would like to see if anyone recommends a specific lender for a small self storage unit property that is selling for around $350k.

Thank you

Many first-time hotel investors can recall the same advice being handed down to them time and again: Acquire something with low risk and a good reputation, like a franchise. If one has the financial means and right business experience to purchase a DoubleTree, Hilton Garden Inn or even Super 8 as their first hotel, I’m all for it.

Most likely, however, that person is not a young investor trying to make their first million. If you are in this boat, as I was only eight years ago, I’m going to go out on a limb and recommend thinking outside the box, at least for now. If you’re willing to do so, the opportunity you are looking for can be much easier to find. Actually, it could be right under your nose.

As investors, many of us avoid mom and pop shops, but it is easy to overlook one thing that mom and pop were bang on about: Wealth does not only come from perfectly procured packages, wrapped in ribbons of low risk and good reputation. 

Higher rents, placement in upscale neighborhoods and access to the finest amenities are typical of the Class A/B properties that can reel in investors hook, line and sinker. Costs to maintain these luxuries, however, eat away at the limited investment capital one has as a new investor. Class C and D properties, on the other hand, found in somewhat neglected areas and opportunity zones, can be much more lucrative.

At first, fixing up a Class C or D property requires a sizable investment. Security, repairs to the envelope and/or foundation and bringing the property up to code are paramount to getting the new business up and running. Remember, however, that the C or D Class motel was bought for pennies on the dollar compared to the cost of an A or B Class hotel. You also get a bigger bang for your buck: Spending $100,000 in capital infrastructure on a C or D Class property could have a much higher economic impact, and not only for your own pockets.

Converting dilapidated and unused spaces into affordable homes or businesses that offer useful services can benefit the macro-economy, and in my experience, the results trickle back to us. Young investors who have the energy and enthusiasm to improve the conditions and future outlook of others are wise to do so, because in the process, they’ll also make the political and social connections needed to expand their ambitions. A good support network of influential thinkers and decision-makers can help make up for what one might lack in age, experience or financial backing.

No doubt, money is the rainmaker. Without it, one cannot plant the seeds of any investment. However, the key to growing those seeds into a successful business is to provide a service people actually need. Improvements to a once-neglected neighborhood — i.e., gentrification — open the doors to a population that will come in droves with an ongoing demand for cheaper rent, new jobs and new business opportunities.

Once the newly acquired property is ready for public consumption, it is important to remember what market segment it serves. Create staff positions dedicated to marketing, especially when re-opening properties that have been shut down by local authorities. Repetitive advertising is key to ensuring your target audience is aware there is an improved, more affordable option in town under new management.

As you bring new customers in, hiring staff who live on-site is essential to helping you manage the property effectively. Two of these key positions should include a property manager and courtesy officer. Property managers are needed 24/7 to deal with maintenance issues. They should also have experience working in the same asset class. Incidents that usually take place at newer A or B Class properties will not likely be the same incidents a property manager would see at a C or D Class property. These buildings are typically older, in need of ongoing repairs and in socio-economically challenged areas. It is also helpful to have a property manager who has worked or lived in the local area in order to help guests settle into their new surroundings.

A courtesy officer is another key role required around the clock. Their focus, however, is on security. Having them live on-site, readily available to report incidents to the police, is important in areas with C or D Class properties. It is even more important when these properties are lodging for families with children.

For any investor, paving their own path away from the franchise route can be hard work. In addition to capital, it requires additional research on how best to staff the property, creative thinking on how/where to market the property and unrivaled skills in relationship management. Any investor, especially a budding millennial investor who more likely has the time and means to take up such a challenge, would be prudent to start this journey now while opportunities for gentrification still exist.

Too often, I see individuals who want to become real estate investors but don't bother taking that first step because they don't have the savings for a house down payment and/or have no credit. What many don't know is that with a few strategic moves, anyone who lacks these essentials yet has that entrepreneurial mindset and drive to make money can get started.

Alongside the rising popularity of Airbnb and VRBO comes the opportunity for any person to reap the same benefits as a real estate investor who makes a killing while passively collecting rental income. Starting a vacation rental business by renting out other people's homes and apartments and hosting them to short-term guests has become the perfect side hustle for many. I encourage others with the right mindset to jump on that gravy train fast.

Many home owners have tapped into the hospitality market by advertising their space on short-term rental sites. A host could easily collect up to three times more with a short-term rental (STR) than they would by renting to long-term tenants.

Fortunately, we don't require a mastermind to see how this works. Let's use the town of Dunwoody, Georgia, where the homes neighbor Atlanta's downtown core. Single-family homes are available to long-term tenants in the range of $1,400–$1,600 per month, but hosting that same space as an STR could easily generate two to three times that amount. This means it's actually possible for a host to net $2,000–$3,000 per month on one property while being their own boss, working their own hours, and providing very little outlay. Now, imagine the prospect of that host scaling to multiple properties.

As the CEO of a real estate investment firm that has its own portfolio of vacation rentals, I've learned the most laborious part of the process is its initial set up. Once that's done, it's easy to sit back, relax and dip your feet into a sea of green.

When looking for your first home to host, I recommend playing it safe by hosting a space in the city as close to the downtown core as you can get within budget. Target cities like Montreal and Nashville where there is a good supply of tourists and long-term rental rates are low enough for your business to be profitable.

Be mindful of cities such as New York or Miami, whose municipal policies either don't allow short-term rentals or make it very difficult to host a property. If you're located in such a city, simply set your sights on a neighboring district, which is likely to do extremely well in those circumstances.

I should clarify, however, that targeting the city core is important for the first property you're hosting, not all of them. Once you start to scale the business and expand out of state, there are plenty of opportunities to be found in small towns, college towns, ranches, homes by the lake, etc.

Close The Deal

After you've decided on a location, seek out landlords who are actively advertising to renters on sites like Craigslist and apartment search sites. Call the landlord and request an in-person viewing; don't propose anything over the phone.

Airbnb expert and host coach Brian Page encourages his students to build a rapport with the landlord first, which makes it much easier to close the deal. The best way to guarantee a win is by making them a deal they can't say no to.

After viewing the place and assessing whether it works as a vacation rental, explain to the landlord that you are willing to pay at least three to six month's rent upfront in order to host the property. In addition, you should be offering liability insurance, reimbursement for minor damages, marketing services to advertise the property, management of its guests, different furniture if required and anything else needed to set up the space for short-term tenants. Make it clear that you, as the host, are taking on all the risk.

Calculating The Risk

When starting up any business, there comes a certain amount of risk that we, as the business owners, will have to take on. This doesn't mean we can’t take steps to mitigate those risks. The first step is to be aware of them.

For one, as a host, you are committing to pay a lease period plus damage deposit upfront, yet there's no guarantee of 100% occupancy. Mitigate the risk of low occupancy by ensuring the property is marketed successfully through the right channels, to the right target markets and frequently, with a plethora of immaculate pictures.

I always recommend doing as much of the work as you can on your own at the start. If that's not possible, there's a massive community of hosts and side businesses you can reach out to in order to outsource any aspect of the business, from advertising to cleaning.

In my experience, owning a vacation rental business is well worth the risks. It's even more worth it for those of us with access to very little outlay for an initial investment and possibly no credit. As a side hustle, this strategy can help investors save up for a down payment on your first fully owned property.

If the simplicity of the idea is not enough motivation, think about the prospects of scaling up the business instead. Finding 10–20 units to rent out in most metropolitan areas is very doable. Many owners don't have time to actively seek renters, especially if they have a portfolio of properties already. There is plenty of opportunity out there. And even at high occupancy rates for those units, there's lots of room in a sea of green for our aching feet to take a soothing dip.

Starting a vacation rental business is a potentially great way to grow personal wealth, even if you aren’t a homeowner or if you have bad credit. Making the business successful and maintaining good ratings, however, requires a slightly different type of business acumen.

The way to a customer’s heart in this business is by offering them a valuable product — an excellent accommodation — to consume, and making it easy for them to do so. Running a vacation rental business over the past few years has taught me that guests’ satisfaction depends on three main factors:

1. Product Offering

Most of the listings we find on platforms such as Airbnb or Vrbo are entire home units or private rooms within a home. Offering a more unique, less obvious type of space could provide you a cutting edge over your competitors. Get creative and diversify your basket of hosted properties. Boats/yachts, bungalows, private islands, oceanfront villas, treehouses, cabins and even castles are now being listed.

Amenities can also give your space an advantage over competitors. As we can see with the high demand for condos in the United States, high-rises that offer the best amenities can demand the highest rents. Popular amenities include a weight room, games room, swimming pool and/or hot tub and electronic locks on the doors. Amenities that are now being considered necessities include free Wi-Fi, parking, desks or workspaces, entertainment systems and access to a full kitchen.

As great as they are, amenities can only go so far. Taking it a step further and going beyond the basics could add major value to your product offering. Consider providing an airport shuttle service, meals and other pet- and family-friendly services.

Location is another paramount feature of your product offering. Tourists usually travel with the intent of visiting a nearby city and all its major attractions. The closer your property is to public transportation, famous landmarks, etc., the more likely you are to run a successful operation. First, however, you should research your city’s/state’s/county’s rules on hosting. In New York City, for example, Airbnb recently implemented a “one host, one home” policy, which prevents multiunit property owners from running a vacation rental business similar to a licensed hotel that is subject to additional taxes for doing so.

2. Product Marketing

Hosts who offer a fully compliant, conveniently located place to stay with the top amenities can make a killing, if people know about their product. Fortunately, sites like HomeAway and Airbnb are in such high demand that most travelers already know where to go looking.

High demand has also churned out a high supply of listings, which means hosts are under pressure to make their listings stand out. This makes having great pictures absolutely critical. Airbnb claims hosts earn up to 40% more by using professional photos in their listings.

Some platforms offer this service for free. For hosts more inclined to DIY or who don't have professional photography access, you can still put your best foot forward:

• Try to use a professional DSLR camera with a wide-angle lens.

• Take bigger photos for optimal resolution, using landscape orientation whenever possible.

• Aim to create depth in each photo for a 2-D effect.

• Make good use of natural sunlight.

In each room, remember to:

• Accent the bedrooms with contrasting pillows and shams.

• Complement the living room with flowers.

• Include quirky works of art in your pictures. They give your space more charm and character.

• Ensure the kitchen and bathroom are sparkling clean.

3. Good Reviews

Important as visuals are, good reviews remain an essential part of your marketing strategy. Furthermore, positive reviews bump up your ratings as a host and can easily become the deal-breaker when guests are deciding between two properties.

Negative reviews, however, are a deal-breaker in favor of the competition. Fortunately, there are some ways you can try to avoid receiving them:

• Provide any relevant information for the guests’ stay in a check-in message. Attach this message to the house manual, which should provide further instructions on how to use/configure household items such as the remote control.

• Be available for questions or concerns during the first 24 hours of every stay. If necessary, outsource the communication. This is important because most kerfuffles can be quashed with simple communication.

• Be generous with free stuff — wine, mints on the pillows, chocolates, fruit baskets, snacks. These are simple pleasures that go a long way to getting a positive review.

• On platforms that permit it, leave your guest review immediately after checkout. This notifies your guest, and conveniently, guests can only see the review once they write their host review. There’s no guarantee their reviews will be positive. Regardless, go ahead and post a positive review for the guest, and then sit back and relax.

Building good relationships with your customers goes a long way to earning that five-star review every host wants. If you plan to scale your business, these reviews will likely be the first item that prospective property owners read about you. Many homeowners who list their properties for short-term rental have multiple properties they could use your help with. According to a study published in 2017 by CBRE, multiunit hosts are a key driver of Airbnb revenue growth. Yet that’s also the reason various states are cracking down on multiunit property owners who host their space without having to pay the same taxes as hotels.

Remember to fully research all the rules around hosting for your city, state or county. An unfailing way to receive a bad review is to have your guests learn the space you’re hosting is not fully compliant, which may result in them having to look for new accommodation. However, by offering a superior product with the right marketing and real positive reviews, you’ll be on your way to a successful side hustle through vacation rentals.

I often discuss the importance of location when looking for real estate investments. For me, the ideal location refers to proximity to the city center and other areas ripe for gentrification. Often, investors shy away from buying real estate that's located in neglected areas, also known as class C or D assets, even if those properties are right in the downtown core.

But shying away from these properties is a big mistake, especially for seasoned investors who may already have a good enough grasp on how to actively manage such properties. And considering the lower barrier to entry, newer investors should also consider this option, as long as they're aware of requirements attached to ownership. Seasoned or new, you'll have your work cut out for you; it's not for the faint of heart.

One of my first purchases on a multi-unit complex in a rough neighborhood, for example, involved working with the local police to remove drug dealers who had taken over the building to run their operations. All things considered, the numbers made it worthwhile.

Finding these hidden treasures is as easy as going onto Loopnet or Realtor, applying the appropriate filters such as city or state and sorting results by price from lowest to highest. Remember, you're looking for the best price per room or unit, not per building.

Understand that, most of the time, you'll find the most value for your money on a C/D-class property in a low- or no-income neighborhood. At this moment, for example, a quick search of Georgia suburbs on Loopnet returns the option of buying a 67-room hotel for $1.5 million in Americus, or a five-bedroom single-family home for the same price in Buckhead. From an investment perspective that is focusing strictly on cash flow, at a price of $22,400 per room versus $300,000 per room, the hotel is the best choice. With the hotel, after paying a sizable down payment, you'd likely see positive cash flow right off the bat. If each room is rented out at $50 per night — which is not a hard sell given that nightly rates in nearby franchise hotels are three times higher — then at 75% occupancy, you would gross approximately $1,125 per month on one room. It's a disposition most helpful to new investors who need more room to grow their portfolio.

To be fair, I should stress that the initial search and purchase of a C/D-class property is the easiest part of the acquisition. Typically, these assets require a lot of renovations and ongoing maintenance compared to class A/B properties in the same area. Even then, spending $100,000 per year, for example, on renovations for a property that's grossing approximately $1 million per year is very doable. The resplendent single-family home in Buckhead, on the other hand, will likely cost you $50,000 per year in mortgage payments and maintenance alone, all the while not producing any revenue, leaving you in a cash flow-negative position. It could be shared/rented out to one tenant, which would help alleviate some of the financial burden; however, the cash flow situation you're in is still vastly different and, depending on your financial standing, potentially jarring. We can hope the loss would be made up by an equity gain, although this is not guaranteed.

Be prepared for the fact that the extra cash flow from a multiunit investment won't be going straight into deeper pockets. As with any multiunit property, you'll need to outsource the property management and security. Understanding the local culture is the key to success here. Outsource third parties that specialize in managing the same type of assets in the same type of area. If an online search for these companies is implausible, consult the building management staff of similar properties nearby. Pricing for property management would usually be around the range of 5% of gross rental revenue, likely higher for neglected areas.

Security can cost even more and is dependent on many factors, including the risk of legal fees and gaining a bad reputation. In my experience, it's short-term pain for long-term gain (because much of the revenue you'd lose from unpaid rent, property damage, premises liability claims, losing loyal customers, etc.) is made back. In my experience, if you're investing in a C/D-class hotel in a low- or no-income neighborhood, look to spend at least 10% of your gross sales revenue on security per year. Do not recruit internal staff, especially when it comes to security. Third-party companies carry their own general liability insurance, which comes in handy if you're a property owner being sued for incidents that involved a security guard on duty. Also, many third-party security companies are started by former police officers who can do a better job of training and vetting new recruits.

If your investment is located in a high-crime area, consider hiring the local police during off-duty hours to supervise the premises. I've done this for multiple properties and found it to be an excellent deterrent. It proves, to both your clientele and local authorities, that you are serious about preventing crime. Ensure management knows the first and last name of the local staff sergeant for direct communication, should the need arise.

Remember, buying and maintaining C/D properties in low- or no-income neighborhoods is not for the meek. There are certain risks you have to be prepared for. By the same token, preparation is the key to avoiding those risks altogether. In my experience, if you're willing to actively manage the property in conjunction with third-party help, the rewards will outweigh the risks. As a bonus, you will be adding a healthy balance and cash flow to your investment portfolio.

I’ve always been a strong believer in diversification, or in other words, not putting all of your eggs in one basket. Typically, when we want to learn about how to diversify our assets, the information provided through general research is on how to diversify your overall portfolio that includes public investments, such as stocks and bonds, as well as private investments, such as private equity funds and real estate.

The problem with public markets, however, is that they’re shrinking. The number of IPOs has dropped by half over the last 20 years; industries such as airlines, banking and social media are dominated by just a few major players. Although I still invest in the public market, I prefer to keep my overall allocation to a minimum.

 I’ve learned that, in the long term, we get a bigger bang for our buck in the private market. So, I’d like to focus solely on how to diversify within it or, more specifically, within one’s real estate portfolio.

My allocation approach is as simple as pie. I call it the 60/20/20 rule.

1. 60% For Multifamily Residential Properties

The ideal scenario for any real estate investor is, at a minimum, doubling your cash flow from the same square footage you receive with a single-family property. The security and consistency of such an investment also make up for the volatility of our investments in other markets or asset classes, which is why I park the majority of our firm’s funds in this piece of the pie.

During times like these, when inflation is rising and fewer people can afford luxury homes, there will always be a growing demand for affordable living space.

When purchasing a multifamily property, remember that the initial cost must be low enough to ensure the property has a positive cash flow very soon after the purchase. However, this doesn’t mean investors should focus solely on turnkey investments. Older buildings in low-income areas, for example, may initially require additional investment to bring their living standards up to code. The revenue gained from steady, long-term renters, however, will likely reward that investment with sizable dividends shortly thereafter.

2. 20% For Vacation Rentals

Although holiday planning is not top of mind for everyone right now due to the spread of Covid-19, it’s important to remember we’re in a situation that will not last forever. Just as crude oil prices have dropped, the resurgence of vacation planning is as inevitable as us driving our cars to and from work again. In a similar vein, whether it’s for family, business or personal reasons, we’ll all need to travel abroad and find accommodations again.

Vacation rentals are another great way to gain more income from the same square footage you would receive after purchasing a single-family property.

While managing our firm’s portfolio of vacation rentals, I’ve seen how easily hosts can make three times more on short-term rentals compared to what they would make with long-term rentals in the same space. When this rental is located near a popular event space, such as an arena for hockey games or an outdoor space that hosts annual festivals, profits can soar even higher — up to 10 times as much.

3. 20% For Private Equity Real Estate Funds

Private equity or real estate firms often take on the roles of fund and property managers. After finding contributors for a blind pool fund (i.e., blank check offering), investors could be rewarded with a significant amount of passive income.

When funds include investments on multifamily properties, it's a huge benefit to contributors because much of the legwork is done for them. In our case, for example, all of the staffing, security, insurance, ongoing maintenance, marketing, accounting and legal services, to name a few, are outsourced.

The 60/20/20 rule works best for seasoned real estate investors who enjoy taking an active role in the management of their properties because it gives them a balance between earning active and passive income. Those who prefer earning more passive income and have found a private equity firm with a great track record they can trust should consider increasing this piece of the pie.

If you’re an avid investor in the public markets, I still recommend increasing your investments in private equity funds, in addition to multifamily residential properties. Vacation rentals, on the other hand, can be subject to volatility during times like these, and you may be getting enough instability in the public markets.

Although it’s hard to predict where public markets will be in the next 20 to 30 years, it’s never a waste of time to invest in stocks and bonds, especially for those who study this market on a regular basis. However, consider keeping the majority of your funds planted in real estate. As long as the world’s supply of land is diminishing and people need homes to live in, it's bound to be stable.