Listen to Anna’s most recent podcast guesting, an interview with Paul Moore and Josh Thomas of How To Lose Money.
Anna Myers is the vice president of Grocapitus Investments, LLC, teaches underwriting for MultifamilyU, and co-hosts a real estate investor meet-up in the San Francisco Bay area. With an extensive background as a programmer in systems architect in the tech industry, she uses these skills to evaluate multifamily deals, identify key investment markets, and implement systems and processes to acquire and manage multifamily assets. Anna partnered with Neal Bawa to purchase 500 units of apartment projects in 2018, and added another 300 units in the first few months of 2019.
Time Stamped Show Notes
[4:50] At the end of 2005, there was a shopping mall that was a part of her grandfather’s trust that was identified as needing to be entirely replaced. Even though it was fully functional for the developer that purchased it, they were able to get a 1033 declaration instead of a 1031. This allowed them to hold the money themselves and gave them 2 years to replace the property. They needed to finish their purchases to fulfill the 1033 by December 31, 2007.
[6:15] They were looking for property to invest in and found some in Mississippi. Her brother was in the area working as a forensic architect during the Katrina aftermath. There was an elevated area called Diamond Head that the contractors would stay in. As someone looking for investments, it was appealing to him. He agreed to look at a single family property nearby that Anna was interested in.
[8:30] In closing, there was a change to the insurance. In response to Katrina, they were creating a new policy requiring wind and hail insurance for an additional $600 a month. Since she had money and time invested into the deal and the current owner already purchased a new home, she did not want to walk away. The current owner even offered to pay half of the insurance for the first year.
[12:35] The insurance went up another $300 after the first year. People were having trouble paying their rent and insurance. There was a lot of vacancy in the area, and people trying to sell could not find anyone who could afford to buy and pay the insurance. Since the circumstances were so difficult, Anna was having to pay $800 out of pocket every month just to cover the insurance for a property that was never going to flood.
[15:00] Anna had to go into a short sale for the property in order to save her primary home. While it impacted her credit score, the short sale enabled her to find a buyer and not foreclose. Her total loss was about $80,000.
[29:30] Failing Forward Segment
- Why did this failure experience happen to you? “I picked the wrong market based on not understanding the underlying fundamentals, and I was too nice.”
- What is the single most important lesson you learned from this experience? “Data science is the way I avoid it now, so really using…market analysis to understand the fundamentals of a market and to make sure that it’s not so fragile that it could break so easily. If I had understood- the way I look at markets now, I would have looked at that market and said, ‘it’s way too fragile, there’s too many things that could go wrong here’. So really doing your due diligence on markets, and populations, and jobs, and understanding the real fundamentals of what’s going on in the market and not just looking at it and saying, ‘what could be’…you’ve got to look at the actuals.”
- How can you prevent yourself from failing in this way again? I’m going to go back to data science, so using data, understanding the market trends that are going in. I use a lot of spreadsheets to mash together the data, and the data doesn’t lie, so you’ve got the numbers that are supporting those trends. I also scale, so instead of relying on one, a single family, I’m a big proponent of multifamily now. So instead of having one point of failure if you’ve got a tenant that’s leaving, I’m a big proponent of being in multifamily where it’s got a lot more leverage with a lot more units. Again, in the right market. That’s critical.”
- Who do you turn to when you need help? “Well, I turn to my mentors. I’m very fortunate to have Neal Bawa as a very strong mentor right now. I think that everybody needs mentors. When I got to conferences, and I meet people that I really admire, I reach out to them and try to formulate relationships. I think there’s room for many mentors in our lives, so right now I’m fortunate…I can speak out the name of Neal Bawa, but I do have several other people that I rely on, as well, as mentors in my life.”
- What advice would you give to someone in a similar position? “There was nothing I could have done to fight it. The entire community was going out. I think that I could have gotten out sooner. It was just a death spiral for that whole community, and, by the way, it’s never recovered…I think a short sale was the only way out of that other than a bankruptcy. It was just a very bad situation. So, the only thing was getting out sooner or buying sooner, like my brother did…he didn’t have that requirement, but, at the same time, he never made any money on his house. He finally sold it the other day, and he really, over time, it just paid for itself…other than the depreciation that he got through taxes, he never made anything in that community. So, it just didn’t end up being a great community.”
How To Lose Money By Surviving Hurricane Katrina with Anna Myers
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