Tag Archives: Real Estate Investing

Business Articles, Investing

Howard Marks 6 Investing Principles

Recently while listening to Oaktree Capital’s Co-Founder Howard Mark’s it was clear I needed to pull up my notes and write down for you these 6 Investing Principles which give Oaktree’s Team an Investing Edge in the Market.

Like most value investor’s we all know the steps of using Benjamin Grahams strategy from the Book Intelligent Investor when valuing a Stock of Investment that is trading at a steep discount. Well like Graham, Mr. Howard Marks puts his own personal twist and strategy to work while adhering to a few universal Basics Graham has taught us all as Value Investors. It is said when Mr. Marks writes an Annual Letter or his famous yearly Memo and releases it? Warren Buffett himself stops what he is doing and reads it.

During an interview recently Mr. Marks shared; ” I wrote my yearly memo for nearly 12 years and knew that not many people would read it. But one day after the 15th year or so? It basically became an overnight success.” That gives me hope that maybe one day my little Investment Blog will also be as interesting as Mr. Howard Marks annual Memo’s. Just maybe.

These Principles Guide Our Investment Process

  1. Risk Control. Managing Risk should be a Investment Managements Greatest Investment Objective. Without managing risk through extensive Due Diligence and heavy research and planning? Our Investment thesis maybe unproven.
  2. Consistency. When thinking about making Bad Investments to Knocking one out of the Park like a Baseball Player, an Investor must be consistent with the performance of their investments. On a scale of 1-10? It’s great to be hitting Home Runs with Investments that always win. But when things go bad and they often due with unforseen Risk with Investments? It’s better to be averaging a success rate range in the upper middle of 3-6max. And not allow the bad beats of Bad Investments to bring down your Median Average of Consistency. Very Important.
  3. Be Selective and Look inside the less efficient markets for opportunities. Most markets are highly efficient. But there are places within markets where efficiency is lacking. Those are the spaces where you will be able to apply the Value Investor Graham basics and WIN! Finding Investments that are Cheap and look over leveraged? Maybe just exactly what you have been looking for to apply the skills we have learned over the years. Emerging Markets where information is not as transparent and is also not as available? Marks say’s this is where you will find Deals.
  4. Focus on a High Degree of Specialization. Mr. Marks say’s “Our people at Oaktree do a few things well. We are not Generalists.”
  5. Investment Decisions are not driven by Macro Forecasts. Don’t allow the wind blowing over the markets to catch your sails and take you off course to far away lands. We are Fundamental Analysts. We use Bottom Up Strategy.
  6. We are not Market Timers. Mr. Marks emphasizes “If it’s cheap today? We buy it! We don’t need to wait six months and see if it will be cheaper. That makes no since.” I tend to agree with Mr. Marks. When your looking for investments? Your Thesis is proven correct or it’s not. Apply the Rules and Skills we have been taught.

Did you catch my last Article on Commercial Real Estate HERE.

Additional Notes from Mr. Marks that are very relevant to Investment Management and Investing for Success.

“You Can’t Predict. But you can prepare.” “Have a Large number of Good Investments is our Mantra.” “Find Good Companies with correctable Bad Balance Sheets” “Distressed Debt holds opportunities” “Find Good Companies that have fallen on Hard Times.” “Look for Companies with Good Managment with Too Much Debt.” “How do we fix this?” “Our Credit committee during the Bankruptcy process can fix and raise the value. We get profit from our efforts.” “We reject Onerous Debts” “We are not turnaround artists.” “All we focus on is Senior Secured Debt obligations.”

In the End? Our team Avoids Losers and Bad Companies!

In Conclusion

In conclusion to this week’s post on Investing Philosophy, If you do adhere and adopt the unique and proven principles in this post for your own purposes? It’s very likely you will be happy with the results that follow. I do hope you learned something from Mr. Howard Marks Investing Principles. And do feel free to share todays article. With that I personally Thank you for stopping by and reading. And I hope you will come back and visit my Investment Blog soon.

Godspeed.

JS

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Business Articles, Finance Articles, Financial Products, Real Estate, Securities

“Asset Backed Securities”

What are Asset Backed Securities? “Why every Finance Professional Should Know All the Asset Classes and “How they impact our Community and Business’s.”

Asset-backed securities (ABS) finance pools of familiar asset types, such as auto loans, aircraft leases, credit card receivables, mortgages, and business loans. In one way or another, these asset types represent contractual obligations to pay.

  • These contractual obligations to pay often rank senior to a borrower’s traditional debt obligations, reducing ABS investors’ exposure to the borrower’s financial health. ABS also have many other investor-friendly features that may help protect against loss and improve liquidity, such as traunching (SEGMENTS) of risk, over-collateralization, and diversity of payers in each underlying pool. Despite these and other strengths discussed in this report, some ABS and other forms of structured credit continue to offer higher yields than similarly rated corporate or municipal bonds. ABS investors’ principal job is to analyze the cash flows from these obligations to assess value and the possibility of loss, rather than relying solely on the current market prices of hard assets, the reputation of a sponsor, or the presence of an investment-grade rating.
Guggenheim

What is a RMBS? (Residential Mortgage – Backed Security)

Residential Mortgage – Backed Security is exactly what it sounds like. A Home or Residential Building Mortgage Contracts packaged and registered by a Investment Bank Institution placed into a folder with other Residential Mortgages and Packaged as a Security product by the Investment Bank for the purpose of trading and Investing within the Public Markets.

LARRY FINK – BLACKROCK

1970 to 2000

It is with great enthusiasm that I am able to introduce the Man who pioneered Mortgage Backed Securitization. Mr. Chairman of BlackRock Larry Fink. According to Wikipedia’s Profile on Fink? Larry started his career in 1976 at First Boston, a New York-based investment bank,[13] where he was one of the first mortgage-backed security traders and eventually managed the firm’s bond department.[14] At First Boston, Fink was a member of the management committee, a managing director, and co-head of the Taxable Fixed Income Division; he also started the Financial Futures and Options Department, and headed the Mortgage and Real Estate Products Group.[15]

Fink added “by some estimates”[3] $1 billion to First Boston’s bottom line. He was successful at the bank until 1986, when his department lost $100 million due to his incorrect prediction about interest rates.[3] The experience influenced his decision to start a company that would invest clients’ money while also incorporating comprehensive risk management.[3]

In 1988, under the corporate umbrella of The Blackstone Group, Fink co-founded BlackRock and became its director and CEO. When BlackRock split from Blackstone in 1994, Fink retained his positions, which he continued to hold after BlackRock became more independent in 1998. His other positions at the company have included chairman of the board, chairman of the executive and leadership committees, chair of corporate council, and co-chair of the global client committee.[3][15] BlackRock went public in 1999.

For more info on Mr. Fink please refer and read Blackstone – Mr. Scwarzman’s Book “What it Takes“.

Continuing with Asset Backed Securities.

Did you catch and watch my latest Youtube Channel Video on Derivative Contracts Below?

Commercial Mortgage Backed Security

(CMBS)

A commercial mortgage-backed security (CMBS) is a type of fixed-income security. It is backed by real estate loans. These loans are for commercial properties. They might include office buildings, hotels, malls, apartment buildings, and factories.

Learn more about CMBSs, how they work, and what they mean for individual investors HERE.

In 2008 WallStreet’s Lehman Brothers Investment Bank was overly exposed by backing, and registering TOXIC Securities, otherwise known as Subprime Mortgage Backed Securities.

Watch as Warren Buffet shares and explains more about the Financial Crisis that happened in 2008 Below.

CDO SWAP Derivative – Collateralized Debt Obligations

According to my friends at the Corporate Finance Institute: A Collateralized Debt Obligation (CDO) is a synthetic investment product that represents different loans bundled together and sold by the lender in the market. The holder of the collateralized debt obligation can, in theory, collect the borrowed amount from the original borrower at the end of the loan period. A collateralized debt obligation is a type of derivative security because its price (at least notionally) depends on the price of some other asset.

Historically, the underlying assets in collateralized debt obligations included corporate bonds, sovereign bonds, and bank loans. A CDO gathers income from a collection of collateralized debt instruments and allocates the collected income to a prioritized set of CDO securities.

Similar to equity (preferred stock and common stock), a senior CDO security is paid before a mezzanine CDO. The first CDOs comprised cash flow CDOs, i.e., not subject to active management by a fund manager. However, by the mid-2000s during the lead up to the 2008 recession, marked-to-market CDOs made up the majority of CDOs. A fund manager actively managed the CDOs.

Finishing out this month’s post on Corporate Finance and Investing, I genuinely hope this article and post was of value to you. Did you know I began learning all about the depths within Corporate Finance only few years ago? This has been a difficult road. But I am having a Blast learning and becoming a Professional Investor and Corporate Finance Professional. There have been times learning all these Financial Products has been Challenging. Especially learning the exact details of Markets, Contracts, and the growing list of Sophisticated Financial Products. But I can say with certainty all my efforts and has been worth the effort. And I do hope you will share the Post. And until next time? We will see ya. Thank you for reading.

Godspeed.
J.S.

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Investing, Investment Adviser Arizona

Pooled Investments: What you need to know?

Today’s post will be fairly quick about Pooled Investments, Unit Investment Trusts “UIT’s”, Open End Funds, Closed End Funds, thier Management companies, ETF’s Exchange Traded Funds and REIT’s.

On my road to obtaining my Series 65 Investment Advisors License I have been learning and polishing my skills within Investment Funds. Today’s post is a quick need to know for Investors who have been curious and have been search for more detailed information about Pooled Investments? What are their uses, and how they work and more? Today’s post is what you have been searching for!

Unit Investment Trusts

In U.S. financial law, a unit investment trust is an investment product offering a fixed portfolio of securities having a definite life. Unlike open-end and closed-end investment companies, a UIT has no board of directors. A unit investment trust UIT is one of three basic types of investment companies. The other two types are open-end funds (usually mutual funds) and closed-end funds. Exchange-traded funds (ETFs) are generally structured as open-end funds, but can also be structured as UITs.

Open End Funds

Open End Funds are usually recognized as “Mutual Funds” and used as Pooled Investments. According to the SEC Website:

  • Mutual funds generally sell and purchase their shares on a continuous basis, although some funds will stop selling when, for example, they reach a certain level of assets under management.
  • Investors purchase shares in the mutual fund from the fund itself, or through a broker for the fund. Investors cannot purchase the shares from other investors on a secondary market, such as the New York Stock Exchange or Nasdaq Stock Market. The price that investors pay for mutual fund shares is the fund’s current net asset value (NAV) per share plus any fees that the fund may charge at purchase, such as sales charges or loads.
  • Mutual fund shares are redeemable. This means that when mutual fund investors want to sell their fund shares, they sell them back to the fund or to a broker acting for the fund. Investors sell their shares at the current NAV per share, minus any fees the fund may charge at redemption, such as deferred sales loads or redemption fees.
  • Mutual funds are registered with the SEC and subject to SEC regulation. In addition, the investment portfolios of mutual funds typically are managed by separate entities known as investment advisers that are also registered with the SEC.

Mutual Funds are also SEC Registered Securities and traded on the Open Primary Stock Market.

Closed End Fund

Closed End Funds are also known as Closed End Investment Management Companies like Blackstone, Morgan Stanley, Vanguard typically offer their funds to Accredited Investors and Institutional Investors. According to the SEC Website:

There are many varieties of closed-end funds.  Each may have different investment objectives, strategies, and investment portfolios. They also can be subject to different risks, volatility, and fees and expenses. Fees reduce returns on fund investments and are an important factor that investors should consider when buying shares.

Exchange Traded Funds ETF’s

The SEC Investor Website classifies ETF’s as

Exchange-traded funds (ETFs) are SEC-registered investment companies that offer investors a way to pool their money in a fund that invests in stocks, bonds, or other assets. In return, investors receive an interest in the fund.  Most ETFs are professionally managed by SEC-registered investment advisers.  

Some ETFs are passively-managed funds that seek to achieve the same return as a particular market index (often called index funds), while others are actively managed funds that buy or sell investments consistent with a stated investment objective.  

ETFs are not mutual funds.  But, they combine features of a mutual fund, which can only be purchased or redeemed at the end of each trading day at its NAV per share, with the ability to trade throughout the day on a national securities exchange at market prices.  Before investing in an ETF, you should read its summary prospectus and its full prospectus, which provide detailed information on the ETF’s investment objective, principal investment strategies, risks, costs, and historical performance (if any).

REAL ESTATE INVESTMENT TRUSTS or REIT’s

REIT’s are also pooled investments. Real Estate Investment Trusts are a “EQUITY SECURITY” and the Shares are whole shares and never fractional shares. However REIT’s are not classified like Mutual Funds. As the Investors of REIT’s typically only receive “INCOME” from their investment in the form of Rent and Mortgage Income. REIT’s are traded in the Open Stock Markets. That Tax is attractive to most and REIT’s usually have low management fee’s since they are Passively managed Assets.

Pooled Investments are all required to offer investors access to a Prospectus. And Pooled Investments are Regulated under the Securities Act of 1933 and the following Securities Act of 1934. Some are Private Investments and some are Initial Public Offerings. However this post today will not dive deeper into these topics. Later on I will writer more about IPO’s and Private Placement Memorandums and more. Stay tuned I will also be “NET ASSET VALUE” the formula to calculate Net Asset Value per share and more.

Becoming a Investment Advisor Arizona & Kansas City

I do hope you learned a little today by reading up on Pooled Investments, I am working hard towards obtaining my Series 65 NASAA Investment Advisors License and feel it’s my duty to educate other Investors and qualified individuals about the different investment opportunities out in the market place.

Thanks for stopping by and reading some of my required Investment Advisor Information I must digest. Godspeed.
JS

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Business Articles

What are the 6 types of Assets?

If you are a Entrepreneur, Accountant, Tax Attorney, Businessman or Wealthy Individual you already likely know what the 6 Assets you should list on your Financial Statement? Great! But if you don’t know? Maybe this is an article you should read. Because I am going to dive in and share what these 6 Asset classes are?

The six asset classes you want to include on your personal Financial Statement is not only Real Estate property income. But it’s also other income streams like Stocks, Bonds, and definitely NOT your home. We will dive more into this later. You will want to stay tuned because I am preparing you to become a Financially Literate confident business player.

Ok So I appreciate you showing up and reading my Blog post, I do believe I am beginning to have a few heavy hitters from Wall Street read from JP Morgan. I appreciate you guys. 100% And I Thank you. So back to business here. What are the 6 types of Assets Accountants and Business Personalities list on their personal Financial Statement?

Let’s start with an activity as we dive deeper into this thought of what is the six Assets a business individual needs to list on their Financial Statement? And by the way when you finally have enough money and assets to fill out a Financial Statement that day when you see it take shape is liberating. Absolutely. If your just realizing one day that you Made a Million Dollars in one year? This video by Patrick Bet-David is for you. Watch It!

Ok let’s get back to Asset’s. What are the Six Assets types you should list on your Financial Statement?

  1. Bank Accounts

Bank Accounts mean your Personal Bank Accounts, not your Company Bank Accounts. It should go without saying that Commingling Bank Accounts with your Company’s money and Personal Money should never happen. I hope I don’t have to explain. It’s just bad for business. Capeche? Great Moving on.

2. Stocks

Do you have Stocks in the S&P or an Account with Charles Schwab or Edward Jones? Or even Robinhood? Then you will want to individually list each in Subsections on your Financial Statement. I hope your learning this is the Big Leagues.

3. Receivables

If your a business owner or you have personally loaned money out to your Community your going to want to list Receivables. To take this definition a bit further and be more politically correct with the Accountants who will read this. I grabbed this definition from a reputable source online. Receivables is the balance of money due to a firm for goods or services delivered or used but not yet paid for by customers. Accounts receivables are listed on the balance sheet as a current asset. (R) is any amount of money owed by customers for purchases made on credit.

4. Real Estate

Ok this one could be tricky for most who are out there and do not have an Accounting Background. But when your listing your Real Estate assets on your Financial Statement you need to list them correctly. What do I mean by this? We want you to list your Real Estate Assets in a selected manor. Meaning take the Fair Market Value of your Real Estate Asset and write this number down. Now make sure you do not include the sum of the Mortgage you still owe on the Asset or Property. Make Sense? Ok Good! Speaking of Real Estate I want you to go check out this Madman named Ben Mallah.

Ben Mallah’s Youtube channel all about Real Estate is surely to entertain you with how crazy it is. LOL Here is a video from his Channel. Between you and me, I have told Ben several times how much I appreciate his crazy Youtube channel and him as a Investor. He is a solid Big Loveable Bear! LOL Ben taught me personally about 1031 Exchanges and Deferred taxes. These topics will be a post all on it’s own.

And for our last 2 Asset type’s you should list on your Financial Statement? Drum Roll……!

5. BOND’s

It should go without saying you should list your Bond assets on your Financial Statement. After all it is a legitimate Investment Asset. What is the proper definition of a Bond? I grabbed this online and this should help with describing this asset class. Bonds are units of corporate debt issued by companies and securitized as tradeable assets. A bond is referred to as a fixed-income instrument since bonds traditionally paid a fixed interest rate (coupon) to debt holders.

If you need to brush up on the How the Bond Market Moves and Operates? Please be sure to check out my former post on the subject. Here!

6. Business Value

When sharing this Asset type on your Financial Statement you should consider that you want to share the (NET) Value of your Business. What you listed on your Tax returns. NOT what you think it’s worth. To many business owners I meet have a value that is unrealistic. And fail to consider thier EBITDA and other costs. It becomes a big mess in the end and certainly lead you down to having unrealistic expectations. Be honest and be straight about your Busienss Value. That’s the smart play.

What is the definition of Business Value? It is the standard value measure used in business valuation. A Partner with PWC shared with me today, business value is the entire value of the business; the total sum of all tangible and intangible elements. Examples of tangible elements include monetary assets, stockholder equity, fixtures, and utility.

In conclusion you should have picked up some good information from today’s Article and Post. Generally speaking if you look at the Cash flow, and asset patterns on your Financial statement and the Assets you list on this Accounting form you can see where your lacking and where you should add a little value of shore up weaknesses. Thank you so much for reading and IF you have any questions or Requests? Please email me at JamesonDocSharp@Gmail.com and please tell me if I am missing the mark or really making a difference? I love helping others in Business. In fact with so many people who did not help me and blew me off? I feel it’s my duty to be open to helping others.

Thanks everyone Take Care – Please Comment, Like, and Share. And I will catch you on the next artcle.

Bye Bye!

JS

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Business Articles

Real Estate Fund Investment Strategies

Stay tuned for the next article I have on my mind. Investing strategies. If your a small home Investor that is trying house flipping for the first time? Im sorry this is likely not the Article or you. This is for Developers and Commercial Real Estate Syndication Entrepreneurs and Investors in this space. Believe it or not one of My Fraternity brothers is the Founder of Crescent Real Estate in Texas. John Goff made a fortune selling his Crescent Real Estate to Morgan Stanley for $6.5 billion in 2007, just before the financial crisis. Mr. Goff was also inducted into the Texas Business Hall of Fame. He is undoubtedly someone you should look at for Real Estate Property Investment strategy.

Stay tuned as I evaluate how he has been able to dominate his industry by, with, and through Investment Strategies. It doesn’t take much to develop a strategy inside investing. However using creative and basic Real Estate Investing Strategies others have used. Will allow you to dissect and reconstruct how they did it! John Goff and his Son Travis are honestly investors I highly recommend absolutely following and paying attention to. I will share why their basic Real Estate Investing Strategies are so profitable in a few…..

Thanks for stopping by for my latest article and post.

Let’s dive into several Real Estate Investment Strategies you need to know to grow your basic foundation.

Goff Capital 4.3 Billion assets under management.

Commercial Real Estate Development Projects

You and your Real Estate Investment Partners could raise a fund together and then buy a commercially zoned piece of land and redevelop this land into say… Multifamily housing Urban Apartments, or any Real Estate that could produce your fund and partners monthly cash flow. This is a investment into future cash flow opportunities. The endless possibilities are literally at your teams discretion.

Commercial Office Space

The current Commercial Real Estate office space has been massively affected after COVID mandates forced most companies to send Employees and company staff home. And viola the rise of Zoom meetings happen. Moving on. I have asked my personal friends the Abnos Family about the current market conditions related to the COVID Mandates and how their portfolio has faired. They haven’t seen much of a downturn. But other Market Analysts inside this space at CBRE see vacancies and the space moving towards full recovery by 2025. Regardless Commercial real estate when coupled with the right Tenants in Business equal fantastic cash flow margins. Add strategy to Commerical Real Estate Office Space Business acquisitions. You could easily repackage several properties after a Value add addition investment. Then accept larger Real Estate property business offers from larger funds. This is the unsee way of the Real Estate Investment Fund and REIT world.

Commercial Hotels

Hotels traditionally has been a fantastic investment strategy for Real Estate Portfolio managers. I have seen Businessmen or Real Estate Investors like Ben Mallah in South Florida use this option for his growing 300 million dollar empire. Check out Mr. Mallah’s Youtube Videos Here. The way we have seen Mr. Goff and Personalities like Mr. Mallah use Hotel strategy is to sprinkle a few in there growing portfolio’s. They seem to be extremely selective on properties and locations. Because after all they are competing against large Hotel chains like Hyatt and Hilton.

Residential Multi-Family Housing

It’s very interesting I bring up Residential Multi-Family Housing as a Strategy for Commercial Real Estate investing. I have seen what it takes and the process of how Developers build properties to generate opportunities. Usually this is called Value Add Real Estate Investing. It’s interesting to know. I have seen first hand how these Multifamily Complex’s develop into real life asset’s. My Girlfriend is an Architect here in Kansas City. And If I am being honest she is incredibly impatient and doesn’t seem to see my Entrepreneur journey as a tenable option for me. LOL However she has never seen the inner workings of my business dealings. I can’t make her a believer. However maybe one day I can when she meets a few of my fantastic mentors and partners. She will change her mind. LOL I have always found it’s better to show or demonstrate then talk. I can share with you that I have seen the Multi Family Housing Business Boom over the last several years. And it’s continuing to grow. Which should be a que for your Real Estate Investment Partners to look at these possibilities. It’s a very attractive option or real estate investment strategy.

That’s all for today’s article on Real Estate Investment strategies. This subject is deep as it is long. However this information should get any developer or new Real Estate Investment Fund manager moving in the right direction with this information. This information will pull back the curtain just slightly for any entrepreneur or Investment Fund Manager to consider the possibilities on the horizon. And give you a foundation of information that will help you along your way.

Thank you for reading. And as I always say at the end of my nightly thoughts Good Night and Good Luck!

JS

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