Category: Jewels of Wisdom Newsletter

Jewels of Wisdom Newsletter – $10,529,000 Profit from a Cold Call

High School Drop Out Now Owns 1.5M Sq. Ft of Commercial Real Estate

I’m here in Las Vegas today at the Diamond Inner Circle commercial real estate event and hanging out with my friend & business partner Jarred Elmar. Through The Geneva Group, the commercial real estate investment firm he founded, he’s accumulated more than 1.5 million feet of commercial real estate. He’s also averaged over 30% IRR to his investors on deals exited.

He just released his life story, Built from Nothing, detailing his journey to the present day. If you do audible, he reads it himself-which are my personal favorite audiobooks. If you read it & love it, give him a review on Amazon. While it’s not a “how-to” commercial real estate book, there is great value in the mindset necessary to go from broke to wealthy. I recommend reading or listening.

My favorite line in the book: “N.O. stands for NOT OVER”

This useful belief leads to The Best Deal Possible. However, you must be persistent. This belief is powerful in sales and in successful Cold Calling, which Jarred has done to build his porfolio. I’ve also generated 8 figure profits from cold calls.

More than $10M in Profit from a Cold Call

Back in 2006 one of my mentors told me to cold call houses listed for rent in the local newspaper. The goal was to find that landlord who was more interested in selling than re-renting and buy their house. Only one person answered, Craig, and he had zero interest in selling his house. I believe he still has that house in his portfolio today, almost 19 years later. Regardless, Craig changed my life.

They Assumed I was a Player!

Instead of selling me his rental property, Craig invited me to a local real estate networking event. I was 26 years old and had to get a ride from my dad because I couldn’t afford a car. However, when Craig introduced me to the big players in that room, they paid attention and assumed that I, too, must be a player. People too ME seriously. Thank God they didn’t see me getting dropped off by my pop!

How I Pissed Off Craig

Craig & I did several deals that year. Craig sent one deal which my dad & I considered, but it had water damage in the enclosed back porch. My dad tried inspecting it by pulling on the wet section of the wall-creating noticeable damage to the house. We passed on that deal. Soon, I received a call from Craig saying, “What the hell did you do to that back porch?? It looks like you dug a frigging mine in the wall!!?” He was not happy with us…

Regaining Rapport

Proverbs 21.14 says, “A secret gift calms anger”. So my dad & I constructed a “miner’s cap” to present to Craig at the next real estate event. Honestly, I felt a little foolish bringing this hard hat with a light into the event to give to Craig, but it did the trick. Last week, while in Philly for my daughter’s graduation, I used Craig’s office to run company meetings and noticed that Miner’s Cap from 2006 still displayed in his office. That gift did the trick, huh?

$10M+ in Profit, from a Cold Call

Post miner’s cap, Craig & I flipped dozens of houses in an informal partnership. We went on to formalize our partnership in Diamond Equity sometime around 2017 and went on to flip several hundred houses since. That $10.529M in profit? That’s just the last 2 years – the actual total is significantly higher than that. Craig has been a friend, mentor, private lender, & great business partner since 2006. All from a single cold call. Thank you Craig!

Are You Capable of Cold Calling to Generate Leads at a High Level?

I’d consider high level to be someone earning $200,000 per year, or more. Right now we have 26 deal makers throughout our 3 offices and buy & sell houses nationwide. We also have custom AI systems which select, in real time, the most motivated property owners throughout the U.S.

If you are a cold calling monster, I have a position that can generate $200,000 or more, per year, just sitting at a computer cold calling to generate leads to disburse across our nationwide team. You don’t have to make any offers, you don’t have to negotiate, you don’t have to run rehabs or put any cash into any of the deals. You simply generate leads & set appointments. If this is you, please reply to me directly with details on your past cold call experience.

It would be helpful to be in either Chicago, Atlanta, or Philadelphia, but I’d consider a fully remote situation for a cold call killer. You would work directly with me on this endeavor. Why don’t you & I close a few hundred deals together too?

Jewels of Wisdom Newsletter – Current $17M Industrial-Office Deal Details

What is a “Killer”?

A killer is a salesperson I want on my team. They get shit done, close more deals, and outperform the average by 3-5 times. On Diamond Equity’s team, a killer earns $250K+ per year. Details on a “killer”: (to join: careers.diamondequity.com)

How to Find Off Market Industrial Deals & Multiply their Value

This week I had lunch with my friend Saul Z. You may recognize Saul from the REI Diamonds podcast we created last year on how he’s driving value of $10M or more per deal. Saul also publishes the Value Builder newsletter each week, sharing strategies for creating & cashing out millions of dollars in value in industrial real estate. He does this through Off Market Deals & Driving High Leasing Velocity.

Industrial HQ Bootcamp Jun 21-22 in Chicago

Saul is hosting an exclusive 2 day bootcamp in Chicago where he will share, in detail, how he built a $100M portfolio.

Saul’s goal is to meet a few exceptional entrepreneurs (aka killers), who he can elevate and partner with long-term—coaching, underwriting, closing off and providing capital industrial deals using everything in his toolbox, including his new Industrial IQ software, built for small bay industrial acquisitions.

Saul will go deeper than spreadsheets and tactics. He’ll break down who you need to become to be a top tier real estate pro—the mindset, the discipline, the habits, the goals, the drive, the energy, the oomph. The whole enchilada. The stuff you can’t fake—and sure as hell can’t fit in a spreadsheet.

This event is perfect for experienced industrial operators or ambitious guys and gals (aka killers) looking to become elite players in real estate—specifically those working on acquisitions of industrial deals where we can invest.

Details & Application Here

Full disclosure, I am not affiliated with the event and am not earning any commission if you attend. Saul is a friend and mentor who loves building people up. I am sharing this as a favor to you-to make the introduction-if you have a burning desire to succeed in Industrial Real Estate.

I will be in attendance-mostly because I’m always looking to meet the best Commercial Real Estate Operators with whom I can invest my capital. Meeting operators in person is my preferred method of choosing passive investments. If Saul approves, perhaps I’ll see you there!

Jewels of Wisdom Newsletter – Current $17M Industrial-Office Deal Details

Case Study 90,000 Sq. Ft. Industrial – Office in Atlanta, GA MSA

All week long we’ve been dealing with Operating Agreement Details, waterfall profit distribution discussions, and sending financial docs over to the Life Insurance Company doing our loan. This will slow down once we close DD and simply await the closing. Here are the Details:

90,000 sq. ft. (actually a bit larger)
8.7% cap rate on current income
National & Regional Tenants with 3+ yrs on Lease
10% Vacancy – to add to marginal value
$17,000,000 purchase price
$8,100,000 Capital Raise projecting 8% distributions beginning Day 31 (fully subscribed)

Why are We Buying this Deal?

This deal is projecting an 8-9% yield to Limited Partners paid monthly, beginning on day 31. If you’ve ever invested in syndications, you know this is special. It is very rare that distributions begin immediately. Normally they begin in the 1-3 year range-after a value add plan has been executed. This deal is special.

This deal is located in the Atlanta MSA, in one of the Northern suburbs. An 8.7% cap rate is a solid deal in a market like this. But, if this deal is so good:

Why the Seller is Selling?

This deal is 3 buildings, each about 30,000 sq. ft. One of these buildings is office space. The tenant was just acquired by a national company and resigned a 3 year lease. The risk is that the tenant leaves at the end of Year 3 when the National decides the location is redundant. 30,000 sq. ft. of Office Vacancy is the risk in this deal.

The Value Add – Redevelop the Office

If the office tenant leaves, we will redevelop the office building into 3 spaces of Industrial Small Bay-a red hot asset class right now. This deal only works because above the drop ceilings in the office building there is plenty of height to reconfigure the use. However, this is not cheap. A redevelopment of this size may run $500,000 or more. We’ve raised this capital up front-so Limited Partners will not receive a capital call in Year 3 if the tenant vacates.

Delusional Optimism – The Home Run Potential

If the office tenant leaves, the distributions will slow down as the space is vacant & during the time of the redevelopment project. It might be a tough year or so while that occurs.

However, if the office tenant stays, and we either give NO TI money, or even a few hundred thousand dollars, this deal becomes a home run. We have already budgeted for dealing with either of these scenarios going into the deal.

I wrote this article on how Delusional Optimism plays into my decision on whether or not to do a deal.

The Office Building

How to Invest Alongside Diamond Equity

Here at Diamond Equity, we have two main types of investments:

Syndication Deals: 5-10 year hold periods. 18%-25% IRR
Private Mortgage Deals: 3-12 Month hold. 2 Points & 10% Interest.

Most of these deals mentioned above are funded through a few phone calls & texts without ever being sent out to this email list (like today’s featured Atlanta Industrial – Office deal – $8.1M fully subscribed).

If you want to be added to my personal short list to place capital in our deals, reply to this email with the estimated amount to deploy, your cell number, & two times & dates that work this coming week for a quick phone call.

On the other hand, if you prefer to just see the investment opportunities which make it to the email list, you can sign up here.

Jewels of Wisdom Newsletter – A Developer’s Most Valuable Skill

“What is Your Most Valuable Skill?”

I asked a successful real estate developer this question over a lunch early in my career. He sat back & thought a moment before answering with one word: “Vision.”

What is a Developer’s Vision?

I’d define a Developer’s Vision is seeing something that can be done with a property that no one else believes is possible within the confines of maintaining a profit. Often, there is additional investment to create a superior project to anything found in comparable sales-with the faith that your project will command a premium.

Developer’s Vision in House Flipping

House flippers with Developer’s Vision often buy houses from us in rough condition and are much more creative in their construction phase than I would imagine myself. Small one story house receives a 2nd story addition. The façade is transformed by adding a larger porch or reconfigured entry way. Both require additional investment compared to a standard renovation project where no major alterations are made.

Note that Developer’s Vision is different than simply fixing up a house and selling it. If you look at comparable sales and match the renovation to what the market has already accepted, this is not really a visionary activity. It may be the safest route to a profit, but no new, grand “Vision” was executed.

Executing a Developer’s Vision is risky because there are no comps proving the value. You build a 2nd story addition and create a 4,200 sq. ft. house in a highly rated school district where no other sold homes exist with more than the 2,100 sq. ft. home you modified within a half mile radius to “prove” the market’s willingness to accept such a home. Risky.

However, this same inability to “prove” value offers the opportunity to price much higher than you could if there were already another property just like it. This is where Developer’s Vision pays off big-assuming you’re right and the market agreed. This is how new price records can be achieved.

Here’s an example where a small additional investment, adding a small porch and “address shutter” feature transformed the curb appeal:

The interior of this home was also impeccably designed, and I’d say with optimal Developer’s Vision. (Developer credit RESolutions Team, LLC) Photos

Managing the Risk -vs- Reward

In conclusion, for anyone reading who has limited experience in flipping houses, I’d suggest ALWAYS matching the renovation quality found in nearby comparable sales. You might implement Developer’s Vision at a small scale, as in the front porch example above to test your design skill. Before executing a larger Developer’s Vision, such as a large addition or any project exceeding $10,000, I’d plan to have at least 20 successful projects under my belt.

Jewels of Wisdom Newsletter – My Greatest Loss

My Greatest Loss

One of my first memories in life was my greatest loss. This happened somewhere around 2 or 3 years old. My favorite book at that age was The Little Engine that Could. I must have brought that book everywhere with me-so it came to pre-school on that fateful day.

Mom picked me up but placed the book on roof of the car-then drove off. The book disappeared and I was distraught. We looked around everywhere back then, but couldn’t find a replacement copy. I don’t remember the details of the event or the time period, but I still feel the sense of great loss. That feeling of loss exceeds any of the monetary losses I’ve experienced (some of which exceed 6 figures).

Alas! A Lifelong Win!

“I think I can-I think I can-I think I can-I think I can-I think I can-I think I can-I think I can-I think I can-I think I can.” This is all I remembered from The Little Engine that Could. What a fantastically strong belief system to install in the mind of a 3 year old! Most of my life, this mantra has applied: “I think I can!”

Faced with any challenge, “I think I can!” Considering executing that first fix & flip, “I think I can!” Build a $15M development, “I think I can!” Hoping to win that next deal, “I think I can!” Once any challenge has been met, this becomes, “I know I can, because I’ve done it before.”

(Aside, as I researched an wrote this, I am now realizing my mom might has simply gotten rid of the book to avoid my likely endless requests for her to read it to me… As an adult, I’d completely understand this now if that was the case. You can see why if you read it yourself.)

I Think I Can – MAKE A DEAL!!

Here’s an example of how this created the life I live now. I am a Deal Maker. Any deal begins with: “I think I can win this deal,” and therefore I make an offer. If you don’t believe you have a shot at winning the deal, you’ll never make the offer.

Further down the track on Deal Making is your follow up. Again, “I think I can win this deal,” and therefore, I follow up. If you don’t believe you have a shot at winning the deal, you’ll never follow up. In Diamond Equity’s experience, about 45% of deals occur 30 – 1,819 days after the offer is made. That is a long, strategic follow up cycle requiring a strong belief system to stay the course.

Next time you consider a deal, remember, “I think I CAN win this deal” and MAKE THE OFFER! And when the offer isn’t immediately accepted (which is 99% of the deals that get done..), remember to follow up diligently and earn that deal!

Jewels of Wisdom Newsletter – How to Retire with $1 Million

How to Retire with $1 Million & NEVER Spend the Principle

A few months back I wrote an article on retiring with $3.2 Million. That article made some assumptions on high risk, high reward investments. There is a place for that all-in strategy mapped out in that article for some investors-probably earlier in their investing career. If you’re on the other side of your investing career, perhaps within 5 years of retiring, or already retired, the types of deals mentioned in that article (distributions don’t begin for 2-3 years) may not provide for your goals.

How I Envision a Perfect Retirement – from a Financial Perspective

The goal in a perfect retirement is a steady income which covers all expenses and NEVER touching the principle. For me, there seems some security in reaching retirement under these minimum assumptions:

Paid Off Housing
$80,000 income generated from $1 Million invested at 8% per annum receiving monthly or quarterly distributions at exactly that amount, or more.

I’ve chosen $1 million as the example here, but depending on earning power, current financial position and lifestyle, this number can be cut in half, doubled, etc and the plan still works. $80,000 per year plus social security should cover the property taxes on that Paid Off Housing and allow for all living expenses plus some travel, leisure, birthday gifts to grandkids, etc

How do You Receive 8% Returns without Losing Principle

Many reading this article know how to obtain 10% returns & even a few points by making short term Private Mortgage Investments to fund Diamond Equity’s real estate deals. Maybe you even have a few more fix & flip investors to whom you loan money. If you’ve made loans like this you know the challenge is keeping that money working for 12 months straight.

For example, you loan $200K on a deal this month, it pays off a few months later at $210K. However, the next available deal is only $140K. So $70K sits around waiting for a $70K deal which comes 18 months later. Right now, many investors I talk with have a certain amount available at any given time and they’d love to be able to place that money and simply keep receiving returns. Perhaps an even 8% return is earned when you do the final calculations over the course of a year.

The Reason I’m Writing this Article

I have two friends who run debt funds which pay 8% preferred interest monthly. Both of their debt funds exceed $35 million in size. They borrow at 8% and then reinvest in large hard money loans that pay 10-15% depending on the risk. They shoulder the burden of losses and also the burden of paying the 8% even when the money is idle. Their investors love it because of the regular distributions and the lack of “down time” while their money sits idle. They live on that 8% return.

Finding an 8% even paying, passive return anywhere else in the market is very rare.

I am considering creating a fund of this nature myself to streamline the returns for our investors. I’ve written this article as a public method of thinking through the idea. Perhaps you have some feedback on whether something like this would be attractive?

No promises on whether an “8% Diamond Equity Debt Fund” will be launched, but in the interim, I am willing to pay 10% & 2 points on our short term loans. You can get detailed info on how those loans work and receiving the next Private Mortgage Investment Opportunity at www.FundRehabDeals.com

Jewels of Wisdom Newsletter – What’s the Purpose of Real Estate Investing?

What’s the Purpose of Real Estate Investing?

The obvious answer, and the purpose most people begin Real Estate Investing is to make money. A better place to begin is asking, “What is money?” I believe money is the lifeblood of the human super-organism. Money is the channel of reward, like Dopamine, which propels humanity forward. An incentive program for continuing human evolution. Without money, humankind would not have the ability to cooperate at a global level, or even a local level.

When I got into real estate investing it took me 6 months to close my first deal. I was pretty much broke at the time, 26 years old, and living with my mom. My 5 year old daughter was in town, and with no one to babysit, I had to bring her along to the appointment to meet the seller. It was a high crime area, but I didn’t really know that at the time. I signed a contract for $5,500 & found a buyer willing to pay $11,500. That $6,000 profit changed my life. It was about the money back then, until I realized the wide ranging impact of investing with purpose.

Our Purpose is Evolution

Back then, the sole purpose of the business was to make money. Now, with a few thousand deals under my belt, the purpose of Real Estate Investing-actually all of my investing activity, has become Evolution. I’m looking to further impact human evolution with every deal I work on. Even if that means simply improving one house on one street in one neighborhood. I’m sure the neighbors on either side are happy once we are done flipping a house.

I know that many business owners & their customers are happy at our Desert Oaks Plaza shopping center, now that the vacancy is cured and the improvements have been made. The center has been transformed by our investment in both time & money. That deal is available for sale, if you’re interested in a well located, stabilized Las Vegas shopping center with rapidly rising rental rates.

Our Purpose is Making Dreams Come True

When you flip a house, you are evolving that property into an even better state than you found it. The buyer likely has a dream of homeownership-buying a newly renovated house. They lose sleep during the contract period-maybe like you, the flipper-hoping & praying that the deal closes. Once it closes, you have fulfilled that buyers dream of homeownership & made that neighborhood even better. Oh, and you’ve made a few bucks doing so.

Transform Communities One Property at a Time

This is Diamond Equity’s #1 Operating Principle: “Transform Communities One Property at a Time”. Every deal you successfully complete serves to continue the ongoing transformation of our existence. While an investor could, in theory, just buy a property and sit on it-in decrepit condition, this is NOT how we choose to invest. We believe in the impact our efforts & money can create. This is good.

The Real Estate Super Organism’s Purpose

Every person who applies effort in our field of real estate contributes to the evolution. Without the Broker, the deal may never begin. Without the lender, there is no money to buy, and certainly much lower prices across the board if they didn’t exist. Without the contractor-even the laborer-the building never goes vertical. And of course without the Principle-those of us who spot the deal, make the offer, & take the risk, none of this would happen.

Plus, God said So…

Genesis 1:28, “And God blessed them, and God said unto them, Be fruitful, and multiply, and replenish the earth, and subdue it..” Our purpose as real estate investors is to be fruitful, and multiply, and replenish the earth.

Jewels of Wisdom Newsletter – Have you Ever Door Knocked for Deals?

Have You Ever Door Knocked for Deals?

My first job in life was delivering the Town Talk newspaper. It was a free newspaper you’d deliver to every house and then go door to door to collect the fee monthly. I’d get half of that collection, plus $6 per week as my total compensation.

My first business was mowing lawns. My best friend & business partner, Paul Haggarty, usually preferred that I was the one who’d go knock on doors to ask for business. He probably remembers it exactly the opposite, if I had to bet! We made good money that summer which covered the cost of the equipment, our lifestyle, & even a few BMX bikes. We were all about that in 1992.

Notice how both of those early successes included knocking on doors for business? Many of my mentors have had experience door knocking in their early careers. Chris, a friend of mine, recently bought Easter wreaths from an online wholesaler, developed a script, and then took both of his young daughters door to door to sell them at $10 each. His goal is to develop sales skills early in life. They made enough money to buy an above ground pool-which they love & cherish as fruits of their own labor.

Do You Have Door Knocking Experience?

I’m hoping someone reading this has experience as either a successful door to door salesperson OR a leader who has developed a door knocking team. I’m talking a lot more professional than the experience I mentioned above.

I’m hoping to form a partnership with someone who can build a team of door knock reps to knock on the doors of the owners of properties which we are specifically interested in buying & set appointments for our Acquisition Manager to close the deal. If this is you, please reply back and let’s talk soon.

If you happen to live in the Atlanta, Chicago, or Philadelphia region and would like to be a door to door sales rep to book appointments for us, please reply back with a resume and a cover letter explaining the area you’d be willing to work. We pay per qualified appointment, commission only.

Jewels of Wisdom Newsletter – Equity Investments -vs- Debt Investments

Private Lending -vs- Equity Investments

I’ll define Equity Investments here as investing in a partnership. This might include going 50/50 on a fix & flip or investing passively in my Self Storage Development in Lawrenceville, GA. Private lending is when you lend money in the form of fixed debt-usually using a Note & Mortgage. I personally allocate about 70% to Equity Investments and 30% into Debt Investments as a Private Lender.

These two investments come with very different Risks, Rewards, & Tax Implications. I’m not giving tax or investment advice here-just sharing from my own experience. Please note-the structure of Debt & Equity investments can be very nuanced and anyone considering any investments should seek proper legal council before doing so.

Private Lending / Debt Risk:

Secured by the Property: If the Borrower cannot complete the project and pay you back, you could become the owner of the property you’re lending on. If the loan is well below the actual value of the property, this might be a good thing.
Borrower Risk: Does the operator with whom you’re investing have more cash available to cover your interest & guarantee your principal-even if they lose money on the deal you’re lending on?
Construction Risk: The more construction being completed on a project, the greater the risk of cost overruns & delays. Back to the Borrower risk-do they have enough cash reserves to cover unforeseen issues like this? I personally never go back to my lender for cost overruns. It is always paid out of pocket.
Market Risk: If the market for the property you’re lending on declines, will the Borrower have enough cash to return your principal? And Interest?

Private Lending / Debt Reward:

Defined Reward: I pay my lenders 2 points & 10% interest, no matter what. We lost $150,000 on a single deal and our lender made about $80,000. His reward was defined & his selection of Borrower (Diamond Equity) was ideal because we had plenty of cash to cover that shortfall.
Principle Protection: When I borrow money from my Private Lenders, I am agreeing to pay their entire principle & interest back, no matter what. I’m contractually obligated to do so-which is the defined principle protection, in writing, which are expected on Debt Investments

Private Lending / Debt Tax Structure:

Short Term Capital Gains: Debt is normally taxed as short term capital gains, or ordinary income

Equity Investment Risk:

Principle Risk: In Equity Investments, or Limited Partnerships, your principle is NOT guaranteed to be returned. No matter how much cash the operator may have outside of the deal you’re investing in, they are not agreeing, or obligated to pay back the full amount you invest. If the deal fails, you may lose some, or all of your investment.

Equity Investment Reward:

Contingent Upon the Outcome of the Deal: If the deal succeeds, Equity Investors participate in that upside. If the deal breaks even, Equity Investors receive their money back, with no interest. If the deal fails, Equity Investors lose some, or all of their money. That last outcome isn’t really an Equity Investment Reward, I guess…

Equity Investment Tax Structure:

Long Term Capital Gains: Right now, the US Tax rate for Long Term Capital Gains is 20% for those in the highest tax bracket. Short Term Capital gains are 37%.
Depreciation: Many Equity Investments come with tax losses, such as depreciation, which help minimize tax bills. You can listen to this podcast for more detail on this tax benefit.

The Right Time & Place for Each type

Equity Investments that I currently own were made for these reasons: first, the tax efficiency of the gain. I’m making good money now and have heavy taxes to pay. Making Equity Investments that will distribute profits later as Long Term Capital Gains help me maximize the money I’m left with after taxes. Second-the expected greater return. I’m aiming for 20%+ returns in all of my partnerships.

As mentioned, I’m about 70% in Equity Investments right now. This is a lot of risk. Since I’m not yet near retirement age, this risk is acceptable to me right now in search of greater reward-and a more efficient tax structure.

As time goes on, I’m intentionally moving more toward Debt Investments. Defined risk & defined reward are more desirable long term-as you are better insulated from market swings. Of course this assumes you’re lending to a well capitalized, high quality Deal Maker. If you’d like to view my projects which are available to lend, please sign up at www.FundRehabDeals.com