REI INK

How Military Leadership Skills Translate to Civilian Careers

by Matthew Croslin Do military leadership skills translate to the civilian world? Military leadership education and experience are highly regarded as of form of learning to lead organizations. This education and experience can carry over to the business world at the various levels of civilian organizations. The military leader brings focused leadership education along with practical leadership experience to the civilian market. The military leader is also typically adept at adjusting leadership styles to match the environment. The biggest hurdle for the former military leader is likely adapting to the culture and norms of their new civilian organization. The pace and work attitude can vary from that experienced in the military. Professional military leadership education combined with the practical experience gained from various assignments leads former military leaders to become better trained business leaders. They are equipped to handle a greater variety of situations with better results. The business environment does have unique challenges that military leadership will not directly prepare a leader to overcome. However, leadership education combined with experience will better prepare any leader to achieve success. The military expends a great deal of time and resources focused specifically on creating better leaders.  Military leaders are put through a range of positions and opportunities to further develop abilities through the application of the leadership training. The ongoing leadership education and subsequent rotation through leadership positions are inherent to the military leadership model. Leaders can and should be grown.  Military and civilian leadership are somewhat similar, and each can benefit from the other. Normally, business benefits from those who are or have been military leaders, but sometimes it goes the other way. Leadership is fundamentally leadership, regardless of military, business, or any other organization. The military focuses a great deal on leadership education. This is probably the biggest up-front difference between how the military grows leaders versus the corporate world.  In the business world, less corporate time is spent on educating leaders. It is more up to the individual to pursue education. Business leaders are expected to spend personal time and expense in obtaining leadership education both before employment and after normal work hours, especially at lower levels of business management. The military encourages the pursuit of additional civilian education, and often subsidizes the cost of pursuing higher education through various benefits.       Another aspect of leadership is the practical application of leadership lessons or on the job training. Military leaders are always engaged in leadership, most often 24 hours a day, 7 days a week. Military leaders get to apply the leadership management skills all throughout their careers, in ever increasing levels of the organization from the very junior to the most senior.  The military leader experiences multiple levels of management through a variety of positions during their career. This applies to careers that only span one enlistment all the way to 20 plus years. How many in business ever achieve more than one or two levels of experience in a corporation? Most business leaders do not achieve more than a few levels on the corporate ladder. Another benefit that a military leader may bring is they typically have at least some, and often a great deal of, international experience. Many military leaders also have experience working with businesses in other countries as a part of their duties. This experience, even if limited, is more than the average business school graduate obtains. Many leaders in business have no direct international experience. The business world has much to benefit from a military leader in terms of leadership training and education, experience under fire, international experience, and the variety of positions that the military leader undertakes. The military also can benefit from those who have left the military for the corporate world and returned. Leadership education and experience is valuable, no matter where it is obtained. While not an absolute requirement to be a great leader, experience is essential to make sound leadership decisions. The military provides nonstop experience as leaders are repeatedly given the chance to lead and to both succeed and fail. It is from these experiences that the military leader can advance his leadership past what is taught in the classroom.        Military leaders are exposed to concepts such as vision, mission statement, and objectives. Implementing and executing strategy and monitoring and evaluating the performance of the organization are also fundamental.  Military leadership education and experience is in a state of constant evolvement since the beginning of military leadership. Business leadership is also evolving and being developed. Most will agree that leadership is leadership, no matter where it is learned.  The military leader has not only “learned” how to be a leader, he/she has applied that learning to a multitude of leadership situations and gained valuable experience in return. When a business school graduate applies for the same position as a former military leader, experience is no question.  Some authors that study and write about leadership and management have argued that military leadership is in fact a desirable trait for business managers and leaders. Military leaders are sought after by corporations for the qualities and experience that they possess.  Business school graduates also possess varying degrees of leadership training but not necessarily experience. Those who hire leaders for businesses and corporations must look at the individual and not merely the fact that they were a military leader or just a business school graduate. What traits does the candidate possess that the organization finds valuable. The chances are high that the former military leader will succeed and provide benefit to the civilian organization. There have been and will continue to be successful business leaders with zero experience in the military. The military has even borrowed from business in teaching leadership. The military leader is a valuable source of talent for business. The basic leadership lessons taught in the military are transferrable to the civilian business market. This is one reason the military professional is sought by corporations.  Yes, military leadership skills do translate to the civilian work force. Leadership

Read More

Making a Habit of Best Practice

Keystone Asset Management Finds Solutions in Every Real Estate Scenario.  By Carole VanSickle Ellis Keystone Asset Management has been on the path to big things from its very inception. Founded in 1995 in Philadelphia, Pennsylvania, Keystone started out, as CEO Ryan Hennessy describes it, as “a real estate company in ‘Philly’ handling distressed bank-owned assets for lenders including Fannie Mae, Freddie Mac, HUD, and various financial institutions.” Keystone is a family company; Hennessy’s mother, Jane Hennessy, and a then-partner realized in the mid-1990s that there was a need in the market for an asset management company specializing in distressed assets and REO (real estate owned) properties. Soon, business was booming, and the two added a valuation unit to handle broker price opinions and other facets of valuation. “By 1997, they had a national platform,” Hennessy said proudly. From there, the company continued to grow and expand to meet investor needs. Today, Keystone offers a vast range of services from property valuation to REO asset management to property preservation to property tax consulting and insurance. “There are so many things that go into a successful plan for each asset in a portfolio. As investors encounter diverse scenarios across their portfolio, we can help them formulate best practices, commonsense solutions, asset protection strategies, and even brand protection and building processes,” explained Jim Jacquelin, the company’s Director of Operations. The company combines decades of experience and deep-dive economic analytics to create custom management strategies for large real estate portfolios. “Effective, profitable asset management requires constant monitoring and evaluation of assets, strategies, and analytics. Our service and quality remain the same, but we adapt to our asset owners to reprioritize strategically and analytically to meet their specific goals and needs,” Hennessy said. Keystone employs a vast array of experts in a wide variety of fields including field services, performance and execution and an economic arm. This combination approach has served the company well, particularly since the end of the Great Recession when institutional investors entered the housing market in full force and began dealing with the kaleidoscopic and intricate details of single-family residential real estate. As the face of institutional investing and high-volume portfolio owners has changed over the past decade, Keystone has evolved to keep up with the changing and diverse needs of these major real estate players. Fitting All the Pieces Together Because Keystone is a national company catering to clients with vast geographic spread in their portfolios, nearly every service sector within the corporate structure is equipped to identify bellwether signs of a changing economy and respond appropriately. However, Hennessy said, that positioning, while starkly apparent today, has been serving Keystone clients well for decades. “We know that markets are cyclical, and certain types of investor behavior in certain sectors are also predictable. Combining those two facets of knowledge gives us a head start on the rest of the field when it comes to adjusting asset strategy,” Hennessy said. By working closely with clients to identify what type of investment strategies are most comfortable for them and what types of assets they want to leverage, the company can create the best position for each asset in the portfolio. For example, when a new “file” or asset enters the process, occupancy is the first piece of the equation. This is particularly important at present when the COVID-19 pandemic creates unusual issues with tenancy, leasing, rent payments, and evictions. “There are a lot of factors that go into working on a property with a tenant to create a positive outcome for everyone involved,” said Jacquelin. “Even if there is no one residing in the property, there are certain liabilities we protect against like securing the property against the elements, preventing break-ins and squatting, and preventing anyone from getting hurt while on the property.” Even before COVID-19, each state and local government had different rules, laws, and codes for these issues. Failing to address the logistical “fine print” could be catastrophic from both a legal and financial standpoint, particularly for high-volume investors who might be particularly attractive targets for litigation and bad publicity. “We have to handle all of those angles before we dive into figuring out what strategy will be the best fit for that property,” Jacquelin said.  Getting in the Best Position for 2020 and 2021 Thanks to Keystone’s extensive work with high-volume portfolios and owners with a diverse set of goals, Hennessy has been able to identify certain investing characteristics and types of investor over the years. Embracing certain strategic tendencies can position any investor, regardless of the volume of properties they currently own, in a prime position to emerge from the current economic downturn better off than they went in. “You must know who you are as a real estate investor and be flexible,” Hennessy said. “Does your strategy dictate your portfolio or, through pool acquisition, does your portfolio dictate your strategy?” In 2020 and 2021, the latter type may have an innate advantage over the former due to rising competition in the single-family marketplace. “We have a unique ability to aggregate critical data points surrounding the four core inputs on asset decisioning: geography, occupancy, valuation and intangibles—title, HOA, taxes. Ultimately, correctly aggregating data on these inputs paint a true picture on management philosophy and optimal disposition paths,” Hennessy added. “If you are the type to strategically acquire a specific type of property, then you should take a close look at your ‘buy boxes’ to see how they are affecting your long-term goals right now,” Hennessy said. “It might make sense to stretch the box or diversify a little bit.” On the other hand, most institutional investors tend to be acquirers first and strategize second, mainly because they tend to acquire in bulk. In this case, the portfolio itself will dictate strategy and, ideally, each asset will have a unique strategy that makes the most of that asset while protecting the interests of the new owner from every angle. “Institutional players tend to look at things at a much

Read More

Funding Strategies in an Evolving Market

Expert tips for developing your correct financial structure by Kendra Rommel Since the COVID-19 pandemic began, there has been an odd sense that we have been operating in some sort of time warp. Anything that happened before March feels like years ago, yet the fact that it’s October seems almost surreal.  Nothing exemplifies this feeling more than the roller coaster ride of the real estate market. The uncertainty created obstacles and accelerated the velocity of change, challenging investors, contractors, lenders and related businesses to address and adapt to a myriad of challenges and obstacles. Remarkably, even amidst the uncertainty, a health care crisis did not become a housing market crisis and the real estate market has continued to be strong. Thriving as a real estate investor, broker, or lender, today requires a sound and stable financing strategy. Having a consistent, reliable capital partner is perhaps the most important element to building a solid business model. This may evolve over time— from your start in business to becoming an experienced pro. Regardless of your strategy, there are a myriad of capital or financing options available to you.  Here are some tips for developing your correct financing structure. Types of Finance Private lenders. There are two types of private lenders:  (1) Individuals such as friends, family, accredited investors, etc. that are known to be syndicators or funds, and (2) Institutional private money lenders, sometimes called hard money lenders, who have their own capital as well as institutional capital partners, such as banks and Wall Street investment firms. A notable difference with private money is the fact that they base risk on the asset, rather than on the individual’s personal borrowing strength. This makes the loan process considerably faster and easier than conventional lending. Conventional Lenders. Banks, credit unions and mortgage lenders are common for investors who have strong individual borrowing strength. Interest rates with conventional lenders are at historic lows. However, LTVs are lower and down payment requirements are higher than private money programs. Qualifying for a bank loan on an investment property can be onerous, difficult and time consuming. Additionally, banks typically have a maximum exposure limit for the borrower which limits the amount of properties they can finance. Mortgage brokers. They do not lend their own money. Instead, brokers work to find you the right lender from all the options available. For this, they take a commission in the form of points on the loan, which are paid at closing. Real estate partnerships, Joint Ventures (JVs) or Equity participants. These are individuals or companies included in the participation of any one deal, (usually as a limited partnership or as a passive partner to the primary). It is standard for a prospective partner to want to review the investment strategy, summary, pro-forma and intended exit strategy. Warehouse Banks/ Bank Lines. These are banks that extend a line of credit to lenders at predetermined terms, such as type of assets, terms, pricing, and LTVs. This line enables lenders to fund less on their company balance sheet. Selecting A Capital Partner Circumstances such as the recent pandemic clearly illustrated the absolute imperative of conducting due diligence when choosing to align with a capital partner. It is important not to think merely in transactional terms—getting a good deal on one property—but rather focusing objectively on who will be your best capital partner as you grow and change through market shifts, both forecasted and unexpected. Capacity and Access to Capital. At the onset of the pandemic shutdown, many lenders had their warehouse lines leveraged and they were reliant on institutional capital partners buying their loans at a premium to remain profitable. Overnight, warehouse lines and institutional/Wall Street buyers froze. This forced many lenders into a compromised position of which they had to stop originating or funding deals. Experience. There is simply no substitute for experience—whether it is a sales associate, broker, or lender. They need to have a broad perspective and know how to deal with fluctuations in the market, handle challenging or creative scenarios, and understand what makes a mutually beneficial deal. The industry has been feast or famine over the past decade and those who have weathered the ups and downs can bring that expertise to bear for your benefit.  Options. One of the biggest rookie mistakes is to focus on rates. Keep your focus on the entire financing structure. This will ensure you do not miss crucial details in achieving the highest ROI possible. When evaluating a credible finance partner, they should strive to understand each unique strategy and exit plan to enable them to provide the best loan options to meet their clients’ individual needs and goals. True capital partners are problem solvers. Communication. Clear communication and transparency are vital for building a successful relationship with anyone, especially your capital partner. Funding Strategies It is critical that financing strategies and guidelines align with the specific investment opportunity. Financing solutions are not one-size-fits-all. Each sponsor or property likely will have a different strategy and disposition plan. Therefore, be clear on your intention with the asset(s) so you can determine the short and long-term objectives. Having a clear exit strategy in advance, including timelines, will help you find the right financing solution while maintaining the highest margins or returns: Fix and Flip. When you find a good deal, you have to be able to move quickly to acquire it. It is important that you have supported data verifying the neighborhood value range, the bottom and highest comps. Also, know what types of finishes or appeal warrants the high versus low end of that market. In today’s market, investors are optimistic that they can reap returns quickly, whether it is through simple cosmetic updates or more complex ones. Rehab Financing. When you finance your rehab, this portion of the loan is typically held in a control fund & issued in draws as a reimbursement when the work is completed. This is a great option to preserve your liquid position and be ready for

Read More

Now Is the Time to Winterize REO Properties

Expert advice to get ready for winter by Andrew Oliverson The enormous demand for rental housing and the scarce supply of new properties has created white-hot conditions for those with inventories of well-kept, salable assets. But cold weather comes to even the hottest markets and as winter approaches, it is wise to take actions now to keep those properties ready for the sunnier days ahead. The timing is critical as acting now to winterize assets is the best way to avoid having an otherwise valuable home fall into disrepair. There are several steps to take when preparing a vacant property for the winter. Ideally, to ensure the protection of assets from the seasonal elements and to help identify and address any potential maintenance issues before cold weather sets in, properties should be spruced up in the early fall and winterized soon after. Winterization should be thorough enough to maintain the property in good order from early October until the end of March or longer, depending on the local weather and temperatures. In addition to identifying and addressing any urgent interior maintenance issues, a decent fall spruce-up should include a focus on exterior conditions: Remove all exterior debris. Perform a final lawn cut and remove all grass clippings, leaves, limbs and debris from the property. Leaves, pine needles and twigs should be removed and disposed of offsite in an appropriate manner. Flowerbeds, driveways and sidewalks should be edged. Remove all weeds and saplings from flowerbeds and around shrubs and fence lines. Weed-wack around the house, fences, and trees, and remove dead vines from fences, latticework, etc. Remove all fallen limbs and excessive leaves from the roof. Clean out gutters and remove all holiday lights. If there is a gutter guard, replace it after cleaning out the gutters. Prune branches from trees and shrubs that encroach on entryways, walkways, or sidewalks and trim at least four to six inches from the house or roof. With the property looking well-kept on the outside and in good working order on the inside, listing brokers should turn their attention to winterization and consider some of these best practices:  Electrical and heating services should be up and running and must remain on. The temperature within the home should be set at a reasonable temperature to prevent interior freezing (usually above 50 degrees).  If the property requires significant plumbing repairs or when a boiler is involved, a general contractor, licensed plumber or an accredited entity with the professional expertise should complete the winterization. If the property was winterized prior to your adding it to your inventory, it should be re-winterized to ensure that every step has been taken properly.  If the property is frozen when it comes into inventory, obtain bids to thaw the pipes prior to winterizing. The year 2020 has been a roller coaster for all of us. The pandemic and the responses to it have contributed to distortions in the real estate market. In our industry we’ve seen glutted real estate markets suddenly heat up and clear in a matter of weeks. But until conditions improve, the market for real estate will continue to experience extraordinary market-to-market fluctuations. Taking basic tried-and-true winterization steps will protect homes well into the cold winter months and bring a level of certainty into uncertain times.

Read More

Acquisition and Asset Management Strategies for Bulk SFR Portfolios

The maturing of the SFR asset class by Russell Schmidt The Single Family Rental industry continues to mature into a standalone subsector of the commercial real estate space. As the space gets more crowded and competitive, SFR investors will need to adapt and develop advanced acquisition and asset management strategies compared to the previous “buy everything and figure out operations later” strategy. Early movers such as Invitation Homes and American Homes 4 Rent were able to amass large portfolios of SFR’s at steep discounts beginning in 2012 due to a massive supply of distressed properties. Homes were repaired and turned into cash flowing assets and investors saw huge gains as housing values steadily rebounded over the following years. Today’s SFR landscape is shifting into the next phase, as the initial entrants that (correctly) bet on a sharp and quick rebound in values are now being joined by new capital willing to acquire at elevated price levels, sometimes even matching ‘market’ prices, to satisfy their yield and capital deployment requirements. The original SFR operators successfully demonstrated that capital can be deployed into the space at institutional-quality scale and efficiency, bringing in other institutional investors eager to match the strong historical proven returns the space can offer. Simultaneously, the rapid growth of SFR-specific debt lenders and tech-smart service providers have made it easier for new investors of any size to gain exposure to the asset class. Couple this with record-low mortgage rates, strong home buying demand from owner-occupants, and an already-constrained supply of houses, and the result is a strong downward pressure on cap rates and a lack of deals appealing to investors. Moving Forward What does this mean for SFR operators going forward? Those who bought 5+ years ago were able to acquire at such significant discounts that any operational inefficiencies had little effect in their total returns; asset appreciation has been so significant that marginal differences in collected rent or reduced operating expenses were dwarfed by approximately 300% increases in asset value. But as the SFR industry transitions from being a simple trade on undervalued assets into a long term buy-and-hold investment, investors looking to acquire today don’t have the same luxury of buying anything and letting appreciation cover up potential flaws in their acquisition and management systems. New and more nuanced strategies must be implemented in order to succeed in today’s more crowded and competitive SFR landscape. As one example, there is more attention on implementing consistent rent increases, even if nominal. A common school of thought among mom-and-pop landlords is that aggressively pushing rents leads to vacancies and costly turns, so therefore it’s financially smarter (and less of a hassle) to simply not increase rents and keep tenants for as long as possible. However, issues arise when after several years of no rent increases, landlords then attempt to increase rents now that they are 20% or 30% below market levels. The probability of having a tenant accept such a steep increase is slim, so the landlord is faced with either accepting a vacancy (which they were trying to avoid in the first place) or keeping the tenant and continuing to lag market rents at a significant discount. In contrast, large institutional operators have explicitly stated their intent to consistently increase rents, not only to continue growing cash flows but also to instill an expectation that rent increases are a normal and regular event. Acquisition Channels From an acquisitions standpoint, the state of the housing market has made it significantly more difficult to acquire properties with attractive yields on the MLS, especially in scale. Institutional investors have responded to this by looking elsewhere for volume. These new acquisition channels require new ways of thinking when it comes to stabilization and asset management strategies. One increasingly prominent acquisition channel is sourcing off-market portfolios directly from mom-and-pop landlords. While these deals offer immediate scale and pricing typically below market, they also present challenges of their own compared with MLS acquisitions. Unlike the acquisition of a multifamily building with 100 relatively homogeneous units, bulk SFR portfolios typically have a wide range of assets in different neighborhoods and with different styles and finishes. Owners usually aren’t interested in only selling a portion of their portfolios, so the buyer must be equipped to repair, stabilize, and manage the entire bulk even if some or most of the assets don’t fit within their typical management or buy-box strategy. As bulk acquisitions become a more important piece of the SFR space, it is important that buyers can optimize different strategies within one bulk rather than the singular viewpoint applied to MLS transactions. Implementing a multi-faceted acquisition and asset management strategy will result in more efficient management and greater total returns. Varying Strategies As an example, assume a portfolio of SFRs evenly distributed between Class A, B, and C. Rather than applying a single strategy for repairs (e.g. granite countertops in all units) and asset management (e.g. aggressively increase rents in order to maximize pro forma NOI prior to a sale to an investor in 5 years), applying several different strategies across the different buckets can result in a more optimized approach:  Class A: Definition: Higher end homes all located in gentrifying neighborhoods with low existing cap rates Strategy: Continued appreciation / cap rate compression likely means that it will become too expensive for an investor to acquire in the future, so the likely exit will be to an owner-occupant. Less emphasis is needed on maximizing NOI growth, so focus can instead be placed on maximizing occupancy until value has appreciated enough for a sale.  Class B: Definition: Institutional quality rental homes in neighborhoods where the rate of appreciation is unlikely to significantly outpace NOI growth, resulting in the asset remaining an attractive target for another investor Strategy: Optimize as a rental asset with focus towards maximizing NOI growth prior to selling as a package to another investor  Class C: Definition: Lower end assets and/or outside of the typical institutional buy box Strategy: Optimize as a

Read More

Always Looking for Ways to Reinvent

I remember it like it was yesterday. My business partner and I were in the process of closing a construction loan to continue developing a 19-acre retail center in Arizona. It was 2008 and the financial and real estate collapse of the Great Recession was upon us. Capital dried up immediately, deals fell through and panic ensued. What followed were years of struggle for most in real estate as the subprime crisis led to the bursting of the housing bubble. I had worked in the real estate industry since graduating from business school in 2002. In Las Vegas in March of 2011, I met with Wayne Hughes, the founder of Public Storage, and two members of his executive team—Marvin Lotz and David Singelyn. They wanted to look at houses and evaluate the potential of single-family rentals. Wayne not only recognized the great opportunity that resulted from the bursting of the housing bubble, but he also understood the need to move forward quickly and boldly to achieve the goal of creating a new paradigm in residential real estate. He realized that the key would be in execution, and that the real challenge would revolve around scale and building an operational platform to efficiently manage assets spread across the nation. Wayne’s vision to institutionalize this historically mom-and-pop industry would change SFR forever. The Start As part of our Las Vegas meeting, I drove them all over the city, scouting properties, evaluating neighborhoods and discussing the model. The idea for American Homes 4 Rent (AH4R), a real estate investment trust focused on SFR, was solidified shortly after this house-hunting trip, and I joined this exciting new start-up in September 2011. Today, AH4R has built, acquired, renovated, leased and now manages a portfolio of 53,000 high quality single-family homes throughout the U.S.  After high school, I went to UCLA to study Business Economics and subsequently earned my MBA. UCLA to Real World Upon graduation, I started my career in real estate acquisitions for an owner/manager of multifamily and commercial properties in California. Here I applied what I had learned in business school to real world deals including underwriting, fundraising and management. Most importantly, I was taught how to look for value opportunities. After a few other opportunities I came across a company that controlled the apartment leasing market of West Los Angeles. Their subscription-based model leveraged the digital marketplace to connect landlords and renters, creating a convenient and efficient leasing experience. I then relocated to Las Vegas, where I experienced firsthand the difficulty in renting an apartment. While this experience was awful, renting a single-family home was even worse. The creative entrepreneur in me longed to design a rental experience with the customer in mind—where technology was even more broadly implemented to eliminate inefficiencies and create a vastly improved customer experience. Beginning with AH4R From my early discussions with Wayne Hughes, I could see that we were about to pioneer the new concept of the institutional SFR owner/operator, and I was hooked. I joined AH4R in acquisitions and began selecting markets and building out our acquisition platform. Over the first year, the company expanded its footprint across the country. We pioneered the use of directed technology solutions to remove friction from the touring and leasing process. At each step of the property lifecycle, we developed and deployed new tools to create a significant advantage over our competitors, while we efficiently scaled up operations and attracted the necessary capital to fuel and manage this exceptional growth. A Better Way of Doing Business We created a technology-driven platform that allows our current and prospective residents to manage their entire rental experience online. Through our proprietary Let Yourself In mobile leasing technology, prospective renters can drive to a home, tour the property, apply, get approved and sign a lease in a matter of hours. After move-in, residents can pay rent, request maintenance and communicate with their property managers seamlessly online. One of our latest innovations focuses on another area of inefficiency in the industry: home maintenance. Initially, we utilized third-party vendors for all our maintenance and turn work. However, we soon realized that we could apply technology here as well. So, we established a national maintenance team and developed a logistics system to manage their work orders, schedules, and routes. The result is a more effective and cost-efficient way to serve our residents.  Our strategy stems from an unrelenting focus on the resident that has shaped our modern operating platform and continues to deliver solutions that are changing the industry. Very few companies have mastered scale, complexity and geography in such a short time. I am proud to be a part of AH4R and the reinvention of the SFR industry over the last nine years. 

Read More