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Capital Market Trends with Bryan Shaffer - CREPN #224

Commercial Real Estate Pro Network

Release Date: 11/28/2019

Automate Capital Raising for Commercial Real Estate with Jake Marmulstein - CREPN #267  show art Automate Capital Raising for Commercial Real Estate with Jake Marmulstein - CREPN #267

Commercial Real Estate Pro Network

Today my guest is Jake Marmulstein. Before grant before founding his company Groundbreaker, Jake held a number of roles involving real estate and technology, supporting the growth of early stage digital technology ventures, while working with the government on foreign direct investment by Fortune 500 companies.

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Commercial Real Estate Pro Network

So Darrin, the BIGGEST RISK for Groundbreaker in as I as I look at our business, and what we're doing is really managing expectations with people. Software is a living, breathing thing. And it is very challenging for people to evaluate. who aren't typically Software buyers and a lot of people in real estate aren't. So our job is to be good stewards of the, you know, good stewards to other people.

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Attract & Connect With Commercial Real Estate Investors on Linkedin with Yakov Smart - CREPN #266 show art Attract & Connect With Commercial Real Estate Investors on Linkedin with Yakov Smart - CREPN #266

Commercial Real Estate Pro Network

Today my guest is Yakov Smart. Yakov is considered to be the leading expert when it comes to attracting A  list investors and raising capital using LinkedIn.  He is the author of Disrupting LinkedIn and a sought after authority by top business owners and sales leaders worldwide. Yakov has shared the stage with Samantha DeBianchi of Bravo's hit TV show Million Dollar Listing.

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Commercial Real Estate Pro Network

It's a great question. It's not something that I you know, honestly think about on a daily basis. I guess I'm you're a little more. You know, you see, you see A lot more different scenarios as being an insurance than I probably do when it comes to risk. But I'm gonna I'm gonna give a bit of what might be a bit of a surprising answer here. I think the BIGGEST RISK is a combination of plagiarism and misinformation because in the space, let's call it mentorship or online programs or coaching, consulting.

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Commercial Real Estate Pro Network

Today, my guest is Jason De Bono. Jason is the NuView Trust Company, Vice President and in a little bit he's going to share with us the benefits of using a self directed IRA.

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BIGGEST RISK with Jason DeBono show art BIGGEST RISK with Jason DeBono

Commercial Real Estate Pro Network

I think the BIGGEST RISK for a self directed account is that you take responsibility for all the investments, and it's a risk of personal accountability, right? If you keep your IRA in the stock market, one really nice benefit is that when it goes up and goes down, you know, you can kind of finger point your way around around it. Risking in a self directed account means you're taking on all the risk.

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Cash Flowing Short Term Rentals with Jon Bell _ CREPN #264 show art Cash Flowing Short Term Rentals with Jon Bell _ CREPN #264

Commercial Real Estate Pro Network

Today, my guest is Jon Bell. Jon is an IT professional turned real estate investor. He's a he specializes in vacation rentals, and today we're going to speak with him about Airbnb. He's also got a podcast he hosts the podcast Vacation Rental Machine Podcast. And he's also the co founder of the Vacation Rental Machine Formula an online training.

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Commercial Real Estate Pro Network

I'll answer it and maybe the most common risk that people assume when they think of short term rentals or specifically Airbnb s and that is major parties. People messing up your your place. With my experience, it's not the major risk, it is something you can hedge off. And this is how you do it. 

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Forever Cash Through Real Estate with Michelle Bosch - CREPN #263 show art Forever Cash Through Real Estate with Michelle Bosch - CREPN #263

Commercial Real Estate Pro Network

Today, my guest is Michelle Bosh. She and her husband are real estate investors, entrepreneurs. They have multiple businesses and they have taken businesses multiple businesses they've built from scratch to seven and eight figure income revenue streams. And their business platforms include land auctions, rental portfolios, they've all authored a an Amazon number one bestseller called Forever Cash. And also, they host together the podcast Forever Cash. And Michelle also hosts the podcast In Flow.

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BIGGEST RISK with Michelle Bosch show art BIGGEST RISK with Michelle Bosch

Commercial Real Estate Pro Network

You know, the BIGGEST RISK that we have right now is that for the percentage of the tenant base that is unemployed, or that has lost their job because it is worked for housing, we buy c properties and B neighborhoods you know, that that if they've lost their job and unemployment you know, kept gets cut down, that they might not be able to To make their rent payments, so though, that's a big risk right there.

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Capital Market trends are a barometer for where the commercial real estate market is headed.

Bryan Shaffer is the Principal Managing Director at George Smith Partners.  GSP is a boutique capital market resource providing owners & developers the structure capital needed to complete projects nationwide since 1979.

The value of utilizing a broker like George Smith Partners is that they are in the market every day, and know when it is more beneficial to utilize one option over the other.  This compares with a bank who has one model. The capital market is continuously changing. They work for the client in hope to create a relationship that continues to help the borrower get the money needed to grow their business. 

Commercial Real Estate Financing 

Large commercial real estate projects come with tremendous risk.  The borrower sees opportunity, while the lender sees the risk. If the lender does not feel comfortable with the borrower or the project, they will not finance the deal.  An experienced finance professional has the needed relations with the various lending products. They can help the borrower explain their project to a prospective lender that will assure the lender of the projects upside, and set them at ease with the potential downside.

Capital Source

Most new investors use their own capital and raise additional funds from family and friends.  A proven track record with successful, profitable projects will attract investors with capital who are looking for lower risk.    

Mistakes Borrowers Make

The most common mistake borrowers make is to not focus on one particular market.  If you are constantly chasing the next hot market, you will never develop the intimate local knowledge that puts makes investors confident you know the market.  

Sweet Spot

GSP is best suited to help the owner or developer who is focused on finding deals and needs help raising capital.  In these situations, they can partner with the project owner to locate the capital needed to finance the project. This allows the developer time to find more deals.

An ideal partner for GSP is someone who has done multiple smaller deals in a specific market and has intimate knowledge of the market.  They have the market knowledge, but need help with raising capital. This is the perfect opportunity to work with GSP.

Relationships

Commercial real estate is all about relationships.  For owners looking to grow their portfolio and needing help to solve the capital requirements, GSP can be the solution.  Their extensive network of capital sources include traditional sources such as commercial banks and insurance companies. Additionally, they have multiple new capital disruptors such as crowdsource funding and private equity funds like BlackRock and Blackstone, which are not available to all mortgage lenders.

A perfect borrower is one focused on growing their portfolio, like the client they helped grow from two apartment properties to over thirty properties.  GSP was able to help bridge the gap from $10 million properties to $50 million properties.  

Capital Stack

The capital stack needed for a deal is made up of debt and equity.  For both single operators and syndicators, the traditional sources of equity come from the individual developer, friends and family while debt has come from banks and institutional lenders.  

The recent disruption of the financial market has made crowdsource financing a viable source of capital.  Additional private equity funds like BlackRock and Blackstone are resources available to GSP, which may not be available to all mortgage lenders.  

Markets

The market is client specific.  If you are a proven developer in one market, that does not guarantee success in a different, new market for you.  Lenders look for the borrower who has knowledge of the market based on their experience in the market.  

A mistake many developers make is trying to follow the hot market.  Jumping from hot market to hot market is not the path to proven success.  Lenders want to know that you know what you are doing, and that you have success in the market.  

Lenders like larger markets that provide insulation from failure based on the large number of potential opportunities to guarantee your success.  

Deal Sponsor

Lenders want to know that the deal sponsor has experience and success in the market your project is located in.  The lender wants to make a safe bet that you will be successful. This is different than the borrowers perspective.  The borrower wants big returns, the lender wants small safe returns.  

Asset Class

Each asset class has its unique risk.  Lenders like to lend to a low risk opportunity where they know they their investment is protected and will get paid back.  The following are some examples of assets and situations where George Smith Partners were able to provide financing solutions to their clients. 

Hotels are considered one of the more risky asset classes.  They are susceptible to the winds of the economy. If there is a terrorist event, economic downturn or similar event, people will not travel as much nor rent hotel rooms.  

To make a hotel less risky, GSP was able to do some additional research and apply their experience in the market to recognize the upward trend and make the case to a lender and get they borrower their loan.  

Multifamily on the other hand, has more predictable demand and is less susceptible to down turns.  People need a place to live. When the economy slows down, people lose their homes and need a place to live, so they rent.  As long as you operate and keep the property full, the lenders will get paid, and they like that.

Office A recent office project where GSP was familiar with the marketplace gave the developer the help needed to complete the project.  Because GSP recognized the positive trend developing that other lenders had neglected to see, they were able to get the financing for the borrower to needed to complete the project.    

Rate and Terms

Most borrowers are excited to get a low rate for their loan.  However, too often, borrowers fail to think through their plan for the asset they are financing. Is there a yield maintenance penalty that prohibits the borrower from selling or  refinancing early? Failure to recognize this can on the front end can ruin your otherwise profitable deal. 

Cycle

The Real Estate market cycle goes up and down.  For the past 10 years the cycle has been on the increase, compressing CAP rates, and driving prices higher.  As the cycle continues, markets that have been hot are cooling as investors refuse to push prices higher, and instead they look to secondary markets for higher returns. 

BIGGEST RISK 

Each week I ask my guest, “What is the Biggest Risk Real Estate Investors face?”  

BIGGEST RISK: To me, I mean, you know, we are in the risk reward business. I mean, people get loans based on the level of risk. If it was a very risky loan, you pay twelve percent. If it's not such a risky loan, you pay three or four percent. So we're always looking at risk. 

But if I look at a more global risk to my business and really to the market as a whole, I think you've got to think about the economy and what causes a real estate downturn and what influences a market to go from being a very hot market to a very cold market. And really its activity. So when activity dries out, when people stop buying properties, people stop selling properties and people have fear when people are thin or they don't move.

For more go to:

Website: https://www.gspartners.com/

Call: (310)867-2906