Investor Interview: Learning What NOT to Do in Real Estate Investing

Aug 21, 2017

The ArborCrowd community has many different types of investors – each with their own story for why they chose to invest in real estate with ArborCrowd.

Eric SchultzWe spoke with an experienced investor who explained his journey. Eric Schultz candidly talks about the lessons he learned over the years and how he figured out what types of investments would maximize his financial growth.

We’d like to hear a little about you first. What’s your professional background?

I’ve been an owner of an accounting firm for about 11 years, but I have about 25 years of experience in accounting. My firm is in Midtown Manhattan and we work with private equity funds, fund administrations, etc.

Prior to ArborCrowd, did you have any experience in real estate investing?

Definitely, I started early. In 2005, I invested in vacation properties in North Carolina. Not realizing I bought at the height, I still own those properties and I’m trying to get back my original investment in them. I also bought land in Florida. I’ve pretty much done everything you can think of in real estate…and learned a lot of what not to do. It was some trial and error, but now I have great experience.

What led you to real estate investing?

I realized that I’m going to be most successful in my day to day business…that’s what I’m really good at. I don’t have time to manage property, rental units, deal with tenants and rental leases. I’d rather have someone with deep experience in that area to deal with those details so that I can focus on my day job.
There are other types of investments such as the stock markets that I do contribute to with my 401k, but to go all in on that has too much risk. Stock markets can be incredibly volatile. I don’t want to risk all my money with that level of uncertainty.

As an accountant, you’re keenly aware of the tax benefits of real estate investing. Was this a factor for why you’ve invested?

I’ve invested in real estate for a while. And it’s one of the best tax advantage vehicles there is. That’s because the income you get from properties are sheltered by the depreciation they take on by the buildings. Essentially, you don’t get taxed on the current income or cash you’re receiving. Upon ultimate sale of the investment, you take ordinary losses which were generated by the depreciation of the property, and when the depreciation is recaptured it’s triggered as a capital gain. So, you can get ordinary tax loss for depreciation that is in excess of the operating income with a corresponding capital gain. You make the difference between capital gains rate and income tax rate if and when you exit that property.

Why did you decide to invest with ArborCrowd?

The reason I chose ArborCrowd – security. I only want to partner with a firm that has real investors who are investing in real properties. Essentially, people with serious real estate experience. I had incredible comfort by the fact that ArborCrowd’s CEO has been in the industry for more than 30 years. And, after meeting the leadership team, who all took the time to answer my questions, I felt very confident that we would do well together in real estate and that my investments are safe.

What about the multifamily sector do you like?

It’s about security. With multifamily, the risk is spread among many properties or units – like 50 or 100 units. The performance of one or two units isn’t going to make or break this deal. And at the end of the day I could make 8 percent, but it’s still better than the 1 percent that I would make at the bank or maybe the 5 percent that I could do on my own, but with the headache and stress of managing the property.

What was your motivation for making multiple investments with ArborCrowd?

For the first deal, I didn’t go all in because I wanted to test you out. Then in only four months, I got a return. This proved to me that you are capable of achieving results. I also wanted to see the incremental increase in value (of the properties) over the next 5-7 years…to me, that’s long-term security. I also like putting money in four different projects in different markets with the same velocity. This diversity gives me confidence and security in my real estate investments. With the 4 deals I’ve done with ArborCrowd, I know you are doing deals in your sweet spot and I trust your experience in knowing a good investment.

You mentioned that your past real estate experiences left you without the materials to make the best decisions for yourself. Did you get the transparency you wanted from ArborCrowd?

It’s night and day. The first transaction I did passively with someone and there were no details. Nothing was written down and there was no real documentation or specifics. This just made me uncomfortable. With ArborCrowd, I know exactly what you’re going for. I know the rates, the people you’re partnering with to manage the properties as well as the history of their experience in property management. I know the rental income and the projected rental income – I know exactly what’s happening.

Do you have any advice for people who are looking to invest in real estate through the crowdfunding model?

I started my career investing in properties and dealing with tenants. Everything sounds great when you’re a real estate investor – but not everything will go perfectly. You have to deal with the aggravation of tenants, landlords and maintenance. With ArborCrowd, I literally make my investment and watch my money come back. I don’t have to do anything else. That is your job. And that is what you’re good at. For me, that’s the way I want to invest in real estate.