Old Capital Real Estate Investing Podcast With Michael Becker & Paul Peebles

Michael explains that todays low rate environment can benefit many apartment buyers with lower debt costs, BUT will exponentially increase the yield maintenance prepayment penalty costs for sellers. Lower rates may mean more loan assumptions in the future to avoid the yield maintenance cost.

Lane Beene is with Pilot Properties and owns almost 700 apartment units. This recently retired Lt. Colonel graduated from the Air Force Academy and flew combat F16’s for over 28 years. Less than 15 years, he started with one single family home and turned that into a large multi-million dollar apartment portfolio…all during the time he was serving in the military. He is direct. He is smart. You need to listen to him if you are new to real estate investing. He guides you through his real estate decision tree. He examines the ‘4’ doors that will have an impact on how you size up a real estate investment. To contact Lane Beene: lane.beene@pilot-legacy.com

Michael owns over 5000 apartment units and he still uses an independent 3rd party property management company to oversee his portfolio. Michael discusses the reasons why he doesn’t self manage. Also, Michael examines what an apartment ASSET MANAGER does for the partnership.

In the Midwest, around this time of the year, many apartment owners face the risk of bad weather that can destroy your asset. Darwin German’s 161 unit apartment building was recently hit by a tornado. It destroyed the roof on two buildings and affected 14 units. Fortunately no tenants were killed or hurt. We discuss what he did when he originally got the call that the tornado hit and now his plans on the rehab. In the second part of the interview, Darwin explains language in his bank loan documents. Darwin refinanced a large apartment building with bank financing. The language in your loan documents is important. When you borrow money, the lender will have language and covenants that will always be slanted protecting the lender in case of default. Darwin goes through his bank loan documents and highlights some of the language that he and his attorney pushed back on with the lender. Having a seasoned “contracts” attorney to represent you in negotiations with the lender will help in your success. To contact Da

Bruce and Stephanie Petersen have purchased over a 1000 apartment units in the last few years, but they would not have done it unless they had a mindset change. The change was from being a W-2 employee to a real estate entrepreneur investing in apartments. For over 18 years, Bruce was a hard worker in retail sales; often working over 80 hours a week and savings his money. He knew that there was a better life out there. After participating in a multifamily education and mentoring program; he got the confidence to start buying apartments. Stephanie discusses her journey from being a former single mother and owning a few single family rental properties to becoming a key decision maker in a large apartment portfolio and what she does to advocate for her tenants to make a true sense “of community.” To contact Bruce or Stephanie Petersen: APT-GUY.com Are you interested in learning more about how Multifamily Syndications work? Please visit www.spiadvisory.com to learn more about Michael Becker’s Real Estate Syndic

Mike discusses a large line item expense…property insurance. After property taxes and payroll, property insurance is an every increasing expense that sponsors must recognize sooner than later.

Protecting your asset is critical in your success. You must have insurance to cover POTENTIAL problems. Jeff King has been advising apartment owners on insurance matters for over 35 years. Ramey King Insurance was established in 1881. He “knows a thing or two, because he has seen a thing or two.” Jeff discusses several topics: 1) What items do you need to get insurance quoted? 2) What coverages are necessary for the lender? 3) How much is the typical deductible? 4) What happens when you have a claim and how long before I get paid? 5) What is a master-insurance policy? How does that work? 6) Should you require a tenant to have ‘renters insurance?’ To get in contact with Jeff King: RameyKing.com or info@rameyking.com Are you interested in learning more about how Multifamily Syndications work? Please visit www.spiadvisory.com to learn more about Michael Becker’s Real Estate Syndication business with SPI Advisory LLC.

After you have spent over 90+ days in the acquisition process…its time for you to actually own and operated your building. Michael discusses a PRE- and POST- apartment takeover strategy. If you self-manage or have a third party management team; a transition plan is critical for your immediate success.

Emily Cortright and Adam Roberts were corporate folks. They went to the right schools, (Ohio State and Penn State) lived near the ocean in southern California, and both worked for the right company (General Electric- Aviation); everything was great-UNTIL…GE sold their division and they were going to get downsized or transferred. They began to look for additional income options to support their lifestyle. They attended an educational class on real estate investing. After spending a weekend in the class… it was an epiphany moment- a change of mindset. They wanted to become investors. In the podcast, Emily and Adam take us on the journey from a corporate wage employee to an apartment investor. They show us how they educated themselves on apartment investing and teamed up with an experienced investor to buy two large buildings in Texas. To contact Adam & Emily: emilycortright@kw.com or adam@aehomebuyers.com Visit their website at: AEMULTIFAMILY.COM Are you interested in learning more about how Multifamily Syn

Michael discusses and defines the term: KEY PRINCIPAL and how it applies to commercial real estate lending. The lender makes the loan to the Borrower. The Borrower is not typically an individual; but typically a limited partnership. Generally, where the Borrower is a limited partnership, the general partners are the managers of the Partnership. Thus, individuals general partners are potential Key Principals. For any general partner of the Borrower which is an entity, the Lender must identify as Key Principals those individuals who control that general partner. Key Principals usually have control of the Borrower and a fiduciary responsibility to the limited partners. However, where either a managing general partner or group managing general partners have been authorized in the Borrower's Limited Partnership Agreement to manage the partnership without participation from the other partners, then, the Lender must identify as Key Principals only those individuals managing general partners, or if a managing general

For various reasons, not all apartments will qualify for a Fannie Mae or Freddie Mac loan today. An example could be that current net operating income (NOI) versus sales price does not support a higher leveraged loan amount. Today, borrowers are seeking the right loan structure that can “bridge” them from point A to point B. Bridge loans may be the right financing strategy for value-add investors with a clear plan to increase future property income. Most bank bridge loans will only do low leveraged (60-65%), full recourse, short term loans. Bridge loans are NOT HARD MONEY LOANS. Underwriter John Q. Banker explains how to qualify for a HIGHER LEVERAGED NON RECOURSE REAL ESTATE BANK BRIDGE LOAN when a permanent lender does not offer an immediate solution based on the asset’s current financials, current occupancy and condition. You want to listen to this conversation. John and James go into detail on what is important in bridge lending. Are you interested in learning more about how Multifamily Syndications work?

Michael discusses some recent economic information that Greg Willett from RealPage has shared with investors. Possible slowdown coming in 2020-2021 and the impact it will have on apartment leasing and ownership.

Today, Allan and Laurel Beazer passively own over 2000 apartment units. A few years ago, they got mad after their CPA told them they may have to work many more years to have a decent retirement. They found a better way. They joined an education & mentoring group that focused on multifamily investing. Listen to their journey on how they passively invested into various real estate partnerships and eventually found their own opportunity with an 11 unit building. They discuss how they found, acquired and operate a small apartment building. The Beazer’s got into real estate investing as a SOLUTION to retire sooner; does that make sense for you? Contact info for Allan & Laurel: beazworkzinvesting@gmail.com Are you interested in learning more about how Multifamily Syndications work? Please visit www.spiadvisory.com to learn more about Michael Becker’s Real Estate Syndication business with SPI Advisory LLC.

Michael discusses the status of the capital markets that he is seeing as a deal sponsor. Today, to be rewarded with a lower interest rate, Agency lenders want to see energy or water savings by apartment owners and/or tenants. This year, Fannie Mae and Freddie Mac made a change that calls for borrowers using their green-lending programs to commit to saving 30% on their energy and water consumption, with half of that reduction having to be in energy use.

John Darrow is an underwriter with Red Capital. He specializes in SMALL BALANCE- AGENCY loans under $7 million for NEW apartment buyers. In some areas of the nation…they will lend up to 80% leverage. He explains the differences between NON RECOURSE apartment lenders Fannie Mae and Freddie Mac. These two AGENCY lenders are similar, BUT they have important differences that YOU need to understand. REMEMBER, Fannie Mae and Freddie Mac will only lend on historically stabilized apartment buildings. They are current cash flow lenders. They will NOT finance a distressed asset (low occupancy and low NOI). Longer interest rate term, higher leverage, and non-recourse are some of the benefits of using AGENCY financing for apartment investing. You should be able to answer these questions: What lender will include REHAB into their loans? Can you get a NON RECOURSE loan in a small town with 30 years amortization? Can you do a 10 year fixed with 10 years of INTEREST ONLY? Why are these apartment loans typically better than l

Today, many sellers and listing agents require buyers to put a substantial amount of NON REFUNDABLE earnest money up front…BEFORE they do certain due diligence analysis. As you can imagine, the seller wants to make sure you are financially committed to the transaction without the risk of a future re-trade. Michael explains how he gets comfortable on putting significant hard earnest money upfront on an apartment acquisition.

Berkadia real estate brokers, Will Jarnagin and Michael Ware, have been selling apartments for over 15 years. They have a depth of knowledge to help you. Will gives us an insight on the Value Add apartment market in Dallas. He breaks the sources of capital into two categories: 1) purchases UNDER-$25 million 2) OVER- $25 million. Will tells us that there is more activity and more capital available for smaller transactions under $25 million today. The space above $25 million is usually institutional investors and that segment is a little thin with less activity. Michael discusses the oversupply of BRAND NEW- A CLASS apartments this year, but construction permits have dropped and we will see a reduction of new supply in the next few years. This means current rental concessions will fall in the next 18 months. If you have never bought an apartment building or you are new to the market, Will & Michael gives us several tips on how to get recognized by a top producing brokers selling a deal. Also, Michael gives

Bill Mara & Pat Poling have been business partners for over 30 years. These “old real estate guys,” operated a multi-billion dollar institutional real estate portfolio for about a dozen years and then made the move into large apartment investing. They saw the opportunity to invest into value-add & work force multifamily and wanted to have individual partners instead of institutional investors. Before they established an INVESTMENT FUND, Bill & Pat would raise equity capital on each transaction. They would find the deal first and then find the equity second. That can be burdensome…if you have too many due diligence items coming at you. You can go from ZERO to 100 miles an hour during the acquisition. Bill & Pat found a way to raise capital throughout the year…with an investment fund. They used their institutional investing background to create a possible better way to help in the capital raise. To contact Mara Poling: https://marapoling.com/fund/ To receive our FREE page WHITE PAPER REPORT on

Michael discusses real tenant occupancy challenges that will happen if you do not review tenant files during initial acquisition due diligence.

What’s WORKING or NOT WORKING…in the capital markets. Old Capital commercial loan officers-James Eng, Dave Walls and John Brickson discuss what is happening in apartment lending. Paul Peebles relays an important story about the possible financial impact of the “NEW” SOCIAL SECURITY ADMINISTRATION’s- NO MATCH letter verifying authenticity of your employee’s social security number. This could be challenging for the employee, the employer, and the tenant in your building. What happens to labor costs and apartment occupancy if undocumented employees lose jobs? John Brickson and Dave Walls chat about competitive advantages in buying apartment buildings today. James “the professor” Eng reminds us 1) expect rejection and learn from every ‘no’ 2) hire advisors like your life depends on it 3) you will have to do things- that don’t scale. Great insight from James. Save the Date: 2019 Old Capital Conference - October 24-25 in Dallas, Texas NPR Article on the NO MATCH LETTER: https://www.npr.org/2019/03/29/707931619/so