When it comes to meeting and conquering the negativity in your life, here is a key question: What can you do, starting today, that will make a difference?
What can you do when everything has gone wrong? What can you do when you've run out of money? What can you do when you don't feel well? What can you do when it's all gone sour? What can you do?
Let me give you the broad answer first…
You can do the most remarkable things, no matter what happens. People can do incredible things, unbelievable things, despite the most impossible or disastrous circumstances. Why can humans do remarkable things? because they are remarkable. Humans are different than any other creation. When a dog starts with weeds, he winds up with weeds. And the reason is because he's a dog. But that's not true with human beings. Humans can turn weeds into gardens.
Humans can turn nothing into something, pennies into fortune and disaster into success. And the reason they can do such remarkable things is because they are remarkable. Try reaching down inside of yourself; you'll come up with some more of those remarkable human gifts. They're there, waiting to be discovered and employed.
With those gifts, you can change anything for yourself that you wish to change. And I challenge you to do that because you can change. If you don't like how something is going for you, change it. If something isn't enough, change it. If something doesn't suit you, change it. If something doesn't please you, change it. If you don't like how things are, change it! You're not a tree. You don't ever have to be the same after today.
If there is one thing to get excited about, it's your ability to make yourself do the necessary things, to get a desired result, to turn the negative into success. And that’s remarkable.
Real estate Crowdfunding is a rapidly developing industry, and is among the leading sectors in the equity Crowdfunding landscape. Despite the industry’s growth, most in the mainstream are just starting to hear about real estate Crowdfunding. When they do hear of it, one of the first questions that come up is about the difference between real estate Crowdfunding vs. REITs (real estate investment trusts).
For those who are unfamiliar with the concepts, the fundamentals of both are:
REITs are a well-known and fairly common way to invest in real estate. As they are listed on stock exchanges, they are highly liquid. Their structure means that they must pay back 90 percent (or more) of their profits to investors as dividends.
Real estate Crowdfunding, on the other hand, is a much newer way to invest in property. It shares many traits with other sectors of equity or debt Crowdfunding: it’s more transparent and individuals have greater control over their investment it is a direct property investment and it can be a better way for individuals to diversify their portfolio. The biggest potential downside is that the investments are illiquid, though given the rate of innovation around the equity Crowdfunding space, it’s not difficult to imagine a secondary market arising in the near future.
To better understand the differences between real estate Crowdfunding and REITs, we sourced Wealth Migrate about the two.
What are the advantages of investing in real estate, in general?
There is a reason that there is a saying, “He who owns the land is king.” For centuries, real estate has been the best asset to create and preserve wealth. In more recent times, it is also one of the best vehicles to protect against inflation. People needed houses to live in and it was the only place to preserve wealth in a recognized currency. In the future, there will be more uncertainty than we can ever imagine in the economy. It is going to be more volatile than people expect.
What was learned from Tony Robbins is if you want to be successful, then copy successful people and copy what works. There is a reason that 49 percent of the worlds wealth is held in real estate.
Would the people who find REITs attractive also be interested in real estate Crowdfunding? Or are the two different enough to attract different investors?
A REIT and real estate Crowdfunding are diametrically different. A REIT is a financial instrument and in fact has a 0.7 70 percent correlation with the stock market. At one of the largest real estate events of the year, five of the top REITs were questioned about how they were going to create growth in 2015. They said it would be 50 percent about the property fundamentals and 50 percent about rearranging the balance sheet. The interviewer actually said, “So you mean financial alchemy?” And to my surprise, they all agreed.
Crowdfunding is direct property investment. The recent 2015CF-RE: Crowdfunding for Real Estate report cited McKinsey research showing that those asset managers who are managing $10 billion or more are increasing their exposure to alternative investments to 30 percent, of which 10 percent is in direct real estate. Like I mentioned above, if you want the same success as the top one percent, then you need to copy what works and what they doing.
What are the key differences between Crowdfunding and REITs for investors?
The most important differentiators are liquidity and the value chain. Firstly, the positive of REITs is that they are liquid and people can get in and out quickly. Crowdfunding, at the moment, doesn’t have a secondary market, so it is illiquid like any direct real estate investment. Some might see this as a bad thing, others see this as an advantage. Look at the stock market. In 1960, the average share was owned for eight years. Now, it’s less than five days. Real estate is like the stock market in 1960, but with the advent of technology, It too will become liquid.
Secondly, the harsh reality most people prefer to ignore is the shocking results. In the past 100 years of Western society, less than one percent of people have retired wealthy. The system is broken and the reasons being are all the fees of the middlemen, and understanding the value chain right.
The first step is land rezoning, and generally, land developers aim to make 30-plus percent return on their money. The developer then buys the zoned land and creates something of value, aiming for 25 percent return on their money. The investor often the same person as the developer then buys the asset and looks to increase the value by tenanting the property, what is called ‘seasoning the rents.’ They aim for at least 20 percent return on their money.
Once they have seasoned the rent, their payday comes by selling the asset to a fund or REIT that is incentivized by the amount of money they have under management. They are basically trying to spend their money and buy cash flow so that they can pay the monthly contributions. They aim to buy buildings with a cash flow of five to eight percent.
And then the last person in the value chain is you, the person who invests in the fund or REIT. You want to get wealthy, invest in this financial product which you think is real estate and are happy to just beat inflation. The problem is you never get wealthy as you are at the bottom of the value chain and you are susceptible to stock market volatility and sentiment, not property fundamentals. If you want to be wealthy you have to do what the top one percent are doing invest higher up the value chain.
Like Uber has done for taxis, Crowdfunding has cut out the middleman, dramatically reduced the costs, and increased the accessibility. Before there were surmountable barriers to entry for the average person to be involved in development or investment; now, we all have access to cut out the middlemen and invest directly. This dramatically reduces the costs and as an example, rather than getting returns of 5 to 8 percent, like in most funds or REITs, our investors in Wealth Migrate look forward to returns or 14 to 15 percent IRR.
What are the biggest advantages of real estate Crowdfunding over REITs?
I discussed this above, but in simple terms, it is not a financial instrument. It is a direct property investment, which is susceptible to sentiment, but certainly not the volatility of the stock market which is at the highest it has ever been all over the world. Funds and REITs have a 0.7 correlation with the stock market and therefore, one can expect massive volatility in the coming years. That is why the super wealthy are investing in direct property, something Crowdfunding now allows to all.
On top of this, the returns investors can expect are on average double that of what one can expect from the traditional funds and REITs, due to their excessive fees. I am not talking about share price growth which is not directly related to net asset value, I am talking about the traditional fundamental returns of a direct real estate asset. Technology provides transparency, and so you know exactly what you are investing in and who is making what fees. That is changing the landscape of this very murky environment where investors are basically kept in the dark so that the traditional players can earn as many fees as possible. There is a reason that the only people who get wealthy from funds or REITs are the people who set them up and run them. We have conducted research on this, and the average fund or REIT has 16 fees involved, whereas Crowdfunding has full disclosure and investors know exactly where every cent is being spent.
Finally, Martin Luther King said, “There are only two laws in the universe, those made by our creator and those made by man. Which do you want to follow?” Crowdfunding is using technology to follow nature’s laws and ancient successful investment methodologies of trust, transparency, and the interests of all parties being aligned. It creates a sustainable ecosystem where everybody wins.
Real estate is sometimes thought of as a way to counterbalance volatility in the stock market, but recent research showed that since 2006, REIT correlation to the stock market jumped to nearly 80 percent is that something that will continue in the future? And if so, is that something that may entice people to invest in real estate Crowdfunding?
Interesting as I said above our research shows a 70 percent correlation. I think that Funds and REITs are financial instruments and Crowdfunding is a direct property investment. They are completely different and it is why the wealthiest, according to McKinsey, are increasing their allocation to direct property to manage the risk of the impending volatility which is coming.
What do you see as the key to profitable real estate Crowdfunder investing? How do you see that as similar or different to REITs? For example, you stress partnerships as key to good real estate Crowdfunding investment; how is that different from finding a trustworthy REIT manager?
A REIT manager manages your money. You have no say in what they do. Their incentives are aligned by the amount of money they have under management (4 to 1 focus), rather than on performance of the REIT. In Crowdfunding, you are master of your destiny.
Fifteen years ago, when you wanted to go on a holiday, you went to your travel agent and they recommended a holiday for you and booked everything. You didn’t have the information and you didn’t know who to trust. The travel agent had often been paid for by the hotel to fly there and ‘try’ their facilities which is why they were comfortable to recommend the holiday to you, not to mention the ‘bonus’ they probably received. Now we have TripAdvisor, the crowd tells us who we can trust and we book our own holidays, making the travel agent redundant. We use our common sense.
I believe real estate is a common sense investment and every single person on this planet has the ability to use common sense and see what is needed. It is all about understanding trends and making sure your investment is in front of the trend. An example is medical and health care real estate in the first world, or hospitals and houses in the emerging world. Don’t rely on other people. Use your common sense and invest where you know the needs are.
Now with Crowdfunding anyone can participate in what is commonly recognized as the safest and best investment in real estate at the moment. At the end of the day, you are still in control and you determine your future, not some paid employee playing with other people’s money.
REITs are said to be much more liquid than Crowdfunded investments — can you comment on REITs’ perceived liquidity vs. liquidity of Crowdfunded investments?
REITs are definitely more liquid. One of the nice things about property is actually the fact that it is not liquid, it removes the volatility, but to be honest, like the stock market changed in the last 50 years, real estate will go through the same process. The regulators have massive concerns about the secondary market, as they don’t know how to regulate it, but I guarantee it is going to happen. Let’s just say I might actually know someone personally who is building it at the moment.
Crowdfunding enables people who want to be in control of their lives, take responsibility for their decisions and be accountable for the results. This is why we focus on only two things: education and solutions. We ensure that we educate people so that they can make informed decisions as to what they want. Each person’s needs are different and we are creating the tools to empower themselves to make the best decisions for them and their families.
In the future, do you see real estate Crowdfunding becoming a replacement to REITs? Or are the two different enough to coexist without competing?
Who knows where the future will go. I do know I caught an Uber taxi this morning and the driver was telling me that the metered taxis were threatening him the night before. We have all seen France and the protests there.
The problem for the taxi industry is: there is nothing it can do. Technology has disrupted the industry, cut costs, increased efficiency, and most importantly greatly increased the experience both for the clients and the taxi drivers. I see technology having the same impact in real estate. Even though Uber co-exists at the moment with metered taxis, it is only a matter of time until they adapt, increase the value proposition, or join the ox wagons.
I see traditional funds and REITs have the exact same experience. In fact, I see everything in the financial, banking, insurance, and medical aid industries being dramatically disrupted as technology cuts out the middle man and provide a far better value proposition or service to the clients. It is incredibly exciting and we look forward to working with the traditional players who are prepared to adapt and redesign their ox wagons into cars. After all, change and disruption are the only givens.
The buzz continues on EB-5 financing for development projects.
EB-5 financing is an important and viable source of construction financing for hotels, hotel enhanced mixed-use, and other development projects.
Now, after billions of dollars of development have been funded with EB-5, this type of financing is regarded as mainstream, and is used by many institutional players including government entities such as port authorities, major hotel brands like Marriott and Hilton, and some of the largest owners of hotels such as the Related Companies and Silverstein Properties.
Q: How much money can you help source for a project?
Most of the financings we have arranged to date are in a sweet spot ranging from $22 million to $125 million. But we are have recently started working with lenders who can do some smaller deals–perhaps as small as $10 million, and we have one project that will fund shortly for more than $350 million.
Of course, there are other critical factors in sizing the EB-5 financing, such as the total loan-to-cost ratio generally should not more than 90%, and the EB-5 loan should not be more than 30-40% of total project costs (excluding land). But there is a big range of projects we work on.
Q: What are some of the most common mistakes you see developers making with EB-5?
There are a number of mistakes developers make with EB-5 financing. Here are a few tips to avoid the most common mistakes:
Bring in the EB-5 experts as early as possible. All of the common mistakes can be avoided if the developer brings in an experienced advisory team early in the process, rather than blundering around and trying to figure it out themselves. There is a steep learning curve! It is always better to “do it right the first time” rather than trying to untangle a mess.
Document the intention to raise EB-5 money (and replace any early expenditures with EB-5 financing) at the very outset, before you spend any money. Failure to do so will significantly reduce (or eliminate) the amount of EB-5 funding available.
Do not form your own regional center. Most developers should not consider forming their own regional centers. Doing so means going into an entirely new business – – the immigration and securities business. This can be time-consuming, frustrating, and nonproductive.
Do not do anything with the regional center before you have proper guidance. It is too easy to stumble into the “wrong” regional center and get your shoelaces tied together with early discussion. As of March 2, 2015, USCIS had approved approximately 641 regional centers. We estimate that 10% of the regional centers have raised more than 90% of the EB-5 capital. In most cases, using one of the 90% is unacceptably risky.
Do not forget to count all the parts of a mixed use project. In terms of generating the critical jobs count for sizing an EB-5 financing, all elements of a project, and sometimes immediately adjoining projects, should be considered. Just because you want to put all the EB-5 money into a hotel, does not prevent you from counting the jobs created from other parts of the project (as long as the jobs created by these other elements are not being used for another EB-5 financing).
Due diligence. Due diligence. Due diligence. Do not start talking to anyone about EB-5 financing until you know the right questions to ask and have performed enough due diligence to take the next steps.
After a series of data reports that suggested that the housing market is hitting more than a few potholes on its road to recovery, two new statistical updates appear to reaffirm that the market’s return to sturdy health may be delayed longer than first anticipated.
The National Association of Realtors (NAR) has announced that its Pending Home Sales Index (PHSI) fell 1.8 percent to 110.3 in June. Pending home sales in the South and Midwest fell by three percent each, while similar sales increased a scant 0.4 percent in the Northeast and 0.5 percent in the West.
NAR tried to keep a positive spin on its data, noting that last month’s level was 8.2 percent above the June 2014 reading of 101.9 and was the third highest reading of 2015. But NAR Chief Economist Lawrence Yun admitted that things were not entirely copacetic. “Strong price appreciation and an improving economy is finally giving some homeowners the incentive and financial capability to sell and trade up or down,” said Yun. “Unfortunately, because nearly all of these sellers are likely buying another home, there isn’t a net increase in inventory. A combination of homebuilders ramping up construction and even more homeowners listing their properties on the market is needed to tame price growth and give all buyers more options.”
Equally distressing were the mismatched numbers in the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 24. The MBA’s Market Composite Index measured a miniscule 0.8 percent increase on a seasonally adjusted basis from one week earlier; on an unadjusted basis, the PHSI increased one percent compared with the previous week. The seasonally adjusted Purchase Index decreased 0.1 percent from one week earlier, while the unadjusted Purchase Index increased 0.2 percent compared with the previous week. Both the FHA and VA shares of the market experienced drops in applications.
In comparison, the refinance market—which many industry experts were eager to assign to the fringes of a housing recovery—is showing stirrings of possible resurgence. The MBA’s Refinance Index increased two percent from the previous week, while the refinance share of mortgage activity increased to 50.6 percent of total applications from 50.3 percent the previous week.
These new data reports follow yesterday’s news that the U.S. homeownership hit 63.4 percent in the second quarter, a figure that has not been seen since 1966. Last Friday, the federal government reported a 6.8 percent drop single-family house sales during June. And following yesterday’s S&P/Case-Shiller report on increasing home prices, David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, pointed to a potential dilemma about a conspicuous shortage of first-time homebuyers coupled with home prices increasing nearly twice as fast as inflation and wages.
On front page of CFOCP'S News Letter is the first glimp of Fannie Mae Buliding
Fannie Mae is relocating its Washington, D.C. headquarters, and the first glimpse of its new home is quite an eyeful.
The government-sponsored enterprise (GSE) announced plans last year to move out of its mansion-style headquarters on Wisconsin Avenue and to consolidate its five Washington-area offices into a single location. Its new headquarters will be built on the site of the Washington Post’s headquarters, which is being razed as the newspaper relocates across town.
Fannie Mae will lease 85 percent of the space in the new 12-story, 838,480-square-foot office complex being developed by Carr Properties. According to the Washington Business Journal, which published the architectural designs of the property, the new structure will be linked by a massive canopy to a neighboring building owned by Carr Properties and will consist of two office lobbies plus retail pavilions covering 42,000-square feet. There will also be three levels of underground parking, and the new structure is being designed to meet LEED Gold standards.
Fannie Mae, which will be observing its seventh year in federal conservatorship in September, plans to begin relocating its operations to the new headquarters in 2017.