Today's Guest: Jake Clopton
Jake is the Founder and CEO at Clopton Capital, a serial entrepreneur, author, and economist. He founded Clopton Capital in 2009 as a way for property owners and operators to efficiently access both debt and JV equity for commercial property deals. The company focuses on small to middle-market space and all asset classes. Since its inception, Jake has arranged billions of dollars in financing for borrowers across the country. Jake is also the owner and operator of several apartment communities serving residents across the Chicagoland area. He also manages Clopton Insurance Services, a national insurance agency focusing solely on commercial property and business insurance.
Highlights From The Show:
We begin the episode with Jake sharing his background story and how he ended up in real estate. Jake shares that before he got into real estate, he traded product features in Chicago. However, with the financial crisis in 2008, the interest rates went to zero, all the markets dried up, and it was hard to make money. Jake's idea in the crisis was to help people find capital for deals, even though he didn’t have a background in banking. He started making calls to banks, lenders, and anybody he could find to help him put the money out there. That was 15 years ago, and now he has a capital-raising company that has evolved over time, and Jake fell into the real estate side of it.
We then talk about how Jake’s company helps people raise money for deals. He shares that his company is a liquidity provider in real estate. They do straightforward mortgages for commercial properties, bridge loans, and creative capital. He shares that their typical clients are small market real estate operators, but they also get involved with institutions to help them raise JV equity. However, according to Jake, you will need more as you scale the different types of deals and assets, and how you raise money will change. He also shares that when you start getting bigger, your ability to look for more deals will be taken away as you service the properties you already have in your portfolio, especially when you have multiple investors.
Next, we talk about the interest rates, where they are going, and what you can expect. Jake shares that the market is a little different now, and a lot of what is going on is just uncertainty in the system. Uncertain risk makes people pull back and question their decisions. According to Jake, the volatility and the higher risk are based on the credit spread, and we’re not in a recession as many people presume. Banks are very solid, and there is an enormous amount of liquidity out there. He shares that you should not listen so much to what people are saying about the market crashing because they have been jolted so much into that, and it’s creating a lot of uncertainty. Jake’s perspective is that when you finally get clarity on how far the Fed is going to move the interest rates and understand where it’s going to stop, it will solidify your certainty and stability in the market.
We then talk about what is coming up in the market and how Jake is bracing his company. Jake shares that they provide capital, and in times like this, when things are a little bit trickier, they do a lot better. According to him, asset prices didn't go down when the entire economy shut down during the pandemic. There are more debts, but there is a lot more liquidity, and we are starting from a much better place. Jake also touches on the residential market, and he shares that what happened is that it got ahead of itself and became hypercompetitive. There was a surge of demand from investors for residential housing, and 20% of all homes sold were sold to investors. This was an abnormal amount of this year's demand. Jake argues that it was not necessarily that the market was losing value but had a demand problem.
Lastly, we discuss the commercial real estate market and why you might want to look into it. Jake shares that the reason people go from residential to commercial is all about scale and doing bigger deals. According to him, moving from different classes of residential properties, single-family, duplexes to multi-family and then transitioning to commercial real estate space can happen very fast, but not everybody does it. In his books, Jake helps people understand that the residential and commercial markets are very different in terms of finances, equity, and capital raising in order to make a great transition.
Make sure you don’t miss another amazing episode of the Just Start Real Estate Podcast with Jake Clopton and get valuable information on the state of the market and where interest rates will go in the coming months!
Notable Quotes:
“Every deal is different, and raising money for every deal is different.”
“Sometimes we tend to wait so long to peel off some responsibilities in our business that by the time we’re hiring, we should have done it a long time ago.”
“Residential and commercial markets are very different in terms of financing, equity and capital raising.“
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Resources and Links From Today's Show:
Jakes on LinkedIn
Jakes on Instagram
Jakes on Facebook
Jakes On Twitter
Jakes on YouTube
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