The Real Estate Syndication Show

WS1876 The Future of Real Estate Investing | Highlights Steve Olson

• Whitney Sewell • Episode 1876

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Join us as we delve into the secrets of navigating a fluctuating real estate market with expert insights from Steve Olson. We'll explore strategies for overcoming challenges, discuss the rising popularity of townhomes, and uncover the art of mastering Fannie Mae loans.

Next, we'll introduce you to Figus, a groundbreaking real estate syndication platform that simplifies investing. Learn how to perform due diligence and make informed investment decisions in this complex domain.

Whether you're a seasoned investor or just starting out, this episode offers valuable insights and unveils the extraordinary opportunities of real estate syndication.


Ready to dive deeper into the secrets of the real estate market and discover the incredible potential of real estate syndication? Click on the links below to listen to the full episodes and unlock valuable insights from our expert guest.


https://lifebridgecapital.com/2023/09/13/whats-changed-in-the-market-since-2021-steve-olson/

https://lifebridgecapital.com/2023/09/14/building-affordable-rental-housing-in-honolulu-steve-olson/

https://lifebridgecapital.com/2023/09/15/why-every-investor-needs-to-own-10-fourplexes-steve-olson/

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00:02 - Whitney Sewell (Host)
This is your daily real estate syndication show. I'm your host, Whitney Sewell, Today. We've packed a number of shows together to give you some highlights. I know you're gonna enjoy the show. Thank you for being with us today. This is your daily real estate syndication show. I'm your host, Whitney Sewell. 

00:19
Our guest today is Steve Olson. He was on the show almost exactly two years ago. The interesting it was WS 1104, a 1104. I encourage you to go back, even listen then. A lot has changed and we talked about it right in the last two years, so it's an interesting time period. He goes back and talks about some things that have specifically happened over the last two years. But in case you don't remember him, he's helped the Foreplikes Investment Group develop, build and sell over 4,000 doors across the mountain west and Texas. Helped move the company into new markets, developing for rent townhouse project in Indiana, benefiting from property tax credit program there as well. He's GP on ground up rental projects in three different states. He's doing a number of different things, but, man, he has become an expert in this space and especially around why every investor needs to own Foreplikes, as you're gonna hear that in another segment. Thankfully, we're gonna get to spend some time with Steve and dive into a number of different things, but today you're gonna hear him talk about man, what's happened over the last two years and maybe what to expect in the future as well. 

01:25
Steve, welcome back to the show. Good to be back. Yeah, honored to have you back on. I love highlighting guys like yourself, Engels, who just have a very high level of expertise, been in the business for a while and just doing some amazing things. So I wanna dive in. I know it's been like I mentioned in the intro. It's been two years since you were on, and actually two years to the day today. So they were recording anyway that your other show went live and so I'd encourage the listeners to go back and listen again. It's WS1104. So what? 700 and some shows ago. So, Steve, but wanna dive back in, give the listeners a little update over the last couple of years. What's happened with you? How is your? All business changed? A lot's happened over the last two years. Right, Give us a little insight on what's happening with FIG and let's dive in. 

02:17 - Steve Olson (Guest)
Well, yeah, I mean, when you talk about what's happened in the last two years, just a little bit. It's certainly an interesting time to look back on and reflect. Last time we talked I don't know that the market got much hotter than the last time that we talked. That was probably about the peak of the market, at least here in the Western US and the Rockies, where I am, and so things are substantially different right now. Back two years ago, land sales, land sellers, were completely driving the bus and would get whatever they wanted. They would not give you the ability to eliminate your entitlement risk. They basically said I've got land, you want it? Pay me my money. In fact, pay me more and you're lucky to get it Close in 30 days. Thank you right. Those were the terms in late 2021. They've changed a little. I think that land sellers have backed off of their price a little, but they love that 2021 price. They want to get it. They're kind of waiting around to see if there's any suckers left that'll pay you the 2021 price. They've budged a little bit on terms. Some of them, I've noticed, are willing to give you more time to close. They might let you get to preliminary plat. Some might even be willing to do final plat, though they might want some hard earnest deposits by then. So I mean, that's good. It doesn't make things pencil a lot better, though. 

03:51
The land equation is a smaller piece of it. It's these construction costs and interest rates. We saw some relief in construction costs when the rate hikes began and demand was stifled to a degree, but in some ways they're kind of back up again. Labor is such a problem and the whole world is growing and things are changing. So this supply chain is a global thing now. So in a way it's more efficient, but it's also more complicated. 

04:26
So that's a challenge for sure. And wow, on the interest rates, I've got like 18 deals on my board right now and I just don't know which ones are going to work, if any. And it's that interest rate. So we've got to see that come down, or building costs come down or rents go up. You know we can't be at this point where there's so little transaction activity. It's not I wouldn't call it a healthy market. So it'll be interesting to see when we record again two years from today, exactly because that's our thing, I guess which one of those gave, because I think it would have happened by then. But everybody's got an opinion on this one, don't they? 

05:07 - Whitney Sewell (Host)
They sure do. 

05:08 - Steve Olson (Guest)
Yeah, it's interesting. 

05:09 - Whitney Sewell (Host)
You say 18 deals on the board right now, and you know it's a hard spot, right. Not sure if any of them will work because of the interest rates or construction costs, or, you know, labor supply, all those things that you mentioned, all those unknowns, right, that have changed significantly over the last two years. You know, are those projects I say that are under contract now? Are you all on the land? Or you know where are those 18 deals at in year-olds process? 

05:35 - Steve Olson (Guest)
It's a mix of everything. 

05:36
Yeah, yeah, properties we're considering pending LOIs under contract closed, and you know stuff that you closed six months ago that wasn't completely gift wrapped. Now you're having to re-engineer that thing and figure out how to make it work Anytime your cost of debt is higher than your cap rate. It just makes it. It makes it difficult, you know. So I mean, you get a little relief when we do fourplexes, because investors do have the option to buy that interest rate down a little and the rate seems to be floating right there. Or, if you buy it down, you can flip that cap rate equation. But that requires an investor who believes that when they refi in late 2024 or early 2025, that's when most of our new stuff would be up for refi that they're going to be able to do that, or that rents are going to be higher. And so I think you take half the investors off the board just then, because their mentality is well, I don't know, I'm not playing that game right now, so, and I can't blame them it's a really uncertain time to be deploying capital. 

06:47 - Whitney Sewell (Host)
Yeah, yeah, no doubt about it. You know, as far as those projects, I know, this is where a lot of listeners are probably at right now as well. Whether they're passive or active. They're invested in a deal that they probably did exactly what you just said. They bought it six months ago, right, or 12 months ago, and now it's like man, what do we do? Do you have any example or two that's like man, okay, this is how we have shifted. You gave one there, but anything else, that's like man, okay, we're going to make this deal work, be able to make this deal work because of this thing we did right, or whatever it may be, where you all got creative to still make something work. 

07:25 - Steve Olson (Guest)
Well, there's one I'm thinking about in Texas where the city required what's called a condo plat. Now I do some ground up GP work where we develop a site and we bring in LPs a lot like what you talk about on the show but the bread and butter is selling off individual foreplexes in a master plan community. But this particular city had been insisting on a condo plat, and a condo plat basically means the investors who buy the duplex or the foreplex don't own the ground below their units. That's going to be like an HOA or some kind of other entity that owns that, and so anytime you do that, the tricky part is if investors want to own that with 30-year fixed rate debt the same kind of debt you buy your house with the TANI may will not allow more than 50% of a condo plat to be investor owned. 

08:26
Problem is we're 100% investor owned from day one, and so that means we got to go commercial or some kind of portfolio financing, which is even tougher because now we've got debt coverage ratios, we've got bigger down payments, we're fighting against the current. So we've gone back and retreated this seller for more time to go back through the city and do a traditional plat and hopefully talk some sense into the city about this condo plat thing doesn't do what you think it's going to do. It actually just complicates things more. We need to go with a traditional plat here, so that's a key factor. Other things we've been doing too, and this is like we're getting into the weeds. But hey, you asked me something. 

09:12 - Whitney Sewell (Host)
I'll tell you. 

09:13 - Steve Olson (Guest)
And I'll keep this one simple. But especially in Texas, you've probably had people on talking about the brutal, brutal increase in insurance costs In the Houston Metro companies that write policies for an HOA right, we do a bunch of townhomes. There's a master policy over the top. I think they're down to two insurance companies in Houston right now that do those. And boy do they know it. Right, they're going to jack that bit up through the ceiling. And then the Harris County property tax assessor has joined the party as well. They've just rapidly been increasing assessments. 

09:50
You try to go in and fight and appeal those and they're so overwhelmed that they've hired pardon me glorified TSA workers to do their tax appeals, and so it's not the most efficient process. And so where do you get savings? Do you just say I'm not going to develop in Texas right now? A lot of people have said that. But one thing we've done is we call it. We've gone HOA light right. We're trying to do fully detached buildings so we don't have to do a common insurance policy where the top owners can get their own insurance and the carriers haven't bailed out as much on something like that. Now you can get nationwide and all state and state farm. You've got a lot of choices and then we're going zero escape on everything. We don't want that water and sewer bill I mean, you wouldn't want that anyways. 

10:36
But this tight cost environment is making us have to really really think, and if you do that, you can slightly nose right up to where cap rates and interest rates are about. Even so, now it's a question of how much time do we got Something's going to flip here at some point over the next six to 12 months. Where do we get interest rate relief? Because I firmly believe if rates today or if rates in a year are where they are today, that's a lot more renters in the pool. Those are people that cannot buy houses, and that's eventually going to have an effect on rents, as painful as that would be in an already inflationary environment, so that I think the rates would be what gives before that. But that's just something we're thinking about, because you got to grab those dollars wherever you can. This may be a good thing, because it really makes you have to think and get creative. 

11:31 - Whitney Sewell (Host)
Yeah, I know we've talked on the show with numerous guests recently. I mean, there are other. There's times that are tougher, right, exactly what you said. We've got these 18 deals in some spot, and then the interest rates go up or all these things, and all of a sudden we're in an environment where that we didn't expect and we're having to get creative in ways that otherwise we wouldn't have. We wouldn't have worked so hard to get as creative as you are now without this environment. 

11:58
And I think many of us will be better, you know, in the long run, right, because we've had to get creative. We had we've had to think out of the box and and unfortunately there'll be a number that won't right and probably won't be operating, you know, in two years from now. But you know, the ones that can get creative can think out of the box, like you're talking about man, we've got 18 deals. What are we going to do? And we're going to go to the city. We're going to go to, you know, do these things. We're going to change the way we operate a little bit so we can make things happen. I like that, that, that thought process, right, and being pushed in those ways. It's not always comfortable right. It's not always the fun thing in the moment, but I do think that most that that we'll push through that will there'll be better operators right In the long term because of it. 

12:44 - Steve Olson (Guest)
Yeah, I think you're. You need about 10 times the work to get about half of the result that you used to right now. That's that's the way it feels. Yeah, and you know, real estate's funny because I look back on it. I've thought of this over and over again. If it was easy, everyone would do it, because it seems like there's always one piece of the puzzle missing where you go. I've got all these things humming on all cylinders. If I could just have this thing work out. But that's why you're making a profit is because you figure out how to make that work. And if anybody could just come along and plug that in, this would be a very, very crowded space. So it's, you know, right now it's that it's the interest rates. A year, two years ago, it was supply chain. I mean, you'll pick, pick a number. It's always something. 

13:30 - Whitney Sewell (Host)
Yeah, yeah, and I normally talk about this more or ask more about it during the end of the show, but this is a great place to talk about. You know, you mentioned, like you, you expect something to happen right, the next six, eight months or 12, as far as interest rates, or maybe interest rates are going to change, not sure. How are you preparing, you know, for maybe what you expect to happen? You talked about it a little bit, but maybe we, you know, dive into that a little bit more at the moment. 

13:55 - Steve Olson (Guest)
Well, it depends on the nature of your, of your project, of course. I just think it's smart to have a lot more cash on hand. You know, we've got a couple of projects we're selling right now that are platted as single town homes and we kind of ended up there. They weren't originally intended to be something that FIG would do, but our our ownership group kind of ended up with this land. It's single town homes. I thought that that wasn't going to do very well. 

14:28
I was very surprised to see investors gobble those town homes up and as I talked to them, the general sentiment was I've got cash, I just don't want to jump into the deep end of the pool right now. One or two town homes is something that I can do. So this, this, this talk of timing the market I'm going to wait till X happens. I'm going to wait till Y happens. I don't know when or what that is, and neither does anybody listening to this, as much as they might think so. Right, we all. We all have our opinions about it. 

15:00
So what I'm doing is keeping cash and, as deals come aboard. That makes sense to me. Today I invest and could things happen in the market over the next year or two years that make me go. That probably wasn't the greatest investment as possible. I'm highly skeptical that I'll regret it in five years, though, because I'm the type that always likes to be investing because I don't know what the market will do. So I think, keeping cash that you can jump on those as they do pop up, and then fixed rate debt, fixed rate debt, fixed rate debt and by by interest rate caps when you can. 

15:40 - Whitney Sewell (Host)
Yeah, I think it's very wise advice, even you saying I'm not sure what's going to happen. I don't know what's like. Nobody really knows what's going to happen six months from now, right, but I love the. You know just, we're going to have cash on hand when the deals come. We're going to be prepared, right, uh, to invest. And so, uh, I I just yeah, I think it's very wise and I think it's, uh, you know, being prepared with cash. Cash is king, right, no cash to crash, yeah. 

16:08 - Steve Olson (Guest)
I remember oh wait. I remember, oh wait, whitney. And it was, uh, you couldn't give real estate away. It was the end of the world. I mean CNBC, when Lehman brothers collapsed, um, they, they were literally talking about so is this it? You know, is this when we all punch out? You know they were, they were freaking out and I remember, eventually we, we regressed to the mean, which was people need somewhere to live. All the financial markets and all the chaos didn't change the fact that you have to lay your head somewhere at night. And until they invent a technology where that's not the case, I am, I am bullish on real estate over the long term. So there's a lot of noise in the market right now, but I still think we got to live somewhere and you know, generally most of these assets there are exceptions, of course they're occupied. You know tenants need somewhere to live. It's it's your capital stack. That's the problem. That's that's funky. You got to figure out how to how to fix that. 

17:09 - Whitney Sewell (Host)
So many things to look forward to right over the next year. I think I hope it's not an oh wait time period again, but but, man, I still think, even going back to what you said, having more cash on hand you're going to, you're going to survive longer, right yeah? 

17:26 - Steve Olson (Guest)
Whatever most people think it's going to be, it's probably not going to be. That, yeah, that's so it it. Things tend to surprise us. I mean, if everybody could predict what was next, I mean I think it's going to be a big thing next. We would never have these kinds of things happen, Right? 

17:40 - Whitney Sewell (Host)
How many couples or you know investors have you seen take advantage, say, of all 10 loans? Or maybe even their spouse as well, or other family members have creative. Have you seen people get with that? 

17:53 - Steve Olson (Guest)
Oh, I've lost count on how many have done it because I know we're always on the line with our mortgage guys of so and so needs to close, but they're waiting to sell this one over here to free up one of their 10 slots with Fannie Mae. So you know, people are just trying to get that efficiency, like you might have a couple of single family homes and your slot of 10, 10 loans in there and that's okay Gradually exchange into duplexes, into triplexes, into fourplexes, get, get more doors for that fixed rate debt. So people do all kinds of things and and a good investor, friendly mortgage mortgage rep is going to know about that and if you don't have one, you can contact us. We'll refer you to ours. Um, I think it's tremendous because you hear these stories in the news about the rates adjusting and and you know, expenses crushing people out of deals because now the bank's calling for for cash reserves. You're below the one, two, five debt coverage. That's off the table here. 

18:53 - Whitney Sewell (Host)
Yeah, now it's incredible the type of debt, right, we can get today. No doubt about it. Yeah, it's. It's a. That is an interesting thought. You know, I can see a number of people wanting to say, oh, I don't want to be a landlord personally, right, but yeah, like you said, you can find a local management company that that will take care of them for you, right? And, and you know, do you see, most people will hold long term or they'll just, you know, and refi maybe the ones that they have, or they do sell. You know, if they have four plexus, they're going to often do 1031s, or you know what's been the long term plan there for most of those people. 

19:31 - Steve Olson (Guest)
I think it's just continually and this is for any portfolio just continually recalibrating as it makes sense. Sometimes you might look at an asset and it becomes a question of math right, I owe $700,000 on this four plex. My rate is X. It's worth 1.1 million. If I liquidate what, how can I deploy those dollars? And what does that equate to? Is it a more efficient use? And I, yeah, I have seen people and that's been a little easier. 

20:01
Whitney, I will say, over the last you know, six, seven years, did you buy real estate? Great, wait, a year you made money. We're not necessarily in that, in that market, anymore right now. You've got to be a lot more picky about trading, but people have been able to use market appreciation to trade and to replicate, to play with house money, if you will. I've seen a lot of that happening. So it'll be interesting over the next few years when, when arguably, we don't have the wind at our back as much, I think you know the math is going to be a lot more involved. You're saving, you're put in, socket away that cash flow and can you get that efficiency? So people are always doing it. I think it's. It's not as simple as oh, I'm going to buy 10, four plexes. You got to work at that right Gradually accumulate it. 

20:50 - Whitney Sewell (Host)
All right, steve. Now I love the, the push there right and the insight that you have about it that most of us wouldn't, we wouldn't dive into the thought enough to realize, hey, that it may be a really good avenue for us, or me and my spouse, and so I think just bringing that to light for the listeners and myself it's made me think. You know, for myself, because it's something I've steered away from right, as we bought a lot of multifamily, hundreds of units at a time like, oh, there's no way I want to go back and buy, you know, a small multifamily, something that I've got to manage, but but maybe it's something that I should consider. We're going to shift gears. Just a little bit to a few final questions, steve. What's your best source for meeting new investors at this time? 

21:30 - Steve Olson (Guest)
I've gone to a lot of in-person events and those are fun not necessarily as efficient as being online in forums Twitter or I think it's called X now you can meet a lot of people online a lot and it's right at your fingertips all the time. So I think that's been the most useful for me. And podcasts too. You know I hear people on podcasts that so I reach out to you, be surprised how responsive they are, because you get to hear them for a while and go, yeah, that person's, that's the kind of people I want to be around more so. But online is extremely underrated. You know people are online having conversations in Facebook groups right now as we're recording, so you can spend five grand for a ticket and fly somewhere. It doesn't mean you shouldn't there are merits to that but I mean think what you could do in 30 minutes of networking a day online and the people you can meet. 

22:27 - Whitney Sewell (Host)
I think it's very wise and I think I have, and I'm having to learn that the hard way. Yeah fortunately that it is a much more efficient use of time and money because you can network and meet so many people online. 

22:44
I love the in person events, to love speaking out of events, all those things, but man, it's costly, right yeah and you know, spending the same amount of time or capital, a divided, say you know, you know, even four times a four days a week, right, you know, or you get more great. I think you're going to meet more people and more investors. I think it's. I think it's very wise. Is there a way you manage that well? 

23:05 - Steve Olson (Guest)
Well, you just have to be make a conscious effort on it. You know I've got four or five Facebook groups that I'm in. I get to go in there and ask questions and see opinions and see what other people are talking about. I'm in a couple of groups on Twitter that do the same and it actually we might have the reaction that this is going to make you not go to in person events. It's going to make you want to go to more of them. Warning Okay, because you're going to meet some cool people. It is going to help you filter out which ones you should go go to and which ones you shouldn't go to. So if anyone's trying to expand their network, start with 15 minutes a day, start making some tweets, get get on some Facebook groups, make comments, offer free advice. There's a knee jerk reaction. I shouldn't offer free advice, will tell that to you to and Google. You know it's free, so get out there, show your value and you cast that net and the right people start to come into your life. 

24:04 - Whitney Sewell (Host)
Steve, what's your best advice for passive investors right now? 

24:08 - Steve Olson (Guest)
This is a time for patience and perspective. When we were talking in one of the earlier segments, people need a place to live at night and with all the mayhem and noise in the market right now, that doesn't change, I think. Patience and perspective. We've heard of this real estate analyst, john burns, consulting out of California and I've seen him a number of times, and there's an interesting problem brewing on the horizon right now and we're not looking at it as much because we're looking at what's in front of us. With interest rates, builders are slowed down a lot. There's the COVID crazy inventory that's hitting the market and then it's absorbing right now. But after that, what? What's happening after that? I mean, if it's hard to operate and get new deals out of the ground right now, what does that mean for two years or three years from now? I think we need to have patience and perspective. 

25:04 - Whitney Sewell (Host)
I'm grateful for your time and your give back to us to tell the listeners how they can get in touch with you and learn more about you. 

25:11 - Steve Olson (Guest)
Absolutely, and thank you for having me. I love coming on your show. It's my kind of people learn more. Go to figus fig like the fruit. Dot us and you can see me there, send me questions and comments and whatever you want, that's. That's where I am easy to find. 

25:30 - Whitney Sewell (Host)
Thank you for being with us again today. I hope that you have learned a lot from the show. Don't forget to like and subscribe. I hope you're telling your friends about the real estate syndication show and how they can also build wealth in real estate. You can also go to lifebridgecapitalcom and start investing today.