All Forum Posts by: Fletcher Clardy

Hello and Happy Monday BP Family,

I have a friend who recently closed on a 1031 exchange property seeking to find another multi-family asset. I wanted to check with my BP family and inquire with the real estate community to learn of any investment opportunities coming down the pipeline.

Investment Criteria:
Multi-family only
Value-Add Class C+ and above
$8M in Equity so looking for property in range of $15M-$30M
Tulsa OK, OKC, Stillwater and NW Arkansas

Give me a call or shoot me an email if you know of any properties looking to sell. Happy to connect and discuss more in detail.

Fletcher

@Scott Mac Thank you for your thoughts as well. It is very un-American to pawn the issue on business owners and suggest that people will be safer from Covid-19 if we prevent them from being evicted. You have no way of controlling someone's everyday movement or routines. People still have been leaving their homes and socially engaging.  

What has happened from eviction prevention and increased unemployment benefits is a surge of people abusing the system and utilizing this as a break from life and reality instead of working harder to figure out a way to provide for themselves and their families. Several individuals have stood on the Covid-19 relief platform and played the waiting game. 

I think this is just outright lazy and I don't support it one bit. If you were working and lost your job due to Covid-19. I am not saying that it has not been difficult for you. Just saying that there have been more rental assistance programs to help you pay to rent and also the increased unemployment benefits during this time period.

I think we will see an increase and filed bankruptcies in the near future which is not good for the economy.

@Nathan Gesner Thank you for taking the time to read and offer your thoughts. I would also have to agree with you on the CDC's claim to make "science-based" decisions. As you stated in your response most of their actions are in direct contradiction of what the data has shown. I also think there is a big issue with the data overall. 

Have you heard any cases where hospitals were changing the cause of death on death certificates to Covid-19 to bump up their case numbers and receive more support from the government? 

This would also skew the numbers being reported to the CDC. I honestly don't think any entity has a true number of cases/deaths due to Covid-19 or even close to accurate for that matter. There has been too much finessing going on in an attempt to reap the maximum benefits. 

@Chris Levarek Thank you for chiming in and adding your perspective on things. I certainly agree with you about the tenants suffering more in the long run. My managing director and I have been discussing this for weeks and we understand the issues you present relating to the long-term effects. 

It is very concerning to think about the results of the pandemic as it relates to affordable housing. Inventory for affordable housing in low-income communities is already very low and most low-income communities are being gentrified. 

This situation can certainly expedite the process and potentially increase homelessness. I am very curious to see what 2022 will look like.  

Wednesday, May 6, 2021, Judge Dabney Friedrich overturned the national eviction moratorium that the Center for Disease Control and Prevention had put in place on September 4, 2020, due to the Covid-19 pandemic.

If you have been living somewhere other than “planet earth” and have no clue what a moratorium is, by definition a moratorium is a temporary prohibition of an activity. That activity I am referring to was a ban on eviction filings as well as many other protections for tenants in certain rental properties with federal assistance or federally related financing.

This has caused a series of debates between landlords, tenants, county officials, state officials, and congress since the start of the Covid-19 pandemic.

I would like to discuss some of the moratorium effects with a focus on a few key topics (listed below) and open it up to the audience for feedback to learn and hear other's thoughts/perspectives on the situation.

I have provided several topics to allow readers to choose one, or all that is most relatable to them.

Discussion Topics:

1. #1. How did the CDC ever have control or authority to make this ruling in the first place?
2. #2. Who has suffered more due to the moratoriums? Landlords or tenants?
3. #3. How do the different branches of government play a role in all this? (State, County, Federal)
4. #4. How has the stimulus helped with the recovery process?
5. #5. Who is behind on rents and what does this mean?
6. #6. As an investor do you still buy during a moratorium or wait?

#1 CDC and control?

For more than 70 years the Centers for Disease Control and Prevention has been the nation’s leading science-based, data-driven, service organization that protects the public’s health. Their bold promise is to work 24/7 to protect the safety, health, and security of America from threats here and around the world.

Great right? Now, what do eviction rulings have to do with safety, health, and security? That is the concern in question, is it not? A federal judge (Dabney Friedrich), not I just struck the ban down that was originated from the CDC and ruled that the national moratorium exceeds the agency’s authority. Yes the CDC did this for safety, health, and safety reasons but was it the right thing to do?

How many pandemics like the Spanish Flu and Covid-19 has America seen? With these other pandemics has the CDC ever stepped in to ban evictions? Do you agree with Judge Dabney or the CDC?

#2 Landlords vs Tenants? & #5 Who is behind on rent payments?

Who has suffered more due to the moratorium? Landlords or Tenants? Well, I would have to go with the landlords. Tenants have had more protections and grants awarded to them if compared to landlords, and landlords have more risk associated with obligations to lenders if purchased with debt financing and the upkeep of the asset itself.

Shepard Smith with CNBC currently estimates that 10 million Americans or 18% of renters or behind on their payments. Presumptively this means that 82% of Americans have found a way to survive through the pandemic, keep their payments current, and adhere to their rental contracts.

As a property owner, your leverage with difficult tenants when they don't follow the rules or are non-compliant is your ability to remove them from your property for issues listed in a lease (contract) that both parties sign and agree to. 

If I am wrong someone, please correct me. Let me hear your thoughts, what are other options you think would have been justified in this pandemic? I would love to hear from the tenant’s perspective as well. (I am currently a renter by the way and was in 2020)

#3 Branches of Government? (State, County, Federal)

Since the 19th Century, our government has seen attempted mass eviction. The Trail of Tears removed around 100,000 American Indian families from their homeland and created the Treaty of New Echota in 1835. In the 20th Century, we had the Great Depression from the Wall Street Crash in 1929. Most recently in the 21st Century we had the Great Recession between 2007-2009.

My point is that stuff happens and the government will do its best to step in to normalize and restabilize the economy. However, there always seems to be a problem between the levels of government and their harmony. The states say one thing, the county may or may not allow, and the feds say another, and it comes down to who has the most power.

Well with this pandemic at least 17 states have stepped up and provided their own moratoriums on behalf of their citizens in hopes of doing what is best for the local economy. Did you think they made the right decision?

How do you feel governments should have reacted? Do you feel other states should have a moratorium in place?

Learn more about moratorium policies from Newsweek.

#4 Stimulus Package

The American Rescue Plan Act of 2021 is a $1. 9 trillion Covid-19 rescue package designed to facilitate the United States’ recovery from the effects of the Covid-19 pandemic. We are going to focus on the numbers related to the real estate industry.

$21.55 billion for emergency rental assistance through September 30, 2027

$5 billion in emergency housing vouchers through September 30, 2030

$100 million for tribal housing improvements

$100 million for rural housing through September 30, 2022

$5 billion to assist people experiencing homelessness

The added $21.55 billion has increased the overall assistance to $45 billion from Congress for renters. With the addition of personal stimulus checks, increased unemployment benefits, and assistance for small businesses through programs like the PPP loan (which is forgivable). There have been several opportunities for financial assistance for citizens to take advantage of if used properly.

Prior to the Biden administration, the Trump administration passed the CARES Act which was an initial $2.2 trillion signed March 27, 2020, when the pandemic first began.

The government has been printing bills like crazy to turn this economy around. Quick math here will tell you that total that is $4.1 trillion in economic relief. Any more relief the value of the dollar may just be cut in half.

How do you feel about the relief packages presented by both administrations? Do you think the United States will see an increase in production? Or will goods and services just cost more making our dollar worthless? How has Covid-19 changed the value of the dollar? Check this article out from MoneyWeek.

#6 Investors!!!

Since I wrote this blog to my real estate investor audience the big question is, have you still been buying during the pandemic? Why or why not?

Have your property evaluations changed due to moratorium effects? Are you still able to evaluate properties on cash flow or only value-add?

A quick read from Connected Investors on COVID-19 Impact On Real Estate Investors.

Thanks for reading, I know it's a pretty lengthy blog but I have been holding my thoughts back for some time now and with the most recent ruling it just felt like a good time to communicate with the real estate industry as a whole to gain more understanding. 

Fletcher L. Clardy III

Thank you @Shiloh Lundahl for checking in to see how we all have been doing during this very unusual year.

My old goals from the beginning of the year I have bolded & italicized the progress and or completion

1. Build new website - We have completed the new website it launched in April 2020. Clarity Equity Group if you would like to check it out.

2. Trade 240 multi-family units out of our portfolio - We currently are closing on this deal now. Anticipated close August 31st.

3. Inputting new systems/procedures for operations - We have certainly input new systems/procedures and have re-strategized due to Covid-19.

For the new goals for 2020. We have been focusing on adding 500 doors to our investment portfolio. We manage in house and do third party management, so we have been seeking management opportunities and sourcing deal flow looking to reinvest our capital.

Fletcher

@Taylor L.

Morning Taylor,

Thank you for chiming on this pretty lengthy blog post. 

I too have family that has invested with me. I have some friends that would like to invest, however they must first understand more about real estate deal structure, time invested,  the closing process, etc. 

Thank you also for adding more content on SEC regulations. I'm sure we both could write an entirely separate blog about SEC guidelines and regulations for investors. As mentioned in my post, I am not a securities and exchange attorney so I did not want to speak too much on that topic. Just provide little nuggets and a resource for more information.

Happy Wednesday,

Fletcher L. Clardy, Clarity Equity Group

When real estate professionals are looking to expand and grow their business by taking on outside investors to fund larger projects. A real estate syndication structure is a must have component for these larger transactions.

Real estate syndication structure is creating relationships between multiple investors who pool money together to fund a project (real estate or other investment vehicles). As an LP (Limited Partner), when syndicating you are investing in a real estate enterprise as a passive investor alongside other investor. As the GP (General Partner), you put the deal together, raise the capital, manage investor relations, and handle back-office operations.

Real estate syndication usually starts small. Individuals who are inclined to start investing in real estate typically start with smaller balance properties. Once these individuals have found success in these early stages, they are inclined to do bigger and better deals with more earning potential and higher returns.

Sometimes it takes years to grow and scale your business to the desired portfolio. However, real estate investors do not have to wait so long to gain the financial momentum to invest in larger projects like multi-family homes or other commercial real estate rental properties. They have the option to turn to real estate syndication as an LP or GP utilizing both debt and equity syndication through investors and lenders.

There are several things you should know when it comes to syndication: How to deal with Friends and Families, SEC guidelines, & How to Market Yourself as a qualified sponsor.

1. 1. Friends and Families – Since our inner circle is typically where most of us will start syndicating for real estate investment opportunities, let us begin there.

There are pros and cons to everything under the sun. With friends and families this is no different. You should be aware of the positive and negative outcomes that could transpire from utilizing friends and family money and turning them into a business partner.

You should also take these interactions seriously even if your friends and family allow you to be informal when introducing the idea of syndicating funds through them.

PROS

1. A. Those close to you will be flexible and more inclined to take a chance on you as opposed to lenders & investors from institutions and private real estate syndication companies.

1. B. For debt syndication friends and family may lend interest-free or at a lower rate than banks.

1. C. For equity syndication you may receive a substantial gift in the form of cash from your inner circle that can kick start your investment career.

1. D. You are more comfortable with family and friends and will be able to practice your sales pitch and get feedback from trusted individuals who truly care about your success.

CONS

• A. The risk you take on losing friends and family or damaging relationships completely due to lost funds or misunderstandings with investments.

•       - To avoid this hurdle, it is best to be upfront about risks and lay out the business plan completely.
•       - It is wise to get a lawyer involved when drafting these agreements.

1. B. If your family is in a different business outside of real estate, they are trusting you as the expert. When working with other professionals in the real estate sector, most have a general understanding of how transactions work, creating an alignment of interest.

1. C. Most will not have the knowledge you have from your experience as a sponsor and or investor. Becoming a coach/mentor can be very time consuming. Be careful and mindful of your time. How can you inform friends and family but at the same time not waste time?
2. 2. Investor Relationships and SEC Guidelines – When involving investors in real estate syndication transaction, federal and state securities laws typically apply.

I am not a securities attorney. I will only discuss what I have learned from experience about rules and regulations involved with syndicating funds from investors. For more info please visit https://www.sec.gov/fast-answers/answers-regdhtm.html

1. A. Most securities may only be sold if the securities are registered with the SEC (Securities and Exchange Commission).

1. B. Other securities are formed under a private placement exemption under regulation D (Reg D). This allows some companies to offer and sell their securities without having to register the offering with the SEC.

1. C. Exemptions such as Rule 506 of Regulation D, allows companies to sell its securities to what are known as accredited investors. The term accredited investors is defined in Rule 501 of Regulation D.

1. D. Your best bet is to contact a securities attorney when dealing with the SEC. Avoid any misunderstandings. Play to your strengths and outsource your weaknesses.

More info here: https://www.sec.gov/fast-answers/answers-regdhtm.html

1. 3. Marketing Yourself and Your Experience – When you start syndicating funds you want to make it easy for lenders and investors to say YES. You should have quality marketing materials that tell your story, highlight your investment criteria, and explain your exit strategy.

It is also important that you invest your capital alongside these investors. This is known in the industry as, “Skin in the Game”.

1. A. As the sponsor you, find the property, acquire adequate financing to fund the deal, close on the deal, and are responsible for the day-to day management of the investment.

1. B. A pitch deck is the best way to highlight your experience and tell your story in a sophisticated manner. It can be mailed hard-copy or sent through email in PDF (Highly preferred but both are required).

1. C. First impressions are key, but are first impressions face-to-face anymore? The answer is often no. In this digital era, we live in now, transactions are done via email, phone, and Zoom conference videos. Real estate transactions happen nationwide, investors are not flying around to visit every opportunity that comes across their deal desk.

A pitch deck is generally the first communication tool that provides your investor audience an overview of your business which ultimately helps you raise funds. You will need these materials to be treated and trusted as a professional. 

Key Points

1. Be careful when mixing business with friends and family. Yes, your friends and family are a great resource for syndication, you just need to be delicate when your doing business within your inner circle to ensure no relationships get damaged.

2. When you start getting involved with the SEC be sure to seek out a securities attorney for information on the applicable laws and regulations.

3. Quality marketing materials are essential in the sophisticated digital era we live in today. Transactions are happening via email, phone, and now Zoom with the current pandemic, and most likely will continue into the future. If you are raising capital, you want to make it easy as possible for potential investors to say YES to your investment project.

By: Fletcher L. Clardy III

PS: Please excuse the formatting issues. I post on 5 different platforms and BP is by far the most difficult to format. It will look completely fine on the back-end but the post will populate something totally different.

@Dan Wentworth, @Taylor L.
Dan, Taylor has provided some very good initial steps to get you started with creating those relationships that will eventually bring you some quality off-market deal flow.

I would like to reiterate the point that this is not an overnight process. Brokers want to work with investors who can close and close fast. 

I would focus on establishing a track record of success. Closing deals and being sure you are able to market yourself as a credible investor/owner/operator. 

Fletcher Clardy, Clarity Equity Group 

Along this journey of life, we will make mistakes, it is inevitable. Once you learn to accept your imperfection and instead use past mistakes as steppingstones for future success, this is when you separate yourself from the pack.

The difference between the ones who succeed and everyone else is simple, they did not give up after failure but learned from it. Trying again is what takes courage.

In these difficult times I thought it would be helpful to share some tips on failures, lessons, mental health, and time.

Failures – “It is impossible to live without failing at something, unless you live so cautious that you might as well not have lived at all, in which case you have failed by default” – J.K Rowling

As you read through this article think about this quote above and the example of a child learning to walk. A child falls/fails many times before actually learning to walk. However, you better believe that child will get back up and try again and eventually will walk without falling.

1. a. Failure is necessary in life. It is life’s teacher. Taking risk and falling is a part of our journey.

1. b. I truly believe that everything happens for a reason. When things go wrong maybe it was not the right time. Next time when things go right you will learn to appreciate it more because of the bad experience.

1. c. The things we go through and the actions we are taking daily are creating the person we are becoming. Ask yourself, what person do you want to be?

1. d. Here are five key words to remember that failing provides us all. Experience, knowledge, resilience, growth, and value.

Lessons – Life is a continuous learning experience. We all go through ups and downs throughout our journey.

     a. Focus your time and energy on your own personal goals and vision. Do not let someone else’s aspirations influence your own.

1. b. While on this continuous learning experience do not force your ideas on others. Let those who want your opinion seek it out, otherwise you are wasting time which none of us have extra of.

1. c. Act! You can read all the books and watch all the YouTube videos you want seeking knowledge. True confirmation comes from putting your knowledge to use and validating your own understanding by acting.

Time - The indefinite continued progress of existence and events in the past, present, and future regarded as a whole.

1. a. Our entire life revolves around time. Understand the value and respect it because time gone is never coming back. We each only have 24 hours daily if you sleep a full eight well your down to 16 hours.

1. b. Get comfortable being uncomfortable. Nothing good comes easy, it takes time, dedication and persistence.

1. c. Before committing to any activity on your schedule, be sure it will positively add value to your life. If not, forget about it and move on.

Mental Health – Good mental health promotes productivity, and effectiveness in your activities such as work or school.

1. a. Your mental health is important at every stage of your life, for different reasons from childhood and adolescence years until your adulthood.

1. b. Mental health refers to our cognitive, emotional, psychological, and social wellbeing. It affects how we think, feel, and act.

1. c. Develop healthy habits while your young. Are you an optimist or a pessimist? Neither is right or wrong nor has there been any scientific data proving that one trumps the other. I believe a balance between both is truly needed. However, I am more on the optimistic side of life.

Things to Remember:

Time is our most precious commodity in life. Understand the value and respect it because one it is gone it is never coming back.

Failing is easy and we all have failed. The courage comes from not giving up, trying again, and using those past mistakes as steppingstones for future success.

Life is a continuous learning experience. Learn from it all whether it be good or bad.

Mental health issues are very serious in our population today. Do your research and help other around you that are suffering from mental health  problems.

By: Fletcher L. Clardy III