The Real Estate Way to Wealth and Freedom Podcast
Hi and welcome to the Real Estate Way to Wealth and Freedom Podcast. You’re listening to the Friday Fundamentals with Jacob Ayers. This is a short episode that will air every week, in addition to our weekly guest interviews.
Here we’ll talk about a quick real estate investing topic and provide resources and actionable content for you to implement every week.
As I mentioned last week, I want to give a shout out to a couple 5 star reviews from iTunes.
5 Star Review from Mentally Strong says “Love the content Jacob provides. Super helpful interviews that have tons of usefulness. Can’t wait for more!”
Another 5 Star review from DrMarcD says “Great show that gets right to the point with actionable strategies for anyone interested in real estate investing. Fantastic interview with Michael Becker, a banker turned investor with great insight from someone with experience on both ends!”
Thank you all for the great reviews and I’m glad you all are getting value out of the show. If you like what you’ve been hearing, please let me know by leaving a review. I would love to give you a shoutout next week.
Previously we talked about investing for cash flow with our guest, Dave Zook. Dave is a great guy, and is involved in some interesting deals, from investing in ATM machines to Central American resort developments.
This week’s Friday Fundamental
The Apartment Syndication Model
Buying large multifamily apartments is often done through syndication. What’s syndication, you might ask? According to Merriam-Webster, a syndicate is a group of persons who combine to carry out a particular transaction or project.
You see, you might me more familiar with syndication than you realize. You syndicate air travel, dining, and many other things. Say you want to fly somewhere, but don’t have your own private jet? Well, you buy a ticket from an airline, along with other people, and together you pay the airline to take all of you to the same destination. You want someone to cook for you, but you don’t have a chef? Well, you can pick the restaurant of your liking, and pay for the food and service there, along with other guests. You see, buying apartment buildings is similar. You want to buy an apartment building, but can’t come up with the down payment? Well, raise money from other people and buy the apartment building together. Whala! You’re now a syndicator!
So let’s dive deeper into how syndicating works.
It often starts with a lead, or managing partner. This is the person who searches for the deal, puts the property under contract, leads the due diligence, finds investors, raises money, and then manages the deal once it’s acquired.
The managing partner raises capital from investors to fund the acquisition of the property. The acquisition cost includes the down payment, closing costs, attorney’s fees, SEC filings, any rehab costs, etc.
The property is then owned by the partnership of the managing partners, and the general partners, who are the investors.
This model allows for people to pool their resources – capital, experience, strengths, etc. to buy a property they might not otherwise have been able to individually.
The partners will typically have some equity in the property in exchange for their initial investment. They share the risk and the rewards of the deal. When the property is profitable through positive cash flow, the investors receive a return. However, as equity partners, the investors also share any downside the property may experience, although the managing partner will try to keep those events from ever happening.
The managing partner can also raise money from debt partners. Debt partners only receive a return on the money they have loaned, similar to a bank. They are paid regardless of how the property is performing, and have no equity stake in the deal.
Syndicating is a common model for apartment investors. It allows everyone involved to spread risk, and leverage other people’s resources.
I realized early on in my investing career that you’ll eventually run out of your own money to invest. I personally have goals to build a large multifamily portfolio, and I know that it will only be possible through raising capital from other investors.
We’ve had some experienced syndicators on the show already, from Rod Khleif to Joe Fairless. These guests have had tremendous success with syndicating deals. We talked with Dave Zook last week about the process of syndicating deals. We’ll continue to discuss raising money, putting together deals, and how you can get started in upcoming episodes, so stay tuned in for those!
That wraps up this week’s Friday Fundamentals with Jacob Ayers.
If you’re getting value out of this show, please let me know by leaving a rating and review in iTunes. Please subscribe to the show to be notified of new episodes! We have some great guests lined up! I’m going to continue to give shout outs to people who have reviewed the show starting next week! I look forward to reading your reviews!
As a thank you, I want to give you a gift! Click the link to redeem your free Audible trail and free audio book of your choice!
And also, please let me know what you think about this format! After all, I’m here to help you and that’s where I want the focus of the show to be. So please, if you have any questions or comments or just want to drop me a line, I would love to hear from you. You can contact me at www.JacobAyers.com or email me at info@JacobAyers.com.
Dave Zook is a successful business owner and experienced real estate investor active in the multi-family space and resort community development. He has real estate holdings in several states and several countries.
Dave has purchased over $60 Million worth of real estate since 2009 and has over 2300 Multi-Family Apartments in his portfolio.
Dave, along with his development partners, is actively involved in the early stage planning and development of the largest real estate development on the Island of Ambergris Caye, Belize, which has been rated “The #1 Island in the World” two years in a row (2013-2014) by Trip Advisor.
He is a published author and has been a guest speaker at the International Business Conference, The Jason Hartman Real Estate Mastermind, and on the Real Estate Guys Radio Show.
Dave, his Wife Susan, and their four children live in Lancaster County, PA.
1. What was your biggest hurdle getting started in real estate investing, and how did you overcome it?
No experience in real estate, with no reputation as a real estate professional. The psychology and self-limiting beliefs. Dave was able to overcome those things with great partners.
2. If you were starting over with no education or capital, how would you start investing in real estate?
Get around the right people.
3. Do you have a personal habit that contributes to your success?
Discipline to not chase the shiny objects and stay focused on his goal. Dave says “Sometimes you have to say no to the good to say yes to the great.”
4. Do you have an online resource that you find valuable?
Real estate podcasts.
5. What book would you recommend to the listeners and why?
Rich Dad Poor Dad by Robert Kiyosaki
1. Dave got started in multifamily investing from the need to diversify from his seasonal sales and marketing company and the need for a tax protection vehicle.
2. Getting around the right people. The team is more important than the asset.
3. ATM machines – tax free income.
4. Overcoming $200,000 on your first deal.
Dave’s Reasons Why
Dave strives to provide value to the people in his network, by providing opportunities to invest in cash flowing residential properties. He loves doing deals, and is an investor at heart. As long as he can create value to his investors and have fun by adding value to his community by giving them access to deals they normally wouldn’t have.
Visit Audible for a free trail, and a free audio book download.
Why Real Estate?
Many people ask Why Real estate? Everyone has a unique answer, and here is mine.
Real Estate is a tangible asset, and to me it is easily understood. I can wrap my head around rent, mortgages, insurance, repairs, etc. I can look at a property and ballpark estimate what it’s worth, and what it will rent for. I understand the transaction process – from renting to buying or selling. Real Estate is a relatively simple subject. There are no complex schemes, trades, or transactions. It’s up front and widely understood, at least to some extent, by almost everyone.
Real estate investing has always appealed to me for several reasons.
1. You have direct control over the asset. If you want to increase the property value with renovations or upgrades, you have the ability to do that. In multifamily properties, if you want to force appreciation by increasing income or lowering expenses, you can.
2. The property value will never go to 0. While you’re property value may depreciate over time, you’ll likely never see that property value be worth nothing.
3. Your financial investment is secured by an asset.
4. While certain types of real estate, like commercial or retail, may not be in demand forever due to changing consumer trends, residential real estate will always be in demand. People might be able to do away with brick and mortar stores, and order all of their products online, or work from home, rather than going into an office, but at the end of the day, everyone needs a place to live.
5. The power of leverage. The true power of real estate lies in the debt that can be placed on real estate. By using other people’s money, like a bank, you can put a small down payment on a property and then control it.
Real estate investing provides multiple income streams
1. The most obvious one is rental income. The cash flow you see each month is the rental income minus your expenses. Your expenses include the Principal, Interest, taxes, insurance, vacancy, and management.
2. Appreciation of the property. Historically, property values have increased 6%.
3. Loan pay down. My favorite kind of debt, is the debit that someone else pays for you. That’s exactly what residential real estate debt is. The tenant pays rent, and part of that goes towards paying down your principal.
4. Tax benefits. The tax benefits of real estate can prove to be the most valuable. The IRS will allow you to depreciate your asset over time, regardless of the market value. This is a phantom deduction that is extremely valuable to real estate investors. We’ll have an entire show or two dedicated to the tax advantages of real estate by someone much more knowledgeable than I am.
5. Hedging against inflation. In an inflationary economy, locking in a long term, low interest loan will hedge against inflation. Think of it this way, your $500 mortgage payment will be worth more today, than it is next year. That is to say that $1 today is more valuable than $1 in the future. While inflation will erode the purchasing power of your dollar, it will not erode the value of your mortgage payment. That mortgage payment will remain the same.
Joe Fairless is a full time real estate investor and Host of the world’s longest running daily real estate podcast, Best Real Estate Investing Advice Ever. His career began in New York City as the youngest vice president of an advertising agency, to creating a company that now controls over $135,000,000 worth of real estate.
Joe’s, Best Ever Podcast, hosts distinguished real estate investors and entrepreneurs to share their advice and success stories. Past interview guests include Barbara Corcoran and Robert Kiyosaki.
Joe’s is the Author of the Best Real Estate Investing Advice Ever, Volume 1 & 2, which has been personally endorsed by Barbara Corcoran, and all profits are being donated to Junior Achievement of Cincinnati.
This a short episode that will air every week, in addition to our weekly guest interviews.
Here we’ll talk about a quick real estate investing topic and provide resources and actionable content for you to implement every week.
For those that have been listening since Episode 001, we’ve covered the psychology of success with Rod Khleif, Finding your Niche with Paul Moore, and touched on commercial lending with Michael Becker.
These three episodes have provided tremendous value from equally impressive guests, and I look forward to continuing with more great content from our upcoming guests. Stay tuned or next week, where we’ll discuss multifamily investing, and raising money with Dave Zook.
For those of you that haven’t listened to all three previous episodes, I encourage you to go back and listen and pick up on the valuable content there!
This week’s Friday Fundamental
Surround yourself with like-minded people.
Jim Rohn famously said that we are the average of the five people we spend the most time with.
By surrounding yourself with people who share your same interests and goals, you’ll become more like those people.
It’s said that your net worth is measured by your network. Yes, your net worth is measured by your network. So choose wisely who you spend your time with.
By surrounding yourself with like-minded people, you begin to expand your network to other similar people. These connections can help open doors you never thought possible.
So if all you do is one thing starting out, I highly suggest you start building your network and surround yourself with people that will bring you up.
Go to your local Real Estate Investment clubs, real estate meetups, or start your own networking event. Consume relevant material, and follow those people who are where you want to be or doing what you want to do.
And remember, don’t always focus on climbing the ladder for your own interest. Look around and see who you can help, and offer support. Remember, you were just starting out at one point too.
I’ll leave with this aphorism – “A rising tide lifts all boats.”
If you’re getting value out of this show, please let me know by leaving a rating and review in iTunes. Please subscribe to the show to be notified of new episodes! You won’t want to miss next week’s guest! I’m going to start giving shout outs to people who have reviewed the show starting next week! Let your name be the first one!
As a thank you, I want to give you a gift! I would like to give you a free audible trial and a free audible book of your choice! All you have to do is click the link here.
And also, please let me know what you think about this format! After all, I’m here to help you and that’s where I want the focus of the show to be. So please, if you have any questions or comments or just want to drop me a line, I would love to hear from you. Please contact me at www.JacobAyers.com or email me at info@JacobAyers.com.
Michael is a 15 year veteran Commercial Real Estate Banker and has originated and managed numerous portfolios of permanent and bridge loans in all major asset classes. Over the last 5 years of his banking tenure, Michael focused exclusively on multi-family properties.
As a Portfolio Manager, Michael directly oversaw the management and financial performance of the countless C & B class Multi-Family properties he originated loans for. As a result, Michael has developed a keen sense of the multifamily arena, and has since started building his own portfolio of multifamily properties.
Michael brings a unique perspective and fundamental understanding of the banking side of the business.
Paul Moore has completed over 85 real estate investments and exits, appeared on an HGTV Special Real Estate episode, rehabbed and managed rental properties, built a number of new homes, developed a waterfront subdivision, and started two successful online real estate marketing firms.
A compelling rags-to-riches-to-rags-to-riches story, Rod soared from humble beginnings as a young, impoverished Dutch immigrant to incredible success. Rod’s experience involves both remarkable triumphs, and spectacular failures, which he affectionately calls “seminars”.
The Real Estate Way to Wealth and Freedom will air 2 days a week, on Monday and Friday mornings. One weekly episode will be an interview based podcast, in which we’ll host some of the world’s most successful real estate investors. The other weekly episode with be a short episode of actionable real estate investing tips with myself. The podcast will provide the education necessary to get started with your real estate investing journey, and support you with actionable content and resources.
"This podcast offers a great perspective for people who are just getting started in real estate investing. I HIGHLY recommend it!"
- Nathan B.
"Don't pass this podcast up! I was unsure about adding another podcast to my library, but this one has proven to be invaluable in my investing journey!"
- Ernest D.
La Porte, Texas
"I've tried my hand at stocks, and let's just say it didn't go as well as I planned. This podcast has helped me realize the multiple benefits of real estate investing. I just wish I would have started sooner!"
- Jonathan C.