Best Ever Recap of the Best Ever Conference (day 1)Interview with Experts
Wow – what a great weekend we had at the Best Ever Conference out in Denver! If you’re feeling some FOMO or wondering what the conference was like, here’s a recap with my key takeaways of each session.
Friday (day 1)
Keynote: Lessons Learned From 1k Investor Interviews and $265m in Apartment Acquisitions
Joe Fairless – Conference host, Ashcroft Capital, Best Real Estate Investing Advice Ever podcast
Let’s get this party started with Joe’s keynote. For those keeping score at home, he controls $265,000,000 worth of real estate – more than double from this time last year. Joe walked us through a brief background, and then dove into the key three things everyone wants to do in the multifamily investment world – finding, funding, and keeping great deals.
My favorites approaches to each of these objectives were:
- Finding great deal by hosting a local meetup in your area for other multifamily owners. This may cost you some money to get the ball rolling (pick up a dinner or a round of drinks), but you will position yourself as an expert in the space. Consistency, like most things in real estate, will help compound the success of this approach over time.
- Funding great deals by being a GREAT listener while speaking with investors. Anticipate and listen to their concerns if hesitant to invest with you, and be prepared to speak to the things you do to help mitigate risks.
- Keep your great deal by raising more money than you think you will need. The #1 reason why multifamily investments fail is lack of adequate capital reserves to provide a cushion during economic turbulence or unanticipated capex. Investing in deals for cash flow (vs. appreciation) and holding conservative, long-term debt can also help during tough times.
Exploring Niche Asset Classes
John Roy – JNL Parking
Kimberly Smith – AvenueWest Corporate Housing
Divyesh Panchal – Numerous branded hotel investments
As someone with a ruthless case of shiny object syndrome – this session was both awesome and enlightening. An expert panel talked us through the ins and outs of hotels, parking, and corporate housing… none of which I have done but am now obviously fascinated with. The highlights were:
- Surface lots are an appreciation play. They will have a small or break even cash flow, but over time will become more and more enticing for developers to build on.
- Garages are a cash flow play, and can produce great returns with comparably predictable maintenance and without the hassle of tenants.
- John got started while in his MBA program and Notre Dame, and scraped a few single family houses to create a surface lot for football games.
- Courthouses and hospitals are great locations for parking lot investments
- Kimberly walked us through how her companies can help investors find, manage, and optimize their assets suitable for corporate housing.
- Divyesh found his hotel niche with mid-level branded hotels (Hilton, Marriott etc.). He found that these offered the best risk – adjusted returns when compared with boutique, low-end, or luxury brands.
- Hotels are not for the faint of heart, and Divyesh partnered with an experienced hotel investor in his ventures to help him get a foot in the door with these big brands and understand the ins and outs of hotel ownership
Stories of Scale
Kathy Fettke – Real Wealth Network (moderator)
Matt Rodak – Fund that Flip
Dave Van Horn – PPR Note Co.
- It’s hard to start a business in the real estate world… but it may be even harder to grow and scale one
- One suggestion from the panel (which I did immediately when I got home) was to create an organized list / chart of ALL of the job functions that exist within your business (even if you are doing all of them).
- For example, acquisitions, due dilligence, funding, investor relations / reporting, asset management etc…
- Then break out all of the sub-tasks that need to happen under each of these functions.
- Eventually, you will get to the size and scale where you can start hiring out some of the tasks you don’t enjoy and that don’t require your vision or strategic thinking to execute (bookkeeping is a common example).
- One visual the panel mentioned as a way of thinking about this is to take a pie chart, and each section of the pie represents time spent on a particular job function. Initially if you’re a one person band, you’re going to be filling up that whole pie. Eventually, you want to start making your way in closer and closer to the bullseye on some areas, but may choose to remain more engaged in others.
In pictures, this looks like starting here, where you’re doing everything…
and moving towards here, where you focus on the things that you enjoy and add significant value to
Benefits of Development
Scott Lewis – CEO of Spartan Investment Group
- Scott was one of the most impressive people at the conference, and has a unique energy and intensity about him. He crushes.
- Scott shared his “Developer’s Ethos” – five statements that developers should keep top of mind while building their business. My favorite was “prepare to be punched in the face”, because it’s going to happen in real estate. It’s a matter of when, not if. If you’re prepared for it and expecting it, you will react more rationally than emotionally and come to a better solution in less time.
- The other ethoses were great too:
Don’t Just Make It, Keep It
Ryan Gibson – co-founder of Spartan Investment Group
Mathew Owens– CEO of OCG properties
- It took about 5 minutes of listening to Matt discuss his tax strategies for my brain to start hurting.
- I guess the bottom line is… you are very likely paying too much in taxes and not taking enough advantage of the perfectly legal and managable strategies that could boost your post-tax income.
- From a compounding perspective, this can make a massive impact on wealth accumulation over a long time horizon.
- Matt discussed a lot of things I will take back to my CPA, but I think my biggest takeaway is that I am going to hire a real estate specific tax advisor to help me think proactively about my business from a tax lens, and separate out the roles of my tax preparer / filer and tax strategist who can help me think through things more strategically and stay out of the weeds of filling out my returns.
Creative Value Add Flipping
Matt Rodak – Fund that Flip (moderator)
Jason Scott – Lish Properties, 123 Flip
Scott Lewis- Spartan Investment Group
Tim Emery – Co-owner of Invest Success
- This was a true all-star crew of panelists. I’ve been reading J. Scott’s books for years and was great to finally see him in person.
- While each panelist had a different approach to their business, they all had a blend of flexibility and focus that allowed them to stay ahead of the curve while still remaining disciplined to their core competencies.
- An example of this came from Jay, who went into a flip with a partner. His “bread and butter” had been mid-grade rehabs, but the partner wanted to do a pop top and add more square footage to the house. The expected return on this approach was significantly higher, so they went with it… and Jay added a new tool to his arsenal, creatively adding more value to capture more profits.
Trevor McGregor – McGregor Consulting (moderator)
Tarl Yarber – Fixated Real Estate
- Tarl and his team at Fixated are making big moves out in the Pacific Northwest BRRRing and flipping, and are even putting together what looks to be an epic expo in late April.
- One big takeaway and new process I am implementing is to take a bunch of pictures (Tarl takes 100) of each rehab project, each week. This becomes even more helpful if you’re managing a lot of projects out-of-state. The pictures will facilitate contractor accountability, give you a great arsenal for social media, and give greater connectivity / feel to the projects if you aren’t there physically.
- Personally, I wouldn’t hire a random off of craigslist to do this. I would tap into my existing network of brokers / property managers in the area and see if anyone of them would do it for some extra cash. Pictures don’ t need to be listing quality, but should be taken with a good, wide-angled point and shoot camera if possible (phone cameras are getting crazy-good now too)
Jeremy Roll – President, Roll Investment Group
Ryan Gibson – Spartan Investment Group
Nikolai Ray – CEO of MREX
Amy Wan – Founder & CEO of Bootstrap Legal
Matthew Owens – Owner of OCG properties
- According to Joe, this was one of the most requested topic for discussion, and the panel delivered.
- I loved having Jeremy up there to help us understand the “voice of the investor.”
- Jeremy focuses on investing in other’s deals, and does a LOT of due diligence around what sponsors and deals he and his investment group get involved with.
- He picks apart PPM’s and will question and negotiate terms he finds disadvantageous to his group.
- Pro tip: if you raise money from Jeremy, make sure you know your documents and deal inside and out!
- One other nugget from Jeremy I found interesting – he looks to make sure that the sponsors are in a compensation “sweet spot.”
- As an investor, you obviously don’t want a sponsor to eat up too much of potential profits or have misaligned incentives…
- But you also want to make sure that they are being compensated fairly and at market rates for acquisition fees, equity splits etc. so that they are highly motivated to maximize returns on the deal.
- Significant discussions around the different types of regulatory hurdles a sponsor must navigate, and the benefits / risks associated with raising capital through different avenues… 506(b) vs. 506(c), blind pools, semi-blind pools, crowdfunding etc.
- Amy started a company called Bootstrap Legal to help investors navigate this complexity. Bootstrap’s mission is to blend the high – touch strategic advice of an attorney with the efficiency of technology to significantly reduce the cost of executing a capital raise.
- Every sponsor and deal will have different deal terms and fee structures. One way to determine what’s appropriate for your deal is to go onto a crowdfunding website and look through the investment offerings. What are their waterfall structures, acquisition fees, asset management fees etc..? This can be super helpful both in establishing your terms for a deal, and to help educate “newbie” investors as to how your terms compare to the market terms for syndicated deals.