As a founding partner of JWB Real Estate Capital, Gregg Cohen has seen the company grow from humble beginnings to serving over 1,300 clients in 49 states and 13 countries, managing over $750 million in real estate assets. Gregg’s recipe for success in business includes a belief that whatever is measured gets improved and a true passion for creating passive income for clients. He and his team have been featured in The Wall Street Journal, Inc. Magazine, The Jacksonville Business Journal, The Florida Times-Union, Advantage Business Magazine, and Entrepreneur Anchor Magazine. Gregg is a graduate of the University of Florida and contributes to the JWB Real Estate Capital blog and its Facebook group connecting with the community by sharing insights.

Rental properties can be a great source of additional income, but committing to that first one can be intimidating. In this episode, join Gregg Cohen, as he talks on the subject of passive income and rental properties. He discusses the strategies for taking advantage of secondary income through real estate, the pros and cons of turnkey solutions and how vertically integrated companies can produce great results for investors. A great episode to learn from if you’re looking to get into investing in rental properties. Episode Links: http://jwbrealestate.com/ https://www.jwbpropertymanagement.com/nyai-show/

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Transcript

Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.

Michael:

What’s going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum, and today I'm joined by Gregg Cohen, who's the founder of JWB real estate capital and he's gonna be talking to us today about vertically integrated companies, turnkey solutions, and what investors should be aware of when it comes to investing in the Florida market. So let's get into it.

Gregg Cohen, welcome to the show man, thank you so much for taking the time to hang out with me really appreciate it.

Gregg:

Absolutely can't wait, man.

Michael:

I'm really excited because you've got a really interesting story and background. But for anyone who doesn't know, give us the quick spiel who you are, where you come from, what it is, you're doing real estate.

Gregg:

Yeah, absolutely. So my name is Gregg Cohen, I run a company here in Jacksonville, Florida, called JWB real estate capital. We're here to make rental property investing easy for the masses out there, which, you know, most people see rental property investing as an opportunity to make money to make a great return on investment. That's not usually what holds people back from it. What's usually the thing that holds people back is the experience when it comes to rental property investing. So we really built our business to make this a wonderful experience. It keeps people coming back to be able to take advantage of an asset class here, which, you know, historically has performed so well, and especially for what our country has been through over the last couple of years, has performed incredibly well. And I just think that there's real value for families and communities, when you can invest in a stable asset class that performs well over time. You can do some really great things for your family, for the community for the world.

Michael:

Totally agree. Just out of curiosity, what is JWB stand for, where does it come from?

Gregg:

Oh, man, how far do you want me to take you down this path? We've been in business for 16 years and like any other entrepreneur, we didn't know exactly what we were doing when we started right. You know, we started our business. Man, I could just I could just talk for a lot of stories about my business partner is one of my best friends. We went to college together and we lived in a house with a lot of our friends in college and we just nicknamed that house, the huse. Literally, it makes no sense. We call it the who's why I don't know why. So when we first named our company, we were like, oh, we're 23 What should we name our real estate investment company? Let's call it whose homes and investments? Makes no sense at all.

All right, so that company, it still is our holding company, we own a large number of rental properties, and it's still in whose homes and investments. But over time that name clearly did not stick did not, you know share what we were hoping to accomplish in the world. We started to market ourselves under the name of Jacksonville wealth builders and that was really when we kind of hit our stride as far as creating these turnkey rental property investments and packaging the Property Management Services here in house and Jacksonville. Jacksonville wealth builders really talked about what we do but you know, we're a vertically integrated company and that means that we have everything under one roof acquisitions, property management construction. It is all here under one roof and so we had Jacksonville wealth builders as a company but another name for our company. Our home buying company was progress homebuyers and then there was peace of mind property management as we became bigger and started to develop a reputation in the community people would say oh, I really love that company. Jacksonville wealth builders. Have you heard about those guys over at progress homebuyers? I really haven't done too much business with them yet or Jacksonville wealth builders is great, but peace of mind property management, I don't know them so well.

So eventually, we realized you know, how to actually appropriately name a company and that became under the JWB brand, which is now JWB real estate, capital JWB property management, JWB homebuyers. So JWB actually would stand for Jacksonville wealth builders, we just condensed it and made a little bit more user friendly for everybody realized you're there, who they were doing business with.

Michael:

Love it and the whose story so I feel like so many people have similar college experiences or stories like yeah, it was a, we were geniuses at the time and looking back at like, what were we thinking?

Gregg:

You know, we just weren't thinking very much. It's a credit though, because my business partner and I now have three business partners. You know, in the beginning, we just wanted to get out there and try to do something weren't afraid of failing. I think you can clearly see that by the way that we named our companies we weren't afraid of failing and so many investors out there just get paralysis by analysis, paralysis, and they can't move forward, right? Just name your company something you can't possibly screw it up any worse than I did and, you know, there are so many more important challenges to overcome and then simple things like that.

Michael:

So it's funny, my wife actually works for a company that has a very similar story. When he started it, he didn't think anything was gonna come of it and so the company is named Michael management and so when she posted that on her LinkedIn, a bunch of my college roommates were like, oh, yeah, I also used to work for Michael management in college like, no, no, like, it's a real company, like, I actually have a job. I'm not just managing Michael's like, life and stuff. So he's like, I never thought it would take off and it's an SAP company. But needless to say, so talk to me, Gregg, about what it is that JWB does?

Gregg:

Yeah, absolutely. So we're a vertically integrated company and what that means, as I mentioned, is we have everything under one roof. So what we do is actually we buy land, and properties, but mainly land, especially in the current environment and we've been doing this for over a decade, we buy a lot more land than we're actually going to build and sell that year. We've been doing this here in Jacksonville, as I mentioned, we started build to rent back in 2011, before all the big hedge funds and private equity groups, and even now we're in this build to rent space, we actually started this in 2011, they put us on the front page of the Wall Street Journal in 2013 as being a pioneer in this space and so we secure this land, we buy this land, we actually own it and what that allows us to do is to create a path so that our clients have a consistent source of inventory, that they can turn, that we can turn into positive cash flow and high growth investments for them.

Once we own the land, we then build that new construction home, we then fill that home with a resident, and we do all the property management in house, we really focus on long term residence stays, we believe that's the approach that's going to lead to winning in rental property investments and so we only signed two and three year leases, we set resigned 70% of our residents, and that leads to an average duration of about four and a half years for our residents staying in our homes and then our team is just rock solid, we're here to make this. This a wonderful experience for our clients. Most of our clients live outside of Jacksonville, we have clients in 49 states 13 countries, and we get to serve over 1300 clients and manage about 4400 rental properties here in Jacksonville. And our team, we have about 85 people here on staff here and just really focused on creating a wonderful experience for folks and doing something more than just literally buying selling renting properties, right, we believe we have a higher calling, right, a higher mission here than just doing property management, we think that we can really change people's lives, by the returns that we create for folks and also what we can do in the community through the platform that we have.

Michael:

Amazing, Gregg, this is like a super niche way to get involved in in real estate. I mean, you're kind of doing it all. So in that sense, it's almost not very niche, but curious to know, how did you get your start, because this is, again, kind of this is a very specific way to go about it.

Gregg:

You know, my story started, where, you know, I went to school at the University of Florida, I was raised by a single mom and we never really discussed entrepreneurship and we never discussed real estate, it was my both my mom and my dad to have wonderful loving parents, but they never owned a house other than the one that we lived in growing up and so the idea of entrepreneurship or real estate investing was just completely foreign to me, I grew up, went to University of Florida and just tried to work very hard to get a great job and I really found comfort and security in the thought of going and working in corporate America. I realized now how much I just really, really was excited about that. Because it's very different than then how my life and my career has turned out. But I went to go and work for a company here in Jacksonville, a fortune 500 company and after about a year and a half of working there, I was really just depressed, demoralized. What I had thought was going to be my career path was not what I wanted, and I really didn't know what to do. So a friend of mine who was also struggling with the same thing at the same company turned me on to that amazing book, Rich Dad Poor Dad changed my life as I'm sure it did for you, Michael and most of the listeners I would imagine, right?

Michael:

Hmm.

Gregg:

So that book, I remember sitting down reading it, it was about nine o'clock at night and I read it all the way through till two o'clock in the morning, I finished the book, I got up and I looked at myself in the mirror and I said I'm gonna quit my job and start my own real estate investment company and if you know me, well, that is not how I make decisions. I'm very conservative, I'm more on the slow side. So this was a really big moment of inflection in my life, and a very, very powerful moment for me. But the thing that I took most away from that book was that I couldn't just put my head in the sand and just assume that I was going to work for a company and that if I worked really hard that I would just hit my financial goals. I had to mind my own business which can mean doing really well in my active job but it also means keeping my mind open and how I'm going to manage my money investments outside of my active income. But for me, the pain of working in corporate America for me was so great at that moment and I was also 23, I didn't have a lot to lose and I said, you know what, let me go big. My business partner, my original business partner, one of one of three business partners now has been my best friend and he realized that, you know, this was an opportunity for to get me on board, he is much more entrepreneurial than I am. So what he did was, he was still in his final season of Gator football over in Gainesville and I was in Jacksonville working and so his big plan was, you know, what, I know I can get Gregg on board if I just literally move in with him.

And so I didn't have that for him, I didn't have a room for him. So he came over and he said, hey, I'm gonna come over for the weekend, he ended up not leaving sleeping on my couch and he wanted to make sure that I would see him every day, when I would wake up and go to that job that I did not enjoy, he wanted to make sure that I would see him and every night when I got home, just demoralized, he wanted to make sure that I would see him searching for properties, figuring out how we're going to build this business and we did that for a little while and eventually I gave in and quit that job and we started this company. But in the beginning, we didn't really know what we were doing. We were just trying to survive and over time, and really, you know, this was 2006. So the market started to really change on us. You know, we can certainly talk a little bit more about that. But long story short, we evolved into understanding what really that intersection of what, what we are built to do and what we want to be great at, which is that turnkey rental property investment along with the property management, we really just love the fact that people can trust us with their money, we happen to be experts in real estate and we can perform as a team, even though they may live 1000s of miles away and return their money back to them on the backs of a very stable asset that just became our calling card and that's, that's really what we're very passionate about doing.

Michael:

I love it, man. Gregg, I'm curious, I think it's probably come as no shock that a lot of turnkey providers get a little bit of a bad rap in the industry and so what makes JWB difference and who is a turnkey provider really a great solution for and maybe who is it not such a great fit for?

Gregg:

I think it's a great question. You know, I think that when I started to invest, when I started to build this company back in 2006, and we started to go to market with our strategy of what turnkey was, I remember needing to fully explain what the term turnkey meant, because nobody had ever heard it before. Because it wasn't a very profitable niche back in 2006, or 2008, or 2010. Right as the market turned right, but it wasn't very profitable and so you didn't have any turnkey providers. And I remember feeling like I needed to just educate and share with people this this asset class, this possibility for you to invest in rental properties and to do it passively and I just remember just almost just being exasperated because nobody understood it. Now when I think about the space right now you are overrun with companies that claimed to be turnkey. The name turnkey means something different to every person out there. You don't have to spend as much time educating, right? Even the big media outlets are talking about why single family rental properties are such an incredible asset class. But now we're in this phase where we have to really specify what turnkey means and you know, what providers out there may be claimed turnkey, but really means something different.

For me, I really think there's a very big benefit for working with a vertically integrated company, which is a slightly different definition than turnkey, turnkey for me is really working with somebody who owns the asset, who does the property management in house and who can control that experience. That is kind of the definition of turnkey and, and what their job is, is to make sure that producing a return on investment for you today and that is wonderful. There's a lot of companies out there that claim to be turnkey, but don't meet that threshold. They might not own the asset, they might not do the construction themselves, they might not do the property management in house. But if you want to be a passive investor, you got to have all the goals in line and that's really the turnkey threshold. The reason that vertically integrated is different why I think it's so critical is it's a much higher threshold to be vertically integrated company. vertically integrated means that I might I'm not just taking care of your money today, I'm not just focused on selling you an asset that can produce cashflow. I'm not just focused on producing rent for you every single month and making sure that the home is rented and earning a return today. I want to take care of your money for the next 10 to 20 years over a full market cycle and in order to do that, you have to be much more forward thinking, right? You have to be able to source inventory a decade in advance to make sure that you have enough runway for your clients to actually finish their buying plans and own maybe three 5,10, 15, 20 properties as the market shifts, which it is right now.

And you also need to be an innovative team, you need to have an innovations department, you need to be one where you're thinking of what things are going on in the local marketplace, what boards are you on in that local marketplace? Are you a player in the social economic scene in your local market, because what many turnkey companies fail to do if you're not focused on raising median incomes, which a vertically integrated company is if you're not focused on raising median incomes in your local market, your return on investment has a cap that has a ceiling. Because as we are finding across the country, affordability is becoming an issue in many markets, and it will become an even bigger issue. No matter what supply and demand does. If homes are too expensive, then your home prices are not going to appreciate. And home price appreciation is a big part of your overall return on investment. So a vertically integrated company is actively has an impact in raising median incomes in that market, when you raise median incomes in your market. Home prices have the ability to appreciate you have a better chance of producing a return on investment for clients. So I kind of took us down a path of vertically integrated in my mind, there's a threshold of turnkey. First make sure if you want a turnkey company, that they own the assets that do the construction in house and that they actually do the property management. A higher threshold, if you're investing for a full market cycle, which is 10 to 20 years, you want to be investing with a vertically integrated company because rising median incomes and making sure you have a runway of assets is something that you need to be thinking about over that time span.

Michael:

It makes total sense. So how does a vertically integrated turnkey company actually affect and be concerned with raising median incomes?

Gregg:

It's great question. So, you know, Jacksonville is downtown is a great example of this. If you ever been to Jacksonville, Michael?

Michael:

I have not known I've been meaning to make it out that way.

Gregg:

Yeah. Well, I hope you come down here. So Jacksonville is downtown is on the precipice of a really wonderful revitalization. Now, for anybody who is in Jacksonville, who's listening to this podcast, you may have heard that same thing five years ago, 10 years ago, 15 years ago, 20 years ago. So we have so many natural assets here in downtown Jacksonville that we just haven't taken advantage of for many, many years and what it means is we have to take advantage of the political will we have to make it take advantage of the business community and we all have to come together to revitalize with downtown Jacksonville is we need to make this a place where employers come. Employers come employees want to live downtown and then when we do that, and we're surrounded by amenities, you're gonna see median incomes rise in downtown.

I'll give you kind of some numbers here. For the longest time in Jacksonville, we had a very low number of people living downtown number was about 3500 people living in downtown. It's really low number to stay that way, probably for CDs up until about three years ago probably stay that way for the previous 10 years. It just was growing just in the last three years now these are, these are small number games, but it's big on a percentage basis. We're up to about 7000 residents living downtown. Wow, yeah, we've done a lot of research to other successful downtown's and what we have noticed is that when you get to 10,000 residents living downtown, what happens is the numbers start to work so the developers can come in start to renovate buildings that might be sitting vacant in your downtown, turn these into amenities which of course creates this, this flywheel effect of require of encouraging more people to come and live downtown and up till this point, what the city is actually doing is incentivizing developers. So the city gives millions of dollars to developers like JWB in order to actually do these projects. Because right now, the numbers don't pencil they don't make sense until you have enough people living downtown and so what we are doing is JW B is buying a lot of buildings downtown, not for the purpose of earning a great return on investment in the short run. We're here for the long run. In the short run, it's actually not a very wise use of our capital and our dollars, we can make a much better much better return on investment elsewhere. But what this is doing is starting this flywheel effect, so we actually can have an impact we can be a player and helping to raise meaning and incomes attract future employers attract folks living downtown and our belief is that in the next five years, and over the next 10 years, downtown Jacksonville will look very different than what it looks like today.

Michael:

That's awesome. That's so cool, I actually was awarded one of those grants as well out in a market in downtown on Covington, Kentucky, for doing the exact same thing developing an old building. So yeah, I'm very familiar with it and I think it's an amazing program that they've got kind of going on in a lot of places.

Gregg:

You look at some of the other most successful downtown's, like Nashville, we like to think of ourselves as Nashville and 10 years in Jacksonville. And it's the same model, right? You incentivize development in the beginning, right, in order to increase the number of people living downtown, and so that the numbers work, and then eventually, the cities don't have to give these incentives and the development just works, because the rents are high enough for it to make sense on an investment perspective.

Michael:

Right, right. Awesome! Well, Gregg, let's circle back to the question of if someone is listening, thinking about getting involved in real estate, but not quite sure how, who is turnkey, a great solution for and who should maybe steer clear and go another direction?

Gregg:

Well, I think the biggest differentiator is your level of active involvement, if you want to be an active investor, turnkey, does not make sense for you, right, your upside for you to be an active investor is much higher, of course, you are also going to take on a lot more risk. But if you have the stomach and you have the expertise and the time to do the active business, to actually get out there and source your own inventory, renovate it yourself or with your crews, and then manage it yourself or even hire a property manager, go have a field day go do that, because you're probably in a position to earn a higher return on investment. I think the turnkey or vertically integrated approach really works well when you compare it against other alternatives on the passive side, right, let's this really works well, if you're somebody who would never actually go in pounding the pavement, and make hundreds and hundreds of offers to actually secure an undervalued piece of real estate and if you do that, you go to the active side.

On the passive side, though, you're probably investor who has money in the stock market, or in bonds, and they're just not performing like you want or maybe you have too much money in those asset classes, you need maybe a third wheel, or excuse me a third leg to your stool there, right? That's where passive investing in real estate can work and that's where turnkey plays really, really well. You can get the risk mitigation that you can find in asset classes like bonds with the upside that you can also find in stocks and that's why rental property investing really is an asset class that a lot of money is moving to Now, the key is, can it be passive for you? Can it be as easy and enjoyable as it is to invest in the stock market? And I know, that's what you guys do over at rootstock. You guys have made such a wonderful business model of making this an easy transaction and you know, I think that's been the missing piece for most investors.

Michael:

Yeah, no, I totally agree, I totally agree. So let's shift gears here slightly and talk about returns because I think so many people listening, that's what's going to drive the decision and when, when considering different options that's what's driving that is, hey, where can I get the best yield? Where can I get the best return? So we're recording this end of March 2022, where are you seeing investors or rather, what are you seeing investors returns look like in today's market, given all the tumultuous nature that we seem to find ourselves in?

Gregg:

Yeah, you know, listen, home prices are going up, and interest rates are going up and so what that means is that cash flows are being compressed. This is something that I've been talking about with clients for the last two years plus, once the dust settled for COVID and we knew that prices were going to go up and so what we're finding here is that cash flows are coming down. But the interesting thing is that the data and the numbers show that this trend of home prices continuing to go up and interest rates continuing to go up is here to stay for at least the short run and so what we're seeing here is home prices, and cash flows will actually lead to further cash flow compression, further lowering of return on investment and the same property that you would buy today is actually going to give a lower return on investment if you buy that property in future years, assuming that home prices and interest rates go up.

So that's kind of the big picture of what we're seeing. This is becoming a less profitable business model because you've had such low home prices and such low interest rates in the past that won't always stay the same. Specifically, though, for the Jacksonville market, what we're seeing are returns on investment between seven to 8% and that's not including home price appreciation that's taking into account your net rental income, your tax savings, your principal pay down, but it's leaving off to profit centers that are highly influential home price appreciation, and of course, inflation hedging as we all know, inflation is a real thing. It's at its peak since the last 40 years and rental properties do a wonderful job of hedging against inflation.

Michael:

Awesome, awesome and Gregg curious to get your thoughts on where you've seen the Jacksonville market go in the last three to six months and what your projections are. I want to I want you to put some fresh batteries in your crystal ball and give me give me your take on where it's heading in the next three to six months.

Gregg:

I've never been more confident in where the market is going. I said that last year because the data was so telling as far as us seeing above average home price appreciation, and the data is even more telling, I'll tell you which data I'm kind of referencing. But over the last three to six months, we have seen 15 to 20% annualized appreciation in Jacksonville. Those are staggering numbers, we've never seen 15 to 20% appreciation over the year in Jacksonville's history and you got to ask yourself, why is this happening? Well, it's happening because of low supply and increased demand and when you have very low supply and increased demand, it puts upward pressure on pricing. Jacksonville happens to be an affordable market. So you've got a lot of upward pressure and people can still afford to buy homes at this at the appreciated rates.

You know, one thing that you can look at to see where pricing is going in the short run is something called months of inventory, something that we look at and we track we've tracked every month ever since 2014. Here at JWB we track it because it matters, it tells us where pricing is going and so what you're seeing is if you look at the number of homes that are on the market, you can just divide it by the number of homes that sold in the previous month and you get this measurement. It's called months of inventory. Historically, between six to seven months of inventory that would lead to average, or normal home price appreciation, which in the Jacksonville market is 4.6% per year that's coming from 1982 all the way through 2022. So if you got six to seven, you're thinking oh probably about four to 4.6% somewhere around there as what you would expect over the next six to 12 months. Well last year when I was super confident home prices were going up we had like three months of inventory. Looking at it now we have about one month of inventory in the Jacksonville market and so that's why we're gonna see higher than normal home price appreciation. I usually don't make a specific prediction. I can't if you want me to I'm not afraid to do it. But you know, you got to do it guys you want me to do all right, I'm gonna listen. You it's better to go conservative. So I'm gonna go a little conservative. I'm gonna say eight to 10% home price appreciation in Jacksonville.

I think it could be higher. You look at Zillow, Zillow is predicting 16% home price appreciation or 12%, I can't remember which one, Goldman Sachs is predicting either 16 or 12%. You go in most, most outlets out there and they're predicting higher than normal home price appreciation, I think it could get that high. But they're the real reason why I'm so confident home prices are going to go up is because you gotta think about what's going to take to get to an equilibrium level of months of inventory, you're gonna have to build yourself out of this inventory crunch and it's taking longer to build new construction homes today than it has even last year and much longer and much more costly than it did a number of years ago. So it's going to take us some time it's going to take longer than one year and you still have room to run here in the Jacksonville market. So we're gonna see higher than normal home price appreciation over Jacksonville in Jackson over the next year. My opinion.

Michael:

I love it, you heard it here. First, folks, eight to 10% and Jacksonville. Let's circle back in a year and see how close you were. That's awesome. Gregg, this was awesome, man. Thank you so much for taking the time if people want to reach out to you directly or learn more about JWB or invest with you all what's the best way for them to do so?

Gregg:

Michael, thanks so much for having me. It's just really been a wonderful opportunity. For those who are interested to learn a little bit more about JWB. You can check us out online at https://www.jwbrealestatecapital.com/ . We also do a show called- The not your average investor show would love for you to listen to that either. Wherever you find your local, your favorite podcasts. We also do a live audience as well you can check out the show@nyais.com. We do it every Tuesday and Thursday and if you want to join the fun, the fun club come and hang out with us in the audience here on the show.

Michael:

Right on, well thanks again Gregg and we'll definitely chat soon I'm sure.

Gregg:

I appreciate it. Bye.

Michael:

All right, everyone. That was our show a big thank you to Gregg for coming on, super interesting topic. A lot of really good stuff to chew on and definitely gonna be go checking out JWB real estate capital out there in Jacksonville. As always, if you liked the episode, feel free to leave us a rating or review. We'd love to hear from you all, as well as include a topic suggestion if you'd like to hear something more from us. We look forward to seeing on the next one. Happy investing…