The information in this post were my notes from the Women's Real Estate Investment Summit by Beth Azor.
The spirit of the conference was extreme honesty. "Boxers are not judged by how hard they hit, but by how many times they get up."
Because self storage is a business, you can do an SBA loan to purchase. Make sure to go with a lender that is experienced in SBA loans in order for it to take the least amount of time. You will find these lenders at industry specific conferences, you should also ask your network about them.
It was recommended to never to do a CMBS loan, even thought the rates are great, because you are stuck with it for 10 yrs, there's a prepayment penalty, you cannot put a second loan on the property, and it gets sold multiple times over the life of the loan, and you don’t have a direct contact. They can foreclose on you very quickly.
Make sure to ask lenders if they service their own loans. They gave examples of lenders who sell the loan right away, and during events like Covid you have nobody to call because the loan has been sold multiple times. When you are dealing with the bank that lent you the money, you can call them directly and figure out a plan together. Beth mentioned that she was about to call her lender when Covid started and they actually called her first to let her know they were giving her the ability to defer payments for 3 months. In my opinion this is the true definition of the American spirit because this gave her time to talk to all her tenants and help them out. What a spirit of camaraderie. Look at how beautifully this worked for the bank themselves.. After she got the call, she wasn’t stressed about the next 3 months, and she was able to focus on what was important for the business which is helping their tenants make their payments. She was able to point her tenants in the right direction to apply for their own loans if needed. And after the 3 months went by, the lender called again asking if she needed another extension!
Look at NOI/debt amount. Lenders like 9% and above debt yield ratio.
If you're syndicating a deal, documentation on capital call is important for banks. Also, the controlling interest should stay with operator (this will also be required by the bank).
Call brokers regularly so they keep you in mind.
Deals are getting done because of Linkedin. People are meeting people online, they are becoming influencers in their specific real estate field, and they are finding deals because of that, as well as growing their network.
Let/make brokers invest in the deals that they’re bringing you. They will be very honest with the value of the deal they are investing in, they are also a great resource for any questions, and they understand the industry.
Do a stress test analysis on your underwriting (and your existing properties) to see how the potential property would survive in an economic downturn. For instance, what would happen if 10-20% of the tenants left, what would happen if rents decreased by 10-20%.
By the numbers
Women outperform men in real estate investing by 2x1. I say this knowing that my audience is 65% men, and I love men, I’m not a men hater. I say this because I want all the guys here to be mindful and purposeful to partner up with women. It has been proven over and over again that diverse teams in all industries do much better than non diverse teams. The reason should be pretty common sense but let’s go over that… diverse teams have a broader spectrum and think of things that other people in the team wouldn’t think of. When I say diversity it’s not just men and women, it’s also people from different colors, backgrounds, and countries too!
During a lending panel, these were lenders who have been doing this for 20-30 years, Beth asked them how many women have they lent to in their entire careers, they said between 1 and 3 women. That's an average of one woman per decade. To my audience of 35% women, let’s increase these numbers, I understand it’s scary, but once you start investing, you will see the light at the end of the tunnel.
Hiring and compensation
One of the guys that was interviewed in the conference gives his employees a promote after they go through a few acquisitions. Simply put, a promote is an incentive to the sponsor, after the property returns a promised percentage to the investors, let’s say 10%, the sponsor earns a higher percentage. Part of this promote goes to the employees as well, it gives them an incentive to get really great properties and make sure they perform really well. Employees also have a path to partnership at his company.
When you want to do a development deal, JV (joint venture) with a developer who knows everything about that asset class.
Beth’s #1 acquisition strategy: 100% leased centers (rents are too low).
Never vacate old tenants before new leases are signed.
Watch out if a business is being sold to an EB5 person who is just buying to get a visa. If that happens, they will likely not run it properly and will close the business after they get the visa. So you need to start thinking of who may take over that space.
When you paint a retail center, calls from leasing brokers go up 20%, every time!
When your tenants call asking for something, give it to them, but ask for something in return (like a waiver).
For retail signage, have white letters on dark backgrounds, it jumps out in retail.
Metro PCS is known for not paying rent.
NO is a complete sentence. (I love this one)
On the second day of the conference we got on a bus and went to a few of her shopping centers, she talked about all the details of each deal, all the things she went through, lessons learned, etc. No deal is ever smooth, there are always things happening and things you have to deal with. Beth will be back to discuss some of these deals in detail.
Join the conference next year here.