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Article by, Reuven Cohen, Contributor The market for crowd funding is hot. Thanks in part to the JOBS Act; recent U.S. government legislation that allows for a wider pool of small investors with fewer restrictions combined with the success of companies like Kickstarter. A variety of industry specific crowd funding startups are emerging to take advantage of the opportunities for community organized fund raising. By far the largest player in the crowd funding space is Kickstarter. Since its launch in 2009, more than two million people have pledged greater than $300 million to projects by individual groups of creators. Kickstarter specifically focuses on “creative projects” from the worlds of music, film, art, technology, design, games, fashion, food, and publishing. A prime example is Pebble, an infinitely customizable e-paper watch that has raised more then $10 million using Kickstarter’s crowd funding marketplace. Unlike Kickstarter that focuses solely on creative projects, a new group of up-start companies are attempting to fill the void in funding opportunities within niche market segments. FundersClub allows accredited investors to make early stage investments in curated startups recently raised a $6 million VC round. Another is CircleUp, which is tackling crowd funding for retail companies has recently raised $1.5 million in their angel round and claims to have funded five food companies to date. Yet another emerging sector for crowd funders is that of commercial real estate with several companies attempting to fill the void. I recently had the chance to catch-up with the Jilliene HelmanFounder and CEO of Seattle based RealtyMogul.com. She describes the service as “insider access to pre-vetted real estate investments.” The concept of Realty Mogul is fairly straightforward. Users of the service pool money with like-minded investors to make commercial real estate investments that are otherwise difficult to access. Investors can invest as little as $5,000 for a slice of an investment. Each real estate investment is tied to a real estate company that deals with the hassles of “toilets, tenants and trash.” Helman notes that a lot of the investments are in the so-called “rehabilitation” of real estate properties. Anyone who’s ever watched one of the fix-and-flip “reality” TV shows will recognize the concept. Essentially Realty Mogul provides the ability to bring together investors who are interested in short term real estate investments without...
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Article by, Brent Virkus of Find the Capital Knute Rockne, the famous Hall of Fame Notre Dame football coach, used to say, “Build up your weaknesses until they become your strong points.” The reason most investors constantly loose money in the stock market is they simply make too many mistakes. It’s the same in your business, sports and life in general. You never fail because of your strengths. It’s always the mistakes or weaknesses that you do not recognize and correct that bring you down. Most people just blame somebody else, such as your advisors. It is much easier to have excuses than it is to examine your own behavior realistically. Don’t feel bad. It’s human nature. From my years in the industry, managing the emotions of hundreds of investment clients and endless research, I’ve identified the Eleven Deadly Sins of the Amateur Investor. Study them closely, educate yourself and arm yourself with knowledge. It’s imperative to your investment success....
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Article by, Brent Virkus – President and CEO of TRiTON Capital Advisory Bernanke’s speech yesterday made it fairly clear that interest rates may be on the rise. Is now the time to refinance your commercial real estate loan? In our opinion, there never has been a better opportunity to lock into historically low rates. TRiTON has direct relationships with all of the most active CMBS non-recourse lenders and would welcome the opportunity to refinance your existing loan. Most commercial loans are priced off of LIBOR so we thought we would let you see just how great rates are today. See the chart below: Not sure What a CMBS Loan is? Commercial real estate first mortgage debt is generally broken down into two basic categories: (1) loans to be securitized (“CMBS loans”) and (2) portfolio loans. Portfolio loans are originated by a leader and held on its balance sheet through maturity. In a CMBS transaction, many single mortgage loans of varying size, property type and location are pooled and transferred to a trust. The trust issues a series of bonds that may vary in yield, duration and payment priority. Nationally recognized rating agencies then assign credit ratings to the various bond classes ranging from investment grade (AAA/Aaa through BBB-/Baa3) to below investment grade (BB+/Ba1 through B-/B3) and an unrated class which is subordinate to the lowest rated bond class. Investors choose which CMBS bonds to purchase based on the level of credit risk/yield/duration that they seek. Each month the interest received from all of the pooled loans is paid to the investors, starting with those investors holding the highest rated bonds, until all accrued interest on those bonds is paid. Then interest is paid to the holders of the next highest rated bonds and so on. The same thing occurs with principal as payments are received. This sequential payment structure is generally referred to as the “waterfall.” If there is a shortfall in contractual loan payments from the Borrowers or if the loan collateral is liquidated and does not generate sufficient proceeds to meet payments in all bond classes, the investors in the most subordinate bond class will incur a loss with further losses impacting more senior classes...
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Article by, Brent Virkus – President and CEO of TRiTON Capital Advisory One of the most frequent questions we get from our clients is “Why is it so hard to find Joint Venture equity for real estate”? In this article, we are going to outline exactly why this is…. There’s really five main challenges real estate professionals face when trying to locate private equity funds that provide Joint Venture equity. First, it’s virtually impossible to find true Joint Venture equity funds that focus on real estate. Most of the database services out there highlighting capital sources focus on venture capital funds for start up business rather than real estate. There are a few, but the data contained in these services is usually dated and not accurate. Not being able to simply sign up for access to a database of Joint Venture equity sources forces real estate professionals to more traditional methods such as search engines. This leads to the second challenge. When you use search engines the firms that come up are typically the firms that have been around for a long time. These are not the best sources of capital, especially considering the real estate crisis we just came through. The older more established funds are still trying to clean up the mistakes they made over the past ten years. The funds that are active are the startups and these rarely show up in the search engines. The third challenge – when you do finally find a potential Joint Venture equity source, it’s difficult to determine whether they are truly looking for deals and what their focus is. The only thing you have to go on is their website, which is rarely up to date or accurate. The fourth challenge we face is it’s virtually impossible to locate the appropriate person to submit your deal to. Originators for private equity funds are constantly changing funds. This said, once you do locate them, they rarely will return your phone call unless you are with one of the national firms. Finally and probably most importantly, the fifth issue. Once you’ve get through the first four challenges and have actually found what you feel is the right source, you need to...
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Article by, Morgan Brennan, Forbes Staff This story appears in the June 24, 2013 issue of Forbes. A truck backs up the driveway of a small, single-family house landlordsin Glendale Heights, Ill. and with a bang deposits an empty, dark blue dumpster behind an identical one already filled to the brim with tattered carpeting, shredded sheetrock and a worn-out workout bench. As the semi’s beeping echoes around this suburb on the west side of Chicago, Rob Bloemker paces the home’s patchy green-brown front lawn, swiping at a map he has pulled up on his iPad. “This home is a raised ranch, late 60s/early 70s construction, in the early stages of rehab,” explains the tall, lean bespectacled 47-year-old Californian. Bloemker taps his iPad to display all of his local assets and zero in on this address. The property is a three-bedroom, two-bath single-family home recently acquired for $110,000 in a foreclosure auction. The carpenters sawing and hammering inside will complete $28,500 worth of renovations over the next two weeks; once cleaned up it appraises at $168,000, an immediate gain of more than 20%. But Bloemker isn’t planning to sell. He plans to rent the home out for $1,575 per month and figures, after maintenance, management and other expenses, he’ll net a 7.1% annual return on his investment of $138,500. Traditionally, buying, fixing and renting out single-family homes has been a mom ‘n’ pop affair. No longer. Bloemker is a Wall Street veteran who, until 2011, managed a $60 billion fixed-income portfolio at Boston-based Putnam Investments. He left to start his own firm, Five Ten Capital, with the aim of becoming a landlord on an industrial scale and used his Rolodex to secure $100 million in financing from Deutsche Bank . He’s got lots of company. Billionaires, private equity firms and hedge funds have been swooping into the hardest-hit markets across the country and snapping up single-family homes by the tens of thousands. They’re plucking distressed properties out of the foreclosure pipeline with the aim of playing the housing recovery in the most direct means possible–as landlords. Click here to see the Top 10 Markets Where Wall Street’s Been Buying Homes Now Wall Street’s invasion of the cul-de-sac is about to enter a second phase as...
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Phoenix, Ariz. Metro Area: Phoenix-Mesa-Scottsdale, AZMonthly Rent: $1,067Median Home Price: $128,191Median Distressed Home Price: $110,892Distressed Home Price Discount To Peak: 57%Percentage of Sales That Are Distressed: 29%The desert metropolis was one of the first markets institutional investors flocked to, thanks to home prices falling to values worth less than replacement costs, a rising tide of foreclosure-spurred renters, and a supply of homes newly built in the housing bubble that required relatively little renovation. American Residential Properties, started in 2008, was among the earliest institutionally-backed firms to buy and rent homes here. As prices have risen, many firms have stopped acquiring homes here. CoreLogic estimates that institutional investors were behind roughly 25% of all sales in 2012. Chicago, Ill. Metro Area: Chicago-Naperville-Elgin, IL-IN-WIMonthly Rent: $1,512Median Home Price: $157,130Median Distressed Home Price: $101,399Distressed Home Price Discount To Peak: 61%Percentage of Sales That Are Distressed: 35% “Chicago is actually one of the hardest hit markets in the country and nobody talks about it, but it was as hard hit as Phoenix, Las Vegas or Florida,” says John Burns of John Burns Real Estate Consulting, one of the few firms analyzing markets to see where investors can turn the highest profits in single family rentals. The Midwestern metropolis has experienced dramatic discounts on its distressed inventory, spurring firms from Blackstone to Five Ten Capital to buy homes in recent months. MACK Cos, a 16-year veteran of the single family landlord business, recently started selling portfolios of its properties to American Residential Properties as well. Las Vegas, Nev. Metro Area: Las Vegas-Henderson-Paradise, NV Monthly Rent: $1,117Median Home Price: $109,080 Median Distressed Home Price: $103,470Distressed Home Price Discount To Peak: 67%Las Vegas welcomed a surge of institutional investors in the second half of 2012. They comprised an estimated 19% of all sales in 2012, according to CoreLogic, and caused REO (bank-owned home) prices to surge 30% in the fourth quarter compared to a year earlier. Orlando, Fla. Metro Area: Orlando-Kissimmee-Sanford, FLMonthly Rent: $1,208Median Home Price: $113,084Median Distressed Home Price: $103,419Distressed Home Price Discount To Peak: 58%Percentage of Sales That Are Distressed: 35% Florida has the highest foreclosure rate in the country, thanks in large part to a long, arduous judicial process. Institutional investors have buying across the state but most notably in Orlando, Tampa, Miami and Jacksonville. CoreLogic estimates institutional...
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