Doug Marshall's Blog, page 5

When Should You Stop Investing in Real Estate?

Recently I’ve been asked, on more than one occasion, “When should we stop investing in real estate?”  Good question.

As a commercial mortgage broker I have had the privilege to work with several highly successful real estate investors throughout my career.  And I’ve observed that these clients are always seeking out new investment opportunities.  They are continually keeping their eyes and ears open for the next good real estate investment.  It’s their passion.  It’s what “floats their boat.”  So in a sense, I believe you should follow their example and never stop investing in real estate.

Hyper-Supply Phase

That said, the real estate market is cyclical and I believe we are currently in the quadrant called the Hyper-Supply Phase.  This phase is characterized by an increase in new construction resulting in a steady increase in vacancy rates and for the first time in a long time, concessions will begin to creep into some neighborhoods.  Rent growth, though still positive, grows at a much more modest pace.   

Recession Phase

As the real estate market continues to advance, the downward slide at some point in time becomes readily apparent to all and a precipitous drop in real estate fundamentals happens, usually overnight, or so it seems.  When this occurs the real estate market has slipped into the Recession phase.  And the cycle of market emotions moves from anxiety (where we are at the moment) to denial (everything’s fine, just you wait and see), to fear, to desperation, to panic and finally to hopelessness.

No one wants to be in the unfortunate position of having recently purchased an overpriced property prior to this market adjustment.  No one wants to get caught with their pants down but unfortunately some of us do.  It’s like playing musical chairs and you discover you’ve been too slow to find a chair to sit on.

My Loser Property

In June of 2007, I purchased my first rental property.  I believe if you could identify the peak of the last real estate cycle it would have been June of 2007.  And because we bought it at the top of the market, that property never performed well.  We simply paid too much for it.  We owned the property for eight years and it limped along until it was sold.

Eventually we sold the property for a modest gain resulting in a 7 percent Internal Rate of Return.  It could have been far worse.  There were a lot of investors who lost their properties because they overleveraged their assets with debt and when the property’s vacancy rate rose these properties couldn’t support the debt.

When will we slip into recession?  I wish I knew.  Anyone who can accurately predict when the real estate cycle is poised to make this transition is a far better prognosticator than I am.

Are you a net buyer or seller of RE today?

Another question asked of me, “Are you a net seller or buyer of real estate today?”  I had to think about that question and to my surprise so far this year I have been a net buyer of real estate.  That surprised me.  But the two new acquisitions have been value-add plays with obvious upside.  Each property had a glaring issue that needed to be resolved.  One was a fractured condo and the other had a vacancy issue.  Both issues were solvable.

I’ve not yet sold a property this year but if someone were to offer me a silly stupid price for a couple of my properties that aren’t cashflowing well at the moment I would gladly sell them.  The rest of my real estate portfolio is doing quite well and I am reluctant to sell these even at overinflated prices.  The cash flow from these other properties will help me get through the next recession when it finally hits.  Again, I’m clueless as to when that will happen.

Three Reasons to Stop Buying RE

So back to the original question, “When should we stop investing in real estate?”  Here are some reasons when we should stop investing.

When a realistic pro forma for a proposed purchase no longer yields an acceptable cash-on-cash return. In other words, don’t buy a rental property when the numbers no longer make sense.  Don’t assume that rental rates will continue to rise simply because they have for the past several years.
Stop buying when you sense real estate investors are not acting rationally. When you hear words like, “This time is different” realize the folly of such a statement. Those four words have been used to justify any purchase.  I remember, prior to the Great Recession, hearing people justify buying single-family homes because everyone knows that home values never go down.  And when the recession hit, home values plummeted.  So much for that theory.
Do a vacancy rate breakeven analysis for your purchase. Find out what the vacancy rate for your asset type was at the height of the Great Recession.  I believe for apartments, the worst the vacancy rate ever rose was to twelve percent.  Assuming a 12 percent vacancy rate, how much debt can you leverage the property and still have breakeven cashflow?  If that breakeven analysis results in more equity required at closing than you can afford then don’t buy the property.

Bottomline

I will continue buying and selling real estate as long as it makes rational sense to do so.  There will always be sellers who either mismanage their properties or don’t have a vision for how they can optimize their property’s cash-on-cash return.  When you find one of these properties put the seller out of his misery and buy it from him.  Both of you will be glad that you did.

Those are my thoughts.  I welcome yours.  In your opinion, when should we stop investing in real estate?

Doug Marshall, CCIM is the award winning author of Mastering the Art of Commercial Real Estate Investing.  Check it out on Amazon.

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8 Indicators It’s Time to Fire Your On-site Property Manager

For large multi-tenanted properties to be well managed it requires three levels of oversight.  As the saying goes, “A chain is only as strong as its weakest link” is definitely true for property management.  If any one of these three is done poorly the property’s performance will suffer accordingly.

3 levels of property oversight

The three levels of property oversight are: 1) the on-site manager; 2) the off-site property management company; and 3) the owner.  Smaller properties with less tenants do not need an on-site manager.  But apartments with 20+ units and large retail, office and sometimes industrial properties may need on-sight management.  For these properties, on-site managers will maximize a property’s performance.  So when is it appropriate to fire the on-site manager?

Pay on-site property managers well

Before I answer that question, let me begin by stating once again that on-site managers are generally overworked and underpaid.  Often times, they don’t get the credit they deserve for a well maintained property.  If you have an on-site property manager that is performing their job well, pay them accordingly.  My management philosophy is to pay them 120% of what the going rate is for their position.  You never want to have a good on-site manger quit because they can make a few more dollars working elsewhere.  Not paying them well is truly “penny-wise, pound-foolish.”

8 reasons to fire your on-site property manager

That said, there are eight reasons when you should fire your on-site property manager.  They should be fired when they are:

Consistently not maintaining the property’s appearance.

A property’s appearance is the first impression a prospective renter has of your rental property.  Is it inviting, or does it leave a poor impression?  The property needs to look clean and neat.  A good on-site manager when walking the property should be in the habit of always be picking up trash that is lying around.

Not following the rental policies to the letter.

Rent is due on the first and late on the fifth day of the month. No exceptions.  Those who don’t pay on time are always assessed a late fee regardless of reason.  If you don’t consistently charge a late fee you remove the incentive of paying their rent on time.

Not keeping out of control tenants on a “short leash.”

Every property I’ve ever owned or managed has had at least one problem tenant.  These tenants act as if the rules don’t apply to them.  The on-site manager needs to let these problem tenants know that that is not the case.  If you let problem tenants run roughshod over the property, the good tenants will eventually move out.

Consistently not getting recently vacated units market ready for the next tenant.

In a tight rental market, a unit that’s sitting vacant because the unit is not ready to show is costing the owner a lot of money in lost rent.

Ignoring maintenance repair requests.

A colleague of mine once had an on-site manager that he reluctantly fired only to discover she had a drawer full of maintenance requests that she let slide.  Do you want happy tenants?  Make sure maintenance repair requests are completed in a timely fashion.

Consistently poor tenant selection.

There is more to tenant selection than running background checks, calling previous landlords, etc.  There is also intuitively sizing up the prospective tenant.  I’m not suggesting that on-site manager discriminate based on race, sexual orientation, etc.  I’m not even hinting at that.  What I’m suggesting is that an in-person interview can many times give you insights into a person that can’t be objectively measured by the traditional tenant selection process.  Trust your gut instinct.

Beginning to consider their tenants as their friends instead of their customers.

You can imagine how this change in thinking can result in all sorts of bad things happening at the property.

Suffering from burnout causing them to stop caring for the property.

This the saddest reason for firing an on-site property manager.  You never want this to happen.  It’s incumbent on the off-site property manager and/or the owner to recognize the beginning stages of burnout so they can do whatever is necessary for this not to happen.

These are my eight reasons for firing an on-site property manager.  What have I missed?  What would you add to the list?

Doug Marshall, CCIM is the award winning author of Mastering the Art of Commercial Real Estate Investing.  Check it out on Amazon.

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The Importance of Grit For Succeeding in Life

We’ve all been discouraged at one time or another. Even the big boys, those at the top of the food chain in commercial real estate, have had their setbacks. Those of us who make a living on commission income know the euphoric highs of closing a lucrative transaction. We’ve also experienced many disappointments. I know I’ve had my share.

My Early Years on Commission

I remember my early years on commission. I had no safety net. My spouse was a stay-at-home mom. My very first year as a commercial mortgage broker, I worked long hours only to earn $7,000. To stay afloat, I lived off my savings, and when they were gone, I tapped into the equity in my house. To say the least I was deeply discouraged. Ever so slowly I began to succeed as a commercial mortgage broker. But to get to that point required that I borrow against the equity in my house. It was a bit of an exaggeration, but I remember telling people I had the equivalent of the equity in my door knobs. Years have passed and today I own my home free and clear and I’m completely debt free.

Discouragement Takes Many Forms

In commercial real estate, discouragement takes many forms. It could be a day when every cold call you make, is not only a “no” but it’s a “hell no” or worse yet, the prospect hangs up on you. It could be a client, who through his words or actions, makes it readily apparent that he doesn’t appreciate what you bring to the table. And maybe the most discouraging, is losing a deal that you thought was a sure thing.

Grit and Success

So how do we keep moving forward in the face of discouraging setbacks? I recently read Grit: The Power of Passion and Perseverance by Angela Duckworth. This is a must-read book for anyone striving to succeed personally or professionally. For example, a high grit score for cadets entering West Point, is more important than any other factor in predicting whether a cadet will succeed in not dropping out during the first year at the military college. Grit is more important than intelligence, grade point average, athletic ability, leadership skills, etc.

The Hard Thing Rule

The book also reveals how grit can be learned by adopting the Hard Thing Rule. The author and her husband have incorporated this rule for their family members to live by. I liked the concept, so I’ve morphed it a bit so it can apply to commercial real estate professionals. There are three parts to the Hard Thing Rule. It is acknowledging that:

To succeed in commercial real estate, we must do something hard, something that requires deliberate practice. For the newbie in the CRE business, it’s making a specific number of marketing calls each week, or attending a particular number of business luncheons, etc.
You can quit the real estate business, but not until you’ve given yourself a chance to succeed. In my mind, it takes a bare minimum of three years before you can really know if the CRE profession is a good fit for you. Very few of us are overnight successes but those who persevere usually are rewarded for their efforts.
To succeed in commercial real estate, our “hard thing” will change over time. It starts with cold calling and eventually we find a better way to market ourselves that is more productive. Whatever that new “hard thing” is, it’s not necessarily easier than cold calling, but it yields a far better return for the effort we put in. This could be focusing on the Pareto Principle, i.e., that 80 percent of your business comes from 20 percent of your clients. Maybe it’s becoming a thought leader in your particular niche in commercial real estate. By becoming the expert, slowly over time it attracts more clients who want to employ your services.

The Buddy System

One more thought about persevering when we are discouraged. I believe in the buddy system. Find someone you can confide in, someone you can tell your deepest, darkest fears to. This person should not be your spouse, nor someone you work with.

For me, I meet with my friend Rick on Thursday mornings at Starbucks. We’ve been getting together over coffee for about ten years. We talk about our families, our businesses, our ministries.  We do not talk about the weather or sports. When I’m discouraged Rick hears about it and vice versa. Just talking to Rick about my latest setback, whatever it may be, encourages me to pick myself up, dust myself off and get back into the arena of life. Life is not easy. But it’s far easier when you’re not doing it by yourself.

Those are my thoughts. What are yours? What do you do when you get discouraged?

Doug Marshall, CCIM is the award winning author of Mastering the Art of Commercial Real Estate Investing.  Check it out on Amazon.

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The Unparalleled Brilliance of Our Founding Fathers

This week we will be celebrating our country’s 243rd birthday.  I often take for granted the unparalleled brilliance of the concepts found in the country’s Declaration of Independence.  Historians cite Thomas Jefferson as the principal author of this document with edits by various members of the Continental Congress.

So what does The Declaration of Independence declare?  It declares four things:

1. It is a declaration of war

First and foremost it is a declaration of war against Great Britain.  It declares our right to independence because of the egregious behavior of King George III.  Wow!  That idea that the colonies could just declare their independence by itself is amazing.  But when you couple that with the risk of the signers of this document, it becomes much more amazing to think about.  The colonies were declaring war against the military superpower of its day.  What was their winning strategy?  They put their faith in a poorly financed, untrained volunteer army of mostly one-year conscriptions.  And if they lost the war, which was highly likely, the signers of the Declaration of Independence would be jailed, tried and hung with all their properties confiscated by the British crown.

2. It declares all men are created equal

This idea flies in the face of reality.  When Thomas Jefferson wrote those immortal words, he was a slave owner as were several other signers.  But even freemen were not treated equally as most colonies only allowed landowners the right to vote.  And what about women?  Women had very limited rights.  They could not own land and when they received an inheritance it became a part of their husband’s estate, not theirs.

And yet, those majestic words were not removed from this document even though there was an obvious disconnect from reality.  I often wonder why.  Don’t you?  I’m so glad that these words were left in because generations of Americans as well as people around the world have cited this truth as justification for many righteous causes throughout history.

3. It declares that the government derives its power from the consent of the people

Prior to this time that concept was unheard of.  In Europe, royalty believed their powers to govern were given to them by God, not man.  That meant that kings could do whatever they pleased and the people had to submit to their authority or face the consequences.   But the Declaration of Independence changed all this.  Man, not a higher power, chooses who their ruler is.  It also implies that if the people do not like how those in authority are treating them, they have the right and even the obligation to remove them from office.

4. It declares that we have rights

We have rights!  That among these rights are life, liberty and the pursuit of happiness.  Our rights are not limited to life, liberty and the pursuit of happiness.  They are just the beginning of our rights.  Down through the years this has been interpreted to mean there are rights not explicitly stated in the Declaration of Independence which has been cited by several political movements including the Women’s Suffrage Movement, rights for minorities (the Civil Rights Movement), and rights for workers (the Labor Union Movement).  These political rights organizations correctly understood that they derive their rights from the Declaration of Independence.

When you celebrate this July 4th remember these truths and marvel at their significance.

Doug Marshall, CCIM is the award winning author of Mastering the Art of Commercial Real Estate Investing.

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Steve Jobs – His 3 Life Principles to Greatness

A couple of years ago I read the excellent biography of Steve Jobs by Walter Isaacson.  Mr. Isaacson does not sugarcoat Mr. Jobs’s personality.  Steve Jobs would have been an awful person to work for as he could either profusely praise his employees or call them a piece of sh**, sometimes on the very same day.  To say the least, Jobs was a very difficult person to be around.

That said, 100 years from now I believe he will be remembered as one of the great men of our era, held in the same high esteem as Henry Ford, Alexander Graham Bell and Thomas Edison.

Three Life Principles

So what can we learn from Steve Jobs? What made him unique?  What made him highly successful? There were many traits that made him successful, far too many to list in a short blog post, but I would like to mention three:

1. He had an absolute passion for his work.

It was never about getting rich; it was all about making something he believed in.  He passionately believed in the Macintosh computer, the iPod, the iPhone, and the iPad to name just a few of the products Apple developed.  A recent survey indicated that 80% of Americans are not passionate about ANYTHING!  What are you passionate about?  Are you passionate about your work?  Do you find excuses to work late or come in over the weekend because what you do excites you?  Or do you even know what passion feels like?

2. He had an obsessive attention to detail.

There was a book written a few years back titled, “Don’t Sweat the Small Stuff… and It’s All Small Stuff.”  Jobs would have vomited his scorn on the author of that book.  Jobs was all about the small stuff.  “Good enough” was never good enough for Jobs. Jobs was all about hiring the most gifted people he could find and then working them to their extreme limit.  Conversely he would also not hesitate to ridicule and quickly fire those who did not meet his high standards. He pushed and prodded his talented minions to perform at higher levels than they thought possible resulting in many technological breakthroughs that Apple is now known for.  He was absolutely ruthless on his employees but afterward they grudgingly loved and worshiped him for it. How often do you settle for results that are less than your very, absolute best?

3. He was a “value creator.”

He didn’t invent many things outright, but he was a master at putting together ideas, art and technology in ways that superseded what had come before.  Jobs once said, “Picasso had a saying, “Good artists copy, great artists steal” and we have always been shameless about stealing great ideas.” Regardless of what we do for a living, our job boils down to adding value in the form of a product or service, for either our boss, if we have one, or our clients who are our ultimate bosses.  When we stop adding value, watch out, we’re expendable!  What can you do today to add additional value to your work so that your boss or client without hesitation realizes your importance in making them more successful?

I have heard people say, “Well I’m not Steve Jobs.”  Or they might insert another celebrity entrepreneur in that statement, like Richard Branson or Elon Musk. Deep down what they are saying is that they don’t have the courage to try to be exceptional.  And I ask, “Why not?”  Being average is certainly not the road to happiness or success.  But living these life principles may get you further down the road to success than you are right now.

Stanford Commencement Address

In June of 2005, Steve Jobs gave the commencement address to the Stanford graduating class.  If you haven’t listened to his speech it’s worth doing so.  It has been viewed on YouTube over 22 million times!  His words that resonate the most with me are, “Your time is limited, so don’t waste it living someone else’s life… Don’t let the noise of others’ opinions drown out your own inner voice.  And most important, have the courage to follow your heart and intuition.  They somehow already know what you truly want to become.  Everything else is secondary. ”

Yes, it is highly unlikely that we will ever be remotely as successful as Steve Jobs but should that stop us from living by the principles that led to his great success?  I think not.  Those are my thoughts I welcome yours.

Want more CRE investing tips?  Check out my book!

Have a need for financing?  Call me today to discuss at (503) 614-1808

 

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Thoughts from the beach: 5 things to ponder

As I’m writing this article, I’m overlooking the Pacific Ocean from a condominium perched on top of a 30 foot high cliff. I have a direct view of the beach. In fact the beach begins about 10 feet from the end of my deck.

For me, coming to the beach is like therapy. It’s a time of relaxing, reading interesting books, taking walks on the beach, playing golf, eating and drinking good food and good wine. It’s a time of sleeping in which I rarely do anymore. I can literally feel my blood pressure returning to normal.

In lieu of my normal blog post I thought I would give you some thoughts to ponder. Here goes:

The U. S. Economy

Over the past year the economy continues growing at a very healthy pace, somewhere in the 3% range.  Unemployment is the lowest its been in 50 years.  And real wage growth is beginning to see healthy gains too.   I believe we should collectively be doing the happy dance but being the “glass half empty” type of person I am I’m not sure I want to get on the dance floor.

I see a weakening in the American Dream as fewer people are able to remain in the middle class.  We are becoming a nation of “haves” and “have nots.”   Income inequality is real and the income divide is growing.  As a life long Republican I’m beginning to sound like Bernie Sanders.  I’m not sure what can be done to turn the trend around.  Any suggestions?

Trade War with China?

A potential trade war with China is looming.  I don’t believe the Trump administration is bluffing.  They want real, verifiable changes in Chinese behavior of stealing intellectual property rights.  I don’t believe China is going to agree to these changes.  Is there a middle ground that both sides can agree to?

The Commercial Real Estate Market

The commercial real estate cycle has reached the point where it’s becoming more and more difficult to find a property that is reasonably priced. This is especially true for apartments.  The CRE market peaked a couple of years ago and it appears that we are at the very beginning of the downward part of the real estate cycle, what is called the Hyper-Supply Phase.  Are good deals still out there to be purchased?  Absolutely, they are just harder to find these days.  I’d be interested in your view of real estate market.  Where do you see us on the real estate cycle?

Interest Rates

A year ago interest rates were on the rise and had been doing so for several months.  It appeared that the economy and the real estate market were going to stall out because of the rising cost of borrowing money.  A year ago we were in a negative leverage environment where leveraging your property with more debt resulted in a lower cash-on-cash return.

All this has changed.  Rates have come down significantly since last fall and we’ve returned to a positive leverage situation.  I’ve been predicting higher interest rates for years. And for years I’ve been dead wrong. Who knows where interest rates are headed? I’ve given up guessing.

Grandkids

I am blessed with two granddaughters, six and eight years of age. I don’t get to see them very often as they live in Charlotte, NC so when I do see them I’m always surprised by their perspective on life.

When they wake up in the morning they rush into Papa and Nana’s bedroom excited about what the day may bring. They’re not thinking about what’s going on in the economy, the stock market or the commercial real estate market. They’re not concerned about interest rates. They’re not thinking about a potential trade war with China.  No they are enjoying the moment, in this particular case, they are enjoying being with their grandparents.

That’s a lesson we can all put into practice: enjoying the moment, like I’m enjoying my time at the beach.  Those are my thoughts I welcome yours.

Want more CRE investing tips?  Check out my book!

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Best Cities in the USA to Invest in 2019

Today’s article is written by Ashley Lipman, Content Marketing Specialist for The Blog Frog.

The Economy Is Looking Good For Real Estate

When it comes to real estate, here’s the truth: any time can be a good time, for those with enough savvy to capitalize on the market. 

​​During a real estate bubble contraction, you buy an undervalued property, make needed renovations and make changes to the property’s management.  Once the property has increased in value due to your expertise and the improving market conditions you sell the property for a nice gain.  And then start the process over by doing a 1031 exchange deferring the capital gains taxes owed.
 
All that being said, in a “bull” economic market, real estate ventures tend to be more successful. Here’s the thing: real estate is usually the least liquid of assets. It takes time to acquire and time to sell. ​​As with anything economical, you want to buy low and sell high. With real estate, you want to look at the city where you’re buying to get the best deal. 

​​Accordingly, this writing will look into the best-ranked USA cities of 2019 to help give you an idea where you might want to invest your assets to maximize potential real estate profit.

Multiple Contenders

Here’s something to consider: you cannot trust the news today. The news is corporate and runs a specific narrative engineered to preserve their best interests. They give some of the truth, then portray it in a way which causes you to think such that you reflect the outcome they want. With that in mind, we’ve got to look at multiple cities and “split the difference”, as it were, to determine which ones are going to truly be the “best” of 2019.

According to Marketwatch.com, 2019’s top six best cities are, in descending order, Boise, Idaho, Raleigh, North Carolina, Madison, Wisconsin, Iowa City, Iowa, Rochester, Minnesota, and Columbia, Missouri. Meanwhile, Niche.com says the best cities are Arlington, Virginia, Ann Arbor, Michigan, Berkeley, California, The Woodlands, Texas (a Houston suburb), Plano, Texas, and Naperville, Illinois.

In contrast, Areavibes.com has 17 of the top cities to live in for 2019 being in and around Dallas. Here’s the thing: Texas is apt to be short-changed by many websites seeking to give an opinion on America’s best cities in 2019. It’s obvious why: many websites are run from Silicon Valley, or businesses sympathetic to the “royalty” of that region.

This means you get a slanted vibe which tends to ignore results that don’t conform to previously-established opinions. Accordingly, to get the best contender for 2019 top living, you’re going to have to weigh your options and split the difference. Doing so reveals that Dallas, Texas represents one of the country’s best places to live this year.

Making A Decision From Available Data

Presently the Dallas economy is going strong, and the real estate market is booming. You might want to look into The Urban Avenue – Victory Park apartments with a high degree of comfort, aesthetic, and desirability. If you’re going to conduct some real estate ventures, you could get a unit in Victory Park, explore the city, find your best option, and make an investment.

Even investment in apartment housing could be ideal. There are multiple families of real estate out there, and some will be more conducive to investment than others. You may want to invest in a retail “mall”, if you have the assets. Strip malls tend to be more “en vogue” than indoor malls these days; but it will depend on the area where you’re considering investment.

One thing is sure: President Trump loves real estate, and he’s got Texas in his pocket presently. States which are aligned with the present administration have a high propensity to see increased economy over states deliberately working against the present administration. Put politics aside and consider the profit potentiality of being aligned with positive economic revenue streams.

Which region is best?

The truth is, there are many regions in America today that are sitting pretty in terms of economic potentiality. Many of the “old guard” locations have “ripened”, and are in decline; even as new regions become economic centers. Savvy investors may find real estate opportunities in “declining” communities; but for those looking to get an understanding of the real estate game, and see profit, investing in booming areas like Dallas makes sense for 2019.

About the Author

Ashley is an award-winning writer who discovered her passion in providing creative solutions for building brands online. Since her first high school award in Creative Writing, she continues to deliver awesome content through various niches.

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Best Places to Live in the USA in 2019

The Economy Is Looking Good For Real Estate

When it comes to real estate, here’s the truth: any time can be a good time, for those with enough savvy to capitalize on the market. During a real estate bubble contraction, purchasing a cheap property and renting it out until the bank is paid off and the property is fully owned can provide ample opportunity for property maximization and later sale.

You buy a property under a loan, build it up until it’s paid off, then sell it and immediately put the money into another real estate venture to legally avoid taxes—this is called a 1031 exchange.

All that being said, in a “bull” economic market, real estate ventures tend to be more successful. Here’s the thing: real estate is usually the least liquid of assets. It takes time to acquire and time to sell. As with anything economical, you want to buy low and sell high. With real estate, you want to look at the city where you’re buying to get the best deal.

Accordingly, this writing will look into the best-ranked USA cities of 2019 to help give you an idea where you might want to invest your assets to maximize potential real estate profit.

https://pixabay.com/photos/dallas-tex...

Multiple Contenders

Here’s something to consider: you cannot trust the news today. The news is corporate and runs a specific narrative engineered to preserve their best interests. They give some of the truth, then portray it in a way which causes you to think such that you reflect the outcome they want. With that in mind, we’ve got to look at multiple cities and “split the difference”, as it were, to determine which ones are going to truly be the “best” of 2019.

According to Marketwatch.com, 2019’s top six best cities are, in descending order, Boise, Idaho, Raleigh, North Carolina, Madison, Wisconsin, Iowa City, Iowa, Rochester, Minnesota, and Columbia, Missouri. Meanwhile, Niche.com says the best cities are Arlington, Virginia, Ann Arbor, Michigan, Berkeley, California, The Woodlands, Texas (a Houston suburb), Plano, Texas, and Naperville, Illinois.

In contrast, Areavibes.com has 17 of the top cities to live in for 2019 being in and around Dallas. Here’s the thing: Texas is apt to be short-changed by many websites seeking to give an opinion on America’s best cities in 2019. It’s obvious why: many websites are run from Silicon Valley, or businesses sympathetic to the “royalty” of that region.

This means you get a slanted vibe which tends to ignore results that don’t conform to previously-established opinions. Accordingly, to get the best contender for 2019 top living, you’re going to have to weigh your options and split the difference. Doing so reveals that Dallas, Texas represents one of the country’s best places to live this year.

https://pixabay.com/photos/dallas-tex...

Making A Decision From Available Data

Presently the Dallas economy is going strong, and the real estate market is booming. You might want to look into The Urban Avenue – Victory Park apartments with a high degree of comfort, aesthetic, and desirability. If you’re going to conduct some real estate ventures, you could get a unit in Victory Park, explore the city, find your best option, and make an investment.

Even investment in apartment housing could be ideal. There are multiple families of real estate out there, and some will be more conducive to investment than others. You may want to invest in a retail “mall”, if you have the assets. Strip malls tend to be more “en vogue” than indoor malls these days; but it will depend on the area where you’re considering investment.

One thing is sure: President Trump loves real estate, and he’s got Texas in his pocket presently. States which are aligned with the present administration have a high propensity to see increased economy over states deliberately working against the present administration. Put politics aside and consider the profit potentiality of being aligned with positive economic revenue streams.

The truth is, there are many regions in America today that are sitting pretty in terms of economic potentiality. Many of the “old guard” locations have “ripened”, and are in decline; even as new regions become economic centers. Savvy investors may find real estate opportunities in “declining” communities; but for those looking to get an understanding of the real estate game, and see profit, investing in booming areas like Dallas makes sense for 2019.

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Achieving Financial Freedom as a Passive Investor in Multifamily

The Problem

So, you want to achieve financial freedom with real estate investing, but you’re a busy person with a demanding job and a lot of responsibility.  You don’t have time to learn the ins and outs of putting together an advisory team, finding a good deal, or making decisions about the financing and management of a property.

The Solution

The fact is, you can STILL enjoy the benefits of real estate investing by becoming a passive investor in multifamily syndications.  On the latest episode of the Apartment Building Investing podcast, I sit down with Michael Blank to discuss how I achieved financial freedom through passive investing in commercial real estate.

I describe the differences between an active and passive investor, sharing my goals as a passive investor and the characteristics of an ideal candidate for passive investing. I also offer insight around my preference for multifamily over other asset classes and explain how to calculate the amount you need to invest to earn a particular cash-on-cash return.

The Benefits

Listen in to understand the incredible tax benefits of real estate investing and get my take on the #1 thing passive investors should consider before handing their money over to a syndicator!

Listen to the podcast episode now!

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The Six Surprising Laws of CRE Investing

James Montier, the author of the well-known book The Little Book of Behavioral Investing, wrote a white paper called “The Seven Immutable Laws of Investing.” In his thesis, he identifies seven principles for sensible investing in the stock or bond markets. I was intrigued by the title, so I read the article and somewhere along the way realized that six of these seven “immutable laws of investing” also apply to investing in commercial real estate.

Always insist on a margin of safety

In other words, the goal is not to buy at fair market value but to purchase with a margin of safety because property performance, market conditions, and the like may not live up to expectations. This means finding a property that is underperforming in the market, but, with a change in ownership, the property’s performance will turn around.

This time is never different

The four most dangerous words in investing are “This time is different.” The dot.com bubble that occurred from 1999 to 2001 is a perfect example. Investors were buying stock in companies that hadn’t turned a profit because they expected these companies would become the next Google or Amazon.com. Stock prices soared, and even though it made no logical sense, the contention that was bandied about was “this time is different.” The same was true of real estate prior to the Great Recession. Many people believed that house prices could never go down, that we had hit a new permanent high. In both examples, however, a speculative fever resulted in a bubble that caused stocks and house prices to plummet in value.

Whenever someone starts saying, “This time it’s different,” get out of that investment as quickly as you can.

Be patient and wait for the fat pitch

Mr. Montier states in his white paper: “Patience is integral to any value-based approach on many levels. … However patience is in rare supply.” In commercial real estate, there is a time to wait and a time to act. When things go bad, like what occurred after the Great Recession, the tendency is to dump our rental properties as quickly as we can. But the prudent thing to do is wait.

Most investors suffer from an “action bias”—a desire to do something. But often the best thing to do is to stand at the plate and wait for the “fat pitch.” A “fat pitch” is a baseball analogy where the pitcher is behind in the count and his next pitch needs to be a strike or he’s walking the batter. He knows that, and more importantly the batter knows that. So the batter just patiently waits for that fat pitch that he can hit for extra bases. Likewise, real estate investors need to be patient as they look for those buying opportunities that will be home runs for them.

Be contrarian

Humans are prone to the herd instinct. Investors are often no exception. When everyone is buying, investors typically buy; when everyone is selling, they sell.

In 2009, during the worst of the recession, a group of us put under contract an apartment that had been foreclosed on by the lender. It took me six months to find a lender who would finance this property. Today, the property is by far my best investment. The value has shot up dramatically, and the property is truly a cash cow.

Are all the bargains gone in a high-priced market? I don’t believe so, but finding them is certainly more challenging. Anytime can be a good time to buy. But if you go along with the herd and sit on the sidelines with them, you may miss out on some of the best deals to be had.

Be leery of leverage

As an investor, I’m always trying to improve my property’s cash-on-cash return. Adding modest amounts of debt to be paid from the property’s cash flow is the easiest way to substantially improve its cash-on-cash return. Why? As you add debt, you reduce the equity invested in the property. Counter balancing reduced equity is an incremental reduction in the property’s cashflow after debt service resulting from the monthly mortgage payment modestly increasing. So leverage can positively influence the property’s cash-on-cash return. But there is a limit, and we investor’s need to be very leery of leveraging our properties too much. In many instances, those owners with properties that were over-leveraged in 2008 paid the ultimate price—the loss of their properties. Those homeowners prior to the Great Recession who used their homes as ATM machines learned the hard way too. Seven million homeowners lost their homes to foreclosure during the last recession.

Never invest in something you don’t understand

This is just plain old common sense. All too often, I have found myself talking with commercial real estate investors who are clueless about their property holdings. This puts them at the mercy of their real estate advisors. Many times these advisors have a different agenda than the owner, but the owner, not knowing the fundamentals of CRE, is unaware of the conflict of interest. It’s a simple truth: If you don’t understand the investment concept, then you shouldn’t be investing in it.

As long as you follow these six fundamental principles of CRE investing, you can be confident you’re investing wisely. Otherwise, you can go through life being part of the herd, following the latest trend only to be sadly mistaken when the real estate market turns.

Those are my thoughts. I welcome yours.  What real estate investing principles do you live by?

Want more CRE investing tips?  Check out my book!

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