I recently had the opportunity to sit down with one of our borrowers, Adam Ailion for a question and answer session. It was a great experience and one that I am happy to share with our GROUNDFLOOR community.
Q: Adam, please tell us a little bit about who you are and give us an idea about how you got started as a real estate investor.
A: I got started in real estate investing during our most recent economic crisis while working closely with real estate investors in helping them acquire rental/flip properties throughout Atlanta. By doing so, I was able to see the inconsistencies and flaws in how the banks were liquidating their assets and I took advantage of their improper pricing strategies and inadequate marketing of their distressed properties. Through working in the business I was able to cherry pick the good deals, minimize my risk and only purchase properties that I knew would generate a nice profit. Looking back I was able pick up a handful of screaming deals but wish I was able to do more. This opportunity only comes around once every 20-30 years and this was my chance to get a piece of the pie while I was young, but I don’t feel my piece was big enough. I am just trying to catch up these days.
Early on financing was my biggest hurdle. Mentors always told me, find the deal, and you’ll find the money. However back then when the money was tight I didn’t find that to be the case. Even when you had a screaming deal. If only GROUNDFLOOR was around back then. My first investment purchase was buying a $16K duplex in South Atlanta at age 19 back when I was in college and still living in my parent’s basement. I used my own money to buy and renovate the property and leased it for $1100/mo. I later bought a 3-bedroom condo in Buckhead for $61K to reside in, took advantage of the homebuyer tax credit, and had the rental property pay my mortgage for several years. Once I got the taste of how lucrative and rewarding investing in real estate could be I was hooked.
Q: I know that you're very active in this industry and the community in general. Can you tell us some about how you're doing that today?
A: I gain great pleasure in helping others grow within the real estate community and helping them succeed in business. I am constantly seeking to help by training and mentoring new investors/realtors who are early learners of the business and working with them to be successful components of our team. I am an active member of the Cobb Association of Realtors Association (CAR) and serving as the president of their Young Professionals Network, which is part of the Georgia Association of Realtors (GAR), and the National Association of Realtors (NAR). In addition, I am active in local Real Estate Investment Association (REIA) chapters.
Q: Can you describe your investment philosophy and maybe the 2 or 3 keys to your success?
A: I have four pieces of advice.
- Don’t get too greedy, pigs get fat and hogs get slaughtered. If you can make a decent profit, take it and move on.
- Always remember to make your money at the time of "buying". In other words, profit is earned at the time of purchase not at the time of sale, buy smart and don't over pay for a product, asset or a business.
- Don’t get emotionally attached to a piece of property, don’t over renovate or over improve, but don’t skimp on the rehab.
- Don’t be terrified of debt, when used responsibly and modestly debt can be a very good thing for the right situation. Especially when long-term interest rates are at 3-5%.
Q: Where or from whom have you typically raised capital for your deals in the past?
A: Institutional lenders, personal funds, grandmothers estate, private lenders, foreign investors, home equity lines, and GROUNDFLOOR.
Q: Do you still have access to those capital sources today?
A: Yes, for the most part.
Q: What was it that attracted you to GROUNDFLOOR as a source of capital for your deals?
A: It was a cutting edge and innovative way for me to finance single-family real estate projects by means of public support and the pooling of their funds instead of the typical approach of funding from a large regulated financial institution, or an individual investment entity. It allows for average working class citizens who know nothing about real estate investing the ability to place funds into an investment without getting their hands dirty. It’d be foolish for them to take on a project that they don’t have any experience in handling. I get calls all the time from people wanting to flip homes or buy and manage rental property, but they don’t have any experience, which creates enormous risk and most of the time failure. The GROUNDFLOOR service offers those investors a medium to safely and securely invest their funds, earn a premium rate of return, all while minimizing their risk. The investor wins, developer wins, GROUNDFLOOR wins, and the banks lose. I see no problem with that and it is something I can passionately support.
Q: What are the different advantages to using GROUNDFLOOR? How does it help your business?
A: It allows me to offer my clients an alternative means to finance their real estate projects, and it provides me a solution to offer those investors who aren’t equipped to invest solely on their own to still partake safely. It also allows for the market to select or reject a project. My first project, which had 100% equity, was denied funding from a bank and a credit union due to the property being held for less than 6 months; I couldn’t even get a home equity line. Not because I was an illegitimate borrower, I have 740+ credit, sufficient assets, and owned the property completely outright. Getting money out of a property where the risk to the lender is low shouldn’t take 30-45 days to underwrite, and it shouldn’t be like pulling teeth to obtain, and I’m glad to report it wasn’t when I went with GROUNDFLOOR.
Q: Are there any other potential advantages for other real estate professionals that are looking for a new or additional capital source?
A: It eliminates the need for having to shop multiple hard money lenders or private lenders to see who will agree to lend on the project, only to find out they won’t lend because they have funds tied up elsewhere, or that they don’t feel the deal is good enough, not because they deemed the property or you unworthy of funding. The GROUNDFLOOR service offering would work well for those investors who are looking for cash to rehab a property shortly after purchasing it for cash., such as my example in the previous question. It also eliminates having to face a single underwriter at a large banking institution who is forced deny a loan due to regulations requiring them to only write perfectly conforming loans.
Q: How has your experience been with GROUNDFLOOR? Do you expect to continue to use them in the future?
A: So far so good and I would consider using them again in the future. The staff has been supportive, encouraging, and interested in the project. Their corporate culture is inspiring and one that I connect well with as we grow together. The fund raising on my project was relatively swift and the loan underwriting and funding was timely and much smoother than what I’ve experienced at large banking institutions. Loan servicing and post closing support were also responsive and they were prompt to make payments on any construction draws.
Q: What sort of projects or real estate professionals would be a good fit for GROUNDFLOOR?
A: Any project with sufficient equity with a 65% LTV. Short-term purchase financing for SFH and MF dwellings i.e. GROUNDFLOOR funds 65% of after repaired value, developer funds rehab and 35% equity. 5-10 year rental property financing for real estate investors looking to build their rental portfolio. Cash out refinances at attractive rates for small portfolios of rental property. Eventually some larger capital raises for commercial acquisitions/renovations, net leased space, offering longer-term notes. I wouldn’t mind seeing some nonprofit fund raising for real estate projects/developments i.e. parks, housing revitalization, habitat for humanity construction/renovation funding.
Q: Do you believe GROUNDFLOOR offers good value to investors/lenders? What sort of people do you think will get excited about this new investment opportunity?
A: Yes I do, depending on the project and developer in question. With any investment you should always do your own due diligence, inspect the property and ask the developer/promoter tough questions. I was pleased to see GROUNDFLOOR due much of this due diligence on behalf of the investors, they screened me, viewed the subject property, reviewed my renovation plans and budgeting, and put it in a nice package for the investors to review prior to making a decision. Good candidates for this type of investment opportunity would be someone looking to get started in real estate investing without much risk, overhead, or knowledge. Perhaps someone with larger sums of capital sitting on the sidelines either in checking/savings accounts. Someone looking to diversify out of stocks, communities or bonds as the markets change. Once longer-term notes are made available I believe it would appeal more to those individuals looking to invest out of their retirement accounts.
Q: What do you like to do when you’re not running around managing your deals?
A: I’m frequently found hiking Kennesaw Mountain, taking my four legged daughter to various dog parks around town and to Lake Allatoona. I am constantly trying to teach my dog to talk. Sadly I’ve convinced myself that it can happen, I’ve already gotten her to master saying “I Love You”. I also enjoy checking out local microbreweries, trying out new restaurants, attending standup comedy shows, following politics, and I’m pretty skilled at making homemade sushi. However most of the time you’ll find me at home watching the latest movie.
Q: What’s your favorite restaurant in Atlanta?
A: There are so many to pick from, but if I’d have to choose I’d say Bones. The steaks are by far the best in the city, and their service cannot be beat. If I’m going to splurge, it will be there. Second choice would be Atlanta Fish Market.