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Alternative Investing

5G: Revenue Through the Roof

Telecom carriers have deployed 5G networks—could that mean an additional revenue stream for building and land owners? And owners bode well to determine if leasing their land and rooftops will bring them additional income. Every so often a technology comes along that revolutionizes society and the economy. The 5G wireless technology is one of those. And, after a year of what many refer to as the launching and relaunching of 5G wireless technology, we can finally believe the hype. Verizon, T-Mobile and AT&T are just a few of the carriers working to ensure their 5G network preparation maximizes the revolutionary opportunity that exists. What it Means for CRE The owners of commercial real estate buildings and land are consistently looking for additional revenue streams. That’s even more true during the current COVID-19 pandemic. Knowing that average leases range from $1,200-$3,300 monthly, or that an average 10-year advance payment ranges from $144,000 to almost $400,000 of additional revenue for qualified CRE buildings, there is certainly evidence that cell tower ground and rooftop leases will help owners send revenue through the roof. What Exactly Is 5G? 5G is the fifth generation of wireless technology. Most of us are driven and fixated on the need for speed. Whether ordering at a drive-thru, navigating highway traffic or heating food in a microwave, the sooner we can reach our objective, the better. The same is true when it comes to data. Once upon a time, many of us would log on to our computers and select options that would produce the familiar dial tone of a dial-up connection. Our patience would earn us the satisfaction of the dial tone coming to an epic ending as imagery and text crawled slowly down our screens. Telecom providers like AT&T and Verizon have shown speeds past 1 gigabyte per second. That’s up to 100 times speedier than a typical cellular connection and faster than an actual fiber-optic cable going into a home. Global Workplace Analytics recently provided their best estimate that 25%-30% of the workforce will be working from home multiple days a week by the end of 2021. The download capabilities of 5G at an employee’s home will easily outperform the speeds in the office if the employer chooses not to meet or exceed the offerings of 5G in the workplace. Downloading large files fast is certainly a common ground for both work and work-from-home needs. Resilience during the coronavirus pandemic and the ever-accelerating build-out of 5G network, make cell tower real-estate investment trusts an attractive investment too. 5G also differs from previous generations of cellular technology with network latency. Latency is the time it takes a set of data to move between two points. 5G shortens the amount of time it takes to travel. Gamers renting in properties that have 5G will be delighted to avoid high latency, which causes lag and inevitably reveals the delay between the action of the gamers and the real responses within the game. The Benefits of 5G The performance benefits of faster speeds and low latency are as obvious as the choice between a property with 5G connectivity versus one without, but at a comparable rental rate. The not-so-obvious benefits may be surprising. Remote surgery is arguably the most exciting and surprising benefit. Imagine surgeons being able to use surgical robots to perform a procedure in a facility far away. The advanced imaging guides the surgeon. The lag time currently found in 4G would be too great. The ability to help specialists save lives and attend to more patients in critical conditions is what 5G brings to the operating table. Consider the future of self-driving automobiles being developed alongside 5G, using sensors to ping the network and communicate with other vehicles. Ultimately, it helps with collision avoidance because it knows where every car is. Manufacturers can develop more productive and efficient factories. Farmers can sustain ideal conditions for growing and raising food. Smart Cities will use 5G to power the network infrastructure, from the grid to the water supply. Combining technology with services and infrastructure will simplify the lives of residents who are open to becoming early adopters of the “smart city” as a practice, and not just a theory. The Ground Game on Cell Tower Leases Although owners of commercial property generally think of leasing their rooftop with 5G apparatus, the broad reference also relates to ground leases. Cell tower lease rates vary greatly. The rent is derived from myriad factors, including construction limitations, location, network needs, population density, etc. The cell tower lease agreement between the carriers and the landowners allows the tower companies to use the land in exchange for rent in a long-term agreement. Negotiations will take place before the installation, at a renewal date or during a lease buyout discussion. CRE property owners play a part in the solution of some of the challenges 5G is still facing. Pricing and designing systems to use 5G are both major concerns. The challenge of widespread coverage is critical. As networks develop, carriers’ need to lease the property owners’ site is an opportunity for owners to add income. The era of “smart cities” is also the era of “smart leases.” A smart cell tower lease should maximize monthly revenue, and it should also minimize terms that will have a negative impact on future development, financing or disposition of your property in the long term. The time value of money is always a highly weighted consideration. A lease can last 5, 10 or upwards of 30 years. A solid lease is provisioned for flexibility to adapt to changing conditions during the life of the lease. For example, there may be a need to relocate the cell tower or relocate access or utility easements on the property. Or, the lease could address potential changes in the insurance, liability, environmental and other sections of the lease, particularly over 20 or 30 years. The language regarding the ability to assign, sell or transfer the lease is also important. Is the lease

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The Future of Senior Housing

Co-housing may be the solution to senior citizens’ housing  needs—and an opportunity for investors. From McMansions to mini homes, the housing market is ever changing. A major shift that’s occurring right now is being fueled by the aging of the baby boomer generation. According to the U.S. Census Bureau’s 2017 National Population Projections report, every person in this cohort of the population will be 65 or older by 2030—just a decade from now. And by 2034, 77 million people will be 65 or older compared to 76.5 million who will be under the age of 18. Implications for the Housing Market Millions of people are thinking about “downsizing” now that the kids have moved out. According to a Zillow report released in November 2019, four of 10 homes in the U.S. are owned by residents age 60 or older. That percentage increases if you shave off just another five years of age: five of 10 are owned by residents age 55 or older. The report notes that roughly 21 million homes are likely to be vacated during the next 20 years—either through downsizing or death. What does this transformative shift mean for the housing market? As the old adage goes, “There are two sides to every story.” And that’s true of the housing market implications created by aging Boomers. On the one hand, seniors are in the market for a different type of housing than they’ve been accustomed to for decades—and that new type of housing is in short supply. On the other hand, who’s going to buy the houses they currently own? The Silver Tsunami, as the transformation is sometimes called, is creating a glut of larger homes, especially in areas that are pricy and relatively exclusive, making them unaffordable for younger buyers. According to the same Zillow analysis, retirement destinations such as Miami, Orlando, Tampa and Tucson will also likely experience much housing turnover down the road if future retirees aren’t as attracted to these areas and the homes available there. Other regions of the country, including Cleveland, Dayton, Knoxville and Pittsburgh, may also see a bigger impact from the transition. In recent decades, these areas have lost younger residents who have left for better job opportunities. The result is an older population in those communities. Let’s start with the first situation. For seniors, the home that worked for them when they were younger and raising a family may be very different from the home they need and want now. Many need a smaller and more senior-friendly home that still offers some space and privacy. They don’t need the big 3,000- to 5,000-square-foot, four- to five-bedroom home on a half-acre lot they owned when all the kids lived there. They also don’t want to be isolated in an “adults only” neighborhood, but they still want an upscale setting with all the amenities. Given this, many seniors would prefer a one-story or ranch-style home with a garage space or two. The problem? Those homes are not as easy to find as you may think. The other side of the dilemma is this: Who wants to buy that big, older home from them? An older home that needs to be updated or remodeled isn’t as attractive as a new home is to a first-time homebuyer. Plus, many of those homes are too big for families that don’t need as much space because their families tend to be smaller. For the real estate flipper, there may not be as many ready buyers in that size of a home or in that price range either. For the buy-and-hold real estate investor, the rental income may not be enough to cover the debt service and other expenses either. That is a problem for some—and an opportunity for others. In many areas, the McMansions of the 90s that were so popular languish on the market for a longer period then smaller and newer homes. The good news is, there just may be a better use for those homes. Golden Girls a Model for the Golden Years? There is a huge market for specific senior housing and a huge opportunity for builders and developers who get this next trend right. And there is another opportunity for the creative real estate professional who may use that home for a different purpose altogether. These homes could be used as Airbnbs, or co-housing for students—or even as “Golden Girls”-style homes for seniors. The concept of “co-housing,” in which a group of unrelated people such as students live with others who share some common interest, is catching on across the country. Students have been sharing homes for years, and many investors now see this as a lucrative alternative to renting one home to one family. Many students, given a choice, would rather live off campus and have more space. Being able to choose their roommates versus having them assigned is an added attractive benefit of this type of housing arrangement. Co-housing for seniors is becoming more popular as well. We were all introduced to this concept in the 80s with the popular TV show “The Golden Girls.” Living with friends and sharing the expenses and upkeep are some of the reasons seniors like this model. The added benefit of having a community of peers their own age is a huge draw for them as well. It’s a trend that will likely continue to grow. How do investors fare with this trend? They can rent a home by the room and make a higher profit. For example, that same home may only be able to be rented for $2,000 a month to a family. But it could be rented to four or five seniors at $1,000 per room instead. The landlord might pay for the upkeep and the utilities, making it very attractive for the senior tenants. It would save the seniors money and remove the responsibility of maintenance, or even the uncertainty of future increases in property taxes. Because each market is different, the demographics will dictate the

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Why Self-Storage Can be a Reliable Alternative Asset

The industry isn’t sexy or magic, but self-storage is a powerful asset that can grow your finances and solidify your future. It isn’t likely that you’ll find a self-storage facility on Madison Avenue or Rodeo Drive, and you probably won’t find one next door to a trendy, high-end restaurant owned by a celebrity chef. Ordinary looking warehouse-type buildings stuffed with people’s possessions don’t typically offer much “sex appeal.” The self-storage business isn’t a magical money-making machine either, and it isn’t recession-proof (but it is recession-resistant).  Nevertheless, these ordinary facilities have evolved into big business. They are a fast-growing sector that often turns out to be a solid investment. Self-storage investment provides you with a tangible asset that affords steady appreciation, allowing you to create wealth without being subject to a volatile stock market. Turnover is less of an issue than the short-term lease contracts might predict, and the large number of rentable spaces expose owners to less vulnerability to the sizable fluctuations in vacancy rate. These factors protect against the peaks and valleys so often evident in the stock market. Even following a recession, self-storage historically indicates strong resiliency. Storage is one of the best-kept secrets in commercial real estate investment. During the last 30 years, the returns for storage have reached 17.34%. Yet people tend to shy away from it because they lack broad knowledge of this asset class. Opportunities in Self Storage Self-storage investment is attracting single-family, multifamily and other real estate investors who are looking for an alternate vehicle to increase wealth. Here are a few of the opportunities it offers. Cash flow is stable. There are between 45,000 and 52,000 self-storage properties in the United States. As mentioned, the stabilized cash flow on a storage property prevents peaks and valleys. For example, if you buy a retail strip center with 10 tenants and one of them moves out, you’ve lost 10% of your cash flow. The average storage property has 500 spaces. Let’s assume that it’s 80% occupied, which means that 400 spaces are rented. If 10% of them move out, there is still a tremendous amount of cash flow because 360 spaces are still leased. People need a place for clutter. When the economy is bad, downsizing may become necessary. What do people do with the overflow that won’t fit into a smaller home? They store it. When the economy is good, and people are buying lots of “stuff” and growing their businesses, what do they do with the overflow? They store it. Ordinary investors can participate. Compared to other types of commercial real estate, self-storage involves little capital outlay. You don’t have to be wealthy to invest in storage. As an investor, you can also participate in the self-storage real estate market by purchasing shares of a REIT (real estate investment trust). Storage is recession-resistant. In an open stock market, you’re forced to evaluate regularly. In self-storage, you only evaluate when you sell. If the market is down and it’s not a good time to sell, you refinance, hold the property and let time heal the wound. The balance on the mortgage is being paid by the customers, allowing you to create a gap that strengthens your investment by holding the debt longer. Because money has a time value, return is reduced by holding the debt longer; but, in the end, you rarely take a loss on storage. The national historical average of foreclosure in self- storage is 2%. You’ll never lose money if you buy it right, run it right and time your sale right. What to Buy Buy undermanaged, under-enhanced and under-expanded properties. The primary advantage of buying an undermanaged, under- enhanced and under- expanded property as opposed to ground-up construction is instant cash flow. Of the 45,000-52,000 storage properties in the U.S., 12% of them are publicly traded and 17% of them are traded by private REITs or large institutional funds. The remainder are owned by one-off operators, or “mom and pop” properties. The market for these one-off properties is significant, because it’s easier to run and scale a small to midsize portfolio than it is to run a single property. A small to midsize portfolio will be able to achieve growth while decreasing costs because the cash flow immediately helps to pay your mortgage. Being undermanaged and under-enhanced adds value on the back end so that it is returned to the investors. Self-Storage Versus Multifamily From an operational perspective, you can swing the pendulum faster in storage than you can in retail or multifamily investment. Storage vacancies are easier to fill because once your properties are fully occupied, demand is higher. You can then raise rates on new tenants, generating an automatic rate increase from your current tenants. If the large institutional funds investing in multifamily would explore storage, they would move in a different direction. These funds typically want to place hundreds of millions of dollars in one shot. With a multifamily investment in a 2,800-door apartment complex, it’s easy to place $100 million. That doesn’t work with a $5 million storage asset. These large funds tend to overpay for multifamily, which can cause potential economic issues. Even a small hiccup in the proforma can create the inability to make a mortgage payment or pay a return to investors. Multifamily foreclosure rates are around 30% compared to 2% for self-storage, making self-storage a more stable investment with a better performance record. Another factor to consider is the multifamily expense structure. The cost to refresh an apartment after a renter leaves is $4,000-$8,000. The cost to refresh a storage unit is a broom and a dustpan. Self-storage expense ratio is 40%-43%, whereas multifamily runs into the 50%-60% ratio. Higher expenses lower NOI, which means you’re paying more on your cap rate. For the same cash, you can buy a more stable asset and hold it just as long to make more money. Find the Right Operators Hiring the right operator is a key success factor. Too many financial people

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Short-Term Rentals Gain in Popularity as Investments

Investing in short-term rentals (STRs) via single-family or multifamily properties has become popular among a wide range of real estate investors, from those who have never previously invested in real estate to professional investors who have acquired vast portfolios of properties.

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The Key to Turn-Key Notes

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Turn-key notes could be a valuable addition to your investment portfolio. It’s hard to dispute this quote from Robert Kiyosaki: “Toobtain financial freedom, one must be either a business owner, an investor orboth, generating passive income, particularly on a monthly basis.” Passive monthly income investments are available in the realestate market today in the form of “turn-key notes.” Record inventory levels of performing notes (PN) werecreated in the years following the crash. Some were created as a result of aloan workout, while others were created to sell newly renovated property. Muchof that inventory has now been seasoned for six years or more. In addition,property values have increased nationwide, making these notes an outstandingvalue. The beauty of these notes is that with a minimal amount ofeffort, investors can run their initial due diligence in about the same time ittakes to analyze a stock. If it passes the initial due diligence phase,investors can lock up the deal and finalize it after a secondary level of duediligence such as appraisal, external property inspection or title reportbefore financing or closing the deal. If you close a deal this month, you get paid next month andevery month thereafter for as many payments that you purchased. The paymentsare collected, sometimes auto debited, by servicing companies that then forwardthe payment to you—passive, secured and high yielding. What to Look ForWithout a doubt, the best turn-key notes technique is to buy short term,two- to five-year, partials on PLs. Your yield will typically be between 7%and11%, and your investment will be backed by a property worth two to threetimes what you have in it. In addition, the loan will already be third-partyserviced, and you will be buying from a note seller who has a vested interestin getting the income stream back at some point in the future. The graphic at the top of the page illustrates this investment. Just over two years ago, a real estate investor purchased aproperty. After renovating it, she decided to sell it with seller financing.She had a mortgage residential mortgage loan originator (RMLO) facilitate aseller-financed note by qualifying the potential buyers and handling thepaperwork. The borrowers have been making payments for two years. The paymentincludes principal, interest, taxes and insurance. The payments are collected,escrowed and accounted for by ABC servicing company. [In another scenario, shecould have just purchased the note directly from a note investment company.] This investor decides that she needs to raise some capitalfor another investment. Instead of borrowing money, she decides to sell a partof her note. Here is what you found on just the surface level due diligence: The note has two years of seasoning. According to the payment history, the paymentsare auto debited on the first of the month. Property taxes are current. According to Realtor.com and other free sources,the property value appears to be around $130,000. The loan was written for 360 months, and thepayments are $880 per month. You can purchase the next 60 payments for theseller price of $42,400. Sizing It UpEven though sellers will provide more information than this, if this is allyou know, does it seem to make sense of the surface? Well, six months of seasoning is considered OK and this hastwo years of verifiable payments, so we are good there. The house is worthabout $130,000 and was renovated just over two years ago. We will have only$42,400 in the deal, so we are good there. If we invested $42,400 and received$880 per month for 60 months back, we would be making 9% yield per year, so weare good there. You could invest using cash on hand or your IRA or other taxpreferred retirement accounts. You could partner with another investor. These income streams can be: Done from any place with an internet connection. Analyzed in 20 minutes (including documentverification). Utilize third-party verification. You don’t need to travel or canvas neighborhoods, and thepayments are automatically deposited every month while you sleep. This is asecured passive monthly income that, as Robert Kiyosaki pointed out, enablesfinancial freedom By Kevin Shortle Suggested Posts Perspective Grow Your Network, Grow Your Business by admin 0 Comments Profile Jeff Tesch Take the Reins at RCN Capital by admin 0 Comments Profile Jeremy Brandt: The Innovator Who is Making a Difference by admin Comment Off Regional Spotlight Kansas City: Stable Growth in a Hot Market by admin Comment Off Perspective It’s Time for a Checkup From the Neck Up by admin Comment Off Commercial Evaluating Your Commercial Real Estate Investment by admin Comment Off Commercial How to Become an Investor in the Best Investment in the World by admin Comment Off Risk Management Know the True Cost of Investor Insurance by admin Comment Off Single-Family Build-to-Rent Housing Garners Investor and Lender Interest by admin Comment Off Single-Family Here Come the iBuyers! by admin Comment Off

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Emerging Trends in Corporate Housing

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Private equity and venture capital funds are investing heavily in all types of furnished monthly rentals. 2nd Address, a rental platform for furnished monthlyrentals, just received an additional $10 million in additional funds tocontinue to expand their service area providing a transactional platform forprivate property owners offering furnished monthly rentals. Stay Alfred, a company trying to add professionalism toAirbnb by leasing thousands of apartments and offering a standardized furnishedresidential hospitality product, has now raised more than $47 million ininvestment dollars. Sonder, another company competing with Airbnb in the worldof hospitality and private rentals, has raised more than $135 million to buildout their program. In the industry segment of corporate housing, ResideWorldwide, has raised hundreds of millions of dollars in an attempt to purchasemultifamily buildings exclusively for furnished monthly rentals and toconsolidate smaller corporate housing providers under the larger brand. AvenueWest Global Franchise, a firm that provides realestate management of corporate housing rentals, is on track to have 25 local by2020. What’s going on here? Layered under this massive rush to provide managedresidences as a hospitality option is the growing demand for the properties.Corporate housing has emerged as more than just an essential business servicefor relocated or traveling business executives. Today, corporate housing is afull-fledged lodging solution for everyday individuals who need short-termfurnished and even unfurnished housing that has the space and convenience of ahome on the road. Some examples of today’s corporate housing tenants areincluded in the chart on page 30. Making Sense of the OptionsLong before there was Airbnb, the multibillion dollar corporate housingrental industry existed. These fully furnished and managed residences were—andstill are—available for monthly lodging needs. Traditionally, these propertieswere rented by the experienced business traveler on assignment or as part of acorporate relocation. Today, the options have multiplied—and can beconfusing.  Here are several of theoptions available in today’s market. Aggregators/online platforms. These areonline platforms that allow tenants and property owners/managers to connect andtransact a rental agreement. Service companies. These companies rentapartments, furnish and equip them and then offer the apartments as corporatehousing rentals. They may buy or lease the furniture for these properties. Apartment companies. These companies ownor manage large apartment complexes. They use some of their inventory asfurnished corporate housing units. They may buy or lease the furniture forthese properties. Management companies. These companies arereal estate property management companies that manage properties owned andfurnished by individual real estate investors. By owner properties. These are realestate investors who provide their individually owned and furnished propertiesas furnished corporate housing rentals. Two TrendsAcross the country, two trends are emerging. The first is 401(k) roll overinvestment. The other is investing in retirement properties before retirement. With the stock market again hitting high levels, analystsare concerned about how long this bull market will last. As a result,individuals are getting smarter with their retirement dollars. By taking 401(k)investments out of stocks and rolling them into traditional real estaterentals, investors are able to gain more control over their money compared tothe volatility of stocks. The second trend is investors deciding to buy theirretirement home 10 and even 20 years before they need it. For example, someonewho is looking to retire in Phoenix, Arizona, may purchase that property now,locking in low interest rates and giving the investors the peace of mind of knowingexactly what their retirement property will cost. What to Know Before Investing If you’ve decided that corporate housing is right for you, here are someimportant considerations to make before you purchase a property specificallyfor use as a corporate housing rental. Evaluate price per bed, not square foot.Evaluate the price per bed, not price per square foot. While some people thinkmore space or a bonus room is a great perk for their own home, keep in mindthat those features are just added liability in a home you plan to rent. Purchase the least square footage with thegreatest number of bedrooms. Just like a hotel, when you rent out acorporate rental, it’s priced per bed, not by square footage. Avoid first-floor units. If you’repurchasing a condo as a rental property, avoid first-floor units. People whodon’t know the city may not feel as safe in a first-floor unit, which cannegatively affect your rental success. And, often people will use a first-floorrental to advertise a business that they may conduct in the unit. Location matters. Location. Location.Location. Location can single-handedly ensure your property is rentedcontinuously. Look for homes in urban areas, near train stations and airports,and close to universities and hospitals. Typically, these locations rent welland have the best resale value. Functionally obsolete homes can make goodrentals. Don’t rule out functionally obsolete properties. Sometimes aproperty that appears to be a poor long-term home is a perfect short-term,furnished rental home. For example, homes with tiny closets or outdatedkitchens make ideal furnished rental properties because a corporate renter maynot need all the space or features. Moreover, these properties are usually lessexpensive to buy and provide good cash flow. Views and amenities matter. When peopleare visiting a new city for business or pleasure, they want to enjoy all thatcity has to offer. Corporate tenants like city views, covered parking and freegym access. Keep these things in mind when choosing a desirable corporaterental property. Return on Investment What can you expect in terms of ROI? That is the question of the century.There are a lot of moving parts, and each market is completely different. In a market like Fort Collins, Colorado, which you normallywould consider a quieter market, you might be able to buy a two-bedroom condofor $175,000. Then, you may be able to turn around and rent that property ascorporate housing for $3,500 a month, whereas if you were renting it unfurnished,you might be able to get only $700 or $800 a month for it. Corporate housing rentals are an essential part of aninvestor’s portfolio diversification. For example, if you are a full-timeinvestor and you watch your properties 100% of the time, then sure, make yourwhole portfolio corporate housing if that interests you. But normally you willsee a strategy more like this: An investor with 10 units might

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