Certainty in an Uncertain World…

 

It’s been said the only thing certain in life is death and taxes.

Of course, properly structured and well-advised real estate investors can usually mitigate most of their taxes.

Meanwhile, before people die, they live.  Along the way, they get older.  And as people age, their needs change …

… and because entrepreneurship is about serving needs, it’s a safe bet there’s some opportunity in meeting the needs of aging people.

In a recent radio show, we talked about investing in undeniable demographics … specifically, the baby boomers … who are moving into retirement and beyond.

A few days later, this headline popped up in our news feed:

More Growth Ahead in Seniors Housing – NREI August 16, 2017

“… research shows continued confidence in improving fundamentals …”

Of course, if you’ve been following The Real Estate Guys™ for any time, you know senior housing in general … and residential assisted living in particular … is a niche we REALLY like.

The article affirms our belief that …

“ Demographics continue to be a big driver for development.”

“ ‘As active as the market is with the product that we have today, we are looking at the tip of the iceberg in terms of boomers hitting retirement age,’ says Scott Stewart, a managing partner at Capitol Seniors Housing, a private equity-backed real estate acquisition, development and investment management firm based in Washington, D.C.”

“ ‘The fast-paced growth of that population in that sector is going to make today’s discussion of overbuilding obsolete, because there just aren’t enough places for everybody today,’ ” he says.”

 The article is addressing … diffusing … concerns about over-building in the niche …

“ Demand mops up new supply.”

 “Despite the new supply coming online, respondents remain confident in improving fundamentals. A majority of respondents (78 percent) anticipate that rents will rise over the next 12 months …”

Other notable comments include …

“When asked to rate the strength of market fundamentals by region, the South/Southeast/Southwest rated the highest.”

 “When comparing with other property types, respondents continue to rate seniors housing as a highly attractive property type. Its scores topped that of the five major property types on a scale of one to 10.”

Okay, so it’s probably clear there’s some real opportunity here.

But if you’re a Mom-and-Pop investor, does it make sense to jump into a niche that’s attracting big players … or are you just cruising for a bruising?

No … and YES!

When you invest in housing for seniors it’s critical to understand the difference between a high-density community and a residential facility …

… and not just from the investor’s perspective, but from the resident’s perspective.

Let’s start with the resident …

There are some seniors … probably MOST … and their children (the decision makers in many cases) who’d rather see Mom or Dad live in a real home …

… in a tree-lined residential neighborhood, with a backyard, and neighbors … where residents don’t feel like inmates in an institution.

Please understand … we’re not slamming the great people or services provided in bigger facilities.

We’re just saying from a senior’s perspective, having a room in a home in a regular neighborhood FEELS a lot different than living in a room at a campus for old people.

But for a BIG investor, those individual homes are a logistical problem.

To move BIG money, you need economies of scale and the ability to buy or build a lot of inventory at one time.

It’s the same problem Warren Buffet alluded to when he told CNBC …

“I’d buy up a ‘couple of hundred thousand” single-family homes if I could.”

The challenge, as noted in this Forbes article about Buffet’s statement, is …

“… the cost and logistics of making such an investment in large enough size to move the needle for Berkshire Hathaway is prohibitive.”

The point is big money can’t play well at the single-family residential (SFR) level …

… even if the SFR’s are being converted into highly-profitable residential assisted living facilities.

But YOU can.  And that’s why we like them.  Think about it …

The supply and demand fundamentals are solid.

The priority for expenditure is near the top of the list for any family.  Taking care of Mom or Dad is far from a discretionary purchase …

… so as an investor, being that far up your tenant’s payment priority ladder is a much safer place to be in uncertain economic times.

Plus, much of the money to pay you comes from insurance, government, and the senior’s estate.  In other words, you’re very likely to get paid … even in a weak jobs and weak wages economy.

Also, you don’t have to compete with big money investors, even though they clearly see the opportunity and are moving into the space.

That’s because the barrier to entry for the big money isn’t how MUCH money is needed … it’s how LITTLE is needed.

Meanwhile, the customers would rather live in YOUR product than big money’s product.  So while big money is adding to supply, they’re not really in your niche.

This is a BEAUTIFUL thing.

But it gets better …

Residential assisted living homes can’t be mass produced.  They need to be built or converted one at a time.  There’s very little threat of a big player glutting the market.

And taking lessons learned from watching hedge funds move into the SFR space … big money was only able to acquire tens of thousands of SFRs because huge blocks of inventory were available temporarily through mass foreclosures.

We don’t think there’ll be mass foreclosures in residential assisted living facilities.  They’re way too profitable.

But because this kind of senior housing is in high demand and highly profitable, at some point big money will start assembling them …

… buying up groups of homes from multi-facility operators … and then buying up nearby individual facilities which can strategically integrate into existing operations.

It’s called consolidation … and when it comes, big money will bid up existing operations (creating equity for those already there) …

… because they can recover the “over-payment” through operational efficiencies and financial leverage.

Between now and then, for the street level investor, the big opportunity is to be part of building the inventory by converting homes into residential assisted living facilities …

… cash-flowing along the way … then one day cashing out to big money players.

And if those big money players never show up … just keep on cash-flowing while providing a much needed service to the community.

Until next time … good investing!

Certainty in an Uncertain World… is a post from The Real Estate Guys Radio Show.

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RealtyeVest To Fund Camden Crossing Townhomes Near Amazon Fulfillment Center in Jacksonville, FL

President of Northeast Florida Home Builders Association to Build Camden Crossing

New Leaf Communities, in partnership with RealtyeVest, announced plans today to raise capital for the new construction of Camden Crossing, a 35-unit multifamily townhouse development located in thriving northeast Jacksonville, FL. Online retail giant, Amazon, has plans to open a fulfillment center which will add approximately 1,200 new jobs located less than 2 miles away from the planned property. Additionally, Camden Crossing will be located less than 2 miles from River City Marketplace (a large, bustling outdoor shopping center) and Jacksonville International Airport (JIA). Forbes named Jacksonville one of America’s fastest growing cities in 2017. The 1,495 square foot townhouses will have 3 bedrooms, 2.5 baths, single car garages, and will be located on 6.15 acres.

According to Lee Arsenault of New Leaf Communities, Camden Crossing will offer investors an opportunity to earn an above market return while being secured in a hard asset like real estate, including multifamily investments.  Lee is serving as President of the Northeast Florida Home Builders Association and has served as President of the Florida Builders Association. Adding to the extensive experience for New Leaf Communities is Lee’s partner John Latshaw, Jr. John is a highly experienced Ponte Vedra, FL Tax Attorney, developer, and development consultant specializing in small multifamily projects such as Camden Crossing. He and Lee formed New Leaf Communities when market trends indicated more and more people were choosing to delay house purchasing or downsizing and instead opting to rent.

RealtyeVest was chosen exclusively to raise capital for this project due to their powerful real estate crowdfunding platform, which allows individuals to review and invest in real estate online. According to Lee, “After meeting with Dan Summers and his RealtyeVest team, we are convinced of their excellent real estate acumen and that their crowdfunding platform is head and shoulders above any other platform we’ve reviewed.”

The RealtyeVest online platform and social network provide accredited investors unprecedented access to professional-grade real estate. Unlike competitors, RealtyeVest reviews each offering through an extensive due-diligence process and remains actively involved through completion, investing side-by-side with its investors. According to Dan Summers, “New Leaf was able to structure its capital stack to allow investors an annualized overall yield of 10% secured with 1st lien. Investment opportunities for the Camden Crossing project are now open to the public exclusively at the RealtyeVest online marketplace.

 

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10 Things to Consider When Investing in a Real Estate Crowdfunding Deal

Investing in real estate through a crowdfunding platform can be an exciting and lucrative endeavor.  This is especially true for investors who are new to the real estate investing industry.  Since the crowdfunding platform is new and unique to real estate, there are pitfalls in which investors should avoid when attempting to invest in a crowdfunding opportunity for the first time.  These are the top items investors should consider before investing in a crowdfunding opportunity. 

1. Experienced Real Estate Underwriters

As a real estate investor, knowing that a company has knowledgeable real estate underwriters helps ease the burden of wondering if this deal is real or even profitable.  The real estate underwriter’s primary focus is to analyze the deal, identify the risks involved, determine how to eliminate as much risk as possible and structure a deal that results in the best possible outcome. This process will ensure that deals are worthy of investing in.  The main focus of an underwriter is in the financial portion of the deal, it is imperative that the underwriter carefully assess all assumptions to ensure that profitability is achievable and that investors will earn a generous return on their investment.

2. Investment Returns  

As a rule of thumb, if you have extra money sitting around in a retirement account or savings account earning less than 10%, it would be wise to consider real estate to help grow your retirement nest egg.  Crowdfunding platforms can offer exciting opportunities to new investors that were not available to them even a few short years ago. Most crowdfunding platforms offer an annualized 10% yield per deal and some crowdfunding companies offer profit participation as an additional upside to investing in a particular deal.

3. Quality of Sponsor

Having a strong and experienced sponsor is one of the best ways to mitigate risk.  A strong sponsor will understand how to value the property in the initial acquisition phase. Successful sponsors understand what it takes to run a property through the investment cycle from the acquisition, managing the asset during the holding period, then timing the correct moment for selling the asset at its most profitable. Having a sponsor that can demonstrate the qualities will help ensure that the investment is profitable.

4. Quality of Asset

A strong real estate asset is a key to profitability. Depending on the asset class, being located in a highly desirable market contributes greatly to the asset as a whole.  In addition to the market, the asset’s quality can also be determined by trailing financials or rent rolls for example.

5. Cost of Entry

The minimal investment may not be important to some, but others, who just want to test the waters would likely not want to shell out, for example, $25,000 on their very first investment.  Lower minimal investments allow new investors to get a feel for crowdfunding especially if they are new to the platform or crowdfunding as a whole.  Ultimately, smaller minimal investments give investors a chance to find out if real estate crowdfunding is for them in the future.

6. Comprehension

In addition to having professional real estate underwriters analyze the deal, the information or data from the underwriter should be easy to follow and make sense.  An investor should be able to determine if a particular deal is worthwhile or not; simply by the way the information is presented on the offering page.  Advance jargon is sometimes confusing for a novice real estate investor. Real estate investing through crowdfunding should be easy and seamless, and not require an advanced degree of any kind.

7. Getting Paid and How Often

Getting paid should not be a mystery, it should be clearly stated somewhere within the deal.  If you cannot find how often or when you are paid, then likely you should find another deal in invest in all together; because making money is the reason you’re investing in real estate in the first place, right?

8. Exit Strategy

Knowing how and when the investor will get their money back is imperative to any investment opportunity.  A crowdfunding deal should have a clear exit strategy listed within the deal that clearly tells investors how the sponsor intends to repay the initial capital investment; best if in a sequence of easy to follow steps.  If the exit is not listed, you should be able to find out relatively easy from the platform’s customer service team.

9. Crowdfunding Platform

A real estate crowdfunding platform should be easy to navigate. The platforms should be secured and offer an investor every tool they will need to make an informed decision of whether to invest in a deal or not.

10. Fees

A real estate crowdfunding platform is best when they do not charge the investors fees for investing.  It seems kind of silly that an investor who is lending their money should pay to play twice. There are more than enough deals on different platforms that do not charge the investor asset manager or accounting fees. It would be wise to seek those out first, then fall back on investor fee-based platforms when they have an irresistible deal that would be worth paying the fee to invest in that particular deal.

Summary

As you can see, there’s a lot that goes into investing in a crowdfunded real estate deal.  Following these tips will help investors land the perfect deal on any platform regardless of how the platform structures the deal.  

When you are ready to invest, go through t this list to ensure that everything meets your standards as a real estate investor. 

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Why Pledge Funds Are Becoming More Popular Than Blind Pool Funds

It’s a challenging environment for fund managers. Investors want more control over their investment decisions and to “know” exactly what they are investing in. Investors also want good overall returns while maintaining some control over what they are investing in. For these and other reasons, the Pledge Fund is exploding in popularity over the more traditional Blind Pool Fund.

Old concepts become new again, particularly in the investment world. Pledge Funds are an old concept that is finding increased usage in the real estate investment world. Investors are embracing the control and power that Pledge Funds give them over Blind Pool Funds. To understand just why they are becoming more popular, it’s important to know what they are and the advantages they have over Blind Pool Funds.

Pledge Funds Defined
Pledge Funds are private equity/debt funds that are set up to invest in projects within a very limited set of parameters. The managers of the Fund find projects to invest in that meet the pre-determined set of parameters. Investors are given information on the project and its expected returns. Projects are funded on an individual per deal basis. If an investor doesn’t want to fund a deal, they don’t have to, even if every other investor in the fund invests in the project.

VIEW THE PLEDGE FUND!

Login to view details about the ReV Single-Family Pledge Fund!

Pledge funds are seemingly a 21st-century investment vehicle, but a form of the pledge fund has existed for centuries. In fact, the railroads were built with a form of this fund. It was only recently that investors chose to turn over all investment authority over to fund managers.

It’s clear that Pledge Funds offer advantages when it comes to making investment decisions. These advantages are becoming even more pronounced in industries like real estate. Pledge Funds put decisions in the hands of individual investors, but the actual managing of the investment stays with the fund managers. It’s a powerful advantage for those who want an active role in their investments without the day-to-day management work.

Blind Pool Funds Defined
Blind Pools Funds are a type of private equity/debt fund where investors invest in the Fund and a fund manager has wide latitude in determining what investments are made and when they are made. Investors in the blind pool fund do not green light or red light investments as these decisions are made solely by the fund managers.

Blind Pool Funds became popular in the 1980’s and 1990’s with the rise of venture capital and angel investors. While they are still quite popular, some investors began to shy away from them after the dot-com bust. Many Blind Pool Funds had made investments in ideas that were never destined to earn money and some investors lost heavily. A good example is the spectacularly famous flop that was Pets.com.

The obvious advantage of Blind Pool Funds is that decisions are made by the fund managers. The fund managers know that they can throw the weight of the fund behind any project they feel should be backed. Investors don’t need to worry about investment decisions because they are made by skilled fund managers.

Pledge Funds vs. Blind Pool Funds
Pledge Funds have the distinct advantage of putting investment decisions in the hands of the individual investors. They are not bound to invest in what the majority of the investors in the fund want to invest in. If the majority of the investors want to invest in a new shopping mall, those investors who feel there is a shopping mall surplus can choose to abstain for investing in the project.

Pledge Funds can easily limit themselves to certain real estate sectors, like single-family real estate, making the investment parameters naturally narrow. Individual investors understand what the projects are doing and what the expected returns are. They know whether an investment is a good choice or not and can choose to pledge their funds accordingly.

VIEW THE PLEDGE FUND!

Login to view details about the ReV Single-Family Pledge Fund!

Investors without the time to manage or determine what investments to make are a good candidate for a Blind Pool Fund. It’s a set it and forget it method of investing that can solely focus on fund returns. Investors may also fall into this category if they don’t have access to investment information or support.

It is possible for Pledge Funds to provide the right kind of investment information support to these investors so that they feel more comfortable pledging or not pledging an investment. Just because a fund allows an investor to make a choice, it doesn’t mean they are forced to make a choice. The fund manager can give advice on real estate investments. It’s this flexibility that is making pledge funds a popular choice.

As the real estate investment market continues to change, investors should definitely look at the Pledge Fund as a popular alternative to the traditional blind pool fund. It may provide just what investors want and need when taking control of their investment choices. With the right kind of management, they can produce above average returns while providing investors with a good choice of real estate investment vehicles.

This is why RealtyeVest has chosen to focus its first ReV Pledge Fund on single-family homes in the hottest real estate markets in the United States. In the right market, single-family investments are predictable and offer returns ranging from 10% – 14% annualized yield. The ReV Single-Family Pledge Fund focuses on debt investments with limited up-side profits participation in Northeast Florida that are secured with a 1st lien mortgage. This short-term investment fund allows investors to pre-fund quality investments, securing their position in Northeast Florida’s highly competitive real estate market. The ReV Pledge Fund was designed for both novice real estate investors looking for a simple and seamless way to invest in single-family buy-and-sell projects as well as accredited investors searching for a great starting place with quick turn arounds. If you fall into either of these categories, the ReV Single-Family Pledge Fund is a great solution for you!

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Press Release: Introducing Exclusive No-Load Pledge Fund

REALTYeVEST INTRODUCES EXCLUSIVE SINGLE FAMILY NO-LOAD PLEDGE FUND

Offers Investors Unique Opportunities in High-Performing SFR Asset Class

Jacksonville, FL, June 15, 2017 — RealtyeVest seeks accredited investors to create an exclusive $1M Single Family No-Load (1) Pledge Fund for the fast financing of highly opportunistic off-market Single Family Residential (SFRs) deals in North Florida’s profitable SFR buy-renovate-sell market. Investors in this eFund strategy will have a strategic advantage over competing non-fund investors.

“Given the number of Funds seeking capital in today’s private equity market, emerging managers often run into difficulty finding investors willing to fully commit their capital for 10 to 12 years in a traditional blind-pool private equity fund structure,” said Daniel Summers, CEO of RealtyeVest. “As a result, our clients have increasingly asked us about short-term, No-Load alternatives to the traditional private equity/debt Fund model.”

What is a Pledge Fund
A Pledge Fund is an arrangement where investors pledge a predetermined dollar amount into an investment pool with pre-disclosed parameters. Sponsors (real estate operators) have access to the pledge fund for fast financing of attractive deals, enabling them to almost always edge out the competition. Details of every investment opportunity are completely transparent, providing investors the choice, on a deal-by-deal basis, whether to participate in an investment.

Hottest Market Opportunities
North Florida is the hottest real estate market in the United States according to Forbes. Single family properties are increasingly in high-demand and selling quickly in the Greater Jacksonville area. Real estate investors who have their financing secured ahead of time stand the best chance of acquiring the hottest properties normally without layers of brokerage fees, and earning aggressive financial returns on their investment.

Pledge Fund Property Distinctions

  • Located in Duval, St. Johns, Clay, and Nassau Counties
  • Off-Market
  • Single Family Residences
  • No Mobile or Manufactured Homes
  • No Rural Areas, Located in Up-Trending Neighborhoods
  • ARV (After Repair Value) Generally Between $100k – $300k

Pledge Fund Financial Overview

  • $1,000,000.00 Pre-Pledged Fund
  • Interest Only Loan (2)
  • 10% Interest Paid Monthly
  • 10% Profit Participation From Net Profits (5)
  • Secured By a 1st Mortgage with 1st Lien Position (3)
  • Pre-Paid Interest Will Be Held in Escrow and Drawn Upon For The Length of Term
  • Loan to Verifiable ARV (4) Not to Exceed 70%
  • Normal term is 6-9 months
  1.  No-Load Fund – A no-load fund means you can invest in shares of the fund at any time without a commission or sales charge.
    Interest-Only Loan – A non-amortizing loan in which the lender receives interest during the term of the loan and principal is repaid in a lump sum at maturity.
  2. 1st Lien Position – A lender or creditor in a first lien position has priority in case a debtor defaults and collateral has to be liquefied to settle the debt. For example, mortgage lenders are usually in a first lien position; if a borrower defaults on his payments, the mortgage lender is the first creditor to receive remuneration from the sale of the property.
  3. ARV – ARV stands for After Repair Value. This is an estimated value of a property after it has been completely renovated. This is a crucial number for those flipping homes and allows you to calculate the spread between what you should purchase it for and the price you can expect to resell it for.
  4. Net Profits – defined as Gross sales price less any and all acquisition costs, holding costs, rehab costs, closing costs including but not limited to liens, commissions, title charges, etc.

Carpe Diem
Because RealtyeVest’s Single-Family No-Load Pledge Fund is financing properties exclusively in America’s hottest real estate market, the Pledge Fund will quickly reach it’s $1M funding goal. Accredited investors are encouraged to immediately express their interest in pledging to the fund in order to seize their spot in this unique, high-yield investment opportunity.

Visit realtyevest.com/pledge-fund to learn more about their Single Family Pledge Fund. And read their educational article to learn more about Pledge Funds.

Connect with RealtyeVest on social media @RealtyeVest, on Twitter, Facebook or Linkedin.

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