All Forum Posts by: Brian Robbins

@Nathan Cedar the following is our list of cities which have made our "buy" list. Charlotte, Raleigh, Asheville, Atlanta, Savannah, Charleston, Lexington, Ky, Knoxville, Nashville, Chattanooga, and any city in TX with over 300k population.  These all have good net domestic migration, good job creation, and good organic rent growth numbers in linear real estate markets.  There are pockets in most cities where you can do well but we believe its is easier in these locations due to the underlying fundamentals.  

@Michael B. Thank you for starting this thread! @Francisco Cimon @Matt Hoyt @Christine Z @Michael B. thanks for the kind comments. I Love to hear success stories as they always inspire me to greater things...there is always someone else out there who has done more than I have. I did not really understand the power of Real Estate until recently and it provides options that most other asset classes dont.  Mike Dymski is correct. We like to use the acronym CAPT (which is better than CAT-P) :) when talking with our investors about real estate returns. Cash on Cash return, Appreciation, Principle pay down, and tax benefits.  You do have to be careful in this overheated MF market, that the market and submarket you choose is really going to give you the appreciation that you are hoping for. I would suggest a review of some of the many sources available prior to investing in a market to look at the historical appreciation for that specific market. Some tertiary markets have very very slow appreciation and your price point may be your best chance to insure appreciation.   Dont overlook the powerful tax advantages that real estate offers as well. With MF assets using cost segregation studies and an accelerated depreciation schedule should allow for almost completely tax free profits for the first 7-8 years. Many of the big players will then use a 1031 exchange to transfer into a completely new property with little to no tax consequences and start the tax clock all over again. Try that with stocks.  Congrats to all you guys who are on FIRE (financially independent retired early)...that's certainly one of my goals. 

@Jordan Little @John Warren I know you are both referring to SFR and small MF but when talking about larger MF if a deal makes it to the MLS you can count on the deal having significant hair. Commercial brokers keep a list of their go to folks (pocket listings) that they show every deal to. If their best customers don't want the deal then they advertise it to their complete mailing list and the wider market. If no takers then lastly it gets to Loop Net or the MLS. There is always a reason a property makes it to Loop Net ...

@Jim Cummings thanks!  It was a challenge and a blessing thats for sure.

Hit 50 yrs old a few years back and did a "review of the first 50".  Realized I wanted to make a bigger impact on society than I was currently accomplishing and simultaneously leave a legacy for my kids and grandkids. Looked around for ways to accomplish my goals faster and settled on MF Investing. Decided I wanted to build a real estate company to become the "Tom's Shoes" of commercial real estate. Since that time I have not looked back.  Just closed on a 125 unit townhome deal in Lexington, KY 4 weeks ago. Here is my "Big Why"...

From a young age, my faith was a huge part of my life. As a teenager in the border town of El Paso, Texas, I went on more than one mission trip into Mexico to work with kids in orphanages. I was greatly affected by what I saw. I also spent summers working with my uncle at a large church camp he ran in the mountains of New Mexico. You could say that service was part of my life from an early age. The year was 1997. My wife, two kids, and I had a great life by most standards. We had a successful practice, a nice home, and were active in our local church. But we wanted more. We considered adopting a child, then after lots of soul-searching and prayer, we decided to pursue the idea.

Through an amazing set of circumstances, we were made aware of a family of 7 orphans that the Russian government was going to separate. They planned to send them to three different countries, never to see each other again. While we knew that we could never adopt that many kids ourselves, we had a desire to help find a home for them. As we looked at the pictures of the seven kids, my wife felt called to take on the task of finding a family that would keep the kids together. As we set out on our mission, we targeted all our well-to-do friends, as we knew it would take someone with a very good income to support a crew like that. I can remember laughing to myself and thinking, who would be crazy enough and have a large enough home to adopt seven kids? As the months went by, we had no luck finding a family and time was running out. The Russian government was close to separating the kids and sending them abroad. With no apparent takers in sight, and the split-up of the siblings imminent, the idea of adopting them ourselves crept in. We knew there would be major financial sacrifices and challenges, but the thought of someone separating our two biological children (like these kids were about to experience) was more than enough motivation for us. Having a Savior who loved us enough to die for our sins, when we had done nothing to deserve his love, compelled us to do more than just join a $35 a month orphan-support program (those are great though and we support one too).

On August 12, 1999, we arrived back on U.S. soil having just completed the single largest adoption at one time in U.S./Russian history (at least that’s what the embassy told us). We arrived at the Raleigh-Durham airport with three boys (ages 14, 6 & 6) and four girls (ages 13, 9, 7, & 5) who spoke a total of 12 words of English amongst them. We had no idea of the great blessings and struggles that lay ahead. As we raised our crew of nine young adults, we learned of the challenges that many Eastern European orphaned children face. We saw the first-hand effects of rampant alcohol abuse that plagues Russian society, as well as Fetal Alcohol Syndrome, Reactive Attachment Disorder, and learning disabilities in our kids. We saw the psychological damage caused by their family being fractured at an early age and continue to see them struggle even today. Little did we know how this would open our hearts to the plight of orphans and human trafficking victims worldwide.

The most disadvantaged in our societies, the ones who can’t fight for themselves, often live in the shadows. Their great needs go unmet and their stories are seldom told. These kids and young adults need someone to fight for them. They need champions to take up their cause and go to battle, fighting poverty, fighting the sex industry, and most importantly fighting to save their lives. I met one of my Wellings Capital partners, Paul, on a business mission trip to New Zealand. He was an entrepreneur much like me and we immediately hit it off. I admired Paul because he had a desire to help the needy and spread God’s love. We continued to spend many years brainstorming on business ventures that would help investors, while spinning off lots of income we could use to help fund our humanitarian efforts. It is our goal to be the Tom’s Shoes, or Mercy Waters, of the multifamily world. We hope to produce substantial returns for the investors we partner with and create great communities for our tenants to live in. Our desire is to generate profits from which to funnel hundreds of thousands, if not millions of dollars, into the education, care, and protection of children and young adults worldwide, to fighting human trafficking and the care of orphans worldwide. We believe we can leave a legacy that our children and grandchildren will be proud of and MF investing will make it possible!

Cheers!

@ Jon S. Cryptocurrencies are def a force to consider when the government begins to accept them. 3 states are currently considering accepting bitcoin payments of taxes. Utah, New York, and New Hampshire are all in the process of ramping up to accept bitcoins.At least three states in the US may soon allow bitcoin to be used to pay for taxes...  "The State of New Hampshire, New York and Utah have been considering introducing a bill that would make this possible. Each of these states have come up with their own slightly different versions on why this could be a great option and what would be the benefits"  http://bitcoinist.com/us-states-plans-enable-tax-payments-bitcoin/

@Michael Le you are 100% correct. I run a practice full time and was sneaking out between patients ... multi-tasking and you caught my mistake. Should have been ROE (return on equity) not NOI. You are correct that NOI is not "directly" affected by cost of leverage. The way that changes in interest rates affect commercial real estate values is more complicated than it seems on the surface. I have included one of the better articles from Investopedia that dumbs it down enough for non-economists like me to understand it:https://www.investopedia.com/articles/mortgages-real-estate/08/interest-rates-affect-property-values.asp  

@Michael Evans Historically rising interest rates have caused expansion of CAP rates. A softening of the market so to speak. Since most larger -50 units and up- MF assets have leverage, when the cost of that leverage is going up... the NOI comes down.... lowering overall asset value. @Gino Barbaro is dead on when he pointed out above, this is a different era and the CAP rates have remained compressed longer than most MF investors have expected due to three factors 1)Downsizing Baby Boomers, 2) Gen X/Millennnials delaying the purchase of a house, and the rapid growth of migrant population coming from countries where home ownership is not even a possibility for most. Another factor he correctly mentioned is net domestic migration... Americans leaving high unemployment/high tax states and moving to low tax/low unemployment job creating cities and states. Its a very valid question to ask how does one protect himself in these times when considering MF investing? Cash FLOW!

You have to buy the asset right and insure cash flow.  You cannot count on appreciation in a rising rate environment.  Many MF investors found this out in 08 when the appreciation they were counting on disappeared.  You can buffer the effects of expanding cap rates buying value add properties but right now cash flow is king. 

@Jay Hinrichs I have to say that I agree. Syndication investing is not for everyone.  Like you I have flipped, developed, bought, sold, and even have tree farming in common so I think we agree there are lots of ways to make money in RE.  I happen to be partial to Syndication deals because yes one of my companies does syndicate and two because I have found for the busy professionals that we cater to it fits their lifestyle.  I am still in healthcare mostly full time and I dont have time for the 3T's but I still want to enjoy the benefits of commercial MF RE. Not everyone has time for the rehab and flip.  I dont agree on a couple of the points you made about qualifying for deals however.

 We only operate Reg D 506 B.  This allow 35 non-accredited investors per deal. That means that our deals can include accredited and non accredited investors with no problems. Yes they need to be "sophisticated" investors....Meaning they have the business experience to evaluate the merits of a deal...but if someone cannot evaluate the deal I would never have them invest anyway.  And the SEC has set up the operational rules regarding  Reg D 506 B and they require the investor to "self" attest to their own qualifications....wink, nod :)  It is not the syndicator mis-representing the investors qualification in this case.  Great conversation!

@Gavin Tam you have received some great insights from the others who have posted and I will not re-hash whats been said, but try to give you some value-add... When investing in MF RE with a syndicator the due diligence on the property is usually the easy part. Due diligence on the syndicator is a bit more cumbersome. With the track record of commercial MF RE over the past few years (Freddie Mac has not had a single MF loan upside down in the past 3 years) you need to remember the riskiest part of the deal is the sydicator.

Investing with a syndicator is like playing team sports.   You need to not only feel comfortable with the syndicator but his game plan and his team as well. Game plan: are they looking for momentum plays, value add, stabilized, unstabilized, etc... What class properties (A, B, C, or D) do they specialize in?  What is their hold timeline 3yr, 5yr, 7-10 years?  Do investors get 100% of the cash flow?  Is there a pref? What type of hurdle does the syndicator have to meet before they can share in proceeds? What asset management fees do they charge?  Do they use segregated cost studies to take advantage of accelerated depreciation schedules?

Secondly you need to ask about their team members....who is their preferred Property Manager, SEC attorney, entity attorney, tax strategist, corporate insurer, etc...If a value-add play who is their project manager?  

And finally, what is their exit strategy? 

-Buy and Hold long term with periodic refi distributed back to investors

-Systematic refi or infuse syndicator equity to buy out investors

-Sell in specific time period...with or without the option of 1031 tax deferred exchange into a new asset.

-Automatically return your proceeds or give the option to cascade up to larger assets at the time of liquidity events.

Most of all I echo all the other.....Do your own research!

I have a couple chapters in my book (DONE! The professionals guide to double digit returns, multi-generational wealth, and a worry free retirement)  which is on Amazon about choosing a syndicator/sponsor and how to avoid the bad ones.  If you colleague request me I will send you a complimentary digital copy.