Giving Black and Brown developers a fair shot - NEW YORK DAILY NEWS

By VALERIE WHITE - NEW YORK DAILY NEWS |- JAN 02, 2022 AT 5:00 AM

Inequity in access to public contracts for minority developers is a well-recognized problem, but as is made clear by the persistence of the challenge, recognizing a problem doesn’t make it any easier to address. Federal, state and city agencies set goals for enhancing opportunity, but systemic issues that box Black and Brown developers out from winning public contracts clearly remain. Just this past year, three of every four public development contracts in the city were awarded to non-MWBE firms.

Developers of color have faced this systemic inequity for decades in an already hyper-competitive New York real estate market. These minority developers lack access to the capital, networks and resources that the city’s most established developers don’t think twice about but that inevitably allow them to lead some of the city and state’s most consequential development projects.

It’s an inequity that is absolute in its impact, and it’s one that both the Hochul and Adams administrations must address head on if we’re to rebuild from this pandemic equitably. Fortunately, there are resources and networks at both administrations’ disposal to help get the job done.

A major barrier standing in the way of many minority-owned businesses when competing for city and state projects is that few of these businesses have the financial and institutional networks in place that allow them to successfully bid in the first place.

Why? Because public projects don’t repay contractors for their work until after the project is complete to safeguard against impropriety. However, this safeguard uniquely disadvantages minority developers who — despite having the expertise, experience and capacity to complete large-scale public projects — do not have access to lines of credit and working capital that such debt requires.

Public-private partnerships can fill that gap. Just recently, LISC NYC, the organization I lead, reached a partnership with the Dormitory Authority of the State of New York that provides minority developers bidding to participate in state contracts with the liquidity necessary to compete. A LISC fund called the Black Economic Development Fund has set aside $10 million to help minority firms bidding on DASNY projects pay for the material, workers and resources necessary to complete projects. A full-service insurance and surety bond brokerage, in this case The Cayemitte Group, then provides these contractors with back-office supports, including financial management and funds control, to ensure timely payments on all project-related expenses.

While this is one very specific example of a public-private partnership that can expand contracting opportunities for minority firms on public contracts, it’s a model that can be replicated across city, state and even national agencies.

While it’s essential that public-private partnerships provide experienced minority developers with the capital they need to bid on public contracts, it’s also critical that the city and state focus their efforts on growing the capacity of minority developers who are still trying to breakthrough in the industry. The city’s building industry is a large ecosystem of real estate firms, contractors and developers, but so many of the names that make up the market are those that have been at the top for generations.

Take for instance the recent news that a Black-led development firm, Peebles Corp., is planning to build the city’s next tallest skyscraper. Of course this is excellent news, and it’s a sign of progress, but the headlines also tell a different story: that a Black developer building a skyscraper is news, which, to me, seems the truest testament to the fact that more must be done to help MBE firms establish themselves. Industrywide, there’s been recognition of this reality and the need to diversify, but little has been effectually changed.

It’s why LISC NYC launched a pilot Developers of Color Training Program aimed at connecting MBE firms to the training, resources and networks needed to expand their portfolio of business and contracts. The program was informed by extensive market research conducted by R.F. Wilkins Consultants and is guided by a curriculum developed by Columbia University that provides one-on-one coaching by established developers in the industry, real-time assistance with deals in the project pipeline, networking support and access to equity capital.

It’s a program that could serve as a basis for a city-, or even state-sponsored, program helping minority developers grow their capacity to compete with the more established firms in the industry — because the fact of the matter is that if we don’t proactively foster opportunity for these MBE developers, change won’t come.

In some ways, the challenges and uncertainty heaped upon minority communities and businesses during the pandemic have given New York the opportunity to refocus its efforts on ensuring that historically disadvantaged communities are central to our recovery efforts. The opportunity in this instance is even more unique: As we look to rebuild New York State and New York City to their former selves, we have the opportunity to make sure that those rebuilding it are those communities and businesses most impacted by it.

How many Roofs pay for college? - Real Estate Investing, A Great Choice for Parents

Parents work tirelessly to make sure their children want for nothing, but as they grow older, they start to realize that their kids’ expenses are growing as well. In the current economic climate, it can be difficult for many parents to think of solutions to large future expenses, like college.

Investing in real estate is a great way to prepare for your child's education and provide them with a head start in life.

If you have young kids and want a safe investment plan, consider real estate investing. A lot of parents see real estate as a great choice for their children's inheritance because, over the long-term, it has been proven to be a profitable investment. Real estate is a solid asset that can provide financial stability and cash flow for your family for generations. One of the magnificent things about real estate is that there are diverse ways to invest - from owning single homes & apartment buildings to becoming part time online landlords and everything in between.

The bad news for most parents that are supporting their kids and trying to help them finish college is that a ton of people end up not completing their degree because they're short on cash. The average public university student borrows $30,030 to attain a bachelor’s degree. This amount is an enormous deterrent to finishing their degree. The prohibitive cost of tuition has caused many students to take loans which are difficult to pay off when they are in their 20s. In tough economic times, scholarships, student loans, and part-time jobs are often the only options. Another option is an early start real estate investing. Investing in property can offer a lucrative way to help them earn their university degree without the need for a hefty bank loan.

Helping your children attain a college degree will almost definitely require more than your salary alone. You will absolutely need to do your research, but there are two strategies you need to begin:

DEVELOP A PLAN

With the cost of an estimated private four-year college at around $40,000, it's not hard to see why many parents can't support their kids all the way through school. Having a plan is key if you want to make sure you're financially prepared for their educational needs.

Sample Scenario* –  

$12,000 a year for college = $48,000

$48,000 / 18 years = $2,667 a year

$2,667 / 12 Months = $222 a month

$150,000 Property

20% Down Payment – $30,000

$150,000 Property x 8% Projected Return (Cap Rate) = $12,000 Income (NOI)

$12,000 / 12 Months = $1,000 per month

Estimated Mortgage Payment, Taxes & Fees = $758

Profit after Mortgage Payment, Taxes & Fees = $242

As you see in the scenario above, it would take several years before you see the fruits of your labor. However, starting when your child is young, puts you at a tremendous advantage.

*This example is obviously very generalized with estimates. Each property is going to have its own expenses, taxes, and nuances. Consult professionals before investing.

Pre-Kid or Down payment saving

If you don’t have children yet or are considering earning/saving for the down payment, take some time to learn from the experts. Here’s some great articles that will give you ideas on how to generate the down payment.

How To Save For A Real Estate Down Payment: 20 Financial Experts Share Their Tips - https://www.forbes.com/sites/brandonturner/2016/09/06/how-to-save-for-a-real-estate-down-payment-20-financial-experts-share-their-top-tips/?sh=1a5347023dd7

Earn Extra Cash As A Landlord---How To Start Saving Up For Your First Rental Property –

https://www.moneyunder30.com/saving-up-for-your-first-rental-property

How to Save for a Rental Property in a Year –

https://www.realwealthnetwork.com/learn/how-to-save-for-a-rental-property/

Consider buying property near your home so that you can reach it in an emergency if you need to. Try to contact mortgage brokers and real estate agents in your area. Real estate attorneys or other investors may be able to give you guidance on your local market. Grow your network of local real estate professionals.

Becoming a successful investor is not a simple undertaking. You will need to be patient and diligent to do well. More importantly, you need to devise a solid investment plan to preserve your assets over the long term. A strong investment plan is not just about buying property. It means truly understanding the risks and rewards connected to the asset class.

START EARLY

The cost of college tuition has been going up for a long time. Most parents find themselves in a position where they need to take on 2nd jobs or take on financial risk to pay the hefty price. The best way to do this is by saving for it and investing early on - preferably when your kids are still toddlers! This way, you will have enough money set aside for your children to cover their education over the long run, while also building up your retirement fund and creating tax benefits.

The Little Ones are cheap!

Most parents don't want to get into the real estate business because they're afraid their children will need all their money early on. From what my friends tell me, kids get more expensive later when they need ballet lessons, braces and cool sneakers. One way to beat the system is to start investing now. If you have an older child, only a few years away from getting into college, it can be hard to prioritize setting aside funds. It also pushes you into short-term thinking which can make you take on unnecessary risk. Setting the stage early gives time to learn your market & can help you make better decisions.

Time Is on Your Side

Even if you encounter downturns, you have enough time to recover. If we examine previous economic recessions, we can see that even if you experience some downturns, the economy, as a whole, will recover and exceed expectations. Initial complications might be lower cash flow and higher or unforeseen expenses. Eventually, you'll get to the point where your expenses are manageable and you're able to maintain steady cash flow. The timing of sending your kids to college can coincide with a refinance or the compound saving of cashflow.

The cash flow from your investments should be protected so that when your child needs tuition money, it is available. Something simple like a savings account or a bond, to insure safety and accessibility. When your child is already in college, you can slow down and be less aggressive with your investments and hopefully move into maintenance mode.

Don’t be overwhelmed. Real estate investing may feel difficult but if you’re actively learning and surrounded by a supportive team of professionals you can make profitable choices. Commit yourself to study real estate investing and begin to organize a plan to find the necessary capital.

What are you waiting for? It's never too early to plan for college. Invest in something that will help educate your children and build generational wealth. With manageable down payments and the safety of property ownership, as investments go, it's an outstanding choice. -Gardner Rivera + The Paper City Group

Commercial Real Estate Marriage - Finding the Right Partner

With the right partner, you can accomplish far more deals, faster than you could possibly complete on your own.

Commercial Real Estate, because the transactions are capital intensive, is rarely a solo sport. Most transactions, at every level, require some sort of partnership. Partners of every nature can be easy to find, but solid, agreeable ones are rare.

These are some strategies that can improve your chances of finding a solid partner for Commercial Real Estate deals:

1.         Begin your search with those that have the resources to make deals happen. A good friend might be a wonderful person but if he doesn’t have the necessary funds or can’t secure another piece of the transaction, the tenants or architectural drawings for example, they may not be the best choice for a partner.

•           Make a list of everyone you know with a high net worth and those that invest in real estate. For smaller deals, you could work with a partner with some disposable income and decent credit score. For larger deals, you are going to need someone with greater experience and financial resources.

PRO TIP – Industry professionals can be a great resource for investor leads. Bankers, Architects, Engineers and General Contractors are always sourcing of leads and can be great partners and investors. These professionals typically have a solid network and are always looking for opportunity.

2.         Know what you’re bringing to the table. If your partner has the cash, what do you have? Besides providing the deal (which you should have under contract), there are other skills you can put to use. Doing the legwork for the deal, managing the team, and possibly painting a room or too can be your “sweat equity”.

3.         Clarify what you need from a partner. Are you considering a partner that write a check then get out of your way? Do you need a 50/50 partner that will devote equally as much time and resources to the deal as you will? Identify the division of labor first. Set expectations, and then stick to them.

4.         Find a partner with the appropriate capabilities – Are they currently doing the types of transactions that interest you? Great partners can offer more than just capital. Their experience and deal specific expertise can decrease your overall risk.

5.         Begin contacting potential partners. It is especially important that you know the details of the deal inside and out. Present your opportunity professionally and be prepared for all questions. Your potential partner will want to vet you and verify your numbers and other information. It could take a while until someone shows interest and you could face several rejections. Keep knocking on doors until you receive the YES you need.  

6.         Negotiate the terms. There are several standards in the industry, but every transaction is unique. Equity partners can require between 8-15% preferred return. That’s before you see any of the profit. Common agreements consist of a General Partner or GP that handles the operations and a Limited partner or LP that is primarily a capital investor. With a marginal deal you may receive little to no return with the majority going back to investors. Make sure there’s enough income and fees for you to get paid.

7.         Communicate often and in Detail. Partnerships can go sideways quickly when issues are not communicated. Things do happen in any investment, but too many surprises can erode trust. Be upfront with bad news.  Discuss the rationale behind larger decisions and strategy. Stress is reduced when everyone is on the same page.

When you are first starting out in commercial real estate, you may not have the funds, expertise, or network to complete a deal on your own. A partner can provide valuable expertise and financial resources. The appropriate partner can accelerate your success, grow your network, and help provide opportunities for more deals. Choosing a genuine partner will provide an abundance of experience and put your growth and advancement on a fast-track. Connecting to an unethical or dishonest partner can be a disastrous incident, financially and legally. Take your time and choose with caution.