Best Ever Conference 2019 Notes

Here are my notes from the Best Ever 2019 Conference. Enjoy!

Disclaimer: While all attempts are made to present correct information, there is a chance I wrote something down incorrectly! If you would like to make edits/corrections or add your notes, please e-mail seanpanrealty@gmail.com

Notes compiled by Sean Pan – Podcast host of the Everything Real Estate Investing Show, Blogger, Meetup leader, and SFR rehabber.

If you would like to be interviewed on the Everything Real Estate Investing Show podcast, please reach out to me at Seanpanrealty@gmail.com to discuss opportunities.

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John Chang – Economic Update Marcus & Millichap 3

Panel – Neal Bawa, Mark Podolsky, Jaclyn Gibson, Nitzan Mosery 4

Mark Mascia – Asset Update: Retail 6

Panel – Expert Acquisition Strategies – Adam Adams, Sterling White, Scott Lebanhart, Mark Kenney 7

Joe Fairless – Best Ever ROI on your time 8

Road to a Billion Panel – Scott Lewis, Ryan Smith, Frank Roessler, Chris Clothier 10

Hunter Thompson – Money Raiser: 7 steps of due diligence 11

Panel – Hunter Thompson, Scott Lebenhart, Skyler Looper, Matt Podak 12

Ryan Smith – Asset Update: Mobile Homes 13

Debate: Passive investing is a better path to financial freedom – Jeremy Roll, Hunter Thompson (For Passive), Tami Kenney, Mark Mascia (For Active) 14

Brandon Turner 15

Panel – Nathan Tabor, Gene Guarino, Lucas Hall – Location, Location, Location 16

Kathy and Rich Fettke 17

Mark Canton – Taxes 18

Panel – Taking the Next Leap – Joe Fairless, Bill Zahller, Julie Lam, Henry Lai, Ike Mutabanna 19

Trevor McGregor – Success Blueprint 20

SEC Law – Ryan Gibson, Roland Wiederanenders 21

Gene Guarino – Assisted living asset update 22

Worst Ever Deal Ever – Lucas Hall, Danny Randazzo, Justin Grimes 23

John Chang – Economic Update Marcus & Millichap

• 100 months of continuous job creation
  • There’s a labor force shortage
    • Slows down job creation
    • Wages increase
  • Boost consumer confidence
• Most countries have low rate bonds
  • Capital is coming to America from other countries
• 66% of Millennials rent
  • 67.3 million between 20-34 year olds
  • Average first home purchase at 32
  • Average marriage at 28.8
  • Theoretically more home sales in 5 years
• Population growth going south and west
  • Losing population in midwest and SoCal
• Internet retailers are now buying retail properties
• Housing construction falls short of demand
• Average American net worth is at an all time high
• Over the short term, recession is unlikely
  • 1-3 years out
  • Confidence is decreasing though
  • An event drives recession, it doesn’t just happen

Panel – Neal Bawa, Mark Podolsky, Jaclyn Gibson, Nitzan Mosery

Neal

• Student housing
• Lease by room, all bills paid, sign individual leases with everyone
• It comes with furniture, it’s like multifamily, hotel, daycare, and halfway house (if there’s freshmen)
• Buy super strong furniture from China
  • There’s lots of Cap Ex for this type of project
• There’s a large lift but a lot goes to extra costs like extra bills and management fees
  • 5.6 cap across the board

Jaclyn

• RV parks
• Not as institutionalized
  • Mostly Mom and Pop
  • 8-13 cap. 13 is in tertiary markets
  • Destination parks (affordable housing type)
  • Amenities keep people around
  • Created their own debt position

Mark

• Land deals
• Buy at auction, sell on internet
• 300-1000% return, but it’s small dollar amounts
  • 5-15k per deal. Billionaires don’t touch it
• How to make offers
  • 12-18 months comp, look at lowest comp, offer ¼ of that value
  • Start creating marketing package
  • Go to neighbors and pitch them to property, then buyers list, then craigslist, etc…
  • Seller finance the property and get initial money out as down payment, create land notes and make passive income

Nitzan

• Owns Marina
• Not all marinas are created equal
• Seller financed first, then refi’d, not a Freddie or Fannie loan

Neal

• How close to university?
  • Depends on cap rate, exponential increase as you go away from center
  • Not all directions have the same rate
    • You need to go where students already are
    • Don’t be a pioneer, wait for a big REIT to develop a new area
  • You need to go where students are originally away from home
• You need to look at how big the school is
  • Buffalo’s population is decreasing, but University of Buffalo’s population is increasing
• Neal chases GDP growth on Multifamily assets
• Checks for University
  • What is completion rate?
  • How long are they staying?
  • Why are they leaving?
• Turn them into a tribe
  • Students are emotional
  • Create a cult feeling (create a culture)
• Student housing is a lot of work compared to multifamily

Mark Mascia – Asset Update: Retail

• Digital is moving to physical
  • Warby Parker buying physical locations
  • Amazon acquiring Whole Foods
• Modern retail is hyper niche focused or service oriented
  • Rent the runway
  • Dry Bar
• For every store closing, 2.7 are opening
• Some weak mid-market brands are bad
  • Sears, ToysRUS
  • Weaker malls in tertiary markets are hurting
• Opportunity zones
  • There’s some danger
  • Don’t invest just because of an emotional thing like tax breaks. Tax breaks should be a bonus, not the reason to invest

Panel – Expert Acquisition Strategies – Adam Adams, Sterling White, Scott Lebanhart, Mark Kenney

Mark

• Make relationships with brokers because going to sellers directly is just transactional
• Create win-wins always
• When purchasing an asset for the first time, the seller needs confidence that you can close
  • Leverage everything you have
  • Partner with someone who can close
  • You need a track record
• Have a strict criteria
• Don’t waste time looking at stuff that isn’t in your criteria
• Mark only acquires 100+ units
• Stays away from tertiary markets
  • Yield is good but hard to find management
  • Only one main industry (job risk)
  • These markets may be easier to start investing though…

Scott

• Location matters
• Build the relationship with brokers
• Don’t re-trade
• Hardest part is building your reputation
• Invite brokers to lunch and dinner. Meet face to face
  • Actually go to the city and try to relate to the broker
  • Scott purchases $20 million B class properties – 100-200 units
• Looked at 20 MSAs, called brokers to understand growth drivers
• Eventually chose Florida because of job + population growth

Sterling

• Goes straight to home owners
  • Cold calls
• Team consists of
  • Researcher
  • Cold caller
  • Head of acquisitions to close deal (this could be himself)
• When sellers say they’re not interested he says: “I understand, give me 30 seconds and if you’re still not interested I’ll hang up on myself”
• His properties are purchased between a 7-12 cap, C to C+ properties, 50-100 units
• Giving value on BP gave him credibility and trustworthiness to get private money, no direct monetary gain.

Joe Fairless – Best Ever ROI on your time

• Activity level income category exercise (ALICE)
• Color code it based on profit

Passive	Semi-passive	One-off Active	Ongoing Active
…	…	…	…

• Track this year over year
• #1 way to generate leads in 2019
  • 70% of newspapers have gone out of business over the last 10-15 years (that cater to 100,000 readers
  • Only 11% of community papers went out of business during that time
    • It’s because small papers are more relevant to readers
  • When we involve our customers, they take ownership and refer other people

• Sends out snail mail newsletter to investors.
  • Interviews other investors to see how they became accredited
  • Include as many community members as possible
  • Make it add value
• Don’t agitate your audience
  • Tagging a bunch of people when the conversation isn’t relevant to them
• How to breakthrough
  • Just because someone else isn’t doing it doesn’t mean you shouldn’t
  • Best salesman’s secret is to work an extra hour or two every day
  • If Joe started over, he would do a twice daily podcast
  • When you have big goals, your brain starts thinking ‘HOW?’
    • Get a whole crew, them them to all promote it
  • Work hard, learn faster, optimize, make process better
  • Learn and build relationships
    • Go on BiggerPockets and engage with the forums, don’t just listen to podcast
  • Create a book club or network
• 5 content pieces to watch
  • Life Purpose: Adam Liepzig TED
  • Life Principles: Matthew McConaughey
  • Presenting Skills: Tony Robbins Top 10 presentation
  • Networking Approach: Tim Ferris How To Rock
  • Entrepreneurship & Risk Taking: Men Who Built America (Netflix)
• Focus learning and meeting
  • Needs to have both elements, so don’t go to meetups at bars
• Have 2 email lists
  • General list, send info and podcast updates
  • Accredited list, only send deals and asked what else to put in his book

Road to a Billion Panel – Scott Lewis, Ryan Smith, Frank Roessler, Chris Clothier

Ryan

• Created software company, invests in mobile home parks
• He is very curious
• Gets eyes on property
• Hire a team of managers and district managers to see all properties 3 times/year
• Have a reason beyond yourself
• He has a many to many fund
  • Many investors to many properties
  • 4-5 assets
  • Capital out is from his company
• Constantly tell your story
• Do what you say
• Don’t rely on one person
  • He puts limiters on capital contributions for each investor

Frank

• Serial entrepreneur
• Started Ashcroft Capital
• Be passionate about what you’re doing
• Find partner who does things better than you can
• Hire bobbers, not sinkers
• Live for the journey, not the destination

Chris

• Grew up in entrepreneurial household
• He’s in the customer service business
• Be patient
• Working with family is difficult, but it can be done
• Everyone needs a key role
• If you’re going to scale, your employees need to have the same standards as you
• You can do it right, or you can do it again
• Can’t afford to bring on people who do things wrong
• Three reasons to be in business
  • Be excellent, be the best, or make money
  • Memphis Invest wants to be the best
• Make sure employees make you better
• Celebrate all wins, always

Hunter Thompson – Money Raiser: 7 steps of due diligence

• There’s many ways to measure cap rate
  • Annualize past one month
  • T-3 Normalized
  • Use one method and keep doing it
• Ensure neighborhood lines up with property type/tenant base
• Advertisement may say 20000-25000 Daily travelled vehicles, but need to be sure people can see it
  • What if it’s under an overpass?
• Make sure voting rights, additional capital requirements, and waterfall structure are properly documented in your documents

Panel – Hunter Thompson, Scott Lebenhart, Skyler Looper, Matt Podak

Scott

• Make assumptions
• Formulate business plan to increase rents and business
• Don’t be afraid of a problem, just understand it

Skyler

• Right when you sign, sign franchise due diligence process
  • It’ll save you 20 days
• Follow migration of population
• Get away from the emotional buy
• Don’t underwrite with Airbnb numbers

Matt

• Give investors the information that they ask for (not too much)
• Have a bunch of investor decks
• Ask people to send you HUD statements to see if they did well
• Pittsburgh, negative population growth, but most people leaving are older people with 30-40k fixed income
  • Gaining young people with 150k jobs

Ryan Smith – Asset Update: Mobile Homes

• Supply is constrained
  • Nobody wants a new one in their neighborhood
  • Demand is growing
  • Debt is prevalent
  • Liquidity is presently available
• There’s a lot of capital chasing deals
• NOI Growth from $100 in 2000
  • Self storage grew to $225
  • Manufactured housing $219
  • Manufactured housing didn’t go down a single quarter since that time
• Management platform is critical
• Quality vs yield trade off
• Discipline is important
• Be picky with debt, stays away from CMBS
• Remember that there will always be another deal
  • Don’t be scared to pass

Debate: Passive investing is a better path to financial freedom – Jeremy Roll, Hunter Thompson (For Passive), Tami Kenney, Mark Mascia (For Active)

Jeremy

• Easier to invest passively when you have a W-2
• Leverage someone else’s experience
• Diversification
• Still get same tax benefit
• Active investors have a hard time changing to other asset classes
• It’s hard to just go active, he started by investing passively while working a W-2

Tami

• No taxes
• You get time, freedom
• A person wouldn’t get these benefits if he’s just passive
• More control, freedom, you know more deals about the property
• Case study 400 unit
  • 350k in acq fees
  • 400k cash flow
  • 1 mil disposition fees
  • 2 mil total in fees for sponsor (with no money in the deal)

Hunter

• To be successful in life you need to specialize
  • Opposite of good financial portfolio strategy
  • Ike Bautista lost billions
• Easier to get wiped out as an active investor

Mark

• Wants control of his own destiny
• You can also fix stuff
• You have control of the investment
• Don’t diversify so hard
  • Instead of 500 investments, just focus on 5
  • You need both a capital stack (active) and streams (passive)

Brandon Turner

• How to say No
  • Think of every task as stealing time away from something else like family time
  • Would you do this tomorrow?
  • Ask to think about it before committing to anything
  • Schedule appointments with yourself
  • Block out time with yourself
• How to say yes
  • Define your wildly important goal (WIG)
  • From [x] to [y] to [when]
  • Activate your RAS (Reticular Activating System) by writing your WIG daily
  • Schedule time to work on your process
• Work on Lead measures
  • Most people focus on Leg measures(the results)
    • I want to weigh a certain amount
  • Lead measures are the things you do to succeed
    • Go the the gym a certain amount of days in the week
  • Track goals
• Accountability
  • Written action commitments + weekly accountability  = best way to hit goals
  • Mastermind Format
    • 5 mins highs and lows
    • 10 mins to go over new goals and last week’s commitments
      • Tell the group if you succeeded in last week’s goals
    • 30 mins hot seat
      • Rotate around the room
    • 15 mins for this week’s comments
    • Ideal mastermind size is 4-5 people
      • You need a jerk in the group to keep things orderly
• Gratitude
  • The more grateful you are, the more successful you are
  • Keep a gratitude journal
  • Set time feel grateful
  • Grange negative experiences into positive ones
  • Show your gratefulness
  • Anchor a good habit to a habit you already have
    • I.e. be grateful every time you brush your teeth
• Give Generously
  • Science shows that you will get back more when you give
• Favorite investment is buying a 4plex for his daughter when she’s born. It will be paid off when she’s 18

Panel – Nathan Tabor, Gene Guarino, Lucas Hall – Location, Location, Location

Gene

• Looks at demographics of an area
• Wants to see lots of people with high income

Nathan

• Does a lot of gut jobs
• He can bring a property up but not an area
• Looks for 100 units within a 5-10 min drive from each other
• Just needs 1 manager
• Over 100 units in one building makes you compete with national people
• 5 minute call could have saved him 150k because of zoning laws
• “If I can’t go into a unit, immediately take 40k off price”
  • Have to assume it’s a gut job, after saying the above quote, owners suddenly let you in
• Scared of drug dealers

Lucas

• Looks for places with highest rent growth
• Higher than other areas
  • Trendy locations, low vacancy
• Stays away from C class area
• Looks for C+ property in B- area
• Looks for the Panera bread and Lulu Lemons
• Looks for where people shop
• Take something and make it a little different (add more bedrooms)
• Newborhood, Costar, World Pop for data
• People don’t want to share a bathroom
  • Take a large bathroom, cut it in two and make two small bathrooms

Kathy and Rich Fettke

• Received wakeup call when Rich was falsely diagnosed with cancer
• Radio show allowed her to interview big dogs like Robert Kiyosaki
• Have an “Early Adopter” mindset
  • Started podcasts and webinars early
• Even in horrible situation, the managed to recover
• Reinvention to syndications
• Be very clear and selective on qualities of your partners
  • Operators matter!
• Stages of business growth
  • Most people get stuck at 1 mil/year
• Elite Forum, take them from 7-8 figures
  • What is their purpose, mission, org chart
• You might have a vision, does your team have the same vision?
  • Everyone’s goals needs to be aligned
• Having clear values creates inspired leaders
• You can hire/fire based on those values
• Choose your focus and become an expert at it
• Proof of expertise is in group affiliations, writing credentials, and media mentions
• Retreat, take people 20 years in the future to see where they’re at
• What is your unique ability?
  • Do that and delegate the rest
• Remote, zoom, basecamp, allows for remote work
• When culture is strong, you can trust people to do the right thing
• Company health is the most important part of the business
• Don’t just build a list, build a tribe

Mark Canton – Taxes

• Depreciation recapture
  • Money you get as gain taxed at 25% for the dollars you depreciated
• Tell sellers they gain X dollars for doing seller financing
• Cost segregation analysis companies will do an estimate for free
  • Always worth doing
• Opportunity zone
  • You need to invest an extra (half) of purchase price that needs to go into the property within 30 months
    • Permitting process makes this difficult to achieve
• Besides 1031 exchange, what are other strategies
  • Roll gain into Delaware Statutory Trusts (DST)
  • Roll into Opportunity Zone Funds
  • TIC (?)
• Interest on cash out refi funds are only deductible if you use that money to buy another investment
  • Not if you go and buy a Porsche
• Capital basis steps up when you die
• Sometimes estate taxes forces you to sell asset to pay the bill
  • Use 6166 and claim hardship to get onto a payment plan
    • You get to keep asset and use its cashflow to pay the bills

Panel – Taking the Next Leap – Joe Fairless, Bill Zahller, Julie Lam, Henry Lai, Ike Mutabanna

Bill

• Good relationship with broker
• Raised 2.9 million on his first raise
• Found partner to raise funds – 26% of GP
• Him and his partner got ~25% each
• Gave a piece of the GP for the loan guarantor as well
• He does a value add strategy

Julie

• There’s a lot to learn as a GP
• Find ways to help actives
• Partner does blog posts and videos
• Understand the needs of high net worth people
• Talked about her LP experience
• How to vet partner?
  • Communicate a lot
• Exit strategy is to sell in 5-7 years
• 1031s are hard to time right

Henry

• Met partners at this conference last year
• Helped raise for a project, first raise was 750k
  • One person contributed 250k
• Money raisers get 50% of the GP

Ike

• Went through personal list to see who was down to invest in his deal
• Needed 500k to close on a deal, found someone who had 500k in gains from a previous 1031
  • Syndications can’t take in 1031 money
  • Investor made a ‘loan’ for 500k to close on the property
  • After closing, changed the structure to TIC and gave the investor his part of the deal, making the 1031 valid

Trevor McGregor – Success Blueprint

• 80% is how you think 20% is mechanics (how you act)
• Finding deals is like flipping cards
  • Eventually you find an Ace
• Condition your mindset daily
• Know you outcomes
• Build solid operational systems
• Build incredibly strong networks
• Master time management
• Honor your strengths
  • Farm out weaknesses
• Take massive action
• What are you doing to grow
  • Are you doing empowering or disempowering things
• What are you daily habits
• Productivity pyramid
  • Low or now value (Netflix)
  • Low $ value (Newsletter for business)
  • High $ value (sending out LOIs, talking to investors)
  • High Lifetime Value (spending time with kids, conferences, going to the gym)

SEC Law – Ryan Gibson, Roland Wiederanenders

• Reg D 506 B or 506 C
  • Can advertise for 506 C but you can only take accredited money
    • You lose exemption if you fail to verify accreditation
• 506 B
  • You can only advertise for 506B as long as it’s behind a password protected site
  • You can talk about historical numbers as long as it doesn’t invite them to invest while you’re on stage
  • What can/can’t you say
    • Just can’t incite market interest from people you don’t know
  • You can announce contract but can’t talk about forward statements
• You can’t get paid a commission for raising money for someone else
  • They can be partner GP
• 504
  • Unlimited number of unaccredited investors
  • 5 mil raise max
• 506
  • If you have unaccredited investors, you need balance sheet audited, extra 5-10k/year
• Reg A
  • $50-$75k to set up
  • Raise up to $50 million and you can advertise and you can get unaccredited investors
  • Min contribution is $2k
  • Fundrise or other crowdsourcing sites use this

Gene Guarino – Assisted living asset update

• He doesn’t need to worry about buying under fair market value
• Residential assisted living anywhere
• 4000 people turn 85 every day, opportunity is there
• Rehab home for the purpose of assisted living
• 10-12 people per home
• $10,000/month net on a single home

Worst Ever Deal Ever – Lucas Hall, Danny Randazzo, Justin Grimes

Lucas

• Contractors suck
• No elevator on second floor in 55+ community
• Residential flips are no good
• Only he lost money, everyone else made a lot
• Don’t be desperate for a deal
• What happens when things aren’t good
  • He can now tell investors how he handled it and here’s how he did the best for his previous investors

Danny

• No cash flow on deal
• Requires capital infusion
• Partnership alignment was not the same
  • Do they have the same want?
• Mental energy and time suck
• What is your why
• Don’t stray

Justin

• Contractor did a bad job
• Had to treat termites
• Survey showed 10% less land than expected
• Title didn’t pay
• Eventually lost 20k on project
• Always have multiple exit strategies
• Learn the power of strategic partnerships
• Ego and greed caused these issue