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9/21/2017

Project complete! 1711 Washington Street, Hollywood, FL

We just finished a straightforward cosmetic rehab on this 5-unit building in Hollywood. The building is conveniently located on the east side of US-1, in a quiet residential neighborhood walking distance from downtown Hollywood. The five units include a studio, three 1 BRs, and a 2 BR.

Here are a few pre-renovation photos:

For the renovation, we installed laminate wood floors, new vanities in the bathrooms, and new kitchens with stainless appliances. We re-glazed the existing shower/tub combos and added the interior finishing touches with new light fixtures, new fans, and a fresh coat of paint (grey with white base boards). For noise reduction and protection against the elements (I’m looking at you, Hurricane Irma!) the building features impact windows throughout.

Post-renovation photos:

Outside, we repainted the exterior pale yellow with white trim. We also repainted the concrete walkways. We rounded out the exterior renovation with some simple landscaping. The mature plants and open yard on the east side of the building really add to the curb appeal of this building!

Exterior rehab photos:

These apartments are on the market now and sure to rent fast! Check out our leasing page for more information.

9/7/2017

Real estate as a hedge against inflation

Investors should always be thinking about how to protect their money and wealth from inflation, and that’s one reason a lot of investors love investing in real estate. Simply put, real assets tend to act as a hedge against inflation.

Suppose you had $7,000 in 1980, and that money would buy you a new car. A comparable car by today’s standards might cost $28,000. Now pretend that, instead of buying a car in 1980, you stashed the $7,000 under your mattress. You pull the money out today, take it to the car dealership, and find that you’re $21,000 short of being able to buy a new car. In other words, the same money that would buy you a new car in 1980 will only buy you a quarter of a car today.

"Inflation eats away at purchasing power when wealth is kept in real dollars (i.e. paper money)...In the long run, real estate will keep up with inflation. Cash will not."

The foregoing illustrates how inflation eats away at purchasing power when wealth is kept in real dollars (i.e. paper money). But when you buy a hard asset like real estate, the asset has intrinsic value. A single family home puts a roof over someone’s head, and it provides cash flow for investors. Here’s another – perhaps counterintuitive – way to look at it: when you buy real estate, you’re not spending money. You’re just transferring money from one type of asset (cash) to another type of asset (real estate). In the long run, real estate will keep up with inflation. Cash will not.

Inflation also works in your favor when you borrow money. If you borrowed $100,000 today on a 30 year conventional mortgage, the dollars you use to repay the loan in later years are going to be far less valuable than they are today. In other words, think about that very last dollar you’ll pay off 30 years from now. Today that dollar might buy you a can of Coke. 30 years from now, it won’t. So you get to repay today’s loan with future dollars that are far less valuable.

In conclusion, buying a hard asset and taking out debt against it is a tremendously powerful tool for growing wealth over time and protecting it from inflation.

8/25/2017

Now Leasing! Spacious and newly renovated apartments with 1930s historic charm!

702 S 17th Ave is Hollywood’s hottest new boutique rental community! Located less than two miles from the beach and walking distance to Young Circle, Hollywood Beach Golf Resort, Publix, Starbucks, and Hollywood’s best restaurants and nightlife, our new community is perfect for living, working, and playing in the South Florida sun!

Unit Features:

Stackable in-unit washers and dryers
New laminate wood floors
New kitchens with granite countertops and white wood shaker style cabinets
New bathrooms with shower/tub combos, new vanities, and modern tile floors and walls
Central air conditioning
Spacious 800-850 square foot floor plans with enclosed Florida rooms
Hurricane impact windows throughout
10 foot loft-style ceilings

Building Features:

New plumbing
Updated electrical systems
New roof
Secure building with brand new hurricane impact entranceway

Neighborhood Features:

Great location east of US-1
Residential area filled with beautiful single family homes
Walking distance to many conveniences, food, nightlife, parks, and the beach

Available Units:

4 corner units (2 bottom, 2 top) - $1500/month each
4 central units (2 bottom, 2 top) - $1450/month each

This community is professionally managed by Mayfair Property Management. We offer conveniences like quick and easy online applications, online rental payments and maintenance requests, 24-hour urgent maintenance resolution, and weekend and evening move-in options.

What are you waiting for? Contact our leasing department today to schedule a tour!

8/16/2017

Real Estate Investment Options (Part 3 of 3): Co-Investing (AKA Syndication)

In earlier posts we discussed direct ownership of real estate and private lending investment options. In the third and final installment of our series, we’ll be explaining a real estate investment option known as co-investing or syndication.

In a co-investment, a group of investors pool together money and resources to do a deal together. The person or entity who finds the deal, raises the capital, and implements the business plan is known as the sponsor or promoter. The sponsor controls the deal and typically invests alongside the investors, which shows investors the sponsor is confident enough in the project to put his own money on the line. Syndications are usually structured as a limited liability company (LLC) with the sponsor as the managing member (the member who actively controls the LLC, and hence the investment project) and the individual investors as non-managing (passive) members. We are simplifying for illustrative purposes, as there are an almost unlimited variety of ways to structure syndications, much too complex a topic for this blog post.

Advantages of Co-Investing

Direct Ownership. Co-investing offers many of the same advantages of direct real estate ownership: attractive yields, cash flow, tax shelter, hedge against inflation, and ability to drive value through improved operations.

Upside. Investors have the opportunity to share in the profits of any “upside” of the investment but remain almost entirely passive.

Larger Projects. With multiple participants and more funding, investors have the opportunity to invest in much larger projects than they could undertake alone.

Passive. Co-investing is a great option for passive investors who want to invest in real estate but have insufficient knowledge and time.

Diversification. Experienced real estate investors benefit from being able to participate in projects outside their usual investment niche (e.g. a multi-family investor who wants to participate in a retail development project). Anyone participating in group investments has the opportunity to diversify across multiple real estate markets and with multiple operators/promoters, therefore decreasing risk. This is much harder to do through direct ownership.

"Anyone participating in group investments has the opportunity to diversify across multiple real estate markets and with multiple operators/promoters, therefore decreasing risk. This is much harder to do through direct ownership."

Options. Different syndications are structured differently, giving investors options. Some syndications are set up for development deals. There may be no cash flow up front, but the investors see a large return upon project completion. In a multi-family syndication, investors receive cash flow from rent payments and get their investment back when the property is sold or refinanced.

Leverage Sponsor Experience and Team. Participants benefit from the experience of the sponsor, and the team he or she has assembled. Successful real estate operators spend years and frequently large amounts of their own capital to build a successful track record and team. By investing passively with a proven sponsor, you can save time, aggravation, and costly mistakes, and learn a lot along the way too.

We discussed the importance of due diligence in our post on private lending. The same holds true for co-investment opportunities. As the success of the project depends on the experience of the sponsor, you should be certain the sponsor has a good track record.

Disadvantages of Co-Investing

Highly Illiquid. Investors in a co-investment forego access to their money until the project is fully executed, sold, or refinanced. In an extreme situation, one investor could buy out another investor, but the investor who sells his position will almost certainly take a hit. Additionally, there is no guarantee that another investor will agree to a buy-out. If you plan to invest in a syndication, be prepared to tie up your capital for the duration of the project (typically 3-7 years, sometimes more).

Limited Control. The sponsor retains the vast majority of control in a syndication. As a passive investor you want this, as the sponsor is the one with the knowledge and experience, and should be in the best position to make business decisions on behalf of the investment group. Investors typically have voting rights when it comes to the sale or refinance of the property, but the sponsor controls the day-to-day operations of the project.

Ultimately, everyone’s investment preferences are different, and only you know what types of risk and how much risk you’re willing to tolerate. However, we believe real estate investing – if done diligently – offers something for everyone. If you’ve got any questions about any of the real estate investment options we discussed in this series, or if you’d just like to talk about real estate investing in general, please do not hesitate to contact us at any time. And if we’re not already connected, remember to find us on LinkedIn and Facebook!

8/10/2017

Project Update: South 17th Ave, Hollywood, FL

One of the projects we’re working on right now is an eight unit apartment building in Hollywood, less than two miles from the beach and just a few blocks from Young Circle and Hollywood Beach Golf Resort. With its 1930s charm, 10 foot ceilings, and spacious layouts, this one promises a truly unique living experience.

Our favorite feature? Each unit came with its own screened in porch, which we decided to turn into an enclosed Florida room with hurricane impact windows.

As it currently stands, we’ve completed all the drywall work, textured and painted the walls and ceilings, installed AC vents, and updated the electrical work. We’ve also installed new tubs and tiles in the bathrooms, plumbing for stackable washers and dryers in each unit, and high impact windows throughout the building.

Next comes the fun part: laminate wood floors, new kitchens, and the finishing touches like doors, hardware, and fixtures. We’ll be seeing a real transformation over the next few weeks, so stay tuned for updates!

8/1/2017

Real Estate Investment Options (Part 2 of 3): Private Lending

In last week’s post, we discussed direct ownership real estate investment options. Today we’ll discuss private lending.

With private lending, the investor loans money to an individual or business for a fixed rate of return through interest. For the passive investor – perhaps someone with a busy and successful career in something other than real estate – private lending can be an attractive investment option.

Advantages of Private Lending

Fixed Rate of Return: If you’re looking for a predictable fixed rate of return, then private lending is a great option. For example, an investor who makes a $100,000 loan at 6% interest would receive $6,000 per year on his investment.

Collateralized Loan: Private loans are collateralized by the property for which they are being used. The loan is recorded against the title to the property, making it public record that the private lender has a loan against the property. In a worst case scenario where the borrower defaults, the investor has the right to take back the property through foreclosure and then decide whether to sell it or keep it. Not an ideal situation, but it is a nice benefit that helps mitigate risk. Further, even though the value of the collateral (i.e. real estate) can fluctuate, real estate always retains at least some value. Other investment vehicles, like stocks, can lose their value altogether, and are not collateralized by a hard asset.

Real Estate can be Insured: In a total loss situation, private lenders are protected by property insurance. Insurance covers damage to the property and the lender is paid off through insurance proceeds.

Passive: Compared to direct ownership of real estate, private lending is a much more passive investment option. The hard work comes at the outset—a smart investor will do some due diligence on the borrower and the collateral. But once the loan is in place, the investor sits back and receives payments while the borrower manages the day-to-day operations.

While we’re on the topic, let’s talk about what to look for when you’re doing your due diligence for a private loan.

First, look at the track record. Does the business have experience with the type of projects it is requesting money for?

Second, try to understand the company’s financial position. Ask for credit reports and personal financial statements, but keep in mind some (but not all) borrowers are seeking private funding because they can’t qualify for a conventional loan. This is not necessarily a red flag, but as a lender you can increase the interest rate to mitigate the risk. In some cases, borrowers are very well qualified but can’t secure a loan because traditional lenders don’t like non-cash flowing properties in need of significant renovation. Vacant or mismanaged properties may need a lot of work and may not cash flow, but they can represent excellent opportunities for private lenders.

Finally, understand how the principal is to be repaid. Private loans typically run anywhere from a few months to 10 years. At the end, the property can be sold and the loan paid off, or the borrower can improve management, add value, and put in place a long term conventional loan. The new loan proceeds are used to pay off the private lender. The latter is how Mayfair Real Estate usually operates.

Now that you know the benefits of private lending and the right questions to ask the borrower, you should also be aware of some of the disadvantages of private lending.

"For the passive investor – perhaps someone with a busy and successful career in something other than real estate – private lending can be an attractive investment option."

Disadvantages of Private Lending

The Flip Side of a Fixed Rate of Return. A fixed rate of return is great, but unfortunately private lenders don’t get to enjoy the upside of direct ownership. If the borrower does a stellar job on the project, typically the private lender sees none of the profit above and beyond the fixed rate, though in some unique circumstances a profit share structure can be used. If you lend to a house flipper for instance, you might be able to work in a bonus based on the profit in exchange for lower interest during the renovation period.

Not Highly Liquid. When you make a private loan, your principal is tied up for the duration of the project. You could sell your loan to a note investor, but you probably wouldn’t get your full principal back that way. So, you certainly don’t want to commit your emergency savings to a private loan.

Borrower Default. Even though your loan is collateralized, finding yourself in a situation where your borrower has defaulted can be aggravating. No one wants to go through the hassle of foreclosure to gain control of a property. The best defense against this outcome is good due diligence.

A Final Word on Private Lending

Private loans come in all different shapes and sizes, so be sure you know exactly what you’re committing to. Some lenders will offer simple fixed rate returns paid monthly over the duration of the loan; others may offer a single balloon payment for principal and accrued interest at the end of the loan; and still others may prefer a fully amortizing loan.

As always, we’re here to answer all your real estate investment questions. Don’t hesitate to contact us, and if we’re not connected already, please find us on LinkedIn and Facebook.

7/26/2017

Real Estate Investment Options (Part 1 of 3): Direct Ownership

Real estate investment companies provide an excellent opportunity for non-real estate professionals to achieve cash flow, equity growth, and higher returns through real estate investments. However, no two investors are the same. Each has his/her own risk tolerance, financial goals, and time available to expend on the effort. Therefore, it is important that investors have different options to match their personal investment preferences.

Mayfair Real Estate offers investors three investment options: direct ownership, private lending, and co-investments. In this three part series of blog posts, we’ll tell you a little bit about each of these options. Let's start with direct ownership of real estate.

In direct ownership investments, the investor maintains 100 percent ownership of the asset and assumes the risks and rewards of full ownership.

"In direct ownership investments, the investor maintains 100 percent ownership of the asset and assumes the risks and rewards of full ownership."

Some of the advantages of owning investment real estate include:

Cash Flow: Investment properties provide regular recurring income in the form of rent.

Attractive Yields: A well-managed real estate investment can deliver an internal rate of return (IRR) of 15-20 percent, and a cash-on-cash return of 8-12 percent.

Real Assets: Real estate investments are real assets that benefit real people. There is a genuine need for housing. Housing cannot be outsourced or become obsolete through new technology. Unlike stock certificates, real estate has inherent value because it is made from land, brick, and mortar.

Tax Shelter: Income produced by real estate is usually sheltered by depreciation, and therefore is taxed at a lower effective rate than your typical earned income.

Inflation Hedge: Rent prices typically increase along with inflation. This means as inflation increases, so does the income from real estate investments.

Ability to Buy below Market Value: This is a HUGE advantage of real estate ownership that is frequently overlooked. The real estate market is much less efficient than the stock market. Through hard work and knowledge, the savvy investor can find great deals and buy properties for less than they are worth.

Control: When you buy stocks, you’re putting your money in the hands of a company you don’t control. You’ve probably never met the people running the company, and when it comes down to it, you probably don’t have much more than a surface level understanding of the company’s financials. With real estate you have complete control. You can raise the rent, reduce inefficiencies in management to save money, and physically alter the property to improve its value.

Direct ownership is without a doubt the best way to make money in real estate as an individual, but it is not without its challenges.

First, direct ownership without the assistance of an experienced professional is far from a passive endeavor. Finding the most undervalued properties requires knowledge of the market and access to off-market deals. Understanding what can be done to improve the value of a property (and by extension being able to identify undervalued properties) requires experience. Implementing improvements – renovations, changes to management, and minimizing vacancy throughout – requires practice and the right team.

Second, finding a good property manager for small multifamily properties can be difficult. Most property management companies specialize in either single family homes or larger apartment buildings and commercial property. Consequently, there is a lack of property management companies that specialize specifically in small apartment buildings (50 units and under).

Third, with direct ownership, if your business plan doesn’t work out or you lose the property to a man-made or natural disaster, you’re on the hook for the loss. Of course, good insurance will cover you in many scenarios, but that can be very costly.

"Mayfair Real Estate’s direct ownership investment option enables investors to enjoy the rewards of real estate ownership while dramatically reducing the risk."

For many non-real estate professionals, these challenges are enough to turn them off real estate investing altogether. Overcoming these challenges is where a competent real estate investment company can provide massive value to investors.

Mayfair Real Estate’s direct ownership investment option enables investors to enjoy the rewards of real estate ownership while dramatically reducing the risk.

Our Value in Direct Ownership Real Estate Investments

We specialize in finding under-performing (and often off-market) assets where we can add value through improved management, property renovations, and implementation of proven systems.

We are one of the few companies in the South Florida market that focuses exclusively on small- and mid-size multifamily investments. We have the systems in place to manage these specific types of assets through the entire investment cycle: finding the properties, negotiating the purchase, re-positioning the properties for optimal returns, managing them for cash flow, and refinancing and/or selling the property at the appropriate time.

As an added bonus, because we operate our own property management company, investors with just one or two properties can take advantage of the insurance discounts typically available only to investors with large portfolios.

Most importantly, we do all of this while the investor maintains 100 percent ownership of the asset.

If you'd like to learn more about direct ownership real estate investments, we'd love to hear from you. Please feel free to contact us any time, and if we're not connected already, don't forget to find us on LinkedIn and Facebook!

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