165 Rates vs Banks | Passive Accredited Investor Show

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165 Rates vs Banks | Passive Accredited Investor Show

In today’s episode of Passive Accredited Investor Show, Randy Lawrence, The Co-founder of Prosperity Capital Partners joins Bill & Wendy.

Randy Lawrence is known as a veteran real estate investor with decades of experience with single- and multi-family properties as well as a transformational community leader and church founder.

After receiving a degree in Finance with a minor in Economics, Randy began his career as a traditional wealth manager. He understands finance and investing strategies in the broadest sense.

Randy previously held Series 7 and 65 licenses from the National Association of Securities Dealers as a Securities Dealer and Registered Investment Advisor. He also worked in the Money Management sector for fifteen years and owned his own company which he sold in 2006.

Ultimately Randy determined that real estate was the ideal investment vehicle for his own portfolio, and early on (over sixteen years ago), he began partnering with other investors, to their mutual benefit.

Today, Randy oversees a real estate portfolio of $160MM in multi-family assets and is on track to double these holdings in the next three years.

His managing Partner Sara Jo Lawrence is a graduate of the University of South Florida, and she, along with Randy, currently oversees the Prosperity Capital Partners operation.

Timestamps:

0:01 – Introduction

1:41 – https://www.CarolinaHardMoney.com

1:57 – Wednesday with Wendy: https://calendly.com/wendysweet/wednesdays-with-wendy

3:34 – Today’s guest: Randy Lawrence

5:45 – Randy Lawrence talks about how 2008 affected his business and how he gets through it.

9:14 – You need to be more strategic in what you are doing

11:39 – There are multiple exit strategies available in the market

17:30 – Randy Lawrence talks about how is he able to find good apartment deals

21:46 – Long-Term exit strategies

25:43 – Adding value and relationships are important key factors when doing business

28:05 – Over the next decade rental housing is going to be the best investment you could make

28:54 – What CAP are you seeing out there?

31:05 – Classes of the properties and their CAP rate

36:15 – Connect with Randy Lawrence: https://www.PCPRE.net

Carolina Capital is a hard money lender serving the needs of the “Real Estate Investor” and the “Small Builder” borrower who is striving to build wealth and generate income for themselves and their families. We offer “hard money rehab loans” and “Ground-up Construction Loans” for investors only in NC, SC, GA, VA, and TN (some areas of FL, as well).

As part of our business practices, we also serve as consultants for investors guiding them to network with other investors and educating them in locating and structuring transactions. Rarely, if ever, will you find a hard money lender willing to invest in your success like Carolina Capital Management.

Listen to our Podcast: https://thealternativeinvestor.libsyn.com/

Visit our website: https://carolinahardmoney.com

YouTube Channel: https://www.youtube.com/channel/UCYzCFOvEt2n9TchgECLwpww/

Facebook: https://www.facebook.com/CarolinaHardMoney/

Bill Fairman (00:02):

Oh, we’re live. Sorry. I’m trying to make sure that I’m staying behind this table enough, so you don’t see my love handle over here. So welcome. It’s the Bill and windy show again. Jonathan is on the road, but he will be back next week. Our theme is the state of the union, basically the state of the real estate market. Right now, we’re going to get a little bit more into multifamily. Some funds, funds as an F U N D, funds. We might touch on some more short term rental but this is mostly going to be about buying old multifamily, single family portfolio and stuff and what’s happening in the market right now. Uh, but we’ll bring you some more detail right after this.

Bill Fairman (01:13):

Wendy is reminding me that my tease should be a tease and not a speech.

Wendy Sweet (01:20):

I’d love to be the guy who comes up with all those graphics. That’s kind of cool.

Bill Fairman (01:23):

Yeah. It’s a nice job to have if you can get it. So thanks for joining us on the Passive Accredited Investor Show. We are Carolina Capital Management. We are lenders in the Southeast of real estate investors. If you’re interested in borrowing money and you’re a real estate investor, go to the CarolinaHardMoney.com click on the apply tab. If you’re a passive investor looking for passive returns, click on the accredited investor tab, don’t forget to like share subscribe, hit the bell. And most importantly, sign up for Wednesdays with Wendy As many of you know, Wendy devotes, 30 minutes of her time to each individual. And she does it via zoom or face time or telephones, if you don’t want to be seen.

Wendy Sweet (02:28):

I think yesterday I had someone on that was a complete and total counseling session that turned out really good. It was fun. We do everything. We talk about everything,

Bill Fairman (02:41):

But if you really want to get value out of the session, make it about real estate. She’ll be happy to talk to you about anything you want, make it a better regimen. Oh yeah, by the way, questions, comments. Thank you. We do have the chat section to the right hand side of the screen or underneath. If you have any questions or comments, we’ll be happy to answer them in real time. If not, then we may or may not have somebody that will read after the fact

Wendy Sweet (03:13):

We’re working on that. We working on that through our EOS meeting. We had our quarterly meeting just a day before yesterday. And we’re going to get better.

Bill Fairman (03:24):

Yes. I’m supposed to answer this question.

Wendy Sweet (03:26):

Oh, I didn’t even know that came in.

Bill Fairman (03:27):

Maybe people that might know the answer that would be helpful. So one of the things that we are very fortunate in having is a great group of mentors, friends in the business. One of our favorite friends is Randy Lawrence. And you guys have seen him before. He’s been a guest on our show previously. I like to call him Reverend Lawrence because he can certainly preach the word as well. Right. Randy, thank you so much for coming on.

Randy Lawrence (04:00):

Awesome. Well, I appreciate the introduction and great to be back here again together with you guys. You guys have an awesome not only business, but showing, give back to the community. So love being a part of it for sure.

Wendy Sweet (04:13):

Thank you

Bill Fairman (04:14):

Well, we appreciate you coming on. Randy, and I’ll let you touch on this to remind people of where you are in the business, where you started, but you started off doing some single family fix and flip, and then you’ve grown into a pretty large portfolio multifamily operator, right?

Randy Lawrence (04:35):

Yeah, for sure. So we started off 18 years ago. 03′ with a actually small apartment complex was our first buy. And then we did a few small complex is, you know, seven, 10, that kind of thing, 15 unit, excuse me, but then really got focused in Florida, white hot market in 04′. You know, the house flipping thing was like, you know, just going through the roof. And so we started, there was more money in that in an immediate kind of bang for the buck. And so we started just really focusing on that and scaling in that, of course with the oh eight crash that really set back a lot of people, including us but continued on in that journey really through that time. And you know, probably about 1516 started really focusing back on large scale multi-family. So we flipped probably about a thousand houses over the last 18 years. And then now as a multi-family owner operator, we have about $250 million in assets that we own and manage. And that’s right about 2300 plus give or take rental units comprised of that portfolio.

Wendy Sweet (05:42):

Wow. That’s, that’s incredible. You know, you mentioned something that really kind of falls into what we were talking about earlier and that’s, you know, a correction we talk about what’s going to happen. Things tend to be cooling off a little bit and you brought up that, you know, 08′ set you back just like everybody else. What, how is it that it set you back? And what I’m trying to do is to let people know that you don’t need to have fear with the change in the market. So, so like what’s the worst thing that happened and how’d you come through it?

Randy Lawrence (06:15):

Yeah. So I think, you know, one of the things I, you know, it was definitely a painful time that I had to work through a lot of things, but one of the greatest teachers or lessons that came through that kind of baptism of fire was to be much more strategic, you know, because one of the things that I saw as we went through that time period is that the truth is our buy and hold properties are our apartment communities and our single family rentals. They lacked really a quality strategy in terms of like, you know, in Florida, you just get what you get and don’t throw a fit at that time. Right? Cause it’s like, you know, the market’s so hot. And so where we would buy an apartment complex in a D area because it was a deal. Right? And you know, like what happened in that area?

Randy Lawrence (07:04):

And again, I mean, D area by like, you know, there’s hookers walking down US 19 and you know, it’s like, you know, it’s definitely a gentrifying area, right? Like, no, it was like, you know, it was a deal, right? And so again, we fixed it up, made it better, but like when that collapse happened, good Lord rents went from like 550 to 275. They’re like in a matter of months, you know, there was other factors that happened. Like all these neighborhoods went vacant on foreclosure and so people could move up into better housing stock. But the thing that I learned is that, you know, we didn’t really have enough quality mitigation in our strategy when we’re buying those things before. And so that forced us to have to work through that, which we were able to successfully do. And, you know, none of our investors in our private investors over 18 years, never lost capital, always made a double digit return.

Randy Lawrence (08:02):

I mean, I got my face punched in for sure, but it was very difficult to have to work through that year, over year, over year to get where, you know, we could, and thankfully with cash flow, you can work through things and then be able to exit in better times. And so, you know, but I think what you said is a very paramount thing. You don’t need to fear the uncertainty of the future or the possibility or inevitability of a market downturn or slowdown. You just need to be prepared for it and have that to be thoughtful in your execution. You know, I think a lot of times people just probably running gun and they may not be thinking and, or developing things with a strategy in place that factors in those risks.

Wendy Sweet (08:53):

Right. Especially with people who around in 2008.

Randy Lawrence (08:59):

Yeah. Every corner just goes up.

Wendy Sweet (09:00):

I remember the sting and every deal that I do. I remember the sting. You gotta have that in the back of your mind. And I love what you said. You need to be more strategic in what you’re doing.

Randy Lawrence (09:15):

I mean, as an example of that hope not too long, but like we looked at a community in one of our main areas in Atlanta, great potential deal, but it’s in a little col-de-sac community and there’s, you know, one property there, one property there. And then the subject property there and the two other properties were run by crappy landlords, not real good, you know, had this quality people live in there. This property had potential, but it also suffered during the previous downturn. And then now when you look at that, you’ve got two other crappy landlords right here that are going to have not good people in it. And then now you go into a downturn, you’ve got sub quality people living right there is going to drag you down from your performance. So even though it looked good on paper, we knew all those little nuances in details. We said, we’ll pass on that deal. And that’s a thing that, you know, people sometimes don’t know because they don’t have the strategic element. They haven’t been through the pain. Then they don’t know actually the market itself to be able to have those nuances. They just think, oh, it’s a great deal. And let’s do it. You know, whether it’s a house or, you know, a multi-family property too.

Wendy Sweet (10:29):

Right. Well said, well said,

Bill Fairman (10:31):

Yeah. When we look at a deal from, from a lending perspective too, we went through that too. We were initially going after the, the high dollar properties.

Wendy Sweet (10:41):

Very high dollar.

Bill Fairman (10:43):

And because let’s face it, you’re getting the same money on less work when it comes to lending. But your exit strategies are fewer and farther between if it doesn’t work out plan A then plan B and C is not a good alternative. And that’s why we focused in on the income producing properties and the affordable housing on the single family stuff. Because we know that worst case scenario, if we ended up owning all these properties, we can still get what our expected return with me on alone in rents until the markets come back up. And we know, we always know that they will come back up. If we own them, it’s because everyone’s a seller and no one’s a buyer then you know, certainly we still make an income on them until then.

Randy Lawrence (11:40):

Well, and that’s, you know, that’s a really important thing. A lot of people don’t look at that to have multiple exit strategies. You know what I mean? Where you’re looking at that very thing where you, okay, Hey, I can make the loan. It’s all good. But if I needed to, I can operate it and rent it and it’s still all good. You know, and that’s something like, even in our single family business, you know, probably in 2015, we shifted gears to focus exclusively on, you know, this market at the time was like sub 250 houses. Now it’s probably ticked up to, you know, 350 kind of thing as retail value, but that’s all single family kind of first time, home buyer, affordable homes for this market where I’m at in Florida. And you know, so kind of going back to that point, you said, Wendy, about fear, good Lord!

Randy Lawrence (12:24):

We’ve been buying those houses for six years. Right now, we did it in 15. I just sold a couple of million dollar homes back then. And I’m like, look, I don’t want to go through all that crap. It’s, you know, it’s a much easier to focus on just these cookie cutter 322, 122, you know, little simple houses. And we fix them up and sell them if you needed to, you could rent them. And so we were able to buy hundreds and hundreds of houses during a time where a lot of people were thinking, just like we were, Hey, there’s going to be a downturn at some point. And we want to be prepared for that. And I don’t think any of us, of course knew it was COVID. But you know, in the other piece of that is we were stockpiling cash for liquidity during that same period of time.

Randy Lawrence (13:07):

So that when actually the downturn hit and COVID hit, we had great financial liquidity. We were able to tell all of our employees, Hey man, you, don’t got to worry about your security, your job, but you better be kicking right now. Right? Because this is the time that we’ve because in our L10 meetings, we would talk about these preparations and condition our team to be thinking that way and improving systems, improving strategy. And then when the kind of the duty hit the fan and it’s like, oh my God, the world’s falling off the cliff. It’s like, that was one of the first meetings I was in California. I came back, we had our team meeting. I said, you guys don’t have to worry. People are being laid off left and right. But what I’m telling you now, because I knew we stopped buying, we stopped buying apartments. And just, we got to see where the world ends, lands, not ends praise the Lord. I said look, whatever, call it. 30% of our focus is on acquisitions. We’re not doing that now. So that focus is on better execution. And so you better step up. And, you know, we really held people’s feet to the fire, but it was a, you know, a great, great learning experience too, uh, for many of our team members, because those people hadn’t been through what we’d been through.

Bill Fairman (14:23):

Well, at the same time, this gave you an opportunity to be more commute in the, how do you say it communicated community. You were able to communicate more with your current tenants, you know, you had those, rent moratoriums or eviction moratoriums in place and you guys came out of it really well because you were up front and communicating.

Randy Lawrence (14:51):

Yeah. Literally. I was in, we were in Tahoe for a month in March is what our family plan was. And then that thing all fallen apart. So I think we jumped ship like around the 21st or something. My wife’s like, if we don’t leave, we’ll never get out of here. You know? So we flew came home, but that’s exactly what I did. As soon as I got back, our first meeting, we huddled all of our regional managers, all of our property managers, all of our property management company partners on a huddle call and really kind of broke down. We went into this like kind of coaching mode and exactly what you just said, Bill. We had all of our properties had like at the ready texts with the unemployment office, for that state, the local list of charities that would provide, you know, food help and whether it’s the Baptist union or the, you know, whatever red cross or, you know, whoever was providing help. We had that listed. And then we actually did weekly coaching calls with our, you know, on-sites to provide that kind of input to the tenants. And so we really did have a better result where, you know, even though maybe somebody got laid off from their job, as many, many did, there was at least communication in a willingness to work together. And that helped where, you know, we just didn’t have giant onslaughts of rent, strike kind of thing. You know, it’s like, you know, and also most of our people, it goes to operations, we’ve done a good job to screen the people. Now, sometimes we just bought a property. So you inherited some bad seed, but most of our people we’ve screened them. And they’re just decent working people that want to provide a roof for their family. And, you know, yeah. They got laid off from the, you know, manufacturing plant and we tried to work with them, help them file for unemployment benefits or help them connect with the charity for food assistance.

Randy Lawrence (16:37):

And, you know, so that engendered a lot of respect. And I think if you treat people like a human being that helps in that, you know, dialogue, and it helps you get the result, you know, so definitely not an easy time though. I mean, you know, just, I don’t think it’s easy for anybody. We had to go through a lot of kind of ups and downs in government garbage and just all that stuff.

Bill Fairman (17:00):

Yeah, we did as well. But I tell you when he came out a much more efficient business on the other end of it. Again, we have mentors, friends, we were prepared. We had a blueprint for just in case, and I didn’t think it would be put into action that soon, but

Wendy Sweet (17:18):

I had a blueprint put in place, literally less than 45 days prior to this happening. So when it happened, we knew exactly what we needed to do and it worked out, worked out really great. So having said all that and, you know, with real estate just booming, like it has been, how is it that you’re able to still find so many good apartment deals, deals they’re not good buys for deals

Randy Lawrence (17:47):

For sure. Well, and again, I think, you know, we’ve done the work a lot of times people are not willing to do. And what I mean by that is developing the relationships with the key parties that are the real people that are transacting the business. And so, you know what I mean by that is, you know, our size apartment communities call it five to $50 million. 90% of those I’d even probably say 95% of those are going to trade majority through brokerage firms just because they’re not mom and pop sellers. And so we’ve developed those relationships with the guys that are the top three firms in any market we operate in and they know us to be a proven executer, right? So that’s one thing. And then two, another piece of it is we’ve done the work or the groundwork. A lot of times, even with those relationships, like, you know, we’re entering into the Tampa market here, we’ve looked at this market and we’re making our first purchase right now.

Randy Lawrence (18:44):

But in the process of doing that, we kind of eat some crap sandwiches, right? Like you’ve got to, you know, do some difficult things, underwrite, a bunch of turds that, you know, are turds beforehand, but you’ve gotta be able to do that, to be able to explain why back in the relationship, Hey, you know, this numbers don’t work and this doesn’t work and this doesn’t work so that the people understand that. And then, you know, thankfully for us, the transaction volume we’ve done. And then also the size of the company, we are, you know, we are a highly recommended visible operator. And so that opens it up. So when we have those off-market opportunities like this deal we’re doing in Tampa, it was an off-market property and so we were able to kind of bring it together. It was actually two sellers and bring it together and execute on it to create a great deal.

Randy Lawrence (19:33):

And so, you know, the truth is, and I tell this to other people, it’s like, there’s certain people in certain markets, like they’re never even going to see that property. What they’re going to see on a, you know, LoopNet is just a piece of crap that nobody wanted. And because in that space, it’s being transacted in that manner. And so, you know, we put in the difficult work to get those relationships. Another example would be where you got some guy that’s kind of like a dirt bag. He kind of retrains the broker on his commission, you know, which that’s like, that’s dude live up to your word for God’s sakes. That’s like SPS and your no, be no kind of a little ancient throwdown from the scripture. But like, so we’ve come in and say like, dude, look, Hey, that’s wrong you did a ton of work on this thing. Put that 25 grand on my side. Now, most people wouldn’t do that. They’re like, are you freaking kidding me? Those $25,000 dude on the $12 million approaches? That’s 25 grand. Yes, that’s 25 grand out of my pocket, but it also was the right thing to do. I didn’t have to do it, but it demonstrates the level of character integrity we operate by. And that’s where that guy knows, Hey, man, I got this great deal that John’s wanting to sell. Who am I going to bring it to the guy that’s a scumbag or the guy that’s integrous like Randy, that closes and lives up to his promise. So I think people look for the secret bullet to success and it’s like, it’s doing the right thing over a long period of time. You know what I mean, day in, day out doing it, even when it feels like crap and you don’t want to do it. You do it anyway. You know,

Wendy Sweet (21:18):

That’s one of our core values. Do the right thing even when only God’s watching.

Bill Fairman (21:23):

Yeah. It’s hard to be relational when your mindset is transactional. That really, it shows up. And you’re constantly having to look for new people. If you’re a transactional person, if you’re relational, you’re just concentrating on those relationships and the business will come. Right. I want to get it getting kind of close on time. I wanted to get into the longer term exit strategies that you have, and I don’t mean necessarily exit, but long-term strategies. you do a lot of value add or mostly value added. Let’s look at the conventional financing once you’ve got these things stabilized and ready to go in your final financing, are you seeing any changes in financing right now? I know rates are really low and they have been for awhile pull back on the LTVs or anything like that?

Randy Lawrence (22:26):

On the large scale multi-family side at this point in time, it’s still, you know, kind of really a big hunger and a big appetite for the loans. And so, you know, we’re still seeing very strong, uh, you know, 80%, loan to value, or even an acquisition loan to cost. Again, now there are debt service, coverage constraints, you know, in terms of that but you know, three and a half to four and a quarter rates, you know, depending on what the situation is of the property.

Wendy Sweet (22:59):

That’s free money.

Randy Lawrence (22:59):

For sure. I mean like good Lord, if you can get, like, I mean, we’re doing a deal, I think it’s tracking it 365 right now, good Lord, that’s, you know, a nudge above historic inflation, right? Like that’s free money, realistically. And you know, so for us, we are definitely about executing the value add plan.

Randy Lawrence (23:19):

And, you know, like yesterday when I was at the due diligence at the property, like value add to me is like, how can I create a better quality of life for the people that live there? And because by doing that, it’s going to create greater value for us. And so, like, we’re at one it’s a multi-site location about one mile apart and one location, it’s an entire city block, things like 14 buildings, 33 units, real nice, but there was majority one bedrooms and like out of the, whatever, it was, I think 30 of them didn’t have washer dryer. Somebody identified an area there where we could build on for about $24,000-ish, a washer dryer facility there. Right? So that’s the kind of thing that creates real value, not just also renovating the units and making them nicer, but then creating better amenities and better livability there.

Randy Lawrence (24:10):

And, you know, by doing that, we’ve increased the value. Now we’ve got more to work with if we wanted to refinance and keep the property for a longer term on the cashflow, which can be an option that we execute or, and or if we’re then selling it, it’s like you’ve got a built-in increase of value because of the real work you’ve done. And you know, again, I go back to the doing the right thing over a long period of time. It’s like that execution of a plan for us usually takes, you know, 12 to 18 to 24 months, depending on, you know, renovating units on the turn. We do a lot of that, you know, the laundry room outside stuff all on the first, you know, three to six months, but, you know, that’s the biggest part is like, are you really adding value and improving the community?

Randy Lawrence (24:57):

Cause then now you’ve got multiple exit. Even if rates move up or even cap rates go up, I doubt that happens in the near term, but you’ve got such an increase of value that you can easily still refinance out pay out your existing debt, pay out your existing equity capital, and still operate on a cashflow basis. So and again goes back to bill what you said about multiple exits, right? Like that’s, we look at that, like we could sell the property or we can refinance strategy part if rates go up, but we’ve increased the value by this much. We can still refinance and, you know, so we’re very much so able to sleep very good at night because we’ve got the basis covered.

Wendy Sweet (25:41):

That’s awesome.

Bill Fairman (25:43):

Touch on adding value and relationships really count. Um, that’s the way to do business. I don’t understand why more people don’t do business that way. And getting back to the, the financing piece, you know, there FH FHA, I can’t even say it. They’re cutting back the fannie freddie portfolio sizes for second homes and investment properties. I know they’re doing that because the government that doesn’t want to hold these smaller things and a lot of the hedge funds are getting in there and buying up most of the rental properties now anyway, but what it’s done is it’s added an opportunity for those big funds. If they can’t buy the property, they’ll just finance it for somebody else.

Randy Lawrence (26:41):

Yeah. You’re starting to see this kind of the woke thing going on. Of course, in every aspect of everywhere. And they’re, you know, they’re going to start mandating even more things like they did before, but even, probably even more so about you know, providing equality in housing through, you know, how they’re going to structure affordability to back loans and, you know, so no doubt there, you know, paring down in one spot to then push in this other spot you know, and, and, you know, pre crash, there was some things where again, they loosen the credit requirements for people to get, you know, it’s like, we want home ownership for everybody. So the truth of the matter is not everybody’s ready for a home, right? Like it’s like, you’ve got to have financial stability to be able to take care of, you know, not only just your mortgage payments, but like, Hey, you got to fix stuff.

Randy Lawrence (27:32):

And, you know, and so I think that’s part of also what’s going on, on some of the single family pullback side with the agencies, you know, and more of the larger scale stuff, you know, so capital driven that, and again, you’ve got so much money coming into the multi-family and rental and single family rental space. I mean, there is hedge fund after hedge fund coming into the tune. I mean, I just saw, I think it was, Tricon just did $5 billion agreement where, I mean, they’re expanding their ability to buy up to $5 billion with a new equity partnership. They just made, I mean, rental housing in, and I, this goes back to our investment thesis over the next decade. And I would even say that it’s two decades, that rental housing is going to be one of the best investments that you could make both multifamily and single family, because you’ve got an ever-growing demographic of renters in job people 30 to $70,000 a year jobs in this country. Those people are by definition, majority renters call it 80% based on their income and expenses. Those people absolutely have to have a place to live in rent. And, you know, there’s roughly anywhere from five to $6 million shortage or units, rather a shortage of quality affordable housing that it’ll take them a decade just to build, to try to catch up on that based on population growth.

Wendy Sweet (28:54):

Right. We got a question from Rick Bresler, he’s asking Randy, what CAP are you seeing out there?

Randy Lawrence (29:01):

And that does great question. It varies from market to market, you know, like, so Atlanta could be four to five, depending on the asset class. Dallas, you know, three and a half to four and a half. Areas here in Florida, three and a half to five. Now again, for us personally now, again, like I.

Wendy Sweet (29:25):

No, I get that.

Randy Lawrence (29:29):

Buying a property, that’s a, you know, okay, we’re projecting a three cap over the next three years. Like that doesn’t work. Now, that being said now again, also you got to know what you’re doing too. Like, so we may buy a property that is a low cap rate going in just because the value’s not been released because it’s Montauk cattle that have, you know, they haven’t drawn the rents, they’re getting 800 rents in market’s really 1,050. It’s like, so we’re still paying a number that’s under market value for the property. But relative to its current income, it’s not at a great return, but in the next 12 months, based off our execution, it will be, you know, right. And you know, every market’s different too, you know? And then also each asset class, A, B, C, we don’t really do D properties. Just like, again, going back to the story in the beginning,

Wendy Sweet (30:24):

The hookers on them.

Randy Lawrence (30:24):

Not exactly.

Randy Lawrence (30:28):

I, you know, if I go to a property and it’s uncomfortable, it’s not our thing, you know what I mean? It’s like, I need to be comfortable. And like in again, I’ve been in some rough areas over my years, but it’s like, you know, you want to have a place that people, I posted a video on Facebook about one of our manager team members, like a place that people can be proud to be their home, right. That they call in. And they’re like, yeah, this is nice. I like living here or be proud to have family members over and make dinner, you know? And so that’s, you know, we look for a good areas cause then you’re going to get better people.

Wendy Sweet (31:02):

Right.

Bill Fairman (31:03):

Well, I mean, if you, if you look at the classes of the properties too, I wanted to touch back on that. Typically, you know, a class eight type property is going to have a much lower cap rate. There’s frankly there’s less work. I always liked the figure in the return on investment or on effort into this. So your, your class A are going to be much nicer properties, fairly new, the people that are moving in there and have money, they’re higher on the income scale, get down into the C properties. You’re going to have higher cap rates, but there’s going to be more effort involved. So it all boils down to, you know, if it’s owned by a REIT, it’s probably going to have a pretty low cap rate.

Randy Lawrence (31:47):

Yeah. Well, that’s, yeah. That’s the thing like in this market here in the Tampa MSA, where we’re located, there’s a lot of, excuse me, REITs and funds of that nature, that exactly, that they’re willing to take a lower return based on the area, based on, you know, the thought process of appreciation and based on their ability to take that low return. So even to where they’d buy a B property at a, you know, 3,7, 5, 4 cap, and, you know, maybe they yield out at 6%. And so that’s like a decent little real estate bond for them. You know what I mean?

Wendy Sweet (32:20):

And banks are willing to do that low of a CAP rate

Randy Lawrence (32:23):

Yeah. Yeah. It’s you know, I think it goes back to the reality is the truth is there’s no yield in the global world, right? And so that’s where you have more and more money coming into the U S more of that’s funding into alternative asset play, and then making its way into real estate. Because, you know, in most quality real estate ventures, you’re getting a higher yield return than what is maybe available. Like, so right now, junk bonds are 6%, 5, and 3 quarters that’s for crap. And it used to be like eight. Now it’s been suppressed down. So there’s people in their portfolios. They don’t even know it. It’s like a high yield fund. No, it’s all trash, but it’s like, you know, whatever company fund administrators on there, and, you know, you can do so much better risk adjusted in real estate. Even like, let’s say that that hedge fund, that’s getting that six and a half yield on that low cap property. It’s still backed by this tangible $50 million asset cashflow pumping in every right. That’s way better than some crappy junk bond at 6 75. And that’s why they’re doing it. You know what I mean? Plus there’s tax advantages too.

Bill Fairman (33:39):

Well, people are looking at the stock market and wondering what, how, when is this going to end? It just can’t keep going up, but let’s face it that the equity markets and, you know, in the exchanges are going to continue to do this. As long as interest rates stay so low, no one is going to spend 10 years on a bond. That’s gonna give them 1.3%.

Randy Lawrence (34:08):

Exactly.

Bill Fairman (34:09):

Then the only other alternative is real estate. And at least with real estate, you have a tangible, like you said, a tangible asset that is backing up the investment where in a company, it’s just a promise of a cashflow.

Randy Lawrence (34:25):

You know, and I look at like investing even with a company too, like yours, you look at the returns the investor gets, and then that fund is backed by real estate. It’s like whether it’s, you know, with, loans on fix and flips or rental or whatever, the it’s backed by real assets producing real results. And it’s a much lower risk adjusted return. I mean, it’s a much better risk adjusted return. It’s a lower volatility than what you experienced and that’s why I left the traditional money management business. I was a stockbroker and a registered investment advisor for 15 years, sold my company in 06′, started the private equity real estate, no three, because it’s just a better mouse trap. And I would venture to tell you that that’s the truth. And over this next decade, we’re going to see that with the real estate backed assets, there are no doubts going to be an economic correction in the stock market, as there always is. And for many people, you know, they feel all good about it now until your million dollars becomes six 50. And then they’re like, oh, crap. And like start breaking out in hives and like, you know,

Wendy Sweet (35:31):

Jump over rooftops

Randy Lawrence (35:32):

For sure. You know, it’s better to take the million now are going to diversify that portfolio and get it where you’re not subjected to that. And we see that a lot with people that invest with us because it’s like, good Lord, they’re 60. And like last year when their portfolio dropped 30% in March, they’re like, oh my God, I’ve got to do something different. Like, they know maybe retirement is only five years away. And like right now you’re not working. You don’t have any more money going in that thing.

Bill Fairman (36:06):

So Randy, if people want to find out more about investing in what it is that you’re doing, uh, how can they get ahold it?

Randy Lawrence (36:15):

Yeah. I just write to our website, PCPRE.net. That’s PCPRE.net. You have there on the screen and there’s a button there. You can just click on to find out more. Plus we’ve got, you know, testimonials of investors that have invested with us and projects that we own in terms of apartment communities and all like that. So love to answer anybody’s questions and, you know, provide value and help, you know, that’s what we’re here for really our mission, you know, it’s two fold. It’s really impacting the residents that live in our communities and creating a legacy and wealth for our investors.

Bill Fairman (36:51):

Awesome. And full disclosure while our fund is not invested in some of Randy’s projects, the management company is so,

Randy Lawrence (37:00):

No, and that’s, you know, and that’s a Testament, not only for you, you know, to us, but you guys too, and we’ve got multiple guys just like you that invest with us because everything we’re saying is true. It’s going to be the investment of the decade. That’s why, I mean, like if you read the wall street journal for a month, right? It’s like you see entity after entity, after entity moving into this space because it is just, it’s going to be the investment of the decade. There’s no doubt.

Bill Fairman (37:32):

That’s right. Absolutely. Randy, thank you so much for joining us. We’re sorry we kept your longer.

Randy Lawrence (37:38):

No, no, it’s always a pleasure. Always a pleasure. Love seeing you guys love what you do and love being a part of it.

Wendy Sweet (37:44):

Thank you. Thank you so much.

Bill Fairman (37:46):

Thank you so much. Folks, thank you so much for joining us on the Passive Accredited Investor Show. I always want to say passive aggressive. We are Carolina Capital Management. We’re where lenders for real estate investors in the Southeast. You’re interested in borrowing money, go to CarolinaHardMoney.com and click on the apply now tab, if you’re a passive investor, looking for passive returns, click on the accredited investor tab. Don’t forget to like share and subscribe, hit the bell, all that good stuff, and sign up for Wednesday with Wendy and gets over that free info from her. See you guys next week, enjoyed it.

Wendy Sweet (38:23):

Thanks so much.

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