Marshall Saunders, a 30-year veteran of Midwestern real estate markets spoke with Benzinga recently about his Twin Cities-based Midwestern real estate investment crowdfunding platform – SaundersDailey.
Specifically, Saunders discussed how investment in admittedly “boring” Midwestern real estate might help alleviate fear and uncertainty for some investors by providing steady returns.
Benzinga: How is SaundersDaily different from other crowdfunded real estate platforms?
Marshall Saunders: We are very hyperlocal. We look at the Twin Cities, Minneapolis and St. Paul. We include a few close markets to us like Rochester, Minnesota, but only stuff that we know.
Many times when you see real estate crowdfunded sites, what you see are people coming from the investment world and bringing that investment knowledge to real estate.
We are real estate people who have been real estate people for decades, and we are bringing our knowledge to the investment world. It's just a different take on things.
BZ: Why can hyperlocal be desirable?
MS: Much of my experience, knowledge and perspective was forged during the real estate downturn. I bought a large brokerage in 2008 and have a keen perspective on that downturn.
I felt many decisions made in the downturn were made by people looking at broad perspectives and economic factors. Sometimes that did not play neighborhood to neighborhood.
If someone says, "Well, the vacancy rate in ZIP code 55405 is 3 percent," what they don't understand is that along Pendleton Avenue, which cuts right through that ZIP code, the vacancy rate is 10 percent and the vacancy rate is 0 percent inside upper Pendleton Avenue.
An outsider might say, "Okay, I know what I'm buying, because I know what the general vacancy rates are for this area." That's a dangerous choice. It applies broad strokes to a very fine decision.
BZ: What about the flip side? Is being hyperlocal and not offering geographic variety a problem?
MS: Yes, to some degree. When you come to our site, you are going to look at properties in a specific area.
If we do (eventually) have new areas – we're looking at Indianapolis and St. Louis – there would be neighborhood experts, people who had our tenure of experience there.
If you want a broad, geographical bent to your real estate offerings, you might want to look at doing a few on our site, a few on Realty Shares, a few on Patch of Land.
BZ: What’s different about investing in Midwestern real estate?
MS: What usually differentiates us is that our investors are often more interested in cash-on-cash returns, dividend returns, rather than there being a huge appreciation, a huge difference between buying and selling.
You could go to Los Angeles and buy something for a million dollars, turn around in a few months and possibly sell for three million.
That's not going to happen in Minneapolis unless there's some bizarre situation.
BZ: Could you provide an example of crowdfunded real estate in Minneapolis?
MS: In Minneapolis, you hope to buy into a good, well-performing building that's been there for a long time – or into building a new one in an area that has performed for a long time and gives you 7 percent return on your investment every year.
No one's going to make a movie about that. It's pretty darn static, but that is what we have to offer. We have stability.
BZ: Do your Chinese investors find this model attractive, and if so, why do you think that is?
MS: I'm not an expert on foreign investing and what I'm telling you is anecdotal evidence from what I've experienced.
Many of our Chinese investors come to us in frustration – they buy something in San Francisco, receive a minus 1 percent return and have to kick in every year with the hope that they will double their investment over the next five years because of appreciation.
Chinese investors feel that at any point, when the Chinese economy gets rocked, the government will say, "We need your money.
They feel that even in an American bank, the Chinese government could make a call on Chinese money in American banks.
On the other hand, they feel the American government would never allow a foreign government to take away property owned in the United States. It would be such a big incident.
BZ: So, it’s more about preservation of assets than appreciation?
MS: (Chinese investors) want to own American real estate. They want to own a piece of it, which crowdfunding gives you. You own a share of the LLC that owns that property alone, and you own it.
They want it to grow, but growth is secondary to, "I own a share of that property and no one can take that away from me."
At the time of this writing, Jim Probasco had no position in any mentioned securities.
Image Credit: Public Domain© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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