J Darrin Gross
I'd like to ask you, Ashleigh Wilson, what is the biggest risk?
Safety and compliance. Every elevator is is inspected, safety tested and inspected. So you need to make sure that your certificate is consistently up to date, and that your testing has been completed. Now the way that we can avoid this risk, start with your service contract, making sure that you ask your elevator company, what state required testing or city required testing is is what intervals and what tests; all of them. Because they'll say they may say hey, you have to do this every one year in this every five years. And there's fire service testing that the owner can do, or the elevator company can do get the elevator company to tell you everything that's required and who can do it. And who if they can train the owner. Get that covered under your service contract, that's going to be the cheapest way to do it. And making sure that you're transferring that ownership or that responsibility on to the the elevator company. The second is going to be tracking that certificate expiration date, the state can be past due. So waiting for the state to come out and perform your testing is risky business, put a calendar invite on your on your schedule, so that you reach out to the state before your certificate expires, and send them an email, please come inspect my equipment. If you can't come inspect my equipment on time, can you write me an email granting me temporary coverage or temporary certificate until you can come complete the inspection. Some generally the the state inspector will write you an email and say this email serves as your temporary certificate until we can come out and inspect your equipment. That way you have that in writing from from the inspection company and from the elevator company. So making sure passengers are safe on the equipment and making sure that your compliance is up to date with the state endorsee.
Today, my guests are Nick Earls, and Eric De Nicola. Nick and Eric are full time real estate investors, developers and founders of winterspring capital, a private equity firm based in Boston, Massachusetts. Together they have developed over $56 million in multifamily assets with another $40 million in the pipeline. And their work includes value add affordable housing development, and luxury multifamily condo developments in the southeast us. And in just a minute, we're going to speak with Eric and Nick about their experience and how you can learn and identify and, and grow your multifamily portfolio.
J. Darrin Gross
I'd like to ask you, Nick curls and Eric de Nicola. What is the biggest risk?
I think in the business we're in and because we're in, you know, a few sort of real estate verticals, if we focus say just on the condo development They're, I feel like there are two major risks. One is sort of the political and municipality risk in the city or building. And I'll get into that a little deeper in a second. And then the other one is sort of a macro risk right now or in potentially, you know, the Fed raising rates over the long term, it does, you know, potentially reduce buying power for individuals, and we're selling condos. So the way we kind of, we don't necessarily think at our firm, that's going to happen. So at least not in the immediate future, there's potentially too many consequences for that on a macro scale. But these two things that we see, so when you're dealing with a city like Boston, there's so much red tape, that if you get into a project, without sort of a backup plan, or a worst case scenario, still kind of breaking even, for example, a very simple way to put it would be you buy a property in a three Family Zone, you should make sure if you had if you get denied for your variances, you get denied the Zoning Board of Appeals, you could still develop a three unit property, that would always break even the worst case, because by the winter, the why you can do that you don't need special permission, you're in a three Family Zone, you're allowed. So look at that scenario, if that scenario loses a lot of money, then you probably shouldn't get into it without protecting yourself and minimizing that risk either by having a contingency that Nick spoke about, or some sort of backup plan. So that's kind of the local political municipality risks, because in Boston is just very difficult to develop. And it's getting harder and harder, you know, not even every year, it seems like every month, there's much more red tape. And like I said, the other thing would be more interest rate risk, when you're selling condos. Buying Power does go down for buyers as interest rates go up. So one way we kind of, you know, try to eliminate that is we say, okay, look, where's the market at right now, a lot of developers project out oh, you know, the markets increased at this rate, this is the value of homes, you know, a year ago, this is what they're at now continue with that project that I'm going to sell them for this this much higher than they are now. We don't do that we project as is, even if it's two years old, even sometimes with like a 10% hit to see what this still work. And if it doesn't, you know, we second guess that project. So that's kind of how we try. That's how we see to the biggest risks we see. And those are kind of the ways we would eliminate them in our business. But also just the idea of diversifying within real estate where you have the different asset classes that we had, and the different types of verticals that were involved with, is sort of another way or to risk minimization.
Today, my guest is Catherine Tindall. She is a CPA and partner at Dominion Enterprise Services, a concierge tax advisory practice. And in just a minute, we're going to speak with Catherine, how to get the most out of your CPA relationship, and some general tax planning strategies for real estate investors.
J Darrin Gross
I'd like to ask you, Catherine Tindall. What is the BIGGEST RISK?
I say, you know, the BIGGEST RISK that I see, just from my professional perspective of the kind of cases that I diagnose and deal with on a day to day basis, the the main area of loss I see for people is that they, they do a set it and forget it strategy when it comes to dealing with their tax situation. And a lot of people because it's so technical, they don't have a way of assessing whether or not they're doing everything that they can unless they're going to take the time to learn how to do it themselves. And so I'd say for most people who get involved in real estate or who get, you know, start having a lot more going on economically, that it's, it's worth it to take the time to reassess your situation, get a second set of eyes, to make sure that you're not missing out on things because it can be 20 to 50% of your yearly effort. You're kind of working for the government, right if that's how you deal with, you know, paying your tax. And so to just not re examine that every once in a while, you can really be losing a lot of the effort that you're putting in just for, you know, things that are very easy to change, like just filing paperwork for splitting out entities or adding a kid to payroll or things like that. So that's what I see is the biggest risk. And a lot of the times once, once those things are set, and times gone by sometimes we can go backwards to save the tax. But more often we can't, it's once it's done, it's done. I had someone recently where they, they tried to execute a 1031 exchange on their own. And they didn't do it correctly. And they didn't, they didn't meet the timing requirements involved with it. And so they ended up with like over $200,000 in tax that could have been very easily deferred. You know, they were aware of the strategy, they had an intermediary involved, but they just didn't execute correctly. And so I think that's the biggest risk I see for people is, you know, to try to DIY too long, or to just set it and forget it, and not realizing that this, it's another area of being able to really maximize your wealth is being more strategic with you know, that tax number.
Today my guest is Anthony Coniglio. Anthony is the president and chief investment officer of New Lake Capital Partners. New Lake is the leading provider of real estate capital to state licensed cannabis operators through sale leaseback transactions, and third party purchases, as well as funding for builders to projects. New Lake owns a geographically diversified portfolio consisting of 27 properties across 10 states with a tenants. And in just a minute, we're going to speak with Anthony about the cannabis business and the opportunities to invest in real estate for with cannabis tenants.
J Darrin Gross
I'd like to ask you, Anthony Coniglio, what is the BIGGEST RISK?
Yeah, the risk I worry about most right now is and I worry about everything. And my team, they were they were here, you know, our team would laugh right now just they'd be nodding their head saying is he worries about everything. What I worry about most right now is the federal legalization. Impact on our tenants. I keep telling people in the industry, be careful what you wish for. You all want federal legalization, but it will not come in the form of okay, it's legal, keep doing what you're doing. It will come with massive regulation. And so I look at for our tenants, how will they be able to manage through that massive regulation? Are they doing what they need to do to get through the FDA? Right? Because these are consumable products? Are they doing what they need to do to to avoid issues around branding and how they're communicating with people and some of the restrictions about how you will communicate around this product? And so I spend a lot of time trying to make sure that we really understand not just a federal legalization will happen. But how does it happen? What will the regulatory impact be on the industry and our tenants and our prospective tenants really having the capability to navigate what's likely to come out of them at them, because I think many people in the industry underestimate the amount of regulatory burden that will be hoisted upon this industry upon legalization. And so, you know, it's interesting, you said, avoid minimize and transfer. I'm not sure how we do any of those with that particular with that particular risk. But that's where I spent a lot of time worrying about. And maybe that's why I work because I can't avoid, minimize or transfer.
Today, my guest is Chad Griffiths. Chad has been an industrial real estate broker since 2005, and an investor since 2014. And in just a minute, we're gonna speak with Chad about industrial real estate. But first, a quick reminder, if you like our show, CRE PN Radio, there are a couple of things you can do to help us out. You can like, share and subscribe. And as always, we encourage you to leave a comment, we'd love to hear from our listeners. Also, if you'd like to see how handsome Our guests are, be sure to check out our YouTube channel. And you can find us on YouTube at Commercial Real Estate Pro Network. And while you're there, please subscribe. With that, I want to welcome my guest, Chad, welcome to CRE PN Radio.
J Darrin Gross
I'd like to ask you, Chad Griffiths, what is the Biggest Risk?
Right now as I see it, the Biggest Risk is that we are forced into another shutdown or lockdown in the market. And I hope that that doesn't happen. I think everybody has fatigue from from this past two years that we've been going through this. And I think everybody wants to get back to business. But I think from the standpoint that if the medical community starts making more issues of this, and if the if some faction of the of the public starts pushing for more, more measures, then then I can see that happening, unfortunately. And if it is for good cause if that is the best course of action, and people agree on it, then then it is what it is. I'm not going to argue it. I'm not going to be that guy with a pitchfork out there saying we can shut down. I just I really hope that we don't. If we do, I'm concerned that how long this is going for, it's just going to lead to a whole set of problems. And that isn't just the immediate ones of of some businesses not being able to be open and the corresponding pressures of revenue and their continuing expenses. But even just what happens with the government's reaction to another shutdown, because I think that that would mean more stimulus, more spending, more money printing and considering everything that we've had to go through in the last two years. I'm concerned that all this spending is just going to lead to some sort of inflation and, and even though the feds are saying it's transitory and and we should be able to get a handle on this, I'm still concerned that this is this is more than just a short term transitory problem. And I like to really only are the I shouldn't say the only, but the biggest ammo that the feds have to fight inflation is just increase in interest rates. So I think that that's coming, I think we're gonna see, I think we're gonna see inflation in the near term, or continued inflation in the near term, I think we're gonna see upward pressure on interest rates. And this This is the status quo like this is if nothing else changes in, in what we're dealing with right now. And interest rate increases is not good for for, for real estate, because it's now costing that much more to borrow. That's a that's, I think that that this happens anyways. But if we have to do another round of of shutdowns and lock downs, and, and the government prints more money and adds more to it than I think that just adds another level to to inflation and, and trickles down to interest rates. So that that's probably the biggest risk that I see right now. But I mean, you mentioned it as well, there's, there's, there's so many areas where we could be terrified of we could be the geopolitical risk, economic risk that like it's endless. And I guess the only solace that I take it in myself is that, in the 16 years that I've been in this business, there's always been risk. Every, every time you open a newspaper at any day, over the last 16 years, and there would have been the media trying to sell us fear about what's all these bad things going on. And I think that that's just, that's a reality that we have to deal with is that there's always going to be that, that risk on the one side, but that's what makes a market and makes a market that there's going to be people that that look at that risk and say, Okay, now we're sellers, and then there's people like me who are more optimistic and not ignoring but maybe suppressing that risk and mentally, who are saying, well, now it's time to buy, like I see a lot of reasons to be optimistic on this. So I think that's what actually makes them a market is that you've got people that are fearful, and you have people that are optimistic, and that the fearful part does weigh on me, I am cognizant of that. But I I still balanced that by just thinking that over the long term, there's there's going to be blips on the radar, there are going to be things that manifest like, like we saw this last two years, there are going to be issues that we have to deal with. But over the long term, US and Canada have shown an amazing ability to keep trending upwards. So I'm still optimistic long term. But that, to answer your question, that's the interest rates being the ultimate outcome, I can see interest rates going up at some point in the future.
Today, my guest is Michael Hironimus with Duckridge Realty Services. He provides private asset and portfolio management, market analysis instruction. He's an instructor for market analysis. And he's also a CCI M chapter president. And in just a minute, we're going to speak with Michael about the current commercial real estate condition of the various asset classes and trying to look beyond the current situation and where things might go.