J. Darrin Gross
I'd like to ask you. Jeremy Thomason, what is the BIGGEST RISK?
Jeremy Thomason
Okay, man, this is a great question. We are sitting here. I don't know when this will air, but we're sitting here on a on a Fed day. So the obvious answer to me would be interest rates. And so honestly, I'm not going to answer that, because that's just an obvious answer. And I actually have an insurance license too, and I sit in Texas, and so it'd be very easy for me to say, well, it's the high cost of insurance. That's an insurance that's just a really big problem right now for our industry. And in Texas, renewals, everybody's scared when their renewals come up, because it's just going to be a bad news story. So it'd be easy for me to say, well, it's insurance, and those interest rates and insurance are not really controlled by us in a lot of cases, so they do represent big risks. But I'm going to say it is something that I've learned through this last cycle. And so it's related to insurance and interest interest rates, there is a tendency, I think, in our space, to want to go chase whatever the absolute best deal is. So I'm going to use lending as an example. Three years ago, the whole space thought that the forward curve on interest rates was going to have near zero interest rates. And everybody institutional capital, everybody thought, You know what, the best deal in town is to go ahead and do a floating rate loan, and you'll cap yourself, you'll protect yourself with an interest cap, and you'll be fine. I. Obviously, we'll go into it. That was a mistake, mistake by our industry. We nobody could see coming. 500 plus basis points of interest rate movement within a year never happened like that before, and it just it's put a lot of stress on our industry. Similarly, insurance, the insurance markets call it catastrophic risk, high probability, high frequency, all of those different things, coastal all those things have put an upward pressure on rents, and we couldn't anticipate it. So my answer is, on the risk. Thing is, it's the risk of uncertainty. And so how am I going to answer this? I'm going to answer this by saying I am much better off working with someone that has experience in the space and taking risks off the table. So floating rate loan at 2.9 I could have gotten a fixed rate loan at the time with a little less leverage at four, but that 125 basis points was sure nice in my modeling, but I should have taken risk off the table because I only had a five year hold. So uncertainty is my answer. It's the uncertainty, and the way I'm answering it is, I, my job as a fiduciary to my investors is to take as many risks off the table as I possibly can, because there, God knows that there are so many different risks that I can't control and are going to hit me. So if I can eliminate risks and how I underwrite or how I use products and services, or how I look at a particular basis of a property, and take as many risks off the table as possible, then I'll be left with still a substantial amount of risk, execution risk and unknown risk, but my job is to eliminate risk, and I can do that in different ways, because there's all kinds of different risks. But the answer is the uncertainty risk to your question, Darrin, I know that may be too vague, but that's what I worry about, is uncertainty, and how I have learned in this last cycle is it's better for me to have certainty at a little higher price than it is for me to just hope that everything's going to be fine and chase the better priced product, whether it's insurance, whether it's interest rates, whether it's a contractor, certainty wins because I can underwrite I can underwrite certainty.
Contact info:
Website: https://www.convolocapital.com/
Email: jeremy@convolocapital.com
Today, my guest is Sujata Shyam. Sujata is a real estate investor, underwriter, short term rental operator and fund manager, after using her student loans to flip her first house during her MBA, she spent four years underwriting multifamily acquisitions for institutional buyers. And in just a minute, we're going to speak with Sujata about the math behind the money, how to snowball your wealth through real estate syndication.
Contact info:
Podcast: Passive Income Unlocked
J. Darrin Gross
I'd like to ask you, Sujata Shyam, what is the BIGGEST RISK?
Sujata Shyam
So with what I do, Darrin, where we. Invest as a fund of funds, where we're investing as a group, and placing that capital as one investor into a property or an opportunity of sorts. In in my view, the biggest risk by far that's out of our control is the operator. So the operator, you know, we have trust in the operator. We're basically betting on the jockey. In a sense, there's lots of things we control for can't control for. Do we like the deal? Do we like the market? Do we like the property? Do we like the business strategy? But we're trusting the jockey to execute the business plan, or the operator, as we call it. So the biggest risk for me, really is that the operator either, mostly it's that they start, they start acting in their own self interest, rather than in the interest of all the investors. And we try to put lots of controls on that, but ultimately, they can still cause a lot of trouble if they decide to, if they get squeezed, or if they decide for some reason to get too aggressive, that is by far the biggest risk that we have to look out for, and that's why trust in an operator and trust in the people that you operating with, and that they have not only the integrity that's needed, but also the capacity to manage the types of deals that they're doing, as well as the decision making ability to know, have I gone too far? Am I, is this like a little too far outside my capacity? Do I need to scale it back so that I don't put investors capital at risk? That's really the biggest risk, is the people.
Today, my guest is Jaime Seale. Jaime is a content writer at clever real estate, the leading real estate education platform for home buyers, sellers and investors. And in just a minute, we're going to speak with Jaime Seale about the best and worst places to live in 2024 according to Americans.
J Darrin Gross
I'd like to ask you, Jaime Seale, what is the BIGGEST RISK?
Jaime Seale
I think I'm going to try and tie this back to the survey. And our our business at Clever, which is helping people buy homes. And buying homes is certainly a big risk, especially if you're doing it, if you're trying to move and doing it in a place you've you've never been to before. Taking that, taking that leap is a is a big financial decision. It's a lot of money. A lot of people go over budget on their on their home purchase. So that is, I think that's a risk, but it definitely has a lot of benefits, as far as being able to to to build wealth, and having a stable place to to live.
Today, my guest is Dr Eli Karlin. Eli is a partner in Chief Investment Officer at Sphere Investments. Dr Karlin is overseeing the investment of over 1 billion in healthcare real estate, focusing on medical offices, surgical facilities and post acute care. And in just a minute, we're going to speak with Dr Eli Karlin about health care real estate investment opportunities.
J Darrin Gross
I'd like to ask you, Dr Eli Karlin, what is the BIGGEST RISK?
Eli Karlin
It's a great question. I think we live our lives based on risk assessment, whether we like it or not. We all do it in this area. I think I'll break it down into two fundamental risks as it relates to the healthcare, real estate sector, right? Healthcare and real estate versus sectoral risk, right? Healthcare in that segment, I think there's, there's three main categories that I would, I would focus on and that keep us up at night.
One is the regulatory so all the regulatory changes, they happen very quickly and sometimes unbeknownst to just members of the public. And so we spend quite a bit of time focusing on regulatory changes within the healthcare sector, understanding what the government is doing as they're the largest payer in the US and most insurances follow what the government sort of process looks like.
So that's one in terms of financial risk. It leads into regulation as well the reimbursement cuts, I think that's been quite challenging for our sector, those reimbursement cuts in different sectors, especially long term acute care. Long term acute care throughout covid was a darling of the healthcare industry. They had ventilators. They were able to bring in those patients, and yet Congress cuts those reimbursements and the type of patient that visits as new or else to go. So financial risk is certainly one of those under the healthcare sector. And then lastly, change in delivery of care. We are in an environment where technology is moving very quickly. We chatted briefly on the primary care provider losing some of their practice in either through private equity or through technology and so forth, and reshifting of the healthcare environment. So I think the change in how care is delivered in this country certainly falls in that in that category. So those three under the sectoral components are where we focus and try to look ahead and see, how do we mitigate those risks, but transfer that? And so forth. And then in terms of real estate, you know, and certainly as it relates to healthcare, number one, obviously, tenant, tenant credit worthiness, right? Making sure that whomever we have, and you know, you asked a question earlier about leasing, we don't. We typically, in our acquisition strategies, 90% leased or above, right? Our portfolio today is about 98% occupied, so we try to mitigate that, that risk prior to an acquisition, whether we bring in a provider or what have you, through diligence or even prior to that. But certainly the credit worthiness is quite important in understanding where, how they're getting reimbursed. What is their their longevity? How do they work in the long term that they don't, you know, they don't falter, like we've seen many healthcare systems that stewards a great example, right? You had a lot of great outcome, you could say, in the past, and today, well, they're no longer early around, right? And a lot of bankruptcy. So that's a big one for us in terms of the real estate specific angle. And then, of course, the fragility of the business model for healthcare, right? It sort of backs into the financials again. It gets into things are changing. We're seeing that happen very quickly. Procedures are changing, as we discussed earlier, the pharma component. I mean, look at bariatric care. Bariatric care is slowly dying, right? I mean, with those mpig and all the other, you know, pharma components, bariatric care, is an industry that is, that is in decline, and so we need to be be conscious of that fragility of the business model. It's not as recession resilient as everybody would have imagined. It may be in some sectors, but healthcare and maybe better than others. But there is, there's risk there. And then, of course, the obsolescence of assets. That is from a real estate standpoint, probably the biggest one we look at is we're buying a building today. Will it stand the test of time in three, 510, 15 years? Will this asset be obsolescent? And as we discussed earlier, you bought a 10 years ago, a 30,000 square foot orthopedic asset that today is probably closer to eight to 10,000 feet with the same utilization. And so, you know, going forward, will a tenant renew? Why would they renew? Why not go somewhere else? So that's the third so those combined, I would say, are the, the big risk items that we look for. I realize not the not so pretty tied up in 111, word in a bow. But from our perspective, those are the those are the main focuses and the risks that we try to mitigate. Or, like you said, transfer.
Contact info:
Website: SphereInvestments.com
Today, my guest is Reza Raji. Reza is the Senior Vice President of Vantiva, Smart Spaces, Internet of Things, division with a rich history of driving IoT innovation. Reza has transformed industries from smart homes to commercial enterprises. And in just a minute, we're going to speak with Reza about applications for Vantivas, new Smart Security camera, the Vantiva Peek, how it works and its applications.
J Darrin Gross
I'd like to ask you, Reza Raji, what is the BIGGEST RISK?
Reza Raji
For the operator you're talking about for?
J Darrin Gross
Yeah, for however you want to capture. It's up to you.
Reza Raji
Yeah, yeah, yeah. So I think you know the when it comes to insurance and risk at self storage, there's fundamentally two right. There is the facility, insurance and liabilities related to facilities. You know, there's rain damage or there's intrusion and somebody steals stuff off the front store, things like that. And, of course, there is the there is the unit the renters possessions that are at risk of somebody coming in and stealing them or even getting damaged right through water or storm or something like that. And there's insurance products, as you know better than I do, insurance products for both of those, right? And the platform that we have for smart storage is really designed to deliver that peace of mind and that risk mitigation, if you will, for both common area and the smart unit in self storage for for alerting in a timely fashion that there's a water leak. As you know, water damage builds rapidly in terms of cost, if it's not detected early, if there's intrusion you want to know as soon as possible, somebody's somebody broke into a facility, or somebody's broken into a storage unit.
So all of that are is really that peace of mind that I was talking about, both for the Self Storage operator as well as the renter and and we're actually talking to part of our customer base is insurance companies that deliver insurance products for self storage, right, believe it or not, because they understand the value. Look, 15 years ago, it would be 15 minute session or 30 minute session to explain the value of smart cameras and what that. Does we know door ring Bell, doorbells, ring doorbell, sorry, not what they do, what benefits they provide the consumer. We don't have to do that. People understand what they can do with a ring doorbell, what they can do with with a nest, you know, camera, what it does, what we do need to do is, is package that and convey that and deliver that for self storage tenants. And I think that peace of mind and that risk reduction is something the insurance companies are very interested in right now in self storage, because it's augments and enhances the insurance product they're selling, not only that, but also it produces the the risk liability that they're on the hook for.
The same way that insurance, you know, residential insurance companies, home insurance companies, give a discount if you have a monitored security system. That's the same thing that hasn't happened yet, but we foresee that going in that direction. It's like, why not pass on some of that savings, to to the to the customer? Because now there's a way to monitor and manage that
risk.
Today, my guest is Dale Wills. Dale is an experienced real estate developer who has been involved in the industry for more than 25 years. He is the owner and founder of Center Companies, and since 2011 he's overseen the development of more than 1500 homes across 50 projects. And in just a minute, we're going to speak with Dale about the investment opportunity in single family homes.
Contact:
Website: https://www.centrapartners.com/
Linkedin: https://www.linkedin.com/in/dalerwills/