What is a TIC or DST investment and how can you get into one today? Davide Moore of Equity Advantage sits down with Tenant In Common Expert Karlin Conklin of
David Moore: Hello, this is David Moore of Equity Advantage 1031exchange.com, and I’m blessed to have Karlin Conklin of IMG Investments with us today. And I’ve been trying to make this happen for a couple of years, and then she’s been avoiding me. I’m just joking about that, but it’s been hard to get you in here. I think you’re a busy, busy woman.
Karlin Conklin: Busy, I’ve been busy.
David Moore: Yes.
Karlin Conklin: Yeah.
David Moore: Definitely. So I’ve known Karlin for 20-some odd years. I think the first transaction we did, it was sort of baptism by fire.
Karlin Conklin: Right.
David Moore: We had a couple of clients. You had a couple of clients, twins that were relinquishing… And this is stuff I remember. See, even though it’s 22 years ago today, I remember this transaction. But the twins had roughly eight different properties, and we did what we call a “blended transaction” out of those properties into… I don’t remember what you sold them.
Karlin Conklin: It was like 140 or 150-unit apartment building, so it was eight single families into the one. But why it worked is because the seller owned it free and clear, and he could be the debt as we went through this, I mean, if somebody had to… Yeah.
David Moore: So the reason that was so important, that transactions we did, like I said, a blended transaction where you got a few of the property sold and then we had you buy then we had to do reverse out of the residual properties, and that required a reverse which required financing that would sort of outside the box. And you got that deal done because you got the seller to carry.
Karlin Conklin: Yeah, I got it, got it done.
David Moore: Nicely done. Most people start off selling a house first.
[laughter]
Karlin Conklin: Yeah. So it was a little complicated. You know, the really… To tie the bow on the story, those clients have remained with me for 22 years and with Investors Management Group, they are tenants in common in three very large apartment buildings that are doing very, very well. So a lot of this with real estate, in my opinion, is relationships over time, too.
David Moore: So that’s something a little bit about you and the way you take care of your people, and I’ve known you a long time, and then you always do that. So why don’t you tell us a little bit about… Number one, if somebody wants to get ahold of you, just best way to get ahold of you and, and tell us what you’re doing today. I mean, and how you got there…
Karlin Conklin: Sure.
David Moore: A little bit about IMG.
Karlin Conklin: The easiest way to find any of us is with the company, is at our website, imgre.com, investorsmanagementgrouprealestate.com. And that has our track record and articles I’ve written, articles about us, all of that along with any offerings that we might have at the time so… And your other question was, is how do we kind of get to where we are?
David Moore: Yeah. And how’d you end up there? And I… She just mentioned articles, okay, they’re not just articles. You are actually a writer for a couple of publications. Kiplinger, I believe is one. And you’ve done a lot of publications.
Karlin Conklin: And Globe Street, and we are a go-to for even Wall Street Journal. And the real estate, in some respects, is the simplest thing in the world, right? You decide you want to buy a house and you buy a house and you live in your house, and all of a sudden you’re a real estate owner. But when you get into large syndications, institutional-grade properties, the complexities get larger, the loans get larger, how you asset management… Manage the building becomes more complex. And when market start to change, like right now, there’s a lot of folks that want to know how are you dealing with real estate, and it’s not just a little bit of change right now, it is astronomical change really, really fast with the Feds raising rates like this.
David Moore: So for context, we are talking to you the day after Election Day in November of 2022, so when you’re watching this 10 years from now, you’ll know what we’re talking about.
Karlin Conklin: You’ll know. Right, right.
David Moore: And then hopefully, we’ll have good stories going forward, not like the ’07-’08 situation but…
Karlin Conklin: But it’s dynamic. We had an investor event a month ago and had an economist as one of our panelists at the event. And what Josh said was, as the Fed was entering at the end of 2021, looking at 2022, everybody is the indexes, SOFR, LIBOR, all of those. No one pegged inflation or rapidly rising interest rates that that was gonna happen in 2022. So we’ve had four consecutive pretty substantial interest rate hikes, right? To…
David Moore: Definitely.
Karlin Conklin: To curb inflation. And it’s a shock to the system. On the other hand, realistic we all knew this was coming.
David Moore: Yeah.
Karlin Conklin: Yeah.
David Moore: So was that Josh from…
Karlin Conklin: Josh Bodin?
David Moore: Okay.
Karlin Conklin: He’s one of the economists at Berkadia.
David Moore: Got it.
Karlin Conklin: Yeah.
David Moore: Alright.
Karlin Conklin: Yeah.
David Moore: Interesting because I had… Last Wednesday, I had Pat Stone, Williston Financial Group spoke at the CCIM chapter. So I’d sort of be interesting to compare notes on what they were both saying but… Pat, I sort of laughed walking out, because I said, “If you didn’t walk out of there feeling better than you walked in, you weren’t listening to what he had to say.” Now, whether or not he’s correct, but he just sort of felt like this was an issue that would be… We would be dealing with for the first half of 2023, and that the dust might settle after that things started getting going. But he just sort of felt like a lot of this stuff was self-imposed problems or that the fundamentals were still good.
Karlin Conklin: Right.
David Moore: It’s just we had lots of stuff going on that was causing issues.
Karlin Conklin: Yeah. And the other thing is debt is a component of how you grow your wealth in real estate. Debt is a critical component, and it’s how you place that debt. So with what we do at IMG, we started going lower and lower leverage as we entered probably towards the backend of 2021. Why? Because my partners and I, we all lived through the crash and the great recession. If anyone lost a piece of real estate it… I mean, bar none, it was probably due to leverage. A loan was due or you had to get out of a loan and you could not refinance because to go to the table, you had to bring cash. So in all the transactions we’ve done this year, I think we’ve closed half a billion this year in new acquisitions…
Karlin Conklin: Every single one of them, debt is about 55%. And so when you look at your returns, your returns, your project are lower because your debt is that one component, and we’re suppressing it. We don’t care. This is a way to grow over time. And in my opinion, unlike the stock market, real estate is a long-term game. Gain, excuse me. We’re not putting it in today, watching it and moving it to another index tomorrow. When you invest in real estate, I mean, short-term is three years for us. We’re typically five to eight years with any kind of hold.
David Moore: So it’s interesting you say that. I don’t know if you remember those of you that watch our channel regularly, hear me talk about one of my good old buddies, Bob Nelson, that we unfortunately lost this last year. But Bob made the comment, and if you’ve watched channel, you’ve heard me say it before, it’s like, “Real estate is not a get rich quick scheme. It’s a get rich slowly but surely scheme.” And his position was with one golden rule, “Never get yourself in a position where you have to sell on a recession.”
Karlin Conklin: Never.
David Moore: So he definitely echoed during… You’re echoed what he always said. The other thing, I guess, while we’re talking about it, you talk about 55%, I just want to put something in the dust right now. People here, you got this term all the time, you gotta replace debt in an exchange. And you might say, “Gee, the property I’ve given up, I’ve got 70%, 75%. Karlin just said their’s is 55%, I can’t buy it.” And it’s like, “No, you can,” alright?
Karlin Conklin: Right.
David Moore: And then debt can go away two ways. One, by going down in value triggers tax, ’cause you went down value. The other way debt goes away is by adding cash. So if want to buy into one of Karlin’s projects and you’re currently at 75%, you need to be at 55%, you’re just going to add money offsetting the reduction in debt. And that’s totally fine. And to be totally honest with you, that’s going to happen every day in today’s world because in recessionary times, you’ve got lower loan to values, you’ve got reduced equity, and inevitably people have to add money.
Karlin Conklin: And I’ll say the sacrilegious thing, which I say to our clients every day. |”Okay, fine, you have to pay a little bit of tax, get over it.”
David Moore: Yes, yes, yes.
Karlin Conklin: I mean, the fact is the tax advantages of real estate ownership are so extraordinary that whether it’s the depreciation write-off, it’s the 1031 exchange. It’s all of those things. And a lot of it keeps on deferring taxes, so you can go 20 years and really not pay anything. So if you have to pay a nickel or two, I mean, talk… I mean, honestly, it’s okay.
David Moore: Well, it’s not all or nothing.
Karlin Conklin: That’s Right.
David Moore: Right?
Karlin Conklin: Right.
David Moore: So spend what you want to spend. Every dollar you spend more than you want costs you a buck. If you don’t spend, it’s $0.40. So just get what you want to get and be happy with it but…
Karlin Conklin: With our clients, our exchange clients, many of them started with a single-family house. And then it grew into a duplex and a 10 plex. And then they turned around one day and they were 65. And they realize they don’t want to do sweat equity anymore. And so they do sell, and they’ve been exchanging that whole time. And I’ll get a call and it’ll be, “Karlin, my husband and I really want to go on a trip. And I’m like, “For heaven’s sakes, keep some of your money, maybe it’s 50 grand. Go on a world cruise and you’re going to be fine.” And I’m… Because I’m not a spring chicken either and this is the thing, “Live your life. You worked your butt off, take some of your equity, live your life,” right?
David Moore: Yeah.
Karlin Conklin: And so like…
David Moore: Yep. I like the old saying, the armored car and the hearse, right?
Karlin Conklin: Right. And it’s like my kids, probably your kids, too, they’re going to inherit enough. Have some fun.
David Moore: Well, thank you for those opening remarks. Don’t go away. David Moore Equity Advantage. Karlin Conklin, IMG. We’ll be right back. Thank you.
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 investor.relations@imgre.com
David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
