James is a featured contributor to the 2024 Guide to Colorado Real Estate Investing Strategies book. In it he writes about Hybrid Investing, Alternative Asset investing, Partnership, Meetups, and Content.
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James Brown’s Colorado Real Estate Investing Strategy 2024
ABOUT ME
INTRODUCTION
I thought “Shiny Object Syndrome” would go away eventually when I first got started in real estate. I know a lot of people experience the same challenge because there are so many ways to make money in real estate. This book isn’t necessarily going to help this condition! My business partner Toby Hanson and I still struggle with it, but we also realize that markets are different, markets shift over time, and some seemingly different strategies can be complementary and powerful when combined. By combining strategies, you can protect from downsides and take advantage of upsides. We understand there are risks in any kinds of investing and we can make tons of money quickly, but we, and other investors we partner with say that it is paramount to focus on safety, security, and long-term growth. We’ll leave the high-risk stuff to other people that have a stomach for that.
HYBRID INVESTING
Hybrid Real Estate Investing is what we call the ways we invest in single family homes using Lease-Options (aka Rent-to-Own) as a medium-term exit strategy. We get cash up front from our resident-buyers. Then we get monthly cash flow from rent. And cash later when our residents get a bank loan to buy the home and cash us out. In the past we exclusively focused on “buyer-first” where we find buyers that cannot get a traditional loan and we buy homes for them. We still do that model because we get more up front and do not have any risk of vacancy up front. The problem is that we did not consistently find enough of those buyers so we added a proven property-first model because we can buy as many as we and our passive capital investors want. We can find more buyers since we require less down, but still enough for them to have skin in the game. What we like about it is we avoid doing risky remodels with high holding costs, dealing with contractors, or dealing with regular renters that do not have much skin in the game or the intention of becoming homeowners. We also reduce typical vacancy risk, capital expenses like maintenance and repairs, and paying for property management. Our returns are better than regular rentals too. Plus we are helping deserving people become homeowners. There’s a lot more I could go into but those are some of the highlights.
ALTERNATIVE ASSET INVESTING
We love our Hybrid investing model but there are also other asset classes we like for different reasons. Simply diversifying within real estate is one reason. Another is because we need to have a full 20% down and the ability to get financing for the rest when we buy on-market so that’s limiting. Of course, there are other ways to finance, like seller financing, buying subject-to existing loans, finding assumable loans, and DSCR loans. Sometimes we may just want to invest using the cash from our IRAs, home equity or insurance policies for a straight return on debt, without needing to qualify for a loan or put down $100k or more for a 20% down payment. So, we partner with experienced operators (GP’s aka General Partners) in real estate syndications. These operators are experts in buying, adding value and operating specific asset classes like multifamily complexes (apartments) and have a track record in that space. Others assets classes we like are self-storage, mobile home parks and RV parks. We are not exclusive to Colorado but if the numbers work, of course we’d like to have them here because we know, love and believe in the long-term health of the market in Colorado.
PARTNERSHIPS
We have formed partnerships in order to have “Family Office” level advisory support without having the full-time staff that is typically only in place for ultra-wealthy families. As the saying goes “Your network is your net worth”.
Fund Managers: We are working with high-level fund managers that have a track record of getting double-digit returns with low treasury-level risk. They did even better during the last recession! I have a lot to learn about how they do it but that’s the beautiful thing about partnering with people. We don’t have to know it all to be successful.
Trusts Experts: We work with a team that has 40 years of experience setting up trusts structures that are designed and proven to provide tax savings, tax deferment and asset protection. In the past only the ultra-wealthy typically knew about or could afford to set these up and properly use them. We also like it because we never have to do a 1031 exchange again!
Infinite Banking Experts: Also known as “Bank on Yourself”. This is a tool that allows us to leverage the value of dividend-paying permanent life insurance policies. It’s a strategy that has become highly refined over the years to use specifically for real estate investing because the cash value is protected and liquid. We don’t have to wait on banks to approve loans or deal with underwriting. And the money in the account is always compounding.
SHOWS
2024 will be the second full year that I will host the “This Month in Real Estate Investing” show. I get to share and learn from a panel of three other experienced investors where we talk about a wide variety of investing strategies, asset classes and markets that appear in the news. I’ll also continued to be a guest on other shows where I primarily share our Hybrid investing model. A big part of investing is constantly learning, so hosting the show and being a guest on other shows helps keep me on my toes.
MEETUPS
Starting in December 2023 we joined forces with some other movers and shakers to launched the Colorado Cashflow Club. It’s a monthly in-person series with an online community. The format is unique in that it is focused action-oriented exercises. We will have a variety of speakers including myself and the other organizers. We will cover a variety of investing strategies and encourage interactive networking both during the events as well as after the events in smaller groups or one-on-one to build real, solid relationships.
CONTENT
I plan to create and post more video content sharing my knowledge with anyone that wants to join me on this exciting journey.
