The Best Ever Conference in 2020 was packed full of actionable investing advice from real estate pros.
In preparation for BEC2021 this week, I wanted to circle back to the top takeaways from last year’s conference for a sneak peek at what to expect from the 2021 line-up of speakers.
In this post, we will focus on the top takeaways from day 1.
Glenn Mueller, Denver University
The three main drivers of real estate demand are population growth, GDP growth, and employment growth. Compared to previous periods of expansion, these three factors were lower during the post-2008 recession, pre-COVID period. Additionally, these factors are nearly identical to the interest rates (i.e., the costs of real estate). As a result, the most recent expansionary period has been more stable and exceeded the typical 10-year periods of expansion in the past.
The three metrics that run real estate cycles are vacancy, rent growth, and income. When vacancy is low, rents increase. When rent increases, income also increases. Since these are the factors that run the real estate cycles, you should be analyzing them on a frequent basis. And the best place to stay up-to-date on these metrics is CoStar. Either purchase a CoStar subscription yourself or leverage a relationship with a broker who has their own subscription.
Lastly, industrial has been the best asset class in the past five years (as well as during the COVID recession). Why? Because of the Amazon and Walmart effect. Amazon’s online business and the resulting increase in Walmart’s online business has benefited the industrial asset class the most.
Jillian Helman, RealtyMogul
The proforma (your income and expense projections) is always wrong.
Secret #1: To minimize the “wrongness, ”always includes a minimum 10% contingency budget. For example, if you expect to spend $10,000 per door in renovation, budget for $11,000 per door.
Secret #2: Use a cap rate at exit that is at least 1% greater than the cap rate a purchase.
Secret #3: Reduce the number of units renovated and re-leased per month. Four to six units per month, sometimes up to eight, is a more realistic assumption.
Secret #4: Increase the vacancy and bad debt during the renovations period. Expect more tenants to leave because of the chaos that comes from the construction process. Also, someone who can afford a $600 rent may not be the same demographic that can afford a $800 rent, so expect a lot of tenants to skip
Joe Fairless, Ashcroft Capital
To accomplish more every year, have a thorn. A thorn is a negative experience that you can draw upon to propel yourself forward. Joe’s thorn was losing money on his first deal, among other things that went wrong with the deal and around the time of the deal.
The three components of a thorn are that it needs to cut deep, it fades over a certain period of time, and the need to document what happened.
If you don’t have a thorn, manufacture one. If you need to manufacture a thorn, you need to know what the quantifiable objective is for the manufactured thorn. For example, if you don’t read one paragraph every day for a week, you have to hold dog poop in your hand and lick it. (that’s right – I said dog poop).
Dan Handford, PassiveInvesting.com; Roni Elias, TownCenter Partners; Jeremy Roll, Roll Investment Group; David McAlvany, Precious Metals Portfolios
1. Litigation: Roni makes money with a publicly-traded litigation company. Each fund has 1000 cases and he has a 90% win rate on 25,000 cases. The IRR on the funds are in the 60%+ range. For example, a personal injury fund could make a 16% IRR in less than 16 months and then 50% or higher over time.
2. ATMs: Jeremy invests in ATMs. The investment funds have a four year payback period and seven year term. The funds result in a fixed cash-on-cash return of 24.5% and an 18% IRR.
3. Gold: David invests in precious metal portfolios. He likes these investments because they are not tied to the financial markets. If the overall economy worsens, his investments thrive.
Alex Racey, First Principles of Performance
The first principles of performance are eat, sleep, move. These three principals are all tied together. If you are suffering in one, you suffer in all three and your performance suffers as a result.
Most people fall into one of the following three performance categories.
First is “kick the can.” This is someone who was a star athlete in high school or college. They shifted 100% of their focus from athletics to their job. They make a lot of money but their physical, mental, and emotional health is lacking. They tell themselves that they will eventually refocus on their fitness.
Second is “head in the sand.” This is someone who is overwhelmed by the number of fitness routines and diets and say, “screw it” and decide to ignore them all.
Third is “all good.” They work out and eat well but ignore ongoing pain and issues, like joint pain, back issues, etc. Alex says this is the category he falls into.
To optimize your performance, you must optimize your eating, sleeping, and moving. Alex says the best approach is to Google metabolic flexibility for eating, sleep hygiene for sleeping, and minimum effective dose for moving.
To hear more actionable advice from veteran commercial real estate investors, make sure you attend BEC2021 this week. Click Best Ever Blog and use the code WINNERS30 to get 30% off your ticket.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.
