Matt Bell, of Charleston, South Carolina, joins Brian on the show today to talk about how hedge funds are becoming popular in real estate investing. He talks about how hedge funds work, how they've developed, and how they evolve, as well as how people working with hedge funds can work with real estate investors so both parties benefit.

Key Takeaways:

[1:20] There are different niches regarding hedge funds, with real estate becoming one of the more recent avenues. Prior to 2012, institutional money was not in real estate. Once they figured out that they could rate real estate, it became a popular channel for capital.

[4:10] "Securities" have different ratings that have to do with how much they are valued at, as well as insurance. The highest rating is what they view as the safest investment. In real estate, an A asset might be new construction or something recently renovated. This goes all the way down to houses that need a lot of renovation; there is a spectrum of ratings.

[6:00] Where risk and reward are a priority for smaller investors, for institutional money those two priorities switch. Their goal is to not lose the money, and then they focus on trying to make some money as well. It's almost an inverse perspective from how most people approach investing.

[7:55] We've seen more securitization of debt in single-family homes more and more recently. There is now a lot of money flowing in from nontraditional places. Previously, money would be invested into a REIT (real estate investing trade) and would be mitigated over a pool of assets.

[9:45] A REIT and a hedge fund are both pools of capital with their own investors and assets, but a REIT is Federally-regulated. A hedge fund is more about making something attractive to an investor and doesn't have the same regulations and mandates as a REIT.

[11:45] A hedge fund comes from hedging risk and most start in private equity. In Matt's experience, the initial capital was all private equity, and the money they get is debt capital which goes into other properties. The example Matt gives his a $70 million investment in private capital — after $50 million to purchase and $20 million to renovate, they are appraised at $100 million. With a 70% LTB, they use that $70 million to start the process again. Private equity buys the first property, and debt capital buys the others.

[15:25] Hedge funds target specific markets — namely secondary and tertiary markets — because the cash on cash return is stronger where the median home prices are a little bit lower.

[16:35] The evolution of these funds is very similar. They all start with cash on cash focus, usually on properties where they get a high rate of return. That's the first series or proof of concept. Once they have proof of concept, they look for capital from the Wall Street money. You keep graduating up levels until you get the money, then you have to make sure you don't lose it. When you get to that tier, it just changes.

[19:05] Matt believes this kind of money could really change the course of real estate investing. Returns are much less important than the quality of the asset. There are more apps and virtual opportunities that could potentially eliminate the need for real estate agents.

[21:45] People with hedge funds can work together with real estate investors to find off-market deals and be experts at sourcing deals, they can sell the assets to the investors. Depending on where the fund is in its life cycle, you might have to know who you're working with.

[23:45] Matt spent some time working for a large hedge fund. In many cases, some people working for the hedge fund may be working with some agents in your market. If you're interested in working with a hedge fund, you can check the tax assessor site and figure out who the big buyers are, then use your MLS to figure out which agent is working with which buyer. If you list it, investors will buy it.

[28:00] Matt has moved out of the hedge fund realm recently, and had an operating business. He now does some consulting for a large institutional fix-and-flip lender. He's working to build a national sales division for them.

If you'd like more information, you can contact Matt and [email protected] or by phone (706) 267-3293.

Mentioned in This Episode:

Meetings

Daily REIA Show

REI Facebook Page

Brian's Book

Lending Home

Today's guest Dan Zitofsky, long-time real estate investor and owner of Zitofsky Capital Management. He joins Brian on the show today to talk about his real estate journey, and how he found real wealth by shifting his business model to become the bank. He shares a few case studies for his business models to show the numbers. He also talks about the importance of emerging markets and how you can start earning passive income today.

Christina Krause makes her second appearance on the show, this time to talk about direct mail, lead generation, and the importance of follow-up. Christina is incredibly passionate about the follow-up, and in today's episode, she talks about some of the things you can do to maximize the follow-up to ensure more conversions.

Key Takeaways:

[1:30] Christina is one of the owners of Postal Impact, a company rooted in data and analytics. They handle the direct mail marketing for investors across the nation. This includes generating the lead list, analyzing which forms are most efficient, and tracking it all the way through the sales pipeline. They also offer virtual lead managers for their clients.

[4:15] Direct mail is not dead! Right now there's a boom to direct mail; it's important to be consistent and methodical. There is an ebb and flow in this type of marketing just as there is in any type of marketing. It's important to ask questions to evaluate how effective your methods are.

[9:05] If you are in a smaller county, you're ROI is almost always going to be higher than more urban counterparts. Since the competition is smaller, the response rate is usually better. Regardless of your market, it is crucial to track your response rate and your net lead rate.

[12:25] Most people who do direct mail are not consistent and methodical when they use direct mail. As an investor, if this is something you don't excel at, outsource it to a third party that will handle the consistency for you.

[15:30] It is the third or fourth drip where things start to be effective when it comes to direct mail. Direct mail really needs to reach your list more than once over a period of time to be effective. Christina recommends hitting your target audience at least six times before pulling direct mail as an effective marketing strategy. Think of it as the credit card mailings you get.

[20:05] It is important to track your data; you have to know your numbers in order to know what you need to spend on marketing. The KPIs they track for their clients at Postal Impact are response rate, net lead rate, and appointment booking rate. Knowing these metrics will let you know how much you need to mail.

[24:10] For people who are brand new to the industry, Christina is reluctant to have people start with direct mail marketing. It can be quite expensive as a learning lead.

[27:55] Probate leads are good for newer investors if you are doing the work yourself. Probate is the process that most counties require people to go through when someone passes away without a will. If that person's assets exceed a certain amount, their family has to declare that they have assets and open probate. If you going to go for these leads, you want to look for estate probate leads.

[33:05] You can sometimes get the leads online, but if they aren't online, you'll have to find out which courthouse has the probate leads. You may be able to ask the clerk for the estate probates specifically. What you want to find are the named representative on the case and their mailing address.

[36:30] Once you've got your leads and your lists, the most important part of the business is follow-up. Christina is an advocate of having a lead manager, someone who watches the lead from the moment it hits your door until you decide to call it dead. Postal Impact just got done with a three-year study of their clients, and for those who had a follow-up system in place, 74% of their deals came in the follow-up. For clients who did not have follow up, only 8% of their deals happened in follow up.

[40:45] There are two things that can separate you from 90% of people in this business. The first thing is to be consistent and methodical with your marketing. The second thing is to follow up; guard your leads as if your life depends on it.

[42:00] This is why they developed the virtual lead managers at Postal Impact. They are pre-trained to manage your CRM and run follow up sequences on your leads. For many investors, outsourcing this may be the way to go so you can focus on other things and still get the value in the follow-up. They can also help hold you accountable.

[47:10] If you're interested in learning more about the virtual lead manager or their direct mail campaigns, you can visit their website at postalimpact.com. They do also sell probate leads individually.

Mentioned in This Episode:

Meetings

Daily REIA Show

REI Facebook Page

Brian's Book

Postal Impact

Virtual Lead Managers

Episode 63: Christina's first appearance

Marco Santarelli, founder of Norada Real Estate Investments and host of Passive Real Estate Investment podcast, is the guest on today's show. He talks about how his company helps investors create passive income by breaking down some numbers and talking about different markets. He also breaks down some of the benefits of real estate investing and shares why it is such a great wealth-building vehicle.

Key Takeaways:

[1:20] Marco saw his family creating wealth from real estate, and began investing at a young age. At 18, he bought his first townhome rental, fixed it up, and managed it himself. He sold real estate for a while but continues to invest all over the country.

[5:10] Marco went to university to train to be a police officer but he decided not to pursue it because he wanted to be an entrepreneur. This would allow him to create wealth and passive income, which lead to financial freedom and time freedom. His current projects help teach people how to create that financial freedom.

[6:45] Marco started his company in 2004 and they are a nationwide provider of turnkey rental properties. Turnkey properties are a great way to create legacy wealth for you and your family. They have properties in 22 markets across the nation.

[10:30] Their company invests in markets where the numbers make sense — when a rent-to-value ratio is around 1%, that is a quick metric to see if there's going to be a good rate of return, good cash on cash return, and good cash flow. This generally will allow investors to have more than one property in these markets as well.

[13:40] If you can control and acquire an asset that generates passive income for you, that becomes a powerful wealth-building strategy. One of the greatest benefits of real estate is that you can leverage it. Marco breaks down his recommended numbers (usually putting down 20%), as well as some strategies that he has found work for him.

[17:35] Brian and Marco discuss overleveraging. The most important thing is being cash-flow-positive enough that you can weather the ups and downs of the real estate market.

[20:20] While many people agree there will be a recession in the real estate market soon, Marco argues that all real estate is local. What's happening in one market may not have the same impact in another market.

[24:20] There are generally two types of markets: growth markets and income (or cash flow) markets. Jacksonville, FL is an example of a growth market, where prices are appreciating above 5-6% a year. To decide where you want to invest, you must decide what you are hoping to accomplish with your investing.

[28:05] Whenever they get a new client, they determine their experience, look at their portfolio, as well as map out goals based on where they are now and where they want to be.

[30:15] Marco has five benefits of real estate investing. In addition to leveraging, Marco discusses the remaining four. The cash flow or income that you generate from your investment goes to you and grows over time. The second benefit is depreciation that happens with investment properties, essentially when you invest. You can't do that with most other asset classes. The third benefit that happens over time is that your tenants are essentially paying the mortgage on your property, while your equity is growing. Finally, the fourth benefit is appreciation; property values tend to increase over time.

[34:45] If you had complete equilibrium in your market (nothing is changing prices), then the only thing that would change is the cost to build new product. If that is going up, the value of your property would still be going up in an inflationary environment.

[36:00] If you're interested in Marco's podcast, you can visit their website for properties or the podcast. Both are linked below.

Mentioned in This Episode:

Meetings

Daily REIA Show

REI Facebook Page

Brian's Book

Norada Real Estate

Passive Real Estate Investing

Listen to Brian's keynote from his time spent at the Phoenix REIA on 5/21/19.

Brian instructs the audience on how to network and how to utilize their network so that they can get unlimited deal flow.

Brian also talks about competition and how it is a lie we tell ourselves.

Join Brian's real estate networking Facebook group where he gives all his tips on networking: www.facebook.com/groups/reinetworking

Financial advisor and former HGTV personality Chris Naugle joins Brian on the show today to talk about wealth building. Chris shares his story of success, failure, and the lessons he learned from those failures to get to where he is today. He shares strategies he learned from his own experience as a financial advisor and real estate investor and provides actionable items on how you can start having your money work for you.

Key Takeaways:

[1:30] Chris's story started before he actually got into real estate. His dream was to start a clothing line and open a store; to get the money he needed, his mom put her house up as collateral. In between that and where he is today, he became a pro snowboarder, opened a chain of retail stores, became a financial advisor, and finally ended up in real estate.

[5:50] Chris has tried several different outlets in real estate, and while he has been very successful, he recognizes the importance of what we can learn from our failures. There have been some times during his career that he's taken on an opportunity, but it didn't turn out the way he planned. Each failure has brought him closer to success.

[9:15] Chris started in real estate in 2006, but really hit his stride a few years later. He had been buying and flipping properties using the conventional way until a real estate seminar opened his eyes to what he could change in his process. He learned that what the wealthy were doing was the exact opposite of what he was doing.

[11:45] Chris had been using conventional financing as well. One of those most important lessons he learned was the wealthy investors mimic what banks do: they keep their money in constant motion. Instead of asking for money, they create opportunities to use other people's money to solve their problems. This is now what Chris speaks about across the country — how money actually works.

[15:55] After they saw another TV couple speak at a summit, Chris and his wife had the idea for a TV show where their demo crew would use the debris from a flip to make skateboard ramps, and do a stunt/demo show. After a four year journey, it eventually got picked up by HGTV for a six-episode run. The show is currently tabled, and they're still under contract but not currently airing anything. Even though that door is sort of closed, it paved the way for everything he's doing now.

[23:50] Because of the show, Chris now has credibility on a national level. His story got him on stages, and he is able to share not only the story of HGTV, but he is also able to talk about the things he learned during his career as a financial advisor.

[26:20] Some of the topics he talks about now are IRAs, infinite banking, and other wealth strategies like hidden equity. These strategies help the money we work for work for us. If you have money you're sitting on, maybe look into investing it into something that will make you more money.

[32:30] The key thing is putting and keeping money in motion. Chris talks about financial knowledge being what brings people who have money and people who need money to make money together. One actionable step you can take to start putting your money in motion is to create an opportunity to pair up people who have money and want to make more with people who need money to make more.

[34:55] If you have equity, you can take a home equity line and use it to pay off credit cards, and you can start paying off other liabilities. Once you have no liabilities, you can then invest in others who need money. Chris also talks about some ways you can utilize your 401(k).

[39:05] You can look up Chris Naugle on all social media platforms, and follow the links below to receive a free copy of his book and learn more about his work.

Mentioned in This Episode:

Meetings

Daily REIA Show

REI Facebook Page

Brian's Book

Watch the Show — Risky Builders

Free Copy of Chris's Book

Chris's Website

Edwin Kelly is the CEO & founder of Specialized IRA Services. He's on the show today to talk about all things dealing with self-directed retirements savings accounts, including self-directed IRAs, Health Savings Accounts, and other Roth strategies. In addition to information on these types of accounts, Edwin breaks down some numbers to demonstrate the benefits of investing in these types of accounts. There is a lot of information in this episode, but all with the goal to help you maximize long-term wealth for you and your family.

Key Takeaways:

[1:30] Edwin's career started when he was back in sixth grade; he started working odd jobs and investing the money he made into essentially a brokerage account. He realized that he made more money when he invested his money than he did working for it. He saw a need for a provider that offers a service and support for clients.

[4:20] People are hesitant about self-directed retirement accounts. One of the biggest mistakes people make is that they don't have a Roth strategy; a Roth account is one where you make a contribution today and it grows tax-protected, so you don't pay taxes on the distributions when you pull it out.

[8:10] To be successful, you want to have an income goal. Edwin shares some numeric examples of how a Roth account can help you make more money. There are three account categories: IRAs, small business retirement plans, and tax advantage specialty accounts.

[14:00] For people in the real estate investing business that want to make money for today, there are a few different strategies. One approach is to look at the type of investments and where are you holding them; this could be a rental property within the retirement account. The other approach is to do any extra business each month into a retirement account.

[17:20] There are three steps to establishing a self-directed account. These are the three D's: Decide you want to build wealth for your future through self-directed accounts. Deposit money into that account, whether through contributions or a transfer of funds. Finally, Direct your money into an investment you want to make. It all begins with deciding this is something you want to commit to doing.

[20:05] When it comes to a retirement account, you'll always have access to the money. What will change depending on time and other limits is whether or not the contributions are taxed. For a real estate investor, you can also pursue other types of investments outside of your retirement accounts, but keep in mind the tax treatment.

[23:10] Health Savings Accounts came back in 2004. The government combined the tax benefits of the Roth IRA with the tax benefits of the traditional IRA. An HSA is a critical part of your overall plan because healthcare is typically the single largest expense in a household. If you want to use that money, you're using pre-tax dollars to pay for your healthcare.

[26:15] In addition to the immediate benefits of the HSA account, if you have just one cash-flowing asset in that account, that will be all you need to last you in the future as well.

[29:35] When should people start a retirement savings account? If you're hesitant about starting one of these types of accounts, remember that you can create more wealth by taking the taxes off the table. You don't have to choose between your wealth today and in the future. You can have accounts working concurrently.

[34:15] Another major benefit of these types of accounts is asset protection. Any assets that are within a retirement account are safe. To maximize and protect your wealth, it is important to have cash flow today and understand the benefits of a self-directed account.

[38:35] If you go to Edwin's website (linked below), you can get a copy of his book for free, as well as a free consultation. In the consultation, you can map out a plan with one of their specialists.

Mentioned in This Episode:

Meetings

Daily REIA Show

REI Facebook Page

Brian's Book

Edwin's Website — Specialized IRA Services

Brian Trippe and Rob Drum discuss the Birmingham area market in their monthly update show.

For cash-flowing Birmingham properties, reach out to Rob at 205-253-8756 or at [email protected]

Today's guest joins the show from Ohio. Jerry Green has over 25 years of experience in the real estate business. He joins Brian on the show today to talk about his real estate journey and how he's been able to scale his business using systems and processes. He shares some actionable items for listeners who are ready to take the next step in strengthening their business.

Key Takeaways:

[1:45] Back in the early '90s, Jerry was working in the electrical contracting business. When that business closed and declared bankruptcy, he decided to attend a real estate seminar in Cincinnati. He decided to pursue wholesaling full time.

[5:15] Like many of our successful guests, Jerry hired a mentor and after a period of time, he started putting together his first deals. As his wholesale deals took off, he got into the buy-and-flip business as well. By the end of 2000, they had systems in place that helped them reach success.

[7:30] After the birth of their son, doctors found a mass in his wife's kidneys. After several complications and medical treatments, the cancer had spread and his wife passed away. Jerry shares this story to show that even people who are successful in their business also go through hard times. It took him about two years to start rebuilding his business.

[12:30] The business Jerry had built before his wife's illness provided the means to take care of his family during that time. He had the wholesale deals and fix-and-flips but also had a few rental properties that provided monthly income.

[14:10] During the rebuilding, one big thing he learned was not to put everything on him. He learned the importance of building teams and putting systems in place. Over the past 10 to 12 years, he's been drilling down on the focus of systems and teams; the person who runs Jerry's company is actually stationed in New Mexico. He has a handful of employees that make up the team now.

[18:25] A lot of people know how to make money, but they don't know how to make a business. The first two things he looks at are how consistent a candidate is in activities, and at their data.

[21:10] When he works with someone on consistency, he uses an activity line to help them track and grow in consistency. They put items like marketing and follow-up on the activity line, and also have them lay out an accountability chart for different areas. The activity line really helps people see all the moving parts and understand what they must do to be successful.

[25:25] Jerry also looks at data. When you analyze data, you can really understand how you're spending your time. Jerry's team reports their numbers daily to make sure they are on track. You can also use this data to see where you can make changes to help grow your business.

[30:30] Letting go is one of the hardest steps in going from real estate to it being a business. It's important to understand who are you in your business. If you know your tendencies, you can move forward in the areas where you're not as strong. This awareness of who you are and where you want to go is a huge step in growing your business.

[35:00] For people who are looking for an actionable step, one of the best things you can do is lay out an accountability chart. Lay out boxes for each part of your business, and start writing in the boxes all the activities that go on in each area. When you assign your name to these things, it is one of the most eye-opening things.

[37:25] To connect with Jerry, you can visit his business or personal page on Facebook. He also has an event coming up at the beginning of May, Think and Grow Your Business. This seminar focuses on building a business out of your real estate side.

Mentioned in This Episode:

Meetings

Daily REIA Show

REI Facebook Page

Brian's Book

Facebook

Facebook — Business