Take advantage of this special episode of the Broker’s Playbook Podcast, Simeon Papailias joins Dawood Bedrosian of Real Sense Now – Central Florida’s NEWEST addition to Florida Man Radio’s SPECIALISTS line-up! This one-stop talk show, helps consumers connect the dots and get REAL on ALL THINGS REAL ESTATE.
Simeon has achieved tremendous success in his career and he shares with us the principles that have helped him get there. If you’re looking to take your real estate investing to the next level, don’t miss this episode!
How to Take Advantage of Opportunity in Today’s Marketplace
Bobby Puim: What’s going on, Broker fam. It’s Bobby here. And today we’re going to bring you a special episode of Brokers Playbook podcast. Our good friend and Florida real estate contact, Dawoud Bedrosian was in town recently recording an episode of his radio show, Real Sense. Now, Dawood is a 15 year real estate practitioner and an expert in the Florida investment real estate space. We’re going to show you their entire discussion. I would really like to know how you feel about the Florida real estate market, so leave us a comment below. Our snowbirds, a thing of the past or Canadians always going to look to escape the snow somewhere warmer and make some money while doing it. Enjoy the show.
Dawood Bedrosian: You know what time it is? It’s Saturday and we are here not in studio, but actually up north in the cold tundra in Canada, because I just got off doing a crazy weekend working with about 800 investors here that are looking at different opportunities throughout Florida on why to come and invest in our incredible sunny state. It’s not so sunny over here. But I can tell you one thing. If you’re tuning in for the first time, I want to tell you what this show is really all about. So we’ve designed this show called Real Sense now with your host. Of course, that would bedrosian to really give you the facts on what’s trending in real estate, whether you’re a buyer or a seller, if you’re looking for a lucrative deal or maybe just give you some tips on what to search for for that next property vacation home and really kind of give you a sense of what’s going on. The most important thing on our show is to share with you and to teach you our cheat code on success, which is how owning real estate is essentially the cheat code to your success, plus the way in which you can create wealth for you and your family. Of course, if you want to tune in to the show, all you have to do is just ask Alexa, Hey, play Florida man radio and you can hear us live all the time. Or you can visit me on any one of my podcast sites, whether it’s Spotify or Amazon or even Apple Music, and just ask to play real sense now.
Dawood Bedrosian: So on today’s topic, I want to actually talk about the pulse of what we’ve been feeling in what seems like a shifting market in real estate. As of summer 2022, it seemed like the real estate market came to somewhat of a screeching halt. A lot of buyers were on the sidelines debating what to do. A lot of sellers wanted to figure out where the market was going and maybe held out on some listings. More listings came on the market, more homes stayed on the market for a longer period of time, which kind of tipped the scales on what was a seller’s market to evening it out to becoming more and more of a buyer’s market. Sellers were forced to have to work with buyers to be able to negotiate the best deal that worked for a buyer looking to purchase a home and a seller looking to sell one. It seemed like the scales tipped even further in the beginning of the new year as more investors and buyers just simply started to come out of the woodwork and started to say, You know what? I’m not waiting anymore. And they started to take advantage of buying real estate. Recently in the United States, we’ve seen the mortgage interest rates tip into the high 60 seconds and even over into the sevens.
Dawood Bedrosian: And the common question that everybody seems to ask me all the time is, how’s the market? Are the prices going to go down further? When is a good time to invest? And more importantly, what should I be investing in? And you’re probably thinking now more than ever. It’s got to be the absolute worst time ever to invest in anything, especially in real estate. You have the fear mongers that are out telling you to hang on to all the cash that you can. Don’t go out and buy anything, save whatever you can, because a really rocky road is waiting for you up ahead. But I want to prove that concept to be completely incorrect. And I’m going to explain to you why that may be the case. The facts. Numbers. They don’t lie. If there is that many indicators that are showing us and proving to us that now is not a good time to buy, like, for example, a high interest rate, it would be surprising that there is a group of individuals that are aware of what’s going on, have experienced the COVID pandemic, economic economy bubble, the significant layoffs that we’ve been experiencing, especially in the tech industries, a decrease in house sales due to mortgage interest rates. But there’s people out there looking for the deals. There’s institutional money that’s waiting on the sidelines, just waiting to figure out when would be the right time to jump in.
Dawood Bedrosian: And you must be asking yourself, why are these people considering investing in a real estate market when all of the factors seem to be against them? So counterintuitively, these are the kind of challenges that will essentially create the perfect conditions for new opportunities to be born and built. The best entrepreneurs I say this all the time thrive in times of turmoil. They know how to channel their fears and to respond and even shape the disruption in their faith. They are nonconformists. They are unafraid to question convention and of course, are out there to try something new. On my show today, I’m with my dear friend Simeon from RBC, Canada. We’ve collaborated for, I don’t know, over a decade. We’ve worked on a number of deals, even throughout COVID. And currently right now, we both were at an incredible, incredible investor meetup here in Toronto, Canada, where there was 800 investors there. And I can’t tell you the overwhelming amount of people that came over to me to want to talk to me about investing in Florida. It doesn’t make sense that in a market like this, there is so much interest that investors are flocking to find deals. Simeon, the question I want to ask you is you are on stage. You shared a wealth of information with all the investors. And why would now be a great time to invest in in spite of all the challenges investors are facing?
Simeon Papailias: I think there’s a lot to unpack there. You gave a significant preface to to the market and kind of to validating a lot of people’s concerns and fears right now. There is always a community of people who understand the mechanics and and a market behind the hype and the fear mongering. Reporters and media outlets are paid advertising dollars and they need to create impressions and they need to get people’s attention. So they will write and they will headline things with using fear mongering tactics, as always. And then they report the truth in the article. But to get your attention and to create a sentiment out there, it’s always relevant to overreacting and exaggerations at this point. Education is the only thing that can cure ignorance, and that can be the biggest cliche in the world. But unless you understand what you’re getting into, you can never act or take advantage of anything. We were at the Investors summit and it was actually 800 people live in another 600 people online. Exactly. Yes. The amount of energy and momentum on an event like that creates is unfathomable. And it’s something that I truly enjoy because it makes it validates everything that I do for a living.
Dawood Bedrosian: And when you’re there for three days, it’s a full on immersion into what’s going on, teaching you strategies, techniques, ways of looking at different things, how to approach problems and challenges in this given market. And it really gives you a clearer path for what could lie ahead in whatever strategy you decide to follow.
Simeon Papailias: Yeah, in all, real estate strategies are fundamentally placed on black and white numbers. It’s just that simple. You have a specific amount of capital and you want to see a specific return that’s suitable to you in order to get that return. There is many tools you can deploy, and that’s where the education comes in. Because if we were to say that interest rates are 7.5% right now, which is quite high, given that purchase prices are not what they used to be. Correct? So when you scrub a market rent versus the purchase price versus the carrying costs, it is very simple that something has to give. In a hot, blazing market. Prices are high. Rents are typically high. And in this case, if interests are high, what’s going to give is your return. So you may not like that. So you need to look and find and create deals that have a delta of profit in them. Correct. If we all went running to Louis Vuitton tomorrow and emptied the stores, the brand of Louis Vuitton would actually fall because scarcity would not be there. So what happened in luxury goods is a perfect example of how they control the delta.
Simeon Papailias: They said We’re out of stock. Scarcity remains. Just because people want to buy Rolexes doesn’t mean you can get them. Absolutely, because they are looking to control the value in real estate. It’s the same thing when you go inside the pandemic where money is free and everybody just believes appreciation will continue at 25% per year. It is unrealistic and unsustainable. So industry experts knew that this could not go forever. So they shielded and protected their assets. Their assets? Excuse me. Against it. No pun intended. No pun intended. But at the end of the day, today, there is a million ways to create the most incredible deals. And the reason is in a market downturn, confidence is low. As a prudent real estate investor, you can deploy strategies such as vtb’s, meaning that if you need the deal to be financed at 4% or a 3.5%, you need to find a way to do that. The bank is not going to give you money at 3.5%, but somebody who’s owned that piece of real estate for 30 or 40 years has no debt on the property will in order to achieve their purchase price and.
Dawood Bedrosian: A VTB, a vendor take back, is commonly known as seller financing in the United States. And it just it’s one of the many creative strategies that you can take advantage of in a market such as this. It’s the.
Simeon Papailias: Number one in a market like this. You have to take advantage of them.
Dawood Bedrosian: For you to go out and try and negotiate with a seller that may not have an existing mortgage to work with them to be able to have them provide you a portion of the loan or all of the loan at a hopefully lower interest.
Simeon Papailias: Rate. And to put that into context of how that works, let’s just say you found a property and it’s $500,000 to keep the math simple, a conventional loan you need to put down, let’s call it 25%, 20%, 20%. But whatever the case may be, so $100,000, but the financing is available at 7.5%, which makes the payment prohibitive for a good deal. Why? Because rent isn’t as high to cover the mortgage and or all the other associated costs. But if you were to do the math and run your analysis at 3.5%, maybe the property is, you know, a golden asset. So what do you do? You’re going to speak with your broker and you’re going to say, I would like to make an offer on this, but I cannot get traditional financing because the deal doesn’t work unless he wants to unless the seller wants to give me the property at 400,000, I can get regular financing. But if the seller wants to achieve $500,000, he’s going to have to give me terms in that seller. Financing is going to be what we’re looking for at a rate that works for a time period that works, whether it’s a three-year or a five-year deal. And then you can have that replaced by the bank at a different economic time, when you can take advantage of it.
Dawood Bedrosian: And the irony is when the investors came up to us to speak to us at the booth, can I tell you that interest rates were not even a concern to them because we actually created models for them to look at the investment at three different. Interest rate points. So one, for example, a model at 7% mortgage interest rate, another at six, and then maybe another one at, let’s say, for example, four and a half. We all know that these interest rates aren’t going to remain at these prices at these levels forever, and it’s just a matter of time before some things shift. We can definitely tell that even though we are been we have been experiencing this shift in this market, this inflation fever also seems to be kind of curbing down a little bit.
Simeon Papailias: Well, because the actual interest rates are doing their job. So the reason our interest rates skyrocketed is to make people go back to their seats, stop spending in the economy. Correct. For prices to come back down. So the hard and the big lifting has been done. The big damage to people has been done, and now we’re starting to reap those rewards of inflation slowly coming down.
Dawood Bedrosian: Absolutely. And not only that, we’ve also been noticing that the pricing of the homes have started to adjust accordingly as well, too. We’re seeing more homes on the market, more buyers are having more options in terms of the homes that they want to select. And now they can actually negotiate some favorable terms, maybe even seller credits, to help them buy down mortgage rates, which we can take advantage of as well, too. There’s definitely more homes on the market, but the reality of the situation in both markets that we’re in is that there’s just not enough homes. We still are experiencing a housing shortage in both markets. There’s another parallel that can be drawn. There’s a lot of interest from foreign national buyers that are wanting to come and take advantage of both of our markets as well, too. Currently, even though the interest rates are high, you’re finding investors coming and pouring millions and millions, if not billions of dollars from countries like Canada. A lot of the South American countries that are looking for stable, stronger economies to park their money in, and even other countries from the other half of the world, too. Why? The rents have gone up by over 30%. They’re stable assets in stable economies where there’s a great demand for people wanting to move there. Job growth, the economy is growing. And why wouldn’t you want to be in a nice warm place as well, too?
Simeon Papailias: Well, there’s a lot of unfair advantages to to the Florida market. It’s a destination for many reasons, above and beyond the sun. There’s Disney, there’s jobs, and there’s all these different factors that people are attracted to. There’s a reason the population of that state is three times that of the entire country of Canada. To put it into mildly into.
Dawood Bedrosian: Perspective, 22 million, half of that, whatever.
Simeon Papailias: That case maybe. Yeah. Got 100 million. But anyway because it will be but but but.
Dawood Bedrosian: Listen, you know, we have a lot of things that we need to talk about. And one of the things that I want to do is to actually get into strategies. I want to actually talk about how investors today that are looking to diversify their portfolio can actually achieve that in a market such as that. But I want to hold that onto the next break, so you better not go anywhere. And if you want to connect with us and if you have a question, all you have to do is visit my website, real sense Now.com. Catch me on any one of my social media platforms, which is Facebook, Instagram, LinkedIn by just typing in my name. David Bedrosian Bedrossian. I need you to stay tuned because I have my dear friend, the Guru himself, Simeon, to share with us all of the investment strategies that you can be taking advantage of in this current market. Stay tuned after the break.
Bobby Puim: There are too many bad agents out there. With Broker’s Playbook training. We aim to change the game in real estate. We want to make the real estate industry a better place for all. That starts with you becoming the best agent that you can be, whether it’s communication skills, organizational skills, or just building better habits to ensure that you’re doing the right things at the right time and doing right by your clients. You can learn that all here with Brokers Playbook Training and the Rising Agent Mastery Program. Head over to brokers playbook.com Select the training tab and find out everything that ramp and all of our other programs have to offer for you.
Dawood Bedrosian: And we are back. Segment number two. We’re talking about real estate and how you can make money in any economy. Many would think that investing in real estate amidst a looming recession would probably be the worst time to do that, especially when the rates are in the high sixes or even over 7%. In spite of whatever your current strategy is, it’s really wise to understand what strategies best work in every economic cycle. You see, real estate cannot be lost or stolen, nor can it be carried away, purchased with common sense, paid for in full and managed with reasonable care is about the safest investment that you could work with. You don’t need to take expert advice from me. Franklin D Roosevelt said that, and it’s the advice that has been echoed over time by experts in this space will always advise you that real estate investing, even on a very small scale, remains to be the best tried and tested means of building cash flow for individuals and wealth for your future generations as well too. I’m joined by my dear friend Simeon. We’ve known each other for way too long. I don’t even want to share that on the on the radio because they probably think we’re dinosaurs or something.
Simeon Papailias: I had some hair when we met. Now I have none. Okay, well, it’s okay.
Dawood Bedrosian: You know, like they say during COVID, maybe your hair was socially distancing from yourself. It’s possible. It’s very possible. But anyways, I’m happy to be here with you as well, too. And I’m really glad that we’re talking about investing in this current market. You’re an expert. You spoke in front of 1500 investors, 800 live. The rest are all online. I got an opportunity to be able to share my expertise regarding Florida properties, and we really have a lot to offer. And this is exactly why I chose to do this radio show podcast right here in Toronto while we are together live, because the value of the information you have to share is second to none. So let’s talk about our current market, and I want to talk about specifically strategies that can actually work. You see, whenever you talk to a lot of these experts or they’re trying to sell you on a book or an idea, they give you a lot of fluff and they never get to the bottom of it. For our listeners, for our audience, what I want to do today is dive into specific strategies that people can take advantage of in this current market.
Simeon Papailias: So I think right now, like, for example, the entire Eastern Seaboard vacations predominantly in Florida, correct? So it is not a coincidence nor dumb luck that so many Canadians, so many New Yorkers, so, so many from this entire region, Montreal, Massachusetts, we all invest in vacation homes and condominiums and golf course residences and all these things down south because that’s where we need to go for a break. When you take the costs of what it takes to vacation in Florida into account, it becomes very clear and apparent that buying a property can generate not only your own vacations and your own memories, but you can enable those for others and you can profit from it and you can profit from it dearly. So if we go down for 2 to 4 weeks a year, there is a massive balance of weeks that can generate real cash flow in a big way. And we are talking about investing in a place where cleaning crews, property management is very, very available. There is a tremendous amount of of technology that’s gone into a lot of these platforms. And I’m speaking to the short term rental platforms Airbnb, VRBO, all these different things. But on the service side, people have obviously stepped it up and create cleaning companies and property management companies to service investors in this field. So you can really have turnkey investing and teams in place to generate vacation rental cashflow. And that’s just one of the strategies that’s available today in a market where rental and luxury rental for that matter, has skyrocketed by over 30%.
Dawood Bedrosian: So I’m a little bit confused. Are you selling me on Florida because I’m already sold? Because this is supposed to be like the Florida.
Simeon Papailias: You are you are a Florida realtor, but I’m telling you why our clients. So the reason we refer to you dozens of clients is because of those very principles. Well, I think it’s.
Dawood Bedrosian: More so than that, too. I think that the price point compared to a lot of markets in North America, especially in bigger cities, is, you know, half or a fraction of the cost of what you could buy a similar property over here. I think you’re absolutely right about the ability to generate cash flow, but more importantly, the ability to use it. You see, when it comes to real estate assets, I personally don’t know of another type of asset that you could truly call a lifestyle asset which generates you passive cash flow and one that you can use all the time. You know, when we are calculating the performance of an asset, we often refer to ROI return on investment, and there’s a clear formula on how to do that. But you can’t equate in terms of a measurable return, what a role, a return of on lifestyle, an asset like that can afford you and your family and what it can do for your friends or even even if you use it as a marketing tool for your business. Better yet, getting away from the snow blizzard that we just experienced gives me all the more reason to want to go out and invest in a property like that as well too.
Simeon Papailias: But there’s no doubt about it. So, so there’s myriads of reasons why somebody wants to to get a hot weather property into all our friends in western Canada and Western US. It’s the same thing for Arizona. It’s the same thing for New Mexico, for for California, for the entire wine region. Yeah, there’s a reason people flock there, and that is for the weather, for the lifestyle and for the cash flow.
Dawood Bedrosian: And if you often notice that people in various parts of the continent will literally travel directly south. Yes. So people on the Eastern seaboard travel down to Florida, people in the western part of the continent or the western part of the continent, sorry, the middle or the western part of the continent tend to flock towards places like Arizona and Las Vegas. Las Vegas, because it’s a lot cheaper than California as well, too. But when it comes down to drivers, we need to understand what drives your investment. Why is your investment, for example, in a place like Orlando better than it would be in, let’s say, for example, Arizona or Las Vegas or any other part of the country or even within the state as well, too. And we really need to look at the performance on on what moves things. You know, in our case, we have, for example, tourism. 78 million people came in 2019. That’s what I think doubled the population of Canada, plus your 13% tax. On top of that. And in addition to that, I mean, there’s a lot of reasons why people are flocking towards it. You know, it’s a cheaper alternative that you take advantage of for you to stay in a vacation property than it would be to go out and rent 3 or 4 hotel rooms for you and your guests. And oftentimes a lot more people are traveling together. And although Airbnbs and short term vacation rentals are becoming ever so popular, there’s other people that we spoke to in within the conference that are actually interested in other strategies. What are the strategies that are working in our market today?
Simeon Papailias: So long term rental or what’s called buy and hold is the most traditional time tested and true of them all buying assets where people want to live and renting them out forever with no finite timeline, you’re looking for a buy and hold. The strategy there is simply to purchase a home, improve it if possible, just to increase its active appreciation, its actual working appreciation, getting a great family, some great people living in your property and paying down that mortgage while they enjoy the lifestyle and amenities that they’re living in. So sound investment in buy and hold is subdivisions that make sense, that are close to employment and close to lifestyle amenities like parks, shopping, etcetera.
Dawood Bedrosian: In bigger cities, transit, for example.
Simeon Papailias: Is an absolute must and transit will always give you that 10 to 15% lift over other real estate. So if you can get real estate close to transit hubs, it’s definitely a huge bonus. You also expand your tenant pool to those who don’t have a vehicle. So you’re making your your audience bigger and your asset more desirable.
Dawood Bedrosian: And you can also leverage that because the more equity you build in your property, that one property essentially will help. Generate two, four, eight and so on and so forth for you to go out and build your portfolio as well too.
Simeon Papailias: Yeah, depending on your goals of how big you want to get and how serious of an investor you want to become, Real estate is definitely an asset class that can aggregate on itself because of the power of leverage, because of the security it affords the lenders. They are not scared to give you money to become bigger if that’s what your goal is.
Dawood Bedrosian: And you know what? There’s another interesting shift that we’ve all experienced in the last few years. While people have decided to exit the real estate market by selling their property, they have decided in some cases not to repurchase again and go out and rent a property. We’ve seen an increasing demand of people wanting to relocate. Over here you have an increasing demand of people that have come for several reasons wanting to immigrate into the country, whether they’re coming on a asylum as a refugee or they’re transferring over for jobs. Same thing we are experiencing as well, too. There’s an influx of people wanting to come into our cities and our states, driving the rental prices up as well, too. Multifamily has become a very interesting. Alternative or investment approach because now people can go out and buy one asset, whether it has two properties, four properties or even 300 of them within a gated community, like many of the ones that we have as well to. And one of the main reasons why I’m beginning to feel that that’s the case is because all the big boys have put the brakes on deciding to go out and purchase that softening or reducing the competition pool for you, the buyer to go out and look at some of these assets and maybe even now, because they’ve been sitting on the market for a little bit of a longer period of time and negotiate a better deal, do you think that this would be a good strategy to be taking advantage of in this market?
Simeon Papailias: I think multifamily is probably the best asset class to take advantage of in all of real estate. It’s the most secure. It’s the most efficient meaning that when you have eight homes that you own in random places, you have eight roofs and eight furnace systems and your heating venting air conditioning pools, etcetera. If you have a 12 plex, one one unit with 12 doors, as we call them in the industry, you have one roof, you have one boiler, you have one big air conditioning unit and one pool. The efficiencies and the obviously the the scale of the investment, it’s a completely different profile. That’s a commercial investment, although we’re talking about residential use. When you get into multifamily, it is a step above the everyday investor, but it creates returns and security that one can retire from in time they can replace your income. It’s something that is as stable as they come. It’s the most secure investment you can make. And I think.
Dawood Bedrosian: It’s also another great investment in which you can take advantage of and really leverage even more so than a lot of the other asset classes because there’s multiple units there. There is passive appreciation that we’re experiencing from whatever market that we’re in. In any given time of the year. You’re getting positive cash flow because you’re renting out multiple units. There’s a way for you to manage your expenses. And more importantly, you talked about active appreciation. That is what an owner can do to drive the value of their property. That’s right. It could be making improvements on the exterior interior, improving curb appeal, just adding more value to drive the value of that asset up even further.
Simeon Papailias: Value up you drive the rent up and that is fundamentally how commercial real estate is evaluated. So if you were to buy an older building and and let’s just make this a small project, let’s say you’re in the building industry and you’re a very handy person and you were to buy a four plex or a six plex that is very much within shooting range for your first investment. Absolutely. Do I recommend starting there? I would say no. Get your hands working with a few income properties first. But at the end of the day, if you know what you’re doing and you take an old six plex, an old eight plex, and you start renovating each one with each vacancy, making it brand new and getting the rent up to market rent, You’re going to double or triple the valuation of your building by the time you’re done.
Dawood Bedrosian: See, I told you, keep spending fire all the time. You need to stay tuned for my last segment because we want to actually talk about some alternative strategies in which our listeners, our viewers can take advantage of that. Sure. So stay tuned after the break. This is your host at Woodbridge Nissan. You’re listening to me right here on Real Sense.
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Dawood Bedrosian: And we’re back. That would better stand right here. Real sense now, except we’re recording this show in the Cold Tundra, better known as Toronto, Canada, just finished doing a 1500 person hybrid live and online virtual event. Talking about real estate strategies and opportunities to take advantage of for those looking to get into the market. You know, buyers that are buying a home tend to be weary of what to buy when is a good time to buy. Should I be buying, given the fact that the interest rate is over 7%? Guess what? All the people that came up and talked to me weren’t even concerned about what the interest rate were because they were educated investors. I think part of the reason why I love doing this show is to be able to educate our listeners on a regular basis and advise them in spite of all the fear mongering, in spite of what’s going on, how owning real estate is essentially the cheat code to your success. If you were listening to our show, we’ve been talking about several strategies you can be taking advantage of in our current market. We talked about short term vacation rentals and why they are proving to be really popular, why they’re cash flowing amidst everything going on right now.
Dawood Bedrosian: We’ve been talking about multifamily as an alternative type of investment, but there are several other strategies as well too. I’m sitting with my dear friend Simeon from Canada, probably one of the top producing teams here in the country. Speaker At the investor conference that we were at right now and during the break we were talking about some of the strategies that are really proving to work best right now. And the one that I want to shift to is actually one that you may not be considering, because when you’re thinking about real estate, you’re thinking about owning the asset, buying it, selling it, improving it, improving it. But we think we often forget about the most important part about acquiring anything, which is the money part. Did you ever think how. Participating in. Real estate and utilizing private lending can actually be a viable real estate strategy for you to actually make money in real estate given this current condition of our economy. I have my guest, Simeon here, and I want him to share with us as to why this strategy in particular is probably one of the easiest strategies you can participate in given our market environment.
Simeon Papailias: Private lending is absolutely huge and it’s and it’s always a popular strategy. Is it real estate investing? It absolutely is, because your money and your return are secured by bricks and mortar. Deploying private lending. Investing right now allows all those who are wary, as you said, about real estate values and or the viability of any given building to perform a certain way. The advantage of very short term and. Short term guarantees is what I’m going to call them. The way private lending works just from from scratch, is if a home is worth $500,000 and it has existing financing or a mortgage on it for 250, the asset is leveraged 50% loan to value. Correct. In any given market, you have trends. If markets prices are coming down, which right now they have come down 10 to 15%, that home is now leveraged because it’s worth 450 or 400,000 is leveraged, a 6,065%. When you’re lending against an asset and somebody needs money typically because they’re willing to pay you more money for it because they can’t get it from the bank. Millions of reasons for that. Nothing to do with her credit or everything to do with her credit. Nothing to do with her employment or everything to do with her employment. Maybe it’s the use of funds. Maybe it’s whatever the case may be.
Simeon Papailias: But you will be getting a third party appraiser. To give you what the home or asset that you’re lending against. Give you a fair market appraisal. So if the home comes back at 500,000, which is what you thought it was and everything looks great. And there’s a $250,000 mortgage on it. It’s already leveraged to 50%. If they’re asking you for $100,000. It takes you to 350. That equates to a number that you’re comfortable with because you don’t want to lend above 80% or 90%. There are people who lend up to 95%. That typically happens in very urban markets. When the times are typically pretty solid and stable and it’s going to cost you 15 to 25% to get money that’s that closely leveraged to zero. Because if you have borrowed everything, your asset is worth, What prevents you from walking away from it? Absolutely nothing. There is exposure and risk. People who will only lend to 5,060% charge the least. But if they’re coming to you and not the bank, the bank traditionally is always the cheapest money. It’s called institutional money. If you can’t go to the bank and you’re coming to me, whether it’s because of short term for for for a mortgage, because you’re self-employed, because of all the various reasons, it’s typically going to cost you, I would say 3 to 4% higher than the bank is the average rule.
Simeon Papailias: And I’m not talking about loan sharks or anything of that nature. These are other institutions that offer private lending. And you as an investor, every single one of us can participate in this asset class. You can locate a mortgage broker in your market and ask them if they can be connected to a make a mortgage investment corporation where people pool their money and receive a fixed return of 10%, 12%, 14%. Are they in line with your values? Are they in line with what your comfort is with risk? As I said, some more, some some mix, some mortgage investment. Corporations are more aggressive than others. Some are far too conservative. Depending on the return that you want on your money is going to kind of take you where you’re going to end up. But this is also something you can do by yourself with a lawyer. Meaning you can work with a sophisticated MC or you can do this on your own. If you know somebody who is looking to borrow money and you have it. Or if you’re going to invest your meetups, you’re going to meet people who need capital. You’re also going to meet people who will provide you with capital, Correct. And the cost becomes the return.
Dawood Bedrosian: And it’s funny, you talked about masterminds. This weekend was a it was the. Pinnacle, the quintessence of exactly what a mastermind is all about. When you get like minded individuals in a room together and you begin to understand that our common goal is to learn how to invest in real estate. Increase our portfolio. What we come to realize is all of the concerns that stop people from wanting to participate, which is my credit, is not good enough. I don’t have the money. I’m not quite sure what to do next. I’m not quite sure how to tackle the strategy. I’m not sure about this market because I’m not aware of it. I’ve not been they’re masterminds like this, really pull like minded individuals together. And in spite of whatever your challenges are, there are answers. There are solutions in the room as well, too. For example, if you don’t have a down payment, but you’re willing to become the working partner, you can always go out and find yourself a financial partner as well too. There are other opportunities that are existing out there where you can also just deploy cash and have people work on it for you, whether it’s a REIT, a real estate investment trust or a mic, like you said, a mortgage investment, syndicated mortgages, a number of other opportunities that exist in whatever the market that you’re in, based on your comfort level of how much risk you want to take, what you’re willing to participate in. I love when people say, you know, I’m interested in fix and flips. Why? Because they’ve watched way too much HGTV and they really don’t know anything about it.
Simeon Papailias: And that’s probably one of that’s actually not even real estate investing. That’s a business. That’s exactly what it is. So calling flipping real estate investing couldn’t be more skewed or dangerous for that matter, especially if.
Dawood Bedrosian: You don’t know what you’re.
Simeon Papailias: Doing. Even even if you do know what you’re doing, which is called a contractor, trying to always time the market of an asset that can be worth millions can blow up in your face. And I have.
Dawood Bedrosian: The best example of that. I have a client of mine who goes out and started building luxury real estate in when we worked on the property that he built. Got it staged. We were able to get $200,000 over the asking price. A year later, market was really hot. He is going out and building to other properties except in this market. At the height of where his pricing was, the market shifted downwards 15 to 20%. Right.
Simeon Papailias: So now he’s left holding the bag.
Dawood Bedrosian: Exactly. And at the same time, you really need to know what you’re doing now. Don’t know if you guys know what I look like, but I can tell you one thing. I’m quite dangerous with a hammer in my hand. Not because I know what to actually do with the hammer. It’s because I don’t know what I’m doing with a hammer at the same time to fix and flips. Not a strategy that I personally want to do. It involves a lot of work, a lot of babysitting, but for a lot of people it’s a great way to go about doing it.
Simeon Papailias: And Flip is absolutely incredible. It’s fun. It’s engaging. You can make a lot of money. What I’m saying is it’s not real estate investing. It’s a business like any other business. That’s amazing. Correct. So if you understand the market or if you feel you understand the market enough that you’re willing to take your hard earned money, put it up, you know, up front, finance a renovation, and then just hope that the market is there for yourself after that to me is not investing. That’s speculating and trusting your ability in any given business. Meaning I’m a great contractor, I’m going to save this, this, this, this, this and that’s how I’m going to make money. Fantastic. But real estate investing has to have a return that is stable above and beyond market fluctuations that can wipe out or completely dissipate your return in any way, shape or form. And in my.
Dawood Bedrosian: Approach at this point in time, I really want to start investing in assets that are going to generate passive income for me. I want my money to work for me by being able to park it, leverage it, have it grow in a way that it’s constantly while I’m awake, while I’m sleeping, while I’m working actively on my other career, job, business, whatever it may be, is always generating something for me. There is cash flow, there is appreciation that I can enjoy. And of course when I sell it, there are some tax advantages that I can take advantage of. Deferring taxes down the road as well too. In short, tell our audience if you could pull the trigger today, you had $1 million to invest, half $1 million, $100,000 to invest. What would you be looking at right now as your next investment in real estate?
Simeon Papailias: My next investment right this second is I’m building a vacation rental up north. Uh, contrary to to going to Florida. Well, you already have one.
Dawood Bedrosian: You bought one with me last year.
Simeon Papailias: That is correct. But right now I am building on Lake Huron, which is one of the five Great Lakes in in a township called Weirton, specifically in a subdivision called Bluffs Bay. In this, I’m going to be building a 3000 square foot luxury cottage that is estimated in all ways of accounts to generate anywhere between 700 and $1100 a night, depending on season, creating a specific amount of cash flow to carry its costs and everything else.
Dawood Bedrosian: I love it. So it seems like even the feedback that I got from this investor summit as well too, is more and more people are interested in short term vacation rentals. I’m really glad to be on the receiving end. For those interested in it. I’m happy to be in a market where I can service people who want that as well too, because in my opinion, you just can’t get better than Orlando, Florida when it comes to vacation. You really.
Simeon Papailias: Can’t. You really.
Dawood Bedrosian: Can’t. On that note, thank you for listening to Real Sense. Now it’s your host, David Bedrosian. Simeon, thank you for being a part of my show and we look forward to hosting you each and every Saturday right here on Real Sense. Now from 11 to 12. Catch you next week.
Bobby Puim: Thank you for tuning in to this episode of the Broker’s Playbook podcast. For more of our content or for help leveling up your business, check us out at Broker’s playbook.com on YouTube or wherever you listen to your favorite podcasts.