Today, my guest is Jake Harris. Jake is a best selling author on distressed commercial real estate with over 18 years of experience in real estate, construction and investment management, and has been featured as a national speaker on his expertise. Over the past six years, he has managed and developed and acquired over $200 million in projects and over 250 million in the development, or he has over 250 million in his development pipeline. In just a minute, we're gonna speak with Jake about what to do before investing in distressed real estate.
I'd like to ask you, Jake Harris, what is the biggest risk?
So, I mean, I'm gonna give you kind of It depends, because depends on who who you are, as an investor, an LP investor investing into a deal. I think your sponsor Are as your biggest risk. And so because they're the ones that's kind of captaining the ship, I think if you're someone that's buying real estate, your biggest risk is the purchase, actually, because and maybe you've heard this or maybe you haven't heard this is you make all your money on the purchase. And if you overpay for an asset, it's very, very difficult to correct course, and trim out the expenses. And then you're kind of, you know, writing this, you know, failed investment out. And sometimes it takes so much more energy to even get out of it, then, you know, and you'd be like, all I'm trying to do is get my money back. And I see a lot of that right now. And alas, and actually, this morning, I was talking with a buddy, I realized I did not buy a single property and 2021. And actually, so far in 2022, I haven't this is the longest period of time that I have gone without buying a property. I think in the last 20 years, I think this might be one of the only years I have not actually bought real estate at all, any property, and over a year time period. And so I was looking back at that. And I was like, Wait, I didn't even realize that happened?
Well, because I have a very disciplined, you know, like buy acquisition model that I'm looking at. Part of it is because I lost my ass in the subprime meltdown, I became a millionaire. And then I had a negative network. I remember sitting on the street corner in Tucson, I was crying. I was like, you know, a grown adult, crying, and sobbing and praying, dear Lord, can I be worth no money. And there are so many aspects of my life that I look back at that moment of that rock bottom. And the least important of it was the losing the money. The least important of it was going from a millionaire to a negative net worth and wanting to start over at zero, I was 7580 pounds overweight, my relationships sucked with my family, the girl I thought I was going to marry it dumped me. You know, there was so many other things. And so lots of people focus on the money risk of things, and they forget about them 80 or 90%, that is the real life. What is your relationships like, you can make more money, you can't rekindle the time of your relationship with your spouse, your kids, they kind of go away that opportunity to live those those, you know, Bucket List adventures, you grind, grind, grind, grind, and all of a sudden you realize you're 60 7080 years old, and you don't have the health to go travel and do those other things. Those are important. And so it depends on the category.
As a human, I think the biggest risks that we're currently facing, is not pursuing the things that excite us that we truly, really want and living a very fulfilled life. And so I'll give you a Maslow's Hierarchy of Needs of premises. When you get and you're trying to figure out how to pay bills, you're just in a survival mechanism, you get to a levels of and I'm assuming that your audience members are starting to elevate up into that, because they're thinking about investing is they've gone beyond some of those levels. And they're starting to get into the self actualization kind of topper end of the pyramid of Maslow's hierarchy of needs. And so then they're trying to figure out what they are or who they are, what's their purpose in life. And myself, and this is a constant struggle. And I think everybody has it is like they need to give themselves that validation or approval. Sometimes it might be a millionaire, sometimes it might be making the New York Times bestseller list. But what happens is you stop thinking about what everybody else wants for your life, and you start leaning into the purpose of what you are put on this planet for.
And then, because money doesn't equate to happiness, your success and making money is not what makes you happy, you've elevated up to that. And I think there should be an extra category on Maslow's higher hierarchy of needs, is when you're living your purpose and life in the service of others, is when you unlock true happiness is when you unlock the ability to then really impact the world. Because what you're doing is you're serving people that couldn't give you back and just not about a transactional equation of how do I make more money or know how can I benefit them? And they give me $1 back? How can I do this and you're elevated out of trading time for money into an investment that you have a certain free, you're living your purpose, and you're pouring it into the world in the service of others is when you will unlock true true value and I think that's what we're all really Seeking, we have to get through some of these levels of validation, we have to get through this of self actualization we have to get through this. And again, this is also part of my own journey. So to me, the risk and the biggest risks that we're all facing is not pursuing that. However, that mechanism looks for you.
Today, my guests are Alison Williams and Anna Ramos. Allison is the Senior Vice President and Chief Production Officer at Walker Dunlop. And Anna is a managing director for the West Coast and mountain regions. And in just a minute, we're going to speak with Allison and Anna, about commercial lending strategies for multifamily.
I'd like to ask you, Alison Williams, and Ana Ramos, what is the BIGGEST RISK?
Anna, do you want to start?
Yeah, you know, it's interesting, because I think there's a lot of risk in what we do. And I think I'm pretty aggressive. I think we underwrite our loans pretty well, we're at a 125 120 debt cover over breakeven. Yes, we are a non recourse loan, but we vet it out the client. So when I assess risk, I'm looking at risk. It's more for the borrower, the risk of capturing the rate in today's environment, I the way we underwrite the way we get our values, the way we package the file. I think the agency when you look at agency, historically, our losses are very minor. So if being as in on the origination side, I would love to be much more aggressive and see more. But we don't we don't see that a lot. So it's really hard to speak on that, at least for me, because we don't see a lot of that the losses are there. They're unheard of. And it's very, very small. Just because of the way everything is packaged and the way everything is the way we underwrite the transaction, the property the sponsor, the management and we service the loans and how often we service and how involved we are with the loans from beginning to end and also through the life of the loan. So for me, it would be more the borrower side that today I think it's really critical, especially in today's environment is to lock that interest rate because of the risk and the volatility.
I'd echo Ana's comments, but I'll take a slightly different take. And I think what concerns me the most when I think about today is affordable housing. There's just a massive demand for affordability right now. And every market with the amount of rent and growth that we've seen in every city. I'm currently in Tampa, we had 25%, and rent growth year over year. And we're just starting to see, you know, just the lack of affordability. And with a lack of vacant land and where you can build and raising, you know, construction costs and rising interest rate, it's going to become much more challenging to build affordable housing to fit the needs of, you know, the average American. So I think that, to me, is when I think about the future, and my daughter and that kind of stuff, I just think about like, wow, we've got to tackle this affordable housing crisis that we're dealing with right now.
Today my guest is Rod Khleif. Rod is a multiple business owner, and philanthropist who's passionate about business highperformance real estate and giving back. And just a minute we're going to speak with rod about the investor mindset.
J. Darrin Gross
I'd like to ask you, Rod Khleif. What is the biggest risk?
I will tell you to, Today is June 8. And I have to say that because who knows what will happen to things are changing daily right now. But and I know this alehrer in a week or two, but But right now, the biggest risk that I have alerted my students to on several occasions is the debt markets. Okay, that I mean, it is crazy out there right now. And and I'm going to tell you that it when you're performing a multifamily right now, you need to do some worst case scenarios, like if you're planning on getting in, right now, the most common debt is bridge debt. And that is very, can be very honest debt. And, and because you have a business, you have a business plan, you got to adhere to that business plan. Otherwise, you know, what's could be non recourse can become full recourse. So it's very, very important that you do what you say you're going to do. And some of those have short fuses like three year timelines, and we could be in the midst of this recession in three years. So I would encourage you to do absolute worst case scenarios as it relates to interest rate, you know, take out interest rate, when you refinance, we just did, we just put 138 unit under contract, by the way, if if, if you were accredited, we it's a phenomenal deal. 54,000 A unit which is unheard of in an emerging market in Arkansas, so so if you're interested text partner to 72345, and get on our portal, because we'll be presenting that probably about the time this goes live. And it'll be a very short, it's not a big raise. So it'll it'll subscribe very, very quickly. But that that's a really good deal. But the point is, you know, we did worst case scenarios, what happens if the interest rates 8%? And can we still be okay? And yes, we could and so, you know, most people aren't doing that. Most people aren't, aren't stress testing these deal strongly enough? You know, and, and I think we're gonna see some upset when I'm, we're going to snap up some deals where they didn't do it right. You know, and I hate to say it, but that's likely going to happen, people are still overpaying, and they're not paying attention to that risk. And so I think that's the biggest risk right now. That's the first thing I thought of when you when you prepared me for that question earlier, Darrin, because I really, that jumped right into my head. So
Today, my guest is a returning guest, Brent Bowers. Brent is an investor and coach with a focus on buying and selling land. And in just a minute, we're going to speak with Brad about the business of buying and selling land and investing strategies.
I think the biggest risk is me dying. And my children and my wife getting taxed to death with this real estate that they're probably going to sell because I didn't set up a plan with trusts properly. I didn't have proper life insurance, like it talks about this, this great book that I read called, become the Rockefellers and using a whole life policy to, you know, be your own bank. So I think that's a huge risk. And it's like, I'm just recently learning about these things and implementing these things, to where I can fund this policy for, you know, maybe I get a chunk of money 10 20,000, I can fund this policy, and now my, it'll pass to my family tax free. And then oh, maybe I need that 20,000 Later, I can borrow like 90% of it at two or 3% interest. And that 20,000 is still making the 6% interest with the dividends and all this stuff. So I think that's a huge risk. Business owners not having that and talking to you there and about that sort of thing. Because the Rockefellers set it up to where it passes on. That's why they still have money six generations later, and the Vanderbilts don't really have as much money as they used to. So that's a huge risk, taxes, and death, to the things that we're all pretty much guaranteed.
Today, my guest is Marc Pégulu. Marc is the vice president of Internet of Things product marketing and strategy for Semtech Wireless and Wensing Products Group. And in just a minute, we're gonna speak with Marc about the IoT of things with commercial buildings, and how low raw sensors are being deployed to help builders, owners and residents overcome some of the biggest challenges for smart applications with commercial buildings.