How to Use VA Loans to Invest in Real Estate w/Shelon Hutchinson

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Episode Description

Welcome to the Freedom Point Real Estate podcast! In today's episode, Jeremy Dyer calls in Shelon "Hutch" Hutchinson from Hawaii to share his journey from Jamaica to the US Marine Corps to successful real estate. They cover the importance of team work, the value of wise mentors, the power of VA loans, and much more.

Shelon “Hutch The Marine Investor” Hutchinson isn’t just a decorated Master Gunnery Sergeant (E-9) in the United States Marine Corps—he’s a powerhouse leader, investor, and strategist. With 25 years of service in Marine Corps aviation, he’s held key leadership roles, guiding teams through both high-stakes training and combat operations. Hutch’s dedication extends beyond the military. As a real estate investor, he has successfully executed over $2.4 million in single-family transactions, including $870K as an agent (currently inactive). He’s also co-sponsored over $131 million in multifamily acquisitions, amassing 1,018 units across the Southeast and Texas. A proud member of the Raise Master's Mastermind, he’s always sharpening his expertise. Academically, Hutch holds a Bachelor of Science in Aeronautics from Embry-Riddle Aeronautical University. But his greatest achievements? Being the devoted "Husband of Athena" for 22 years and the proud father of three amazing children.

CONNECT WITH SHELON HUTCHINSON!

LinkedIn: https://www.linkedin.com/in/shelon-hutchinson-50a6a721/

H Squared Capital: https://www.hsquaredcapital.com/

CONNECT WITH JEREMY DYER!

Website: https://startingpointcapital.com/

Instagram: https://www.instagram.com/startingpointcapital/

LinkedIn: https://www.linkedin.com/in/jeremydyer

Facebook: https://www.facebook.com/startingpointcapital

Book a Call! https://calendly.com/startingpointcapital/discuss-investing-with-jeremy-dyer?month=2023-12

Summary

Tip #1: Vet the Operator’s Track Record

"Can you provide an example of a successful multifamily property similar to this property that you're bringing to us?"

When evaluating a real estate operator, it’s essential to ask for specific examples of past successful projects. Hutch emphasizes that a solid track record doesn’t just consist of completed deals but includes how the operator has handled challenges. Investors should understand how an operator has navigated difficulties, as those insights will indicate their ability to effectively manage future projects and protect investor capital. This not only builds trust but helps set realistic expectations for what might come in the future.

Tip #2: Understand the Operator’s Investment Philosophy

"Instead of diluting the investor returns, we went from a 80/20 to a 90/10 split which still gave the investors the projected return of what they would have received when they initially made their investment."

Hutch highlights the importance of understanding an operator’s investment philosophy, particularly when unexpected challenges arise. For instance, when an operator faces a financial shortfall, it’s crucial to know how they’ll handle the situation. Hutch recounts how, during one deal, they changed the equity split to ensure that the investors’ returns were protected, showcasing their commitment to a win-win situation for both parties. This flexibility and investor-first mentality are what set top-tier operators apart.

Tip #3: Prioritize Transparency

"One of the operators that we invest with, they would on a monthly basis whenever we push the investor portal and also the link for the investors to view all the ledger, they get to see everything, all transactions from the property."

Hutch underscores the value of transparency in the relationship between operators and investors. Best-in-class operators routinely share detailed financial reports and offer regular calls to update investors on the status of their investments. This practice not only ensures that investors are always in the loop but also fosters trust, which is crucial for long-term partnerships. Transparent communication helps mitigate concerns and strengthens investor confidence, even during market downturns.

Tip #4: Ask About Risk Mitigation Strategies

"What proactive risk management practices does the team employ to mitigate potential risk associated with multifamily?"

Risk management is an essential component of passive real estate investing, and Hutch encourages investors to ask operators about their risk mitigation practices. Operators should be proactive about addressing risks like fluctuating interest rates or rising insurance costs. By understanding these strategies, investors can gain confidence that their capital is protected. Hutch notes that the best operators will have a detailed plan for dealing with uncertainties, ensuring that investor interests are safeguarded throughout the life of the investment.

Tip #5: Look Beyond Realized Returns

"Track record is important, but it doesn't tell the full story. What about deals that haven't gone full cycle yet?"

Hutch points out that while a solid track record is important, it’s also crucial to consider ongoing projects that haven’t yet gone full cycle. Understanding how an operator is handling deals that are still in progress is just as important as their past successes. As Hutch explains, even operators with an impeccable track record can face setbacks, and it’s their ability to communicate and handle these challenges that truly defines their quality. Investors should focus on operators who are transparent and proactive, even when things aren't going perfectly.

Tip #6: Build Relationships Before You Invest

"We need a pre-existing relationship for a 506(b) deal, so let's start building that now."

When it comes to syndications, especially 506(b) offerings, Hutch advises that investors start building relationships with operators early. A pre-existing relationship is required before investing in certain deals, and by connecting with operators before a deal goes live, investors can ensure they’re making informed decisions. Hutch stresses that these relationships are built on trust and mutual understanding, and starting early can lead to a smoother investment process.

Tip #7: Consider the Benefits of a 1031 Exchange

"1031 exchanges allow investors to transition from appreciation-based assets to cash flow-focused investments."

A 1031 exchange can be a game-changer for real estate investors looking to defer taxes while repositioning their portfolios. Hutch explains that investors in high-appreciation markets, such as Hawaii, may benefit from using a 1031 exchange to invest in cash flow-producing properties on the mainland. This strategy can help them leverage their capital for better returns, especially if they’re looking to focus on cash flow rather than relying solely on appreciation. Hutch encourages investors to take advantage of these exchanges to diversify and strengthen their portfolios.

Tip #8: Leverage LinkedIn and Networking

"We’re maximizing LinkedIn for outreach, connecting with accredited military veteran business owners."

Networking is an essential part of building a successful passive real estate investing strategy, and Hutch is leveraging LinkedIn to connect with accredited investors. He emphasizes the importance of social platforms in expanding one’s network and finding potential investors or partners. Hutch’s strategy involves reaching out to military veterans and small business owners, a group that can benefit from passive real estate investments. Networking through LinkedIn allows him to build relationships and gain access to a pool of potential investors who are interested in syndications.

Tip #9: Evaluate Operator Communication Practices

"Operators who hold regular investor calls and provide full transparency build the most trust."

Hutch stresses the importance of operators who communicate regularly and openly with their investors. Operators who offer monthly reports, share financial updates, and host calls or webinars demonstrate a commitment to keeping investors informed. By ensuring that investors are regularly updated, operators can address concerns before they escalate and maintain strong relationships over the long term. Transparency and frequent communication create an environment of trust, which is essential for successful partnerships in real estate investing.

Tip #10: Invest in Education Before Investing Your Money

"Those who pay, pay attention—education is key before deploying capital."

Hutch emphasizes that investing in education before committing capital is essential for success. He encourages new investors to join mentorship programs, like Raise Masters, which provide invaluable insights into real estate investing. By learning from experienced professionals, investors can avoid common pitfalls and make informed decisions. Hutch highlights that those who invest in their education are more likely to succeed because they understand the nuances of the market and can ask the right questions to the right people.