"Lessons From the Military About Real Estate Investing"
Real Estate Investing Expert
Episode 48: "Best Deals"
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On today’s Best Deals episode of The Real Estate Nerds Podcast, we hear from investors and Special Forces veteran Edwin Epperson. Some of you may know Edwin already from his podcast, Can Investors Save The World? Spoiler alert: we totally can. Today, Edwin shares how his real estate journey has evolved, as well as some of the ways he has implemented the lessons he learned from his military experience in his real estate investing life.
Edwin Epperson on the Beauty of Being the “Bank,” the Value of Clear Expectations, & Investing Lessons from the Military
Our host and attorney Scott Smith welcomes investor and decorated combat veteran Edwin Epperson onto the show. The two investors chat about Edwin’s background and his life and mindset going into his best deal.
[1:00] Edwin got into real estate with the plan to buy homes, fix and flip them. He was in the military in a Special Forces unit, training to become a Green Beret. He joined a club in Fayetteville, NC and found a money lender at one of these meetings. The lender told him he wouldn’t make him a loan, which shocked Ed.
[2:30] Ed admits that at the time, “I didn’t have the knowledge or experience to be successful at real estate investing.” His lender friend advised him to carve out time to gain the knowledge he would need. Ed followed this advice and stuck around at the meetings, where the same lender asked him if he’d considered becoming the “bank.” Ed found five mentors. He spent the next couple of years learning about investing from a lender’s perspective.
[4:10] “I fell in love with the idea of shifting the risk to someone else while also mitigating that risk,” Ed explains. Around this time, he was deployed but continued to study his plan to become the bank.
[5:30] By 2014, Ed was redeployed to Afghanistan and had gotten some of his fellow service members interested in becoming involved with these real estate projects. By late spring, he received an offer and began analyzing the relevant figures. He agreed to help an investor make a purchase while he was still overseas. He ended up making his first real estate loan admidst this deployment. He got the copies of all of his confirmation documents just as he was preparing to go out to mission: “I did my first real estate loan while in Afghanistan.”
[8:04] “I fell in love with the idea of not being geographically restricted,” Ed explains. For this reason, he thinks being the bank is a great way to become involved in real estate.
[9:20] Despite his love for Special Forces work, Ed decided not to re-enlist and instead went into real estate full time. He wanted to be home for his family, and realized he could use his tools to build a network and keep using this business model.
[11:00] Ed explains why he believes most Ponzi schemes start with the best of intentions, and how he avoided that. So rather than actually handling another person’s money, he used a servicing company: “I had professionals who were there as a buffer between me and anything that might cause a problem.” This helped his credibility, as did his track record. Ed elaborates: “Word of mouth is huge. My business has grown largely by word of mouth.”
[13:00] Ed started out by leveraging his own network of family and friends. Rather than providing formal plans such as a PPM, he would simply share his personal guidelines and checklist that he would use to evaluate loan opportunities. He also developed hard limits for his company as well, in terms of which loan-to-value ratios he was seeking. By presenting himself and his plan in this way, he was able to expand his network.
[15:50] Scott points out that some of his military friends operate the same way, with highly accurate approaches. He feels operating based on a plan is stronger than operating on hype alone.
[17:40] Ed shares a bit about how military processes, such as “After Action Reviews” following missions, can actually be adapted for investing strategy. He shares how these reviews allowed him to make tweaks to their plans and procedures. Ed believes that implementing this type of process could help any investor (or any business person at all) evaluate what works and what doesn’t, then adjust accordingly.
[21:00] Scott wonders whether Ed’s strategy of showing investors the plan is also a way to recruit them into investing with you. Scott wonders whether this encourages higher levels of personal responsibility. “Every business is a learning experience,” Ed explains: “I’ve got three core values: 1. Communication, 2. Extreme Ownership, and 3. Giving Back. Those are the three things I really focus on.” The second value comes from a book of the same name, authored by a Navy Seal, that both Scott and Ed recommend.
[23:00] For Ed, “Setting expectations is absolutely critical.” Keeping expectations clear keeps all parties accountable and leaves no room for assumptions. He shares about how expectations he has set on himself and investors have worked both in his favor and against him, when not done properly. Ed explains how his failure to set expectations has created miscommunications between him and his investors.
[26:50] Scott points out that “It doesn’t even matter what the expectations are, so long as you meet them.”
Lessons Learned from Edwin’s Story and Experience
Scott and Edwin each share their top take-aways for our listeners.
[28:00] Scott thinks there’s a major lesson in how Ed shared his processes to gain trust. He also was struck by how Ed’s military experience has informed his investing in specific ways. These items go hand-in-hand: “How can an investor be pissed at you if they bought into your process?
[30:00] Edwin’s take-away is even simpler: “Never compromise your guidelines. When you start looking to the almighty dollar, you will make mistakes.”
[17:00] Scott and Dave share about BiggerPockets, and the tools this online community offers investors. Scott regularly contributes asset protection content to BiggerPockets.
[18:43] On the topic of asset protection and long term real estate success, Dave comments: “Having great people on your team is so huge.”
Connect with Edwin Epperson
Connect with Edwin’s company, Vertical Fund Management via their LinkedIn website. You can also reach out to via Edwin’s Facebook page. He’s happy to connect with his fellow investors.
Thank you for joining us on today’s episode of the Real Estate Nerds Podcast.
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About Edwin Epperson
Edwin Eppreson is a social impact investor and a managing partner of a private funds management group, Vertical Fund Management. Edwin told us, “I believe in People, Purpose, Profit and this is reflected not only in the mission of my company, but is the topic for the podcast show I am hosting.” In addition to his work, Edwin is also the host of the podcast Can Investors Save The World?
My fund and I are focused on addressing an epidemic social dilemma seen throughout the US today, the Veteran dilemma of Homelessness, Unemploymentand the loss of a Purpose Driven Life. Our goal is to eradicate this dilemma by addressing sustainability, conservational, and technological social challenges through Real Estate Investing.
Veterans’ issues are so close to my heart Edwin’s heart in part because he served his country for 13 ½ years with the U.S. Army. Edwin successfully carried out multiple combat tours as an Infantryman, and as a Green Beret. He experienced the challenges that veterans go through first hands, particularly with adapting to civilian life again, finding purpose after the service, struggles with the experiences he endured and lived through, and how to reintegrate with family following deployment..
We have all heard the statistic of veteran suicide rate being higher than their civilian counterparts. The veteran community also suffers from increasing homelessness and struggles with readjusting to civilian life and more importantly finding their new life’s life’s purpose outside of the military.
Ed believes that the veteran community’s dilemma can be solved by addressing technological and social challenges through real estate investing, and this is exactly what my fund and I are focused on solving. He especially wants to connect with individuals interested in his charity work.
When making business decisions that affect your long-term goals, like what types of investments to make with your retirement dollars and which vehicles to use, it really is best to be aware of all of your options. We frequently talk about the Solo 401(k) and Self-Directed IRA as tools for funding your retirement. But what about life insurance? And what about the stock market? What if we told you there is a tool that allows to to reap some benefits of both? It’s called Indexed Universal Life Insurance–and some investors have found it a useful addition to their retirement plans.
What Is Indexed Universal Life Insurance?
Indexed Universal Life Insurance (IUL) plans are a variety of permanent life insurance plan that features a cash-building element. One primary benefit of these plans is that the policy holder gets some of the gains of being associated with the stock market without all of the risk Wall Street is famous for. This is in no small part because of how these policies are designed. IULs earn in part because they are directly linked to a market index, such as the Dow or the S&P 500. Any gains remain within the policy, albeit a cap rate will limit how much you can make. However, you are protected during a particularly bad year for your index with an IUL. The worst case scenario with these plans is that you make nothing, but you never actually lose money no matter how poorly your index performs. The protection of your principal is actually derived in part from the same cap rate that limits your gains.
How much money do policyholders stand to make? Historically, returns run between 5-9%. The S&P Index has actually returned at 9-11%, but the upside limit on UILs stems from the account’s cap rate. For this reason, many advisors argue that the UIL can make a wise addition to a retirement or estate plan once more traditional and self-directed accounts are maxed out.
Tax Benefits of Indexed Universal Life Insurance (IUL) Plans
There are three key tax benefits of IULs. First, you may pay into the policy with pre-tax or after-tax funds. Withdrawals from the policy may be made tax-free if you are under 59 1/2. Such withdrawals are regarded as loans, with your death benefit serving as collateral. Any funds paid out to the beneficiary are also tax-free, including normal benefits upon your passing. This is true regardless of their value.
Ask the Experts at Royal Legal Solutions About Your Retirement Planning Options
Regardless of where you are in the retirement planning process, Royal Legal Solutions an assist you. We have extensive experience educating investors about self-directed investment options. Many of our investor-clients love our Solo 401k information, product, and compliance services. Our Self-Directed IRA services can also be helpful for retirement planning, as the SDIRA is yet another vehicle that allows you to diversify and take total control of your investments. To determine which of the available retirement planning strategies are best for you, consult with one of our experts at Royal Legal Solutions. You may also contact us with any questions you may have about your options.