Latest / The Academy Presents podcast / Joint Ventures, Affordable Housing, and Building Generational Wealth Through Real Estate

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Joint Ventures, Affordable Housing, and Building Generational Wealth Through Real Estate · The Academy Presents podcast

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  Did you know that 90 % of the world's millionaires
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  invest in real estate? Well, I'm Angel with the
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  Academy Presents Real Estate Investing Rocks,
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  and I'm here to help you if you want to go for
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  your piece of that pie. Are you new? Are you
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  new to this and you just don't know where to
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  start? It's okay. Are you someone that has invested,
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  but you feel stuck, you feel like you've lost
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  momentum, you don't know where to really head
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  from here? Are you a seasoned real estate investor
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  who is doing great but maybe you just want to
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  hone a few skills here and there? This is the
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  place for you. The Academy Presents Real Estate
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  Investing Rocks podcast will connect you with
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  industry experts so that you can save time, avoid
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  costly mistakes, and begin living the life you've
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  dreamed of all through real estate investing.
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  You're already taking the first step. just by
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  joining us here today. Hey guys, it's Angel and
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  I just want to thank you again for being here.
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  This is, you know, six of my favorite days of
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  the year. I know I've said it like every single
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  time you've opened any of these sessions, but
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  they really are. These are absolutely absolutely
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  my six favorite days of the year because we do
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  this twice a year. We do it in March and September
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  every year, three days a piece. And it's just
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  awesome. I love learning because I'm learning
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  right here with you and being able to share it
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  with people and help other people learn more
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  about various assets in the space and how you
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  can get started. So again, if you want to join
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  us on the live side, we would love to have you.
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  hours of content, a lot of information, and a
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  lot of ways to learn. So that's kind of out there.
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  My friend Ira here, we're going to talk a little
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  bit about a lot of things. We're going to talk
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  some about his why and especially his community,
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  some affordable housing. But the coolest thing
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  is he does JVs. And I don't think there's a whole
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  lot of us out there that have the resources necessary
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  to pull off JVs. But it's still really cool to
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  learn about it. So I'm going to kind of hand
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  things over to Ira. Ira, if you want to give
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  us a little bit about your background, and then
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  we'll get started from there. Sure. Happy to.
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  Thanks for having me on this, Angela. I appreciate
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  it. Absolutely. So I would say I've been in the
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  multifamily space for the last 12 or 13 years.
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  Prior to being in real estate, I've been in the
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  financial service sector with a business partner
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  of mine for 25, 30 years prior to that. Still
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  involved in that world, but my business partner
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  handles the day -to -day in those ventures. So
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  I've been in real estate for 13 years. I originally
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  partnered up with another friend of mine, a friend
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  of mine from college. who's been in the real
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  estate space for 30 plus years as well. We started
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  out, he invited me to do a deal. We always talked
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  about doing some stuff together and I got involved
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  with him in a JV deal. I know Angel briefly touched
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  on that. So let me just clarify. All the properties
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  I'm involved with are primarily in Illinois and
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  a little bit in Wisconsin. and are all joint
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  venture deals. To this date, I have not been
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  involved in a syndicated deal except one deal
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  in Nebraska as a LP, just to kind of get a feel
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  for it, see how the LPs are treated, a little
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  bit about how the investors are treated, the
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  communications, financial statements, how often
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  we're receiving that and, you know, conversation.
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  So I just wanted to check it out. But my vast
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  experience is joint ventures. Presently, I'm
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  involved in both traditional apartment buildings
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  as well as affordable housing. And when I say
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  affordable housing, there's section eight properties.
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  Just to give you a little background, Section
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  8 is typically made up of voucher Section 8 properties,
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  as well as HAP, Housing Assistance Program properties.
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  And the primary one that I do focus on is the
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  HAP contracts, which is a contract with the government.
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  A tenant doesn't walk in with a voucher in hand
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  and say, I know you're property qualifies and
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  I have a voucher I'd like to stay here. Ours
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  is more the we have a contract with the government
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  and the the the the resident doesn't have to
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  walk in with a voucher as I sort of said they
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  as long as they meet our criteria which is they
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  have to do a background check and there's financial
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  criteria that's required by HUD and it's kind
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  of a sliding scale of how much they make. to
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  how much they pay. So some people might pay zero,
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  we call them zero renters, and others might pay
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  75 % of their paycheck and HUD might cover 25%.
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  So that's asset class. It was sort of neglected
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  in the past, but now it's, you know, more people
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  are finding it. You know, there's pros and cons
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  in this asset class like everything else. There
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  are... a lot of bureaucracy, a lot of regulation
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  that we have to follow, which is a good thing.
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  It keeps the properties safe, clean, and following
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  regulation. It keeps the quote, unquote, slumlords
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  out of the business, because there's inspections
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  that have to be done every year or two years.
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  And we think that's a good thing. It just gives
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  our residents a clean affordable housing you
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  know place to live is a place they could call
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  their home so you know we're big fans of that
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  and we think it helps a lot of people who who
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  might have some financial challenges and it helps
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  it helps seniors it helps people with disabilities
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  and those are all different types of asset classes
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  that we that we work with. Awesome. Yeah. So
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  I know we were talking yesterday. Um, one of
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  the things about syndication is you generally,
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  all the team members help raise capital. And
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  I thought it was really funny. This is for all
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  of you listeners out there. I was like, never
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  raised capital. And I'm sitting there and I'm
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  like, wait a second. You do JVs. That's like
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  the ultimate capital raise because it's super
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  big chunks of change. Like it's not $50 ,000.
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  It's a hundred, 200, $300 ,000 that you're putting
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  up. with a partner or two partners or three partners
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  and y 'all are coming together and doing a deal.
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  Whereas some of your average syndicators may
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  be raising 50 to 100 from a person. And that
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  being, I mean, to get a six figure investor is
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  a big deal. So I just, I think that you're really
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  short sold yourself on the fact that you've done
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  capital raising. You're just seeing it differently.
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  You know, when I think of it in that lens, I
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  mean, that is valid. I mean, we, we, it's typically
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  myself, one, two, three partners in the deals.
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  We do bring our own money to the table. When
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  interest rates are more normalized, it is easier
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  to refinance and take your money off the table
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  down the road. Right now, we're in a trickier
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  environment where our money might be out longer,
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  because who knows when the right time is to refinance
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  and when it makes sense to. There's pros and
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  cons to it. And probably one of the big advantages
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  that I like is the equity portion. I would rather
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  give up some of the size, I guess, and have a
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  chunk of the equity. I like to be more involved
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  on what's going on in the property, the bigger
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  decision making. But my partners, everyone brings
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  something to the table. So everyone's has, is
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  active in operations and what's going on. So
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  that's, you know, that's important to do. So,
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  you know, it's not just bringing a partner for
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  money. They, they're, they're part of the team
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  and they need to help operate and, uh, everybody's
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  got a role and responsibility. I just think it's
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  really awesome. Cause if you think about when
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  you put say 50 to a hundred thousand in a deal,
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  my experience has been that it's really similar
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  to a single family as far as returns go. But
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  if it's a JV and it's four of y 'all or five
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  of y 'all splitting up all of the cash flow that's
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  coming in, that's substantially different. So
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  it's, I would say being in JVs is really awesome.
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  As far as the cash flow goes, I mean, cash flow
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  alone, right? It's probably better than being
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  in a syndication where you own like, I don't
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  even want to think about that. It was like 1
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  % of the deal, less than 1 % of the deal. But
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  when you're trying to get started, a lot of people
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  need to start in syndication because it's easier
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  to collect that amount of money. Yeah, and I
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  would agree with that. I mean, I would say that
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  there's advantages of syndication because you
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  could certainly take down larger properties.
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  certainly put teams together. You could meet
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  more potential partners because people have different
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  roles and what's going on. More team members
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  could bring things to the table. At JV, you're
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  limited. Quite often, I feel like I'm wearing
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  a lot of hats. I'm doing a lot of things from
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  sourcing the deal, helping deal with banks, dealing
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  with asset management. That's something I've
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  been doing for the last 12, 13 years. So I'm
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  pretty comfortable with that. So I guess I'm
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  more of a generalist opposed to a specialist
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  saying, this is my road. I deal with investors
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  or I'm strictly an underwriter. So I guess I'm
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  wearing more hats. But as I'm moving into the
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  business, I'm I'm not opposed to syndications.
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  I really don't want to be a one trick pony, I
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  guess, and do strictly JB deals, because it does
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  limit me. So I'm open to syndications. Maybe
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  I'd probably want to start on smaller size. I'd
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  probably like to partner with somebody who's
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  done it before. So I don't learn the hard way
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  or get that tough education where it's going
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  to cost me money. So I would like to work with
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  an experienced. uh syndicator so that would be
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  certainly a choice and i'm definitely open to
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  it so i i think you know i think there's you
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  know pros and cons as i mentioned going with
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  um jv deals and and as well as syndications yeah
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  what like even what frank was saying is he does
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  both um and we still have residential like we've
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  got our own portfolio of residential properties
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  and i know there's lots of people out there that
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  get into the multi -family space And the first
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  thing they do is get rid of all their residential
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  stuff. And we chose against that because the
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  residential properties are ours. They're infinite
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  returns. None of our original money is tied up
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  in them anymore. The stuff that Jason inherited
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  from his father is fully paid off. There's no
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  reason for us to liquidate it. There just really
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  isn't. And like what you were saying with the
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  JV, as far as there being less people, so the
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  decision making process goes faster. With residential,
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  it's just Jason and I. When we want to do like
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  a cash out refi, or we want to do something with
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  the property, I feel like it goes really quickly.
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  Whereas in a multifamily syndication, we wait
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  for a GPT meeting, we make decisions in the meeting,
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  maybe we meet after the meeting. To make additional
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  decisions and then we wait to come back to a
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  meeting to meet with the property management
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  company And maybe it takes them a couple of weeks
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  to take care of it and it's it feels like a very
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  slow process Compared to what we can do in the
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  residential space and yeah, I don't know if that's
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  for real if it's in my head No, I I'm in agreement
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  with that and that's that's part of my JV concept
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  as well I mean my intention is really to hold
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  properties for the long term. I'm You know the
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  generation generational wealth concept. I'm all
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  on board with that So I typically buy to hold
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  and keep opposed to the transaction of a syndication
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  where investors, not all of them want to hold
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  it for a long time. The three to five or three
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  to seven years, they want to cash out, refresh
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  their money, and put in the next deal. And that's
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  not a bad concept. But it's hard to find properties.
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  It's hard to find good properties. And I'd really
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  like to... Ideally, we find the property, we
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  add the improvements necessary, and we refinancing
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  it, taking our money off the table, and then
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  buying the next deal. Ideally, in a perfect world,
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  that's what we would do, and just do that conveyor
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  belt. I think you always hear that If you hold
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  it for the long term, look at it in 10 years,
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  20 years from now, it's gonna be worth more.
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  I mean, it's just, I'm a firm believer in that.