We are covering all the ways REAL ESTATE is the simplest and best investment in the world… with TIC Expert Karlin Conklin of IMGRE.COM. Part two of our series.
David Moore: Hello, David Moore with Equity Advantage, and I’ve got Karlin Conklin of IMG with me today, and we just had a entertaining opening segment. I don’t know if we’re answering questions or raising more questions, but you made a couple of comments during that period of time with the real estate, and I’ve got a look actually, ’cause you made a great comment, I had to write it down ’cause I hadn’t heard that. I don’t know if I totally believe it. “Real estate is the simplest thing in the world.”
Karlin Conklin: Mm-hmm.
David Moore: You want to explain a little bit more to that?
Karlin Conklin: Right.
David Moore: So first off, this is one of my big pet peeves, alright? Real estate in the investment world is considered an alternative investment, even the companies like yours that participate in it and the DST people, it’s a distal, an alternative investments, and I go, “No, it’s not an alternative investment, it is the real investment, real properties. The real investment.”
Karlin Conklin: Right.
David Moore: And where do people go in cautionary times, in recessionary times is a flight to quality of, a flight to hard assets, tangible assets.
Karlin Conklin: Absolutely.
David Moore: And real estate, I would say, is the ultimate tangible asset because most tangible assets, if you go by gold and silver, we all see the ads, hear the ads for gold and silver all the time. Well, you’re betting it, it’s going to go up in value, number one. And number two, if you look at what that price is quoted on that thing is you try to get that price when you sell it, it’s not happening.
Karlin Conklin: Right.
David Moore: So we’re real estate people, we love real estate, so give me a hard time with this, but you know…
Karlin Conklin: I think home ownership right now is plus or minus 65%, which means that of households in the US, 65% of those people have figured out how to buy a piece of real estate, and that is its simplest form. We have a buyer, we have a seller, we have a lender, we have an escrow, we’re done, we own. That’s how you start, that’s how a lot of people get their feet wet, and then yes, it can get complex from there because my firm, Investors Management Group, we only do multi-family, that’s all we do.
Karlin Conklin: So David, and you know better than to ask me a question about a single box or a storage or anything, we know multi-family, but what happens with multi-family then, let’s say you get a duplex, okay, gotta have a couple of tenants, you got all the tenant, landlord-tenant law, then you move up and then you keep moving up, and as you move up, the complexity becomes greater. When we talk about syndication like we’re syndicators, what you’re looking for is you’re looking for institutional grade assets that individual people simply cannot buy on their own, and there’s a huge advantage of larger buildings from just economies of scale to the kind of loans you get, to the kind of management you get, and so folks may start with their single home or they may move around, but at some point, whether it’s age, or it’s just the desire to make more without having to touch it, folks move into the larger real estate and they find people like us.
David Moore: Well, I think one of the fundamental, probably things pushing a lot of your investors these days, if you just look at rent control, I see a fundamental shift in the ownership of real estate, investment real estate, and you’re totally correct, I mean, the gentleman that sort of mentored my brother and I when we got started in investing and got started with the exchange company, he used to say, “It’s pretty simple, you got a rental house, you got one roof, you got four walls or yard, you get a duplex, you got one roof, four walls, and two families in there.” And then, so obviously, it just gets better and better with the doors and stability and diverse income and everything else. But with that said, the problem that we’re having today is that all are wonderful politicians just start taking all the ownership rights away and giving all the rights to the tenants. Rent control in the history of America has never worked anywhere, it’s been counterproductive and it’s going to be.
David Moore: And the thing that sort of bothers me most about it is, we’ve got this widening gap between the House and the have not because the cost of the house gets higher and higher, the cost of building anything gets higher and higher, and in our region, you just look at the urban growth boundary, and you got a pressure cooker in side, they just open it and things change, the costs go down, but instead of doing that, they’re putting attached dwelling units in everyone’s yard, they’re increasing density further without infrastructure, without fixing the roads or anything else, and then they want to us all be happy. Well, the big problem is that the individuals can’t afford to deal with the rent control, can’t afford to deal with the laws, the liability and everything else, and so instead of the money staying here and local ownership with people that care, because you used to put off with a couple of rental properties.
Karlin Conklin: Right.
David Moore: And you care about your tenants.
Karlin Conklin: Right.
David Moore: Somebody that works for me used to be one of your tenants, but you took care of them, you care. Well, if it’s owned by somebody back in Wall Street, do they care what’s happening here? No. So it’s a different deal. Plus, if we just look at our market here with the cost of, you know, if you were to go and sell it, how are you going to turn out what’s going on the cost of doing this? That mom and pop, they’re not going to pay those fees, they’re going to work with the tenants, where the Wall Street firm, the reed, they don’t care, they’re going to just bounce them out, take them out, do whatever they’re going to do.
Karlin Conklin: Right.
David Moore: So I just sort of see all that is counterproductive, but what it’s causing is, those people need a place to go.
Karlin Conklin: Right.
David Moore: And you’re one of the places to go, and if you’ve been on our channels, we’ve talked about DSTs is a lot. You’re not a DST?
Karlin Conklin: No.
David Moore: You’re a Tenancy In Common. So maybe let’s just talk a little bit about the difference between DSTs and Tenancy In Common and why a TIC today? So Tenancy In Common is a TIC, is the acronym.
Karlin Conklin: Yeah. We talk TICs a lot and sometimes I get a TIC on a distraction. I grew up in the tenancy in common world. What I especially like about that is that has a tendency to be most often real estate people, particularly when it comes to multi-family, we are tried and true real estate people, we’re not engineering something for a return, we are not hands-off. We’re very hands-on with the real estate itself and the ownership groups, in some respects are smaller than a lot of the DSTs, so we just went through a three-property acquisition that we wrapped up about four weeks ago, it was three different properties, we raised about $85 million, and between those three properties, we had 40 TICs, but what happens, and that’s what we do, that’s unique. IMG, we are always one of the TICs in every single deal, and in that TIC, we form a partnership, and so we can take limited partner money as little as $25000, but the voting rights…
David Moore: No, I was going to say for a $25000 it’s pretty amazing.
Karlin Conklin: It’s awesome.
David Moore: So with that said, Karlin, and a lot of times we do, also our sister company, IRA Advantage, the self-directed retirement accounts. I’m asking you, but I know the answer. Will you take IRA 401K money in your project?
Karlin Conklin: Yes, so in the IMG TIC, which is one of 10 TICs, in that particular TIC, we’ll have 50 or 60 clients, we always have anywhere from 12-15 clients that are bringing IRA money, as little as 25. We had somebody on one of these deals, we just closed half a million from one of their IRAs. So the nice thing is, again, when most people are placing IRA money or they’re placing other things through a wealth manager, they really don’t know where that money is, there are a lot of real estate people that want to say, I have money in tapestry, in Greenville, South Carolina, and if I’m concerned, I can pick up and call Dave, who’s our Director of Investor Relations, I can call Karlin, and if I can do that, I just feel like a level of comfort, whether they ever call us or not, they know that we also have invested, they know that we know everything going on with that property, and so there is a level of comfort that they know the deal, they know what’s going on, they can ask questions, because their money is all of our clients, all of you, everybody. Their money is very important to them, and a lot of our clients, what they’re doing is they’re spending 20 or 30 or 40 years building a nest egg for retirement, and for a lot of them, were their retirement.
David Moore: Definitely. So something I just want to clarify for somebody that’s watching this and is a student of TICs and they might say, Well, gee, Karlin, how do you have 100 investors in a single TIC investment? And so we know there’s a revenue procedure that limits your number of tenancy in common owners in a given project. And what is that number?
Karlin Conklin: So with us, the limit is set by the lender, so we either have a maximum of 10 or up to a maximum of 15, depending upon the size and the grade of the property, that’s it, 10-15 TICs.
David Moore: So, what I want to clarify here is when she says one of those TICs might have 100 investors, it’s one entity, so you might have 15 LLC’s tenancy in common, one of those LLC’s may have 100 investor.
Karlin Conklin: That’s correct. Right.
David Moore: Yeah. And the other thing I just want to stress, when I made that comment about the $25000 on our form, people come to us and they want to diversify their retirement account into real estate, typically what happens if a finance advisor says, Okay, I’ll sell your shares in this reed.
Karlin Conklin: That’s right.
David Moore: That’s a stock, that’s not ownership of real property, that that entity owns the real property, but you don’t have interest deductions, depreciation, cash flow, any of those things, it’s not real estate. So I just want to stress a difference in this and what’s going on there, so when we’re looking at what they’re actually buying, the problem when somebody comes to me is, you know, I got into investing in the Oregon in 1990, and I always tell stories, the first investment house I bought here was $23,000, Tom and I bought it, it was Bank One, and it was a neat old house, but 25 grand is not going to get you much today.
David Moore: So if somebody comes to me with their retirement account, it’s got $25,000 in it, it’s pretty hard for them to buy a piece of real property, so their choices are sort of, you know, you or I guess they could buy into maybe one of these crowd fund type things, I don’t know, but I don’t know if they take qualified money or not, but I know you guys do, and I just wanted to bring that up and say, for those of you out there that don’t have that much in the retirement account, but you want to diversify outside of Wall Streets offerings into real property, this is a good viable opportunity for you to do that.
Karlin Conklin: It absolutely is, but with our investors, so Investors Management Group right now, we are in 8 states, 14 cities, right now we have about a 1000 clients, and our portfolio itself is about $1.2 billion. Now, in today, election was yesterday. This is now, 2022. Real estate values are predicted to go down anywhere from 10-20%, it is a short-term problem, and the adjustment was predicted, so why we feel good, our investors feel good is even if you slice off 10% of the value of our portfolio, it’s still a substantial, and we feel good about that. Yeah.
David Moore: That’s great. Great, wonderful. Well, thank you. David Moore, Equity Advantage. Karlin Conklin, IMG. We’ll be right back.
Karlin Conklin has specialized in leading companies and charting new industries and startups for over three decades. She has sourced, capitalized, and helped in the repositioning of over 20,000 multifamily units raising nearly a billion in equity from institutional partners, Tenant in Common investors, and high-net-worth individuals. She is a sought-after expert for a wide range of real estate investment publications and events including Multi-Housing News, GlobeSt, and The Wall Street Journal.
Prior to founding IMG’s Portland office in 2015, Karlin held multiple high-powered positions in operations, sales, and marketing. She was an award-winning multifamily broker for nearly 15 years generating nationally ranked annual sales volumes. In the 1990s, Karlin served as the Director of the Lindquist Center for Entrepreneurship at the University of Oregon where she taught marketing and entrepreneurship courses and helped shape a new generation of business leaders. Karlin holds a Bachelor of Science in Journalism with an emphasis in Public Relations and an MBA from the University of Oregon.
Investors Management Group, Inc. (“IMG”) is an award-winning real estate sponsor and asset manager focused on multifamily assets across a national platform. IMG specializes in improving and managing apartment communities to enhance the resident living experience and maximize value for investors. Since 2010, IMG has acquired over 12,000 multifamily units ($1.6 billion) representing 50 properties nationally. Total investor capital in IMG-sponsored real estate exceeds $600 million. IMG has delivered to its investors an average 2.0x equity multiple and 26% IRR over 25 full-cycle investments.
IMG has delivered to its investors an average 2.0x equity multiple and 26.3% IRR over 25 full-cycle investments since 2010. For more information tune into our series or give Karlin’s team a call at the phone number below!
Karlin Conklin Principal, Co-President & COO of Investors Management Group (747) 262-5660 or email [email protected]
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David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
