J. Darrin Gross:
I'd like to ask you, Michael Zuber, what is the BIGGEST RISK?
So the biggest risk? And again, I asked myself this all the time, right? Because I look at it, I go, what is my biggest risk? And if I can, if I can survive the downside, right? up through all those things, those that I think about it all the time. So in my portfolio, my biggest risk that I've been working on all year is variable interest rate risk. I have commercial loans, I own apartment buildings. And those loans reset 357 10 years, depending on what you have. And over the last year, I have feared that I could see at point of refi, where rates, you know, I had a rate of three and a half. I was like, what happens if this is seven, seven and a half? Right? So what I had been doing actively over the last year or so is taking all of my loans and looking for ways to get 30 year money. One thing you can do because there's now for the first time, really in the last couple years are these vendors called non qm lenders, non non qm lenders. And I work with a lender who has taken all of my apartment risk and allowed me to get 30 year money at 3.99%. So it's not a Fannie Freddie loan, it's a 3.9 non qm lender. So I've been I've been actively working to get all of my apartment buildings, and I'm even paying prepayment penalties on one of my loans. Because I I'm deathly afraid of interest rates shooting up. And if that happens, of course, apartment buildings, if rates go to seven cap rates, gotta go to what 910 and then the valuation calls and they're gonna say, hey, you're now in technical default and you got to cut a big check. That freaked me out for a while. So I've been working very hard to Take all of my just double rate mortgages on apartment buildings and go get 30 year money even if I have to, even though my payment goes up slightly now, I'm okay with that. So that was the biggest one for me. Cuz I looked out years ahead and go, wow. Because again, I've been through the last crash, what caused the last residential crash? It's all those adjustable rate mortgages that popped up that and their payments reset. I looked at that going, Oh my God, if that happens to my apartment buildings, and then the cap rate goes up and the value is cut in half. You know, where do I go? So that was a big one for me. So that's, I'm working on my last one right now.
Today, my guest is a returning guest and a favorite. His name is Vinney Chopra. Vinnie is a multifamily syndicator, Senior Living care facility developer, and also a mentor for investors and an author and a podcast host and on and on and on. And he's multi talented. And in just a minute we're gonna speak with Vinney about the opportunities in multifamily and also senior living.
Vinney, what do you see is the biggest risk?
Vinney Chopra 32:17
Wow, that's a very good question. You know, they're not see that, as a businessman, any entrepreneur should always, always always get the insurance, you know, to come back the risk, because we syndicators are using other people's money, you know, to get into LLCs, and buying these properties and all that, if there is a slip and fall, or if the contractor came on the property, not properly insured. I just believe that we need to have the highest amount of insurance and umbrella insurance at the same time to directors insurance, I've had that in the past cyber insurance I've had that. I've been, you know, before big lawsuits, but I just kind of walked away from them, because I had people like you, you know, who really took care of and they were able to write good policies. Were they settling mediated and settled? You know, with the, with the plaintiffs, I think, right, you know, defendants via the defendants, right, ya know, all those things happen in life. So we should really always be looking around us what can go wrong, right. Even in the due diligence side, when you said, you know, risk involved, a lot of risk is there because we get the key to the property, then it's our choice. I mean, it's our baby, no matter what we did. So we need to really mitigate the risk, I call it you know, by taking proper measures about like, I talked about, like sewer lines, running the cameras through, and then, you know, foundation people, termite people to come digging deeper into, you know, if there is some termite and mold and all that stuff. So, no, those risks are there. As business people, we need to, it's the small amount we pay, it's an investment. That's what I say. I mean, one time in my life, I was paying 1.2 million 1.2 million insurance premiums for by so many properties. Yeah, yeah. You know, so that way, it was definitely definitely needed help, you know. So the risk factor is very much there, and especially for us syndicators, and we need to really listen to people like you. Definitely.
Today, my guests is Stephanie Walter. Stephanie is a capital raiser syndicator and the CEO of Erbe Wealth. She recently retired and sold her insurance agency of 16 years by following the key principles she's learned from her wealthy investors. And in just a minute, we're gonna speak with Stephanie, about how to unlearn what we've been wired to think about money.
J Darrin Gross
Stephanie Walter, what is the BIGGEST RISK?
I think you know what? That's a good question. I think that the biggest risk, if it comes down to people investing in syndications is I guess, really understanding the team of people that you invest with? Seeing that they have a track record. I actually have, on my website of, I think about 30 questions that I get from almost every investor, and they involve risk and how to mitigate it. And so that's definitely a good, a good, you know, spot to start. I think the largest risk that I've seen personally of you know, people who have invested in syndications and kind of maybe not done so well, the last few years, I think, and knowing your market, or at least, being with people that really understand the market, that they're working in. That that I think, is huge. Because, you know, we've seen dramatic differences, like I said, between say, a B property, how it's performed through COVID versus a C property. As far as rent collections, we've seen differences in the way that you know, that these properties have done in Florida as opposed to say, Indiana You know, there's just there are definite you know, things about these these different markets that either you need to trust the you know, team that's bringing you these deals, but these are there are risks, you know, and you're doing your due diligence is is definitely important.
Today, my guest is Frank Furman. Frank is the co founder and chief growth officer at Pad Split, a real estate technology company headquartered in Atlanta, Georgia. Landlords list their properties on pad splits marketplace and are connected with workforce renters. In a shared housing room rental model. Landlords earn 120 229%, higher net operating income on average, versus traditional single family rental model, while working members of our community have a more affordable place to live.
J. Darrin Gross
Frank Furman. What is the biggest risk?
Yeah, I feel like I've been talking about risk the whole time. Maybe I shouldn't put on a sunnier face to start. But yeah, it's a great question. It's, it's funny ask because I oftentimes get asked about insurance, that tends to be a smaller challenge for passport houses, because ultimately, it's a rental property, the big risks and insurance that, you know, your kind of homeowner's policy or, you know, kind of landlord policy would cover are the same, you know, risk of a tornado is the same risk of tornado, you know, we, we can be blamed for many things, but typically not for controlling weather. So, you know, that tends to be relatively straightforward. To me, the biggest risk to our business kind of gets to your point, certainly about zoning, but it's, I'd say less is a distinct zoning question and more. But certainly one around like kind of government involvement and prohibition. I mean, it's it's, I guess, you could broadly call it the the NIMBY movement, being weaponized and certainly you've seen it with, with other startups, certainly in the space and an Airbnb is a great example, where, you know, Airbnb, their core offering of letting people rent out their properties was essentially legal everywhere in the United States 10 years ago, you know, there there may be some small exceptions and you know, we can have the debate about you know, whether or not they should have been paying hotel tax in this map, but generally, it was just kind of off the books. No one even thought it was that strange If in 2005, you said, Hey, I'm going to run out, you know, I'm going to leave my house for a week, and I'm going to have someone pay me for the, you know, to live there for a week, no one would say do you would have no issue at all. Now, obviously, they, you know, they grew, they got a ton of coverage. And, you know, they're they're issues that people use party houses and you know, a bunch of guys come into a residential neighborhood to go to a, you know, for a big football game, and they are throwing a kegger and neighbors are mad. You know, I get it. I also live in a quiet neighborhood. I have kids, you know, I like I, we all have a little bit of the the nimbyism in us, right, especially on, you know, work nights and that kind of thing. So, so I get it. They also, of course, have a very powerful competitor and kind of hotel companies and so on let's consolidate and well resorts. So there's, there's a little bit of that, too. So, you know, fast forward to 2021, and many municipalities have either straight prohibitions that are new, you know, they've been legislated into existence, or pretty onerous requirements on Airbnb, and in some cases aren't actually been easy for them to answer, right. Because one of the unfortunate things about our kind of the way the politicians think about these things is like, they think Airbnb is operating all these units when clearly they're not, you know, they're, it's a marketplace house or operating a unit. So Airbnb doesn't know what's going on, or doesn't check the maintenance or, you know, whatever. That would be almost impossible for them to do. So. Okay, fine. But they've, they've obviously faced a lot of headwinds, but they were able to get big enough and secure enough that they could kind of attack them head on for us. You know, I anticipate some of the same sort of challenges. We, you know, we're in the workforce housing business. And, you know, everyone loves workforce housing, except in their street, you know, except in their neighborhood, except in their town, you know, they want they want it to be somewhere, you know, they want to get their Starbucks coffee at the you know, for cheap, but, you know, they don't they don't want to house the barista, so, okay, fine, we're gonna face some of the same headwinds, but can we get to a size and scale quickly enough, fast enough, become accepted enough to where you're, you know, not necessarily too big to fail, but where you can face those challenges head on, and where the, you know, the disruption of blocking things as at least as much as, you know, the disruption that you're causing, because, you know, real estate and renting, you know, that's it's not always an easy business, you know, we have challenges, you know, as I like to say, our, our residents are cut from the crooked timber, that is humanity, you know, and they, they sometimes fall short of what they'd like to do, you know, predominant good people, but sometimes they can only Park like jerks, you know, sometimes they, you know, cause trouble. You know, that's, that's just the reality of it. When you have a couple 1000 these people, it's inevitable. So can we get big enough, fast enough and really create enough value in the marketplace that, look, the hadn't there, headwinds are coming. You know, that's, that's inevitable, but we can face them with kind of a worthy challenge. And when communities say, Hey, you know, we don't actually like workforce housing in this town, we'd say, Okay, well, we're already here. So, you know, what's next? Do we need to tell you where they are? Do we need to, you know, this or that? How do we conform and meet it? But have it not be such an onerous? You know, have it have to have the scale to where we can meet it?
Today, my guest is Anton Mattli. Anton is the CEO at Peak Financing, where he brings his decades of experience in commercial and investment banking, private equity and commercial real estate. And in just a minute, we're gonna speak with Anton about commercial debt financing, the changes terms and the challenges we're currently facing in this market.
J. Darrin Gross:
I'd like to ask you, Anton, Maddy, what is the biggest risk?
Yeah. Obviously, as you mentioned, risk is everywhere. A lot of risks that can be mitigated at least right and Insurance obviously is a is a is a perfect tool for that some risks cannot be mitigated and they it brings me back to the financing side and forever on investments, as well as for our our clients. I would say the biggest risk is really that when you own a property, that you potentially lose that property, even though it cash flows. And this is we have seen it in 2008 and 2009. And oh, we get back to that time period. But doing market disruptions, you will have a situation potentially, there you may not get financing, as it will be available today. And if you get financing, it might be at at terms that your noi and cash flow cannot support. And this is my view is really the biggest risks that one is, is owning a property and one is in a in a financing situation, and is not ready for for that black swan event, during which one potentially would have to refinance or sell the property. So my solutions recommendation really is for that is is make sure that you have lower leverage, or a longer term of the loan, so that you're not caught off needing to sell the property, or refi the property the loan that is in place doing such a black swan event, which essentially means is that one should always have at least one year, ideally two years of a remaining term on the long left. To avoid such a black swan event, right, when we look back to 2000 de 2009, if you had to refinance a property right during diverse period of time, it was not available for for for a lot of the borrowers. However, if one was able to wait it out for another year to two years financing came back and didn't lose the property. And that is I would say is probably my my biggest fear of from a risk perspective, but also something that can be resolved by just keeping the term of the loan locked out for long enough, so that won't get snow caught in the middle of such a black swan event.
Today my guest is Barry Greenfield. Barry Greenfields local works since 2011, has a new take on co working spaces, which means a win win for those with empty offices and leases on their hands, or for small businesses leaving big leases, or for empty law firms. And in just a minute, we're gonna speak with Barry about local works and how that works.