All Forum Posts by: Charles Carillo

Rent control is a topic that is continually reported on throughout the mainstream media but many people don’t know what this actually means and who is actually harmed in the process. Charles discusses how rent control has adverse consequences when it is enacted in a municipality.

Talking Points:
➞ Rent control is a topic that is getting a lot of media attention and it is promoted in certain circles as a solution for affordable housing which is the exact opposite consequence of rent control.
➞ Most states have a statewide ban on rent control but some states do allow it.
➞ As I explain rent control and its consequences; I want to make it clear that we need to have more affordable housing in the US and I am very much in support of that; but rent control is not the correct path to affordable housing.
➞ Rent control limits the amount the landlord can raise rents on the tenant annually. (3%, or 5% etc.) which sounds great when you hear it but it does not work.
➞ Issues with rent control:
o If landlords cannot raise rents; they will not improve the property
o Investors will not invest in an area if their returns or capped; they will invest in another area thus reducing new rental units and new inventory on the market – if I can only earn for sample 6% developing apartments in a rent control area but 12% in a non-rent control area; I am going to choose the non-rent control area; which hurts the rent control area because there is less new housing inventory. Money flows where it is least restrictive.
o Investors will convert apartments to condos in order to avoid rent control laws; which reduces inventory and raises rents
o A cap on rent increases while the landlord’s other expenses increase every year (insurance, taxes, utilities, management) disincentives the landlord to spend money on their property.
o In a normal market, landlords want to keep their tenant and they do that by servicing them. In a rent control market, landlords want turnover. Incentivizes landlords to be slumlords.
o Converting apartments to Airbnb’s has never been easier; reduces housing inventory. I am going to change the use of that property if it becomes rent controlled.
➞ In San Francisco, pre-1995 all small multifamily properties were exempt from rent control but since 1995 only buildings built after 1980 were exempt. This made it an incentive for investors to convert apartments into condos or demolish the building and rebuild. Both instances; tenants lose.
➞ In Melbourne, Australia, not a single housing unit was built following World War II for nine years because rent control laws made it unprofitable.
➞ In the 1970s, Washington, DC, saw its rental housing stock decline from 199,000 to less than 176,000 because fewer people were willing to rent their homes because of price controls.
➞ In Santa Monica, California, in 1979, the number of building permits plummeted by 90 percent from just a few years earlier because—again—rent control laws made it unprofitable to construct new housing.
➞ More housing supply will help communities plagued with high rents; not less inventory.
➞ Don’t take my word on it; research it online and I highly suggest the book “Economics in One Lesson”

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@Ivan Fence

Before opening a US LLC or opening a bank account, I would speak to an accountant who works with foreign investors. You want to make sure that you are setup correctly; to avoid having to make changes in the future and to verify that your setup is the most tax efficient for your goals. DM me if you need any accountant or attorney recommendations (who work with foreign investors).

Here are my favorite books:

Multifamily Millions by Dave Lindahl

The ABCs of Real Estate Investing by Ken McElroy

The Complete Guide to Buying and Selling Apartment Buildings by Steve Berges

Commercial Real Estate Investing by Dolf De Roos

Trump: The Best Real Estate Advice I Ever Received by Donald Trump

Tax Free Wealth by Tom Wheelwright

Commercial Real Estate 101: How Small Investors Can Get Started and Make It Big by David Lindahl

Raising Private Capital: Building Your Real Estate Empire Using Other People’s Money by Matt Faircloth

The Definitive Guide to Apartment Marketing by Josh Grillo

Investing in Apartment Building by Matthew Martinez

Crushing It in Apartments and Commercial Real Estate by Brian H Murray

The 7 Secrets to Successful Apartment Leasing by Eric Cumley

2 Years to a Million in Real Estate by Matthew Martinez

Burn Zones: Playing Life’s Bad Hands by Jorge Newbery

Commercial Mortgages 101: Everything You Need to Know to Create a Winning Loan Request by Michael Reinhard

It’s a Whole New Business!: The how-to book of syndicated investment real estate by Gene Trowbridge

@Greg Cook

My wife and I setup our trusts and LLCs with our asset protection attorney a couple years ago. DM me and I can explain what we did.

We have to agree that the road to financial freedom is not easily traveled. Real estate investing is one promising path to follow but with its share of ups and downs.

In this episode, we talk to Bronson Hill, who has over ten years of experience in real estate investing. He began with single family homes and has since successfully transitioned into apartment buildings. With a company that controls more than 800 units and over $60 million of real estate, he is undoubtedly the right man to share his experiences in real estate investing.

The amount of work that goes into real estate investment comes down to money and, most importantly, time. As our guest reveals, we often undervalue our time, and at times we get lost in the effort that goes into investing, consequently leaving the time spent unaccounted for. Ironically, real estate investors are expected to be patient and open-minded. Still, instead of just having it as a side hustle, it can indeed blossom into a full-time job- as long as you are willing to be involved at every level of detail.

Our guest emphasizes the importance of building a network more than anything else and being in an era where information is handed to you on a silver plate, from conferences to podcasts, etc. The main challenge is having the right partners on board. Additionally, we explore the benefits that come with managing larger types of assets, as in this case, moving from single-family to multi-family. It is a safer space to be in and a well scalable business model. Following that trajectory of smaller to larger is not easy; almost impossible to accomplish single-handedly, and that’s where partnering with others is a blessing. In a nutshell, be prepared to get an accurate picture of how things go down, the success stories, and the disappointments in between, but ultimately find success; all these tips from a man who did it and raised over $15 million from passive investors.

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@Aaron Antis

I would feel more comfortable if they invested some money as well. Is it possible to just do it yourself; purchase the property in your LLC, pay for construction and just hire them to build it? Provide some bonus once it sells? Maybe offer a percentage of your profits to them? If they disappear, it will be easier/cleaner to find a new builder instead of having a partner that won't show up again until the property sells and they are looking for their share.

@Philip Hernandez

Yes, start with a LOI. Make sure that it is known that the "clock" does not start ticking on the due diligence period until you have all of the documents.

@Justin Barnes

Most will require $500k-$1m; maybe look into a Qualified Opportunity Fund.

@Stephen Scire

You can structure it anyway you want. Ask the seller what he wants. With seller financing there are really 3 main points: interest rate/term, down payment and price. What is his pain point? If you speak to them long enough, they will let you know what is most important. Make that point most desirable and conform the other 2 points to make it work for you. If price is most important, I would lower down payment, interest rate and always start with a long term.

For example, he wants X amount for the property and that is what he keeps saying. Tell him in that scenario; you will pay him X, you will give him Y down, with an interest rate of Z (interest only) and a term of 10-15 years. When your lawyer drafts the mortgage, make sure there is no prepayment penalty.  

@Joe Kamenar

In your business plan you will budget for refinancing the property (if you plan on keeping it). Interest rates are rising so make sure to factor that in as well.