Blackstone Seeking to Raise $4 Billion for Real Estate Debt Fund (and what this means for small investors)

Blackstone Group LP is seeking to raise $4 billion from investors for its latest real estate mezzanine debt fund.

 

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Blackstone Real Estate Debt Strategies III LP will originate and structure mezzanine debt linked to institutional-grade real estate in North America and Europe, according to a report to the Commonwealth of Pennsylvania Public School Employees’ Retirement System from the pension system’s senior portfolio manager for real estate, William Stalter, at its Dec. 7 board meeting. The pension board at that meeting committed as much as $100 million to the fund, according to its website.

The fund offers investors the opportunity to underwrite complex real estate deals where traditional capital is scarce, Stalter said in the report.

Fundraising for private real estate debt hit a record $24 billion in 2014, according to data from Preqin Ltd. At Sept. 15, prior to Blackstone’s raising, there were 56 closed-end real estate debt funds in the market, targeting a combined $26 billion, Preqin said.

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Blackstone has lowered the performance hurdle on the new fund — the return rate it is required to meet to receive carried interest — to 6 percent, Stalter’s report said, because of the low interest rate environment. The firm has not set a cap on the fund, according to the report. A representative for Blackstone didn’t immediately respond to requests for comment.

Blackstone, the world’s largest alternative investment manager, has about $10 billion in investor commitments in its real estate debt platform, which has made a 12 percent net return since it began investing in 2008, according to Stalter’s report.

The firm closed its predecessor fund with $3.5 billion in commitments in 2013, above its target of $3 billion, according to data compiled by Bloomberg. That fund has a net internal rate of return of 9.31 percent and a 1.12 times multiple of invested capital, Stalter’s report said.

http://www.bloomberg.com/news/articles/2015-12-11/blackstone-seeking-to-raise-4-billion-for-real-estate-debt-fund

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Why do 97.4% of Real Estate Investors FAIL?

This new video by Matt Andrews reveals why most Investors are dead before they complete their first flip and how you can insure that you are one of the 2.6% who profit on EVERY DEAL. The Secret is… SEE THE VIDEO HERE

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REAL ESTATE FREEDOM is a member of Community Buying Group, which entitles you to free benefits, such as their Lowe’s program. You save 5%+20% every day at Lowe’s, Sherwin Williams, and many others. The average user saves more than $1,600 a year.  CLAIM YOUR FREE MEMBERSHIP!

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The New Housing Crisis (Sky High Rents Are About To Rock The Housing Market)

Out of 43 million families and individuals who rent, 1 in 5 are considered “cost-burdened,” or paying more than 30 percent of their incomes on rent, according to a new study by the Harvard Joint Center for Housing Studies. Others pay half their incomes.

 

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There are now 9 million more renters than there were just a decade ago, the biggest jump in renters on record, and they are paying more for rent than ever before.

Of the nation’s now 43 million families and individuals who rent, 1 in 5 are considered “cost-burdened,” or paying more than 30 percent of their incomes on rent, according to a new study by the Harvard Joint Center for Housing Studies. Others pay half their incomes.

“The crisis in the number of renters paying excessive amounts of their income for housing continues, because the market has been unable to meet the need for housing that is within the financial reach of many families and individuals with lower incomes. These affordability challenges also are increasingly afflicting moderate-income households,” said Chris Herbert, managing director of the center.

shutterstock_110508779Adding to the crisis, the number of “severely” cost-burdened renters, those paying more than half their incomes on rent, went from 7.5 million to 11.4 million in the last decade. This, as renter incomes have declined 9 percent since 2001. Add it up, and 49 percent of renters are cost-burdened, 26 percent severely so.

Demand has clearly outstripped supply, despite a recent boom in apartment construction and a 35 percent jump in the number of single-family rental homes since the housing crash. Multifamily apartment starts are up. (http://www.cnbc.com/2015/12/09/housings-new-crisis-half-your-income-for-rent.html)

“Record-setting demand for rental housing due to demographic trends, the residual consequences of the foreclosure crisis and an increased appreciation of the benefits of being a renter has led to strong growth in the supply of rental housing over the past decade both through new construction and the conversion of formerly owner-occupied homes to rentals,” said Herbert.

But it is not enough. Rental occupancy is at the highest level in 30 years, and monthly rent rates are at record highs — and still rising at a sizable 3.5 percent annually. While there is a wide swath of single-family rental homes and smaller multifamily buildings in the suburbs, much of the recent multifamily construction has been large, luxury buildings in urban centers. Upper-income renters are finding what they need, but low- to middle-income families are struggling.

shutterstock_195738788Homeownership is now at the lowest level in half a century, and some expect it could go significantly lower. Household formation is expected to continue its slow rise, but almost entirely on renter households, not owner households.

“These market conditions will likely continue in 2016, as newly built apartments are absorbed by demand from new, young households. Look for rental vacancy rates to remain relatively low and rent growth to outpace inflation in 2016,” wrote Frank Nothaft, chief economist of CoreLogic, in a recent report.

Mortgage interest rates are expected to rise, and that will keep more renters who might have become homebuyers stuck in place. As rents continue to rise, renters will also be less able to save for a down payment on a home.

“Title agents view first-time homebuyers as most impacted by a potential interest rate hike,” wrote Mark Fleming, chief economist of First American, in an analysis of rising rates. “Now that interest rates are pre-adjusting in response to signals from the Fed for a highly expected increase in December, demand is also declining.”

As more supply comes to market in large cities, rents are starting to moderate, but, again, that is in the higher end, luxury space. Some developers are starting to look to secondary markets and suburbs for new projects, since demand continues to be strong, but unlike the single-family construction market, the timeline for new product to reach the market in multifamily is several years out.

http://www.cnbc.com/2015/12/09/housings-new-crisis-half-your-income-for-rent.html

 

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Why do 97.4% of Real Estate Investors FAIL?

This new video by Matt Andrews reveals why most Investors are dead before they complete their first flip and how you can insure that you are one of the 2.6% who profit on EVERY DEAL. The Secret is… SEE THE VIDEO HERE

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REAL ESTATE FREEDOM is a member of Community Buying Group, which entitles you to free benefits, such as their Lowe’s program. You save 5%+20% every day at Lowe’s, Sherwin Williams, and many others. The average user saves more than $1,600 a year.  CLAIM YOUR FREE MEMBERSHIP!

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HOW TO FLIP REO’S FOR MAXIMUM PROFIT: Part 4 – {Elite Investor Series}

Bank Owned Properties still represent one of the greatest opportunities for saavy Real Estate Investors in the market today. See how it works from the inside out. This 5 part series is an entire REO Investing Course in disguise, so take advantage of these implementable strategies! 

 

FINDING YOUR DEAL SOURCE

After you absorb this article you will be able to:

  • Identify the best REO Brokers in your area
  • Establish strong relationships with REO Brokers
  • Write contracts and make offers that will be accepted

 

shutterstock_185901971REO Brokers: Your New Best Friends

One of the major sources for acquiring bank-owned properties is REO (Real Estate Owned) Brokers. These real estate agents are commissioned by the bank to sell the bank’s foreclosed properties. They work with one or more asset manager(s) to rid the bank of its toxic assets. Developing relationships with these people is essential to your acquisition process.

The easiest way to find REO Brokers is to do a search in your city’s multiple listing service for bank-owned properties. Most MLS programs will allow you to search using “Foreclosure” as a cri- terion. Find the foreclosure listing and the agent’s info will be on the listing. If, however, you are not a Realtor and don’t have access to the MLS, there are other ways to track these valuable assets down. Begin by checking out www.zillow.com and www.Realtor.com. Most Realtors will publish their listings to these websites to gain maximum expo- sure. In addition to checking out these sites, drive the areas in which you’re interested in buying. Look for properties that appear to be abandoned.

You’ll find yard signs with Realtor names and phone numbers. Many times the yard sign will also include the word “FORECLOSURE” so you know for sure the property is bank owned.

How to get in with an Reo Broker

Now that you’ve located a handful of REO Brokers, it’s time to make contact. While it’s true these guys are busy, it’s also true that they need to make a sale. Once they understand you’re the one to help make that sale happen, you will be viewed less as a pest and more like a legitimate buyer. Understand they deal with “buyers” who blow smoke all day long without ever having any in- tention of closing. You will need to prove your worth to warrant them spending any time on you.

In an ideal world, you’d like to be the first buyer they call when they’ve got a new listing. To do this, you’ll need to make it worth their time. Here are some tips:

  • Offer double commissions. If you have a real estate license, forego taking any commission on the foreclosure you’re intending to purchase. You can say something like this when you send the offer: “You’ll notice that I’ve left the selling agent information blank on this offer. I’d like to offer you both sides of the commission.” Even if you don’t have your license, you can still make sure they get both sides of the commission by asking them to repre- sent you as the buyer.
  • Do everything in your power to make things as easy on them as possible! This can be as simple as getting documents signed and back to them in a timely manner. Remember, your goal is to have them remember you fondly after this transaction.
  • A thank you note or gift never hurt anyone. A simple thank you note is al- ways appreciated, and if you’d like to be remembered even more, why not send a gift? In the past I’ve sent REO Brokers out to dinner on my dime or gifted them with Apple’s newest toy (for instance, an iPod Shuffle).

 

shutterstock_126022046GETTING YOUR OFFER ACCEPTED

First, you’ll need to write the offer. For access to the contract that we use, email me at [email protected] This contract is specific to Florida, but a quick Google search should provide what you’ll need for your state.

HOT TIP: As competition has increased for quality investment proper- ties, it becomes even more important to make offers the right way. Remember, you are now competing against a flood of international buyers and the bid bad hedge funds.

Next, you’ll need to email/fax your offer to the REO Broker. Be sure to include the proof of funds along with the offer.

CREATE A SYSTEM FOR MAKING OFFERS

Create some criteria and use them to determine your thresholds for buying. For instance, decide that you will pay $50,000 TOTAL (initial investment + rehab costs) for a 3 bed/2 bath block property and refuse to budge from this stance. Keep your emotions out of it! You will not be living in this house. It is strictly a moneymaker as far as you’re concerned, so the floor plan should only matter from a “Will my prospective tenants like this?” perspective.

shutterstock_195738788THE COUNTER OFFER

When the bank counters your offer (and they most likely will!), be prepared to defend your original offer if you’re already at your threshold. I would suggest sensationalizing the inspection to work them down on price. For instance, have your contractor/handyman create an estimate that includes every single possible repair. Be sure the estimate reflects retail (read: inflated) pricing as opposed to the investor pricing that he typically gives you. Depending on the asset manager handling the file, this may impact their willingness to work with you on price.

At times you may find that you have a lot of competition on a particular property. If you get outbid, it may be worth your time to contact the investor who got it and see if you can work out a quick deal. Many times the other investor may want to flip it over to you for a quick $2k. If the numbers still work for you, you can move forward. If not, move one. But don’t ever begrudge another in- vestor when they make a profit. That usually just shows misplaced aggression stemming from jealousy and feelings of inadequacy. (That’s my Psychology degree coming out. Analysis free of charge!)

 

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Real Estate Investor, and friend to the Real Estate Freedom community, Rob Swanson just released a training video that goes through a probate investing scenario, step-by-step.

In this video you’ll learn:

Learn how to get probate leads that no one knows about by getting the houses released from the probate early — the families will love you. SEE THE FULL TRAINING VIDEO HERE!

**********************************************************************************

Why do 97.4% of Real Estate Investors FAIL?

This new video by Matt Andrews reveals why most Investors are dead before they complete their first flip and how you can insure that you are one of the 2.6% who profit on EVERY DEAL. The Secret is… SEE THE VIDEO HERE

**********************************************************************************

REAL ESTATE FREEDOM is a member of Community Buying Group, which entitles you to free benefits, such as their Lowe’s program. You save 5%+20% every day at Lowe’s, Sherwin Williams, and many others. The average user saves more than $1,600 a year.

CLAIM YOUR FREE MEMBERSHIP!

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Who Are You Listening To? (And how to deal with critics) {New Video}

Who you listen to, get counsel from, and gain wisdom from is one of the most important pieces for a successful business. In this new content training video Matt Andrews breaks down how he decides who to listen to and who to flat out ignore!  

 

 

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Why do 97.4% of Real Estate Investors FAIL?

This new video by Matt Andrews reveals why most Investors are dead before they complete their first flip and how you can insure that you are one of the 2.6% who profit on EVERY DEAL. The Secret is… SEE THE VIDEO HERE

**********************************************************************************

REAL ESTATE FREEDOM is a member of Community Buying Group, which entitles you to free benefits, such as their Lowe’s program. You save 5%+20% every day at Lowe’s, Sherwin Williams, and many others. The average user saves more than $1,600 a year.  CLAIM YOUR FREE MEMBERSHIP!

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Bank-Owned Sales Continue To Decline in 2015 (and what that means for smart real estate investors)

Bank Owned Properties and Short Sale Inventory is shrinking away in most US home markets. The latest numbers show the 5 markets the are bucking that trend. 

 

In October 2015, 8.1 percent of all sales were bank-owned (REO) single family homes and condos. This was unchanged from the previous month but down from 10.6 percent of all sales in October 2014. The October median sales price of a bank-owned home was $121,000, 42 percent lower than the overall median home sales price during the month.

Metros with the highest share of REO sales in October 2015 were East Stroudsburg, Pennsylvania (31.7 percent), Bakersfield, California (25.5 percent), California, Maryland (24.5 percent), Tallahassee, Florida (20.3 percent) and Jacksonville, Florida (19.0 percent).

Short sales decrease month over month and year over year

Short sales accounted for 5.2 percent of all single family and condo sales in October, unchanged from the 5.2 percent in the previous month but down from 5.5 percent a year ago.

Markets with the highest share of short sales in October were Salisbury, Maryland (13.5 percent), Torrington, Connecticut (12.6 percent), Atlantic City, New Jersey (12.6 percent), Yuma, Arizona (11.0 percent), Jacksonville, North Carolina (10.8 percent) and Providence, Rhode Island (10.2 percent).

Markets bucking the national trend with a year-over-year increase in share of short sales included Springfield, Massachusetts, Ocala, Florida, Worcester, Massachusetts, Baton Rouge, Louisiana and Fayetteville, North Carolina.

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Real Estate Investor, and friend to the Real Estate Freedom community, Rob Swanson just released a training video that goes through a probate investing scenario, step-by-step.

In this video you’ll learn:

Learn how to get probate leads that no one knows about by getting the houses released from the probate early — the families will love you. SEE THE FULL TRAINING VIDEO HERE!

**********************************************************************************

Why do 97.4% of Real Estate Investors FAIL?

This new video by Matt Andrews reveals why most Investors are dead before they complete their first flip and how you can insure that you are one of the 2.6% who profit on EVERY DEAL. The Secret is… SEE THE VIDEO HERE

**********************************************************************************

REAL ESTATE FREEDOM is a member of Community Buying Group, which entitles you to free benefits, such as their Lowe’s program. You save 5%+20% every day at Lowe’s, Sherwin Williams, and many others. The average user saves more than $1,600 a year.

CLAIM YOUR FREE MEMBERSHIP!

**********************************************************************************

How Do You Know If It’s A Deal? (Running the Real Estate Numbers)

New Investors tend to avoid true, objective evaluation of property deals. In doing so, you are avoiding the one thing that can separate you from “dime a dozen” Realtors and “wanna-be investors.” Don’t be that guy!

 

I hear it all the time from bird-dogs that bring me properties. “Matt, this property is a great deal. It will make you a lot of money. It will be easy to fix up and flip. It will be a great rental return.” I always laugh to myself when someone attempts 
 to qualify the investment value of a property by using descriptive terms like “great deal”, “a lot of money”, or “easy to flip”. These terms are totally subjective. They tell me nothing about the property and let me know that you have no idea what you are talking about.

Look at those inadequate descriptive terms above and ask yourself, “Would I put my hard-earned money into a property described like that?” I seriously doubt it. Here is what I would want to hear from a trusted real estate partner:

shutterstock_187760795“Matt, I have a property that I think will meet your buying criteria. This property can be bought and renovated for around 65-70% of its after-rehab value. I calculated the ARV using real comps of similar homes sold within the last 90 days. You are looking at a 20-25% ROI.”

Or if it’s a rental investment I would want to hear:

“Matt, this rental property will yield a cap rate of 13% after all expenses, which include insurance, taxes, property management, vacancy and maintenance reserves.”

Do you see the difference between the first examples and these last two? The last two clearly show a knowledge of the real estate investments that you are attempting to sell. You are saying to your prospect, “I am not just hawking prop- erties. I analyze and qualify true investment potential.” This kind of knowledge and understanding of real estate fundamentals will separate you from the crowd and bring real value to your investors.

This next section will be a little challenging, especially for those of you who are as mathematically challenged as I am. But trust me, if I can get it, anyone can! At the end of the section, I will give you some tools and some short cuts, so don’t worry. Okay, put on your analytical hat, because here we go!

shutterstock_136265849ROI

Sometimes known just as RETURN, ROI is the ratio of money gained or lost on an investment relative to the amount of money invested. ROI is a measure of investment profitability, not a measure of investment size. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. The money invested may be referred to as the asset, capital, principal, or the cost basis of the investment. ROI is usually expressed as a percentage and indicates cash flow from an investment to the investor over a specified period of time, usually a year. If someone says that they made a 20% return, they usually mean that the investment made them a 20% gain that year.

In general, the higher the investment risk, the greater the potential investment return, and the greater the potential investment loss.

So, what is a good return on investment for a property that you will buy, fix, and flip? You will get many different answers depending on whom you ask, but here is my general rule of thumb:

After renovations, I want to be into a property for 65-70% of its current val- ue. For example, if a property is worth $100k, then I do not want to have any more than $70k invested in that property. Assuming I pay Realtor fees, buyer concessions, and closing costs totaling $10k, my profit will be $20k — roughly a 30% return on investment. I arrived at that percentage by dividing 20 (my profit) by 70 (my invested capital). Make sense? Good. Now you should be able to use the same process to quickly calculate the investment return for any flipped property you are selling. Your investor buyers will love you for being able to explain how this is done and they will value your input greatly.

Generally, NOI is defined as the yearly gross income less operating expenses.

shutterstock_110508779CAP RATE

When someone says that a property is a 10 cap, what they mean is the property will produce 10% return. Basically, cap Rate is the ratio between the net operating income produced by an asset and its capital cost (the original in- vestment amount). commit this simple formula to memory.

For example, if you bought a house for $100,000 and it produces $10,000 in annual net operating income, then:

The asset’s capitalization rate is ten percent; one-tenth of the property’s cost is paid by the year’s net proceeds.

 

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Why do 97.4% of Real Estate Investors FAIL?

This new video by Matt Andrews reveals why most Investors are dead before they complete their first flip and how you can insure that you are one of the 2.6% who profit on EVERY DEAL. The Secret is… SEE THE VIDEO HERE

**********************************************************************************

 

REAL ESTATE FREEDOM is a member of Community Buying Group, which entitles you to free benefits, such as their Lowe’s program. You save 5%+2% every day at Lowe’s, Sherwin Williams, and many others. The average user saves more than $1,600 a year.

CLAIM YOUR FREE MEMBERSHIP!

**********************************************************************************

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HOW TO FLIP REO’S FOR MAXIMUM PROFIT: Part 3 – {Elite Investor Series}

Bank Owned Properties still represent one of the greatest opportunities for saavy Real Estate Investors in the market today. See how it works from the inside out. This 5 part series is an entire REO Investing Course in disguise, so take advantage of these implementable strategies! 

 

HOW TO CHOOSE YOUR MARKET

A couple of different factors can affect your decision when choosing your market. Keep these things in mind when you are doing your research.

Competition

Competition is always a consideration when going into an investment market. Review the section in chapter 2 about using your competition for determining real estate values. Here are the basics:

  1. Know your competition: look them up, join their lists, ask title companies, ask Realtors.
  2. See what kind of corner they have on the market.
  3. copy them if you can: If they are successful at something, find out how they do it and replicate that.

Demand

Do people want investment properties in your area? If so, how many? Would people buy from out of state? Would people buy from out of the country? What is the investor activity level in your local market? How long are bank-owned properties sitting on the market? compare your market to others that have been acknowledged as good investment markets.

Whatever it takes, you need to figure out the demand for properties in your area. So get to work. Poll other investors, ask Realtors, look up recently sold comps. Find out what people want and then find a way to give it to them!

Know which areas are good for different strategies. One neighborhood may be perfect for rentals, but the numbers won’t work for retailing. Use the strategies in chapter 2 to help you with this process.

 

1_123125_123073_2207907_2226910_090922_exp_fmj.jpg.CROP.original-originalYour Assignment:

This will give you great insight into your market. Don’t skimp on this. You would be missing out on a great education.

  1. 1)  Locate 3 properties that have investment potential in your area. The properties should come from multiple sources (Realtors, investors, online sources like craigslist) and can include REOs, accepted short sales, and auction properties, etc.
  2. 2)  Determine the sales price of each property and the terms of the sale.
  3. 3)  Look up each property using zillow and the other resources listed above. Look at the zestimate value. Then look at 6-8 comps (sold within 90 days) for each property. Take notice of the highs and lows.
  4. 4)  Go visit each property (get inside if possible) and one respective comp for each property.
  5. 5)  Determine if the property would best fit into a:
    a. WHOLESALE MODEL: can it be easily flipped to another investor for between 2 and 5K?b. RETAIL MODEL: Is it financeable? Will it meet FHA standards? Does it meet the 70% ratio described earlier?c. “BUY AND HOLD” MODEL: Does it yield a high enough cap rate?

It’s possible the property fits into none of these models. Use the tools outlined above to arrive at your conclusion.

  1. 6)  Go back to the source of the property and ask them to sell you on the deal. Ask why it’s a good investment in their opinion. See how their information matches up with yours.
  2. 7)  Repeat this process every time you need to evaluate a property. Eventually, you will be able skip the visit unless you are making an offer.

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Real Estate Investor, and friend to the Real Estate Freedom community, Rob Swanson just released a training video that goes through a probate investing scenario, step-by-step.

In this video you’ll learn:

Learn how to get probate leads that no one knows about by getting the houses released from the probate early — the families will love you. SEE THE FULL TRAINING VIDEO HERE!

**********************************************************************************

Why do 97.4% of Real Estate Investors FAIL?

This new video by Matt Andrews reveals why most Investors are dead before they complete their first flip and how you can insure that you are one of the 2.6% who profit on EVERY DEAL. The Secret is… SEE THE VIDEO HERE

**********************************************************************************

REAL ESTATE FREEDOM is a member of Community Buying Group, which entitles you to free benefits, such as their Lowe’s program. You save 5%+20% every day at Lowe’s, Sherwin Williams, and many others. The average user saves more than $1,600 a year.

CLAIM YOUR FREE MEMBERSHIP!

**********************************************************************************