Podcast Summary
Access off-market deals and invest with no money down: DealMachine provides data for off-market deals and Rent to Retirement offers no money down investment opportunities, enhancing real estate strategies and potentially leading to substantial savings and returns
DealMachine and Rent to Retirement are game-changers in the real estate investing world, offering unlimited access to reliable contact information and the opportunity to invest with no money down, respectively. DealMachine provides high-quality, fully compliant data for off-market deals, while Rent to Retirement offers new construction turnkey rental properties with low down payment options or even no money down. Additionally, 1031 Pros can help investors save on taxes through 1031 exchanges. These resources can significantly enhance your investing strategies and potentially lead to substantial savings and returns.
Real Estate Investing Strategies and Lessons: Learn no money down rental investing, negotiating seller financing, self-storage investing, and recovering from a $120,000 loss on a flip. Discover the benefits of BiggerPockets Premium for professionals in the real estate industry.
The BiggerPockets podcast episode features various strategies and lessons shared by a real estate investor. Some of the topics covered include no money down rental investing, negotiating seller financing, self-storage investing, and even a lesson from a $120,000 loss on a flip. For new real estate investors, the episode offers valuable insights, particularly the no money down rental investing strategy. The podcast also discusses the benefits of BiggerPockets Premium, a new membership type designed for those who service the real estate investor community, such as agents, lenders, and property managers. The platform allows these professionals to showcase their deals, get reviews, and generate new business. Overall, the episode provides a wealth of knowledge for anyone interested in real estate investing.
BiggerPockets Connects Real Estate Investors with Agents: BiggerPockets launched a new service for real estate investors to connect with qualified agents through a matchmaking process, ensuring positive experiences for both parties. Upgrade to a premium membership for access.
BiggerPockets has launched a new service that connects real estate investors with qualified agents through a matchmaking process. This is not a traditional dating site, but rather a platform for investors to browse agent profiles and reach out to those who best fit their needs. The focus is on quality matches for both parties, ensuring a positive experience. Interested investors can upgrade to a premium membership on the BiggerPockets website to access this feature. Before diving into today's interview, Ben Lapides shared his background in real estate. He started investing in 2012 after selling his successful study abroad business and used the proceeds to buy rental properties. He then began syndicating multifamily portfolios, eventually turning it into a career. Ben's journey into real estate was unconventional, but his determination and resourcefulness led him to success.
From young age, Ben's disciplined financial mindset led him to invest in real estate instead of material possessions.: Having a disciplined financial mindset at a young age can lead to unconventional investments and opportunities for future wealth.
Having a disciplined financial mindset at a young age allowed Ben to make unconventional decisions, like investing in real estate instead of spending money on material possessions. This mindset, rooted in the belief that doing what others aren't willing to do today can lead to opportunities that others can't access tomorrow, has been a guiding principle for Ben throughout his life. He shares a cautionary tale of individuals who live beyond their means, only to lose everything in a cycle of boom and bust. Ben's experience with buying a 4plex for his daughter as an investment for her future is an inspiring example of thinking long-term and creating generational wealth. Ben's journey from buying single-family homes to syndicating deals began with meeting Joe Fairless before he gained fame and attending one of his Skillshare classes. This encounter led Ben to gain knowledge, experience, and eventually, a small piece of the puzzle in real estate deals. All of these experiences took place in Richmond, Virginia, where Ben acquired 12 to 14 houses over a three-year period. The transition from buying single-family homes to syndicating deals marked a significant step in Ben's real estate career, allowing him to grow and learn in the industry.
Lesson learned: Apartment building purchase complexities: Buying an apartment building involves greater responsibilities, risks, and financial complexities than a single family house. Know your strengths and build strong relationships.
Buying an apartment building is similar to buying a single family house in terms of the work involved, but the financial complexities and risks are significantly greater. This was a lesson learned the hard way by an individual who, inspired by a friend's success, bought an apartment building without fully understanding the responsibilities and challenges that come with it. The process of syndicating the investment was successful due to a strong relationship built with a potential investor, but the property itself did not yield the expected returns. The individual discovered that their strengths lie in deal sourcing and financial analysis, rather than property management and asset management. After moving to Denver, they sought out new connections to expand their real estate business and learn from others in the industry. This experience highlights the importance of understanding one's strengths and weaknesses, as well as the significance of building strong relationships in real estate investing.
Focusing on self storage led to unexpected opportunities: By staying focused and proactively seeking deals, investors can build diverse real estate portfolios through unexpected opportunities
Having a clear focus in real estate investing, such as self storage in this case, can lead to unexpected opportunities. David started with a goal to invest in self storage, but also acquired a car wash and RV park along the way. This happened because he was actively seeking out deals and educating himself, rather than waiting for a perfect plan. Additionally, he recognized his strengths and weaknesses and partnered with others to complement each other's skills. By focusing on self storage and being proactive, David was able to build a diverse real estate portfolio.
Effective Real Estate Investing: Balancing Patience and Impatience: Top producers balance patience and impatience, focusing on strengths and delegating tasks, using tools like Redfin and First American Exchange Company, and investing in self-storage properties for low tenant risk.
Being an effective real estate investor involves a combination of doing what you're good at and being the best role model for your customers. It's essential to acknowledge that patience isn't always a virtue and that it's okay to focus on areas where you excel, while delegating tasks to others. Impatience can be beneficial when speed is necessary, and it's common among top producers. Additionally, aligning yourself with the right team and leveraging tools like Redfin and First American Exchange Company can help you overcome challenges and maximize your profits. Lastly, investing in self-storage properties can offer low tenant risk and other advantages.
Easier development and maintenance in self storage: Self storage offers simpler investment opportunities with easier deal sourcing and conversions of vacant retail spaces, making it an attractive choice for real estate investors despite competition.
Self storage presents simpler development and maintenance compared to multifamily real estate, making it an attractive investment option for those looking to expand their portfolio. While competition in the self storage market may be similar to that of multifamily, the ease of finding deals through building relationships with brokers and conducting thorough research makes it a viable option. Self storage also offers the potential for lucrative conversions of vacant retail spaces, such as Kmarts, into storage facilities. Despite the competitive landscape, the lower risk and easier capital expenditures make self storage a compelling choice for real estate investors.
Focus on profitable markets with population and income growth: Invest in self-storage facilities in areas with positive population and income growth to mitigate risk and ensure profitability. Consider expanding existing sites for added value and solid returns.
In the self-storage industry, the availability of data from various platforms has made it increasingly challenging to identify financially viable opportunities, especially as traditional retail stores like Kmart, Sears, and Shopko struggle. To mitigate risk and ensure profitability, investors should focus on markets with positive population and income growth, and look for existing facilities with expansion potential. By developing and expanding on these sites, investors can maintain their desired margins and still achieve solid returns, even if expansion doesn't go exactly as planned. In the example given, an 81,000 square foot facility with 735 units was purchased and, despite cash flowing from the start, equity financing was taken on to expand the site without negatively impacting the existing profit and loss statement.
Raising excess capital for lower returns and less risk: Investing in real estate with excess capital ensures lower initial returns but less risk through cash flow certainty and interest-only debt periods, leading to larger value spreads upon sale, recapitalization, or refinancing.
The discussed real estate investment strategy involves raising more capital than necessary to ensure a lower return for investors in the initial years, but with less risk due to cash flow certainty and interest-only debt periods. This approach allows for a larger value spread when the property is eventually sold, recapitalized, or refinanced, providing a significant liquidity event for investors. The use of a rolling preferred return adds flexibility to the investment, ensuring investors receive their preferred return over time. The self-storage industry is not considered a boom and bust cycle, as it has shown resilience during past recessions, but has seen significant institutionalization and increasing competition, leading to lower cap rates and higher demand for new supply.
Value-add strategies for self storage investments: Focus on smaller facilities, expand size, buy at lower cap rates, increase portfolio value, and execute plans with fewer competitors for higher returns in self storage investments
Self storage investments offer opportunities for value-add strategies and potentially higher returns, especially for smaller-scale facilities. While there are risks in the short term due to high cap rates and competition from larger institutional investors, the long-term outlook remains positive. By focusing on smaller facilities and expanding their size, investors can buy at lower cap rates than institutions and increase the value of their portfolio. This strategy allows investors to not only benefit from the added square footage and construction spread but also decrease the cap rate on the entire portfolio, resulting in higher returns. Additionally, this approach attracts fewer competitors, making it easier for individual investors to execute their plans. Overall, self storage investments can be a smart choice for those willing to put in the effort and take a more active role in their real estate investments.
Starting a small self-storage business in your backyard: Build a small self-storage facility in your backyard, lease up units quickly, and manage the property for a good return on investment, especially in high rental areas
Owning and operating a self-storage business can be an effective strategy for individuals looking to enter the industry without a large upfront investment. With the advancement of technology, managing a storage facility has become more hands-off, allowing for greater efficiency and potential profitability. For instance, an individual could build a small self-storage facility in their backyard, lease up the units quickly, and manage the property themselves, resulting in a good return on investment. This approach can be particularly attractive for those living in areas with high rental rates, such as Gig Harbor, Washington, where a 50-unit facility could generate significant revenue. While buying a multifamily property to add storage may not be a viable option for some investors due to zoning restrictions and the need for institutional-level buyers, considering self-storage as a standalone investment opportunity is worth exploring.
Exploring Ways to Increase Cash Flow in Real Estate Investments: Real estate investors can add value-added services and syndicate capital to finance larger projects, enhancing tenant experience, generating additional revenue, and securing targeted returns.
Real estate investors can explore various ways to increase cash flow in their investments beyond just collecting rent. Adding value-added services like self-storage or laundry facilities can enhance the tenant experience and generate additional revenue. Syndication is a popular method for raising capital from multiple investors to fund larger real estate projects, offering potential investors a stake in the property and a targeted return on investment. Spartan Group, for instance, syndicates capital and targets a high teens to low 20% internal rate of return, while ensuring a preferred 8% return for investors. They also focus on building strong relationships with both investors and debt providers to secure the best financing deals. By combining these strategies, investors can finance their deals and maximize their returns.
Discussing tax differences on interest and principal during seller financing negotiations: Explaining tax implications can save buyers money on interest and benefit sellers with more cash in hand, making real estate deals more favorable for both parties.
During seller financing negotiations, explaining the difference between taxes on interest and taxes on principal can help lower interest rates significantly. This strategy can save a substantial amount of money on interest over the long term for the buyer, while the seller benefits from more cash in hand due to tax savings. This conversation can change the deal dynamics and make it more favorable for both parties. It's essential to consider taxes as a crucial expense factor when negotiating real estate deals. Additionally, sharing success stories, like driving down to Richmond and partnering with a friend to secure multiple profitable properties, highlights the importance of collaboration and learning from others in the industry.
Pivotal moments in real estate investing: Unexpected conversations and challenges can lead to growth and lucrative opportunities in real estate investing, while understanding assets and liabilities is crucial for success
Pivotal moments and experiences can significantly impact one's journey in real estate investing. These moments, whether they come from unexpected opportunities or unexpected challenges, can serve as catalysts for growth and learning. For instance, a chance conversation with a VP led one investor to pursue real estate investing full-time, while an error in marketed cap rates led to a lucrative investment opportunity. However, challenges can also arise, such as bridging the financial gap while navigating one's first loss in real estate. Despite these challenges, the enjoyment of negotiating and underwriting deals keeps investors engaged and motivated. As for what should be taught in schools, there's a case to be made for the importance of understanding assets and liabilities in real estate investing, as well as in life in general.
Gaining international experiences and conversations during adolescence broadens horizons: Discovering international perspectives through adolescent experiences and conversations can bridge the gap between domestic and international humanity, and finding unique real estate deals on social media platforms can lead to profitable investments.
Gaining international experiences and learning about love and existence during adolescence could significantly bridge the gap between domestic and international humanity. The speaker believes that having such conversations could help young people understand different perspectives and broaden their horizons. On a different note, the speaker also discussed a unique real estate investment strategy. He found a single family flip deal by connecting with a broker who lists properties for free because he earns a 6% commission upon sale. This arrangement allows the broker to find listings without putting his own money into them, ensuring a steady stream of repeat customers. The speaker also revealed that he found the deal on BiggerPockets, a social media platform for real estate investors.
Learning from unexpected challenges in a new real estate strategy: Understanding the nuances of each real estate strategy and adapting to unique challenges is crucial for success. Don't rely solely on past experiences and assumptions, instead approach each deal with a fresh perspective and deep market knowledge.
Even experienced real estate investors can face unexpected challenges when entering a new strategy, such as when transitioning from buying and holding cash flow properties to selling flips. Hubris and overconfidence from past successes can lead to making assumptions that may not apply to a new strategy. In this case, the investor underestimated the importance of location and local knowledge, leading to unexpected permitting issues and a lower than anticipated sale price. Additionally, holding onto a property for longer than expected resulted in increased carrying costs and refinancing fees. Furthermore, the investor's experience in managing cash flow properties led them to believe they could automate flipping in the same way. However, the unique challenges of flipping necessitated a different approach. This experience serves as a reminder that each real estate strategy comes with its own set of unique challenges and requires a tailored approach. In summary, the investor's experience highlights the importance of understanding the nuances of each real estate strategy and adapting to the unique challenges that come with each. It's crucial to avoid relying solely on past successes and instead approach each deal with a fresh perspective and a deep understanding of the specific strategy and market.
Creating value in real estate deals: Success in real estate requires finding or creating good deals through unique strategies and niche markets. Practice interpersonal skills and consider partnerships for negotiations, and always prioritize integrity.
Creating value in real estate deals, especially in competitive markets like multifamily, is crucial for success. Good deals are not easily found, but rather created through unique strategies and niche markets. For those who struggle with interpersonal skills, particularly in negotiations, it's recommended to practice through social interactions and consider partnering with someone who excels in those areas. Additionally, the importance of integrity and doing the right thing, even when it's difficult, was emphasized as a valuable trait for building strong relationships and a positive reputation.
Recognize unique strengths and weaknesses: Find partners, hire people who complement weaknesses. Motivate with 'This too shall pass'. Learn from books and hobbies.
People have unique strengths and weaknesses, and it's essential to recognize them to be successful. Some individuals thrive in networking and extroverted environments, while others prefer introverted one-on-one interactions. It's crucial to find partners or hire people who complement your weaknesses. As for motivation, the quote "This too shall pass" helps keep things in perspective during both highs and lows. In business, reading books like "Remarkable" by Sam Zell and "Never Split the Difference" by Chris Voss can provide valuable insights. Hobbies like skiing, hiking, and being a big sports fan can also contribute to a well-rounded lifestyle.
The importance of taking action in real estate investing: Even if you fail multiple times, continuing to take steps and learn from mistakes is crucial for success in real estate investing.
Key takeaway from this conversation with Ben Lapides is that taking action is key to success in real estate investing. No matter how many times you may fail, continuing to take steps and learn from your mistakes is crucial. As Tyrion Lannister from Game of Thrones wisely put it, "You can fail 999 times, and a 1000th time could be what makes the difference." If you're not actively making progress, you won't learn, feel comfortable, or go anywhere in your investing journey. To learn more about Ben and his investing journey, check out the Best Ever Conference or email him at ben@spartanhypheninvestors.com. And remember, finding an investor-friendly agent can help you navigate the market and take confident action towards financial freedom. Visit biggerpockets.com/deals to find yours today.
