SOUND OPINION—WISE DECISIONS: VOICE OF THE PROFITABLE REAL ESTATE INVESTOR
TABLE OF CONTENTS A nalys i s
11 The Best of Both Worlds Depends Upon Your Perspective Buy and hold or buy and resell? Bruce Norris’ advice? Do some of both. How Bruce favors right buying regardless of the end strategy.
6 In Intimate Detail: Sacramento, CA REI Voice publisher Geraldine Barry interviews Tim Manke—experienced, regional investor about the Sacramento real estate market.
8 The New Real Estate Paradigm Market researcher, Howard Blum, says that returning to a “normal” real estate market is so far off, it’s time to re-evaluate the paradigm today.
A dv i c e
10 True Costs of D.I.Y. Acquisitions Are you honest with yourself regarding the cost of acquisitions? Experienced investor Tom Wilson shows how to properly analyze potential ROI whether you use a buy-and-hold or a flip strategy.
12 Opportunity and Urgency Af ter g rowing u p in rea l estate, Aa ro n N o rris ig no red po r t folio b uilding fo r a lo ng t im e. N ow h e s ays , it ’s t im e to g et seriou s a bou t invest ing .
B asics
14 Asset allocation thinking with “non-traditional” investments Eric Wikstrom, CPA, CFP®, discusses the importance of understanding the “risk premium” that comes with any investment.
16 Creative Financing Techniques A t r i e d a n d t r u e t e c h n i q u e f o r eve n c a s h p o o r i nve s t o r s t o g e t i n t h e m a r k e t i s s h a r e d by r e a l e s t a t e i nve s t o r a n d a u t h o r D yc h e s Boddiford.
Tr e n ds
18 Flip and Hold—the New, Old Strategy In a flip-and-hold investment, the investor sells the property without performing repairs and holds the paper. REO evangelist, Lori Greymont uses this old model with a new twist to build portfolios.
21 Proven Strategy for Distressed Homeowners Comes Out of the Dark Natalie Knowlton, short sale expert, says that besides believing in the myths, some people give up too soon. Short Sales demand a certain level of expertise. She dispels the myths and provides facts about this homeowner helper.
Fe at u r e s
24 Metrics Behind the Madness Real numbers support the importance of Facebook. Social media expert, Aaron Norris, provides evidence that 50% of American’s can’t be wrong.
30 Ger’s Top 5 Re s o u r c e s
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For the profitable real estate investor.
April 2011 REI VOICE
PU B LIS HER ’S NOT E
WELCOME
REI Voice™ Magazine A publication of SJREI Assocation™ Publisher
As SJREI Association President, and publisher of REI Voice Magazine, I have the opportunity to interact with many successful, high profile individuals. What I have learned is that they share common traits, the first being: they are simply human. They are risk takers, courageous and strong, but they also battle self-doubt and fear just the same as the rest of us. A common compelling trait that I have noticed is that they navigate failure very effectively, that is, they do not allow failure to define them. They learn from it, and move on quickly.
Geraldine Barry | 408-264-3198 Geraldine@SJREI.org Editor-in-Chief Susan Hare | 408-391-8068 Susan@REIVoice.com Advertising Sales Meghan Koslowski | 408-264-3198 Meghan@REIVoice.org Art Director Kevin Bell kbell@Western-Web.net Director, Administration Meghan Koslowski | 408-264-3198 Meghan@SJREI.org
Geraldine Barry Publisher President of SJREI Association
Teddy Roosevelt said, “People who neither know victory nor defeat are cold and timid souls.” Do you want to fit this definition? If not, educate yourself, don’t be emotional about financial matters, and take a risk. Remember that risk is part of life, and you don’t fully live if you stay in your comfort zone all of the time. The opportunities that abound right now are worth exploring. In this issue of REI Voice Magazine, we focus on strategy. Is it better to buy and hold investment property or to fix and flip for immediate gain? What funding strategies are available? What’s a good exit strategy for a distressed investment? What is the best timing strategy for getting back into the market? One of our favorite sayings is, “You know you have a strategy when you can say ‘no’ to an opportunity.” In real estate investing,
there seems to be a new opportunity every day. The surest way to lose your money is to grab every opportunity that comes along. The surest way to keep from making any money is to let every opportunity pass you by. Find a strategy that works for you and invest time in understanding it intimately. How do you do that? Reading REI Voice is one step. Then, get out and network with other investors and develop friendships with people who are doing what you want to do. Attend meetings and seminars. Listen to the experts, gather information, do your due diligence, and consult with professionals where appropriate. Most of all, get going!
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Geraldine Barry Publisher President of SJREI Association
States. To order a subscription, visit REIVoice. com/Subscribe. REI Voice Magazine c/o SJREI Association P.O. Box 90542, San Jose, CA 95109-3542 www.REIVoice.com Copyright © 2011 SJREI Association. All rights reserved.
REI VOICE April 2011
April 2011 REI VOICE
AN ALYSIS
In Intimate Detail: Sacramento, CA
REI VOICE April 2011
An interview with Tim Manke by Geraldine Barry In early March, I had the opportunity to sit down with Tim Manke. Tim has been living and investing in Sacramento, California, since the early 1990’s. He struck me as very logical and systematic with his approach to real estate investing. He is also a lovely person. Please enjoy our interview. Q: How did you get your start?
I got my start in real estate back in 1991 when I took a real estate principals class and started my education. I went on to earn a Bachelor of Science degree in Real Estate. My career started in commercial real estate. The first sale I worked on was a 19-story high rise which we sold for over $67mm. I have leased over 4,000,000 sf of commercial, including warehouses, office and retail. By the late 90’s my focus was on residential properties. I find them to be more secure than commercial. I started purchasing single family and multifamily units. Both as properties to hold for cash flow and properties to flip. Between 2000 and 2006 I increased my volume of purchasing, ran a brokerage house and two mortgage companies. In 2005 and 2006 I sold all of our holdings in Sacramento. Q: I understand that you rank neighborhoods on a 1 to 10 scale. Please explain.
1, 2 is a neighborhood where you don’t want to be at night (in Sacrament for example, Oak Park, Lemon Hill area, and Del Paso Heights); a 9, 10 would be the neighborhood where you would want to live (Granite Bay, Arden Oaks, Fab 40’s). The middle class neighborhoods (4, 5, 6, 7, and 8) are where you want to invest, where risk and management tolerance unite. Q: Are you a buy and hold investor - what are your criteria for that? Is flipping risky in today’s market?
Flipping puts money in your pocket, holding brings you real wealth. In Sacramento right now you can buy properties at the mid-90’s prices with the cheapest financing we’ve ever
scene and high rents (it’s a no-brainer). Of the properties that I hold, I have a preference for duplexes. My criteria are simple; I expect one side to cover the entire payment, which alTIM MANKE lows other side to provide me cash flow, security when there is a vacancy and the option to pay off the property early. I prefer to buy duplexes in 6, 7, 8 neighborhoods, I fix them to be very nice, I want my tenants to move in but not out. For the homes that I hold I look at 4, 5, 6 neighborhoods, I expect my price to be under $75k for the most part. I will look at homes at higher prices, however I prefer the flexibility that comes with properties in that price range and I am not afraid to do work on them. I do flip, I look for homes with a ARV of $150k or more and a minimum of $40k profit in a deal. Don’t make the mistake of thinking your remodeled house will get top dollar. I try to price my home totally remodeled where the average homes are selling. The comps that you are using today to price your flip can change and turn your flip to a flop. I personally have had the comps drop on me $100k in 30 days in a neighborhood. We still managed a nice profit (over $50k), but if our margins had been less, it could have been a disaster. Q: What are your goals for investing this year and to maximize the opportunities that this cycle presents?
substantial. Because of the large numbers of foreclosures we are finding lots of quality tenants, people who can’t buy a house but want a nice place to rent. Q: Do you think Sacramento has hit a bottom?
I think that depends on the neighborhood. I can see prices going down in the 1,2,3 neighborhoods, and the 8,9,10 neighborhoods, However I believe that interest rates will be going up so in a few years even if the price is a little lower the payment will be higher. I also think we many see the end of the 30 year mortgage as Fannie and Freddie go away. Q: What kind of houses do you recommend for investors, particularly for those do not reside near their properties?
If you’re an out of town investor, do not buy in 1,2,3,4 neighborhoods. Spend a little more, get a nicer tenant, and minimize the hassles. Q: Where are the opportunities for investors in your market today?
In the Sacramento area I prefer Foothill Farms, Citrus Heights, Carmichael, Antelope, Arden Arcade, Fair Oaks, Orangevale and Roseville. Q: What are your three recommendations for new investors?
This year I plan on acquiring a minimum of 6 hold properties and 6 “flip” properties. To date I’m on track to surpass these goal. By the time this real estate cycle ends, I expect to hold a minimum of 40 properties. I require my properties to net me at least $300 per month per door.
First is to buy cash flow first. Second if you’re trying to flip have a second way out, if you can’t sell it cash you rent it and cash flow. Third don’t be greedy, if you’re new find an experienced partner, they might take part of the profit but also take part of your risk, Also, never buy a investment property from a real estate agent who doesn’t own investment property themselves.
Q: What are your thoughts on the Sacramento real estate market now?
Q: What resources do you use to get information on the market?
Sacramento is ripe for investment. The prices have dropped to the point where cash flow is
I use Metrolist, ForeclosureRadar.com, and sources such as the Norris Group and SJREI.
April 2011 REI VOICE
AN ALYSIS
The New Real Estate Paradigm By Howard Blum
Howard Blum is the founder and owner of The Financial News and Information. Howard was a Bay Area regional Coordinator for the Concord Coalition, a nationwide educational movement founded by former US Senators Paul Tsongas (D-MA) and Warren Rudman (RNH), and is also an award winning public speaker who loves to talk about complex economic subjects in plain English. He is also a frequent guest lecturer at colleges, Universities and business groups around Northern CA.
The financial world changed in a heartbeat on Sept. 15, 2008 when Lehman Brothers brokerage firm failed. They were taken down by the so-called “toxic assets” that were in fact non-performing mortgages of all flavors, but primarily sub-prime. Real Estate has been in a funk for more than four years. The likelihood of a return to what most people consider a “normal” housing cycle is not just around the corner. I DO NOT see the housing sector returning to the sales volume levels of ‘Go-Go’ days of 2004 and 2005 for perhaps a decade, if ever. I do see an end to the foreclosure nightmare sometime in 2012. Some areas of the country may respond sooner than others, but ultimately the national housing sector is not going to return to a vigorous sales cycle for years to come. This makes for excellent opportunities for investors to capitalize on what the market is giving us. Unfortunately, buyer concerns, unemployment, strains on disposable incomes and soaring energy prices are all compelling factors that must be entered into the mix. This will likely depress home sales levels for some time to come. The incessant ‘chatter’ on the mainstream media about the potential loss of the mortgage interest deduction, however unlikely for the overwhelming majority of homeowners, is also having a negative impact on home sales. I frequently lecture on what to expect in the future from home sales volumes, to price appreciation, to marketing times for
REI VOICE April 2011
properties. I suspect the changes that are likely to happen with the phasing out of Fannie Mae and Freddie Mac, and what investor financing will look like in the years ahead, will only present new challenges to real estate investors. I cannot take a comprehensive look at where the real estate sector is headed without first exploring the intricacies of what is unfolding in the financing arena. And for this group the first place to look is non-owner occupied financing. There are any number of proposals, ideas, hopes and desires for the future of financing now
that it is all but certain the two GSE (government sponsored enterprises), Fannie Mae and Freddie Mac, are going to be phased out over the next five to ten years. The powers that be will soon be inviting seasoned investors to meet with Fannie Mae executives to talk through what nonowner financing should look like in the future. As much as the government would like to ignore investors, they remain the only viable solution to the absorption of excess inventory to stabilize the housing sector in this country. The discussions with Fannie
will be over the viability of another vehicle for the financing of investor properties besides the two GSEs. Considering the current environment on Wall Street and their perception that investors were partly responsible for the housing market collapse (they’d never blame themselves), we may see a period of difficulties for investor financing ahead. If you are new to property investing and you have not made your first purchase yet, trust me when I say it will get a lot more difficult before it gets easier. Risk-based pricing for mortgages is going to return. It is an axiom that has endured through time immemorial and got lost in the last decade. Go get a property now so you can demonstrate “experience” as an investor because that may be critical in the new world of investor financing. As home sales start to rise to a level I see as somewhere between five and six million homes sold and closed per year nationwide, competition for distressed properties will become increasingly difficult. Demand for homes will exceed supply in a few years, and with the rate differential between owner-occupant and investor financing that is coming, it will make it more challenging for buy and hold investors to hit their numbers. Unlike some ‘gurus’ that say buy and hold makes no sense, I disagree. If you buy it right, rent it right, contain your expenses, and have positive net cash flow, there is always room for buy and hold investing, however challenging. I also see greater opportunities in the immediate future for flipping.
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April 2011 REI VOICE
ADVICE
True Costs of D.I.Y. Acquisitions By Tom Wilson
Tom Wilson has been investing in real estate since the 70’s. He first invested as a parttime activity, and then after thirty years with some of Silicon Valley’s pioneering technology companies, Tom put his business and management experience toward full-time real estate investing. Wilson Investment Properties offers high cash-flow, fully-leased investment properties.
Imagine two houses on the same tree-lined suburban street. Both were built within the last 20 years, both have three bedrooms, two bathrooms, and yards large enough for a couple of kids to play. House number one, is purchased by a new, starry-eyed investor. He did a walk through, took a few measurements, read the reports and determined that the house only needed fresh paint and new carpet. He based his bid on the minimal rehab costs. The house is in a good neighborhood. It will be rented or sold within a week! Mr. Experienced Investor saw house number one, tallied up the total rehab and acquisition costs and passed. He purchased house number two. Paint and carpet would spruce up the place, but Mr. Experienced investor had learned the hard way to take the long view. If he was planning to hold the property, he didn’t want to have to pay for broken furnace or leaky faucet repair out of his rental income. If he was planning on a flip, he didn’t want to be stuck with repair costs after the inspection report highlighted any flaws. Mr. Experienced also wanted to sell quickly at a profit or attract stable renters for his long-term hold—renters who were at the high end of the rent scale for the neighborhood. In addition to paint and carpet, he replaced the appliances, refinished the cabinets and counters to make the kitchen sparkle, installed an automatic sprinkler system in the newly sodded lawn, and made other significant and lasting repairs. The careful reader will guess how this story ends. When potential buyers entered the staged home placed on the market by Mr. Experienced, they were dazzled. Mr. Starry-eye’s paint-‘n-carpet
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rehab didn’t stand a chance. Worse, Mr. Starry-eye had blown his rehab budget when, during carpet removal, dry-rot was discovered. And that new paint job? Stained by a leaking roof. By underestimating rehab costs, he lost his shirt on his “great deal.” The only shortcut to becoming Mr. Experienced is to put him on your team. Knowing how to account for all of the acquisition and rehab costs and calculate true CCR (Cash on Cash Return) will help the willing investor make better purchase decisions. (We’re already convinced that low quality leads to low results, correct?) When one calculates or projects CCR , one has to include ALL of the costs to the point of sale or of the initial rent check. While the fantasy in the heat of pursuit of a deal is that the cost is the purchase price plus carpet and paint, out-of-pocket expenses are always far greater. One has to add the total cost of purchase, complete rehab, along with the surprises, and the total cost of carrying the property (PITI, utilities, ads, lease-up fee, etc.) until the money clears the bank and the property is occupied. We all like to boast about the great deals we get. The problem is not the rosy picture we paint for our doubting friends and family, but the story that we WANT to believe ourselves. Do your homework, do your due diligence, and be truthful with yourself while you can still cut your losses and move on to a better investment. The Wilson Investment Properties quality turnkey business model is no secret. We share our process and our results openly. In over 260 properties that we have provided to investors and homeowners, only four required just paint and carpet. Could we
have gotten away with that little on a few more properties? Maybe. But experience has taught us that, when flipping, a quality rehab commands the highest price and spends little time on sitting on the market. For maximum long term cash flow ROI when holding a property, high-quality rehabs attract the best tenant at the best rent and costs less out-of-pocket to maintain. Two tables accompany this article. One lists the typical rehab cost items, the other provides a model for estimating typical investor property acquisition costs. When performing a CCR analysis for a potential investment, this level of detail and total costs is critical in making a good investment decision. To be successful with either a buy-and-hold or fix-and-flip investment strategy, understanding the numbers is only one half of the equation. The other half is follow-through. Investors, inexperienced with rehabs, soon learn the challenge of selecting and managing contractors, choosing materials and supplies, participating in the permit process, and forging a relationship with an attentive property manager or real estate agent, all while keeping an eye on the bottom line. To take a property from purchase to the point of cash flow poses a serious challenge. It is hard to do better than someone with experience and the cash and proven resources to do it right. My take on the fix-and-flip versus buy-and-hold investment strategies? For the least risk and greatest long-term reward, I say forget “Do It Yourself” acquisitions. Instead either invest funds with an experienced flipper for a solid return on your investment, or buy quality rehabbed, fully-rented properties and then hold ‘em.
Typical Rehab Cost Items Air conditioning system Appliance repair Appliance replacements Bath repairs Cabinet refinishing Carpet replacement Cleaning, final Electric fixtures and fans Electrical repairs Exterior paint Exterior repairs Fencing Foundation Garage door opener Heating system Interior paint Interior repairs, general Kitchen counter rehab Kitchen repairs Landscape clean up Landscape improvement Locks Plumbing fixtures Plumbing repairs Roof repairs Sheetrock repair Staging Trash out Vinyl/tile flooring Water damage Window blinds Window repair Window replacement Misc. Typical Property Acquisition & Rehab Costs From Purchase Until Leased Market value $115,000 Rent $1,100 Purchase price $94,000 Closing cost $2,800 Rehab $8,600 Utilities $500 Debt service loan $1,570 Insurance $600 Taxes $990 Advertising $400 Lease up fee $550 Total average additional out of pocket $16,010 Percent of purchase price 17% Total out of pocket cost with 20% down payment $34,810 Average days purchase to lease 90 days Initial rehab estimate $3,500 Initial rent ratio estimate 1.18 Rent ratio after rehab and lease .99 Total acquisition cost $110,010 *Add debt service for down payment and rehab funds if those are borrowed.
ADVICE
The Best of Both Worlds Depends Upon Your Perspective By Bruce Norris
Bruce Norris is an active investor, hard money lender, and real estate educator with over 30 years experience. Bruce has been involved in over 2,000 real estate transactions as a buyer, seller, builder, and money partner. Bruce is host of the award-winning Norris Group Real Estate Radio Show and Podcast on KTIE 590am where he interviews real estate industry leaders and economists
Whenever I’m speaking with real estate investors, I am often asked, “Should I buy and hold or buy and resell?” My best response: some of both. Both types of transactions are made possible by understanding how to find and purchase wholesale deals. By finding a property below what it’s worth, you set yourself up for cash flow if you keep it or a profit if you fix and resell it. Your target property on the buy and hold inventory is usually median price and below for your area. This will give you the best chance of cash flow. With these buy and hold properties, you’ll mostly be dealing in properties that were built decades ago. Aged inventory can usually be bought at a discount from a lender through an REO listing agent. The retail buyer may want the same property, but they might not be able to get financing. The retail buyer usually gets a new conventional loan and most lenders have certain requirements before the loan can be funded. This is the perfect niche for the wholesale buyer/wannabe landlord to purchase. With the owner-occupant buyer sidelined due to fewer loans being available, the buyer who has all cash has a big advantage. Once the property is repaired and rented, you may decide to take advantage of historic low interest rates. Conventional loans are available if you qualify for a refinance from Freddie Mac or Fannie Mae. These loans won’t typically be available until after six months of seasoning passes and qualifying can be arduous. There will be a maximum of ten properties you’ll be able to finance going this route regardless of your equity position, property cash flow, or how much money you have in the bank. With the buy/sell strategy, the properties you target to resell could be the exact same
property type you keep as a rental. In a challenging market such as we have now, about 45% of all sales are to first-time buyers. These buyers have the least cash and will usually qualify for the less expensive inventory. If you’re more interested in wholesale deals on upscale inventory, you might consider buying at trustee sales. In just five weeks my company has purchased twenty eight houses and nearly every one of them was built after the year 2000. There would be no way we could ever purchase two dozen recently built houses in decent condition at a discount going after REOs. These properties won’t cash flow as rentals but make very desirable resale inventory in our area. We still don’t buy expensive properties and usually try to stay at about 125% of median price on these types of properties. Buying at trustee sales requires all cash, but it doesn’t have to be your cash. If you’re interested in learning more about buying at trustee sales, I would go to foreclosureradar. com and sign up for a trail period. It’s one of my favorite resources. This is definitely a unique time in California real estate. Both buy/sell and buy/hold strategies are alive and well and some incredible opportunities are at hand. Find a way to buy/sell your way to chunks of money and use that money to buy and keep rental properties. If all you can do is buy at retail, it’s time to learn how find the deals!
April 2011 REI VOICE
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ADVICE
Opportunity and By Aaron Norris
Aaron Norris is Vice President of the Norris Group where he is responsible for business development and production of TNG’s awards winning radio show, events, and educational seminars. Aaron is also principal at Palisoul, Norris, + Conroy, a marketing and strategy team based in Southern California and hosts of the marketing and business podcast, The Cocktail Party Statement.
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I didn’t start in real estate but I grew up in real estate. If you had asked me seven years ago if I’d ever follow in my father’s footsteps, the answer would have been “no.” I have many memories of getting paid to de-junk some of the properties my father purchased to flip. At 6 years old, I vividly remember much of the day at one particular house using the vacuum to suck up the millions of roaches that scattered as the carpet was being pulled. We called that one the Roach house. At 13, my best friend and I spent the weekend painting to save to go to camp (the Summer Camp house). And I’ll never forget the Jelly House. I didn’t know homemade boysenberry jam could keep for 40 years. We didn’t test it, but it still looked pretty good. For me at that age, real estate was tied to manual labor, making money for activities, and finding treasures others had left behind. When you’re young, you miss opportunity because you can’t fully appreciate what’s in front of you. Then again, that same issue can be applied any age. Now at the ripe age of 34, life feels more urgent. At 27, I was investing in trust deeds but had little time to invest due to relocating, a career switch, and going back to school to get my MBA. Now that those issues are settled, I’m under more pressure (self-induced) to buy more houses. At every investor meeting I attend there are the few pros already working the business (they’ve usually got lots of people around them), a group licking their wounds in the corner, a handful complaining that they can’t find a deal, and then there’s the newbies that think real estate is unicorns and rainbows simply because they don’t know any better. The folks on cable TV do it every show and make $50,000 per house (insert sarcasm). Being green and starting today can actually be a huge advantage. Having been around the industry during the worst and fastest real estate downturns on the books, lost fortunes, do-overs, and going back to a “real job” are all too familiar conversations. Real estate has damaged people. If you haven’t been hurt and you don’t remember the easy days
Urgency of flipping in 2006 — when breathing made a profit — cynicism and fear haven’t set in. Without negative baggage, this market is yours to conquer. Just don’t talk to anyone who says it isn’t possible. I think most of us feel an overwhelming sense that now is an unusual time in U.S. real estate history. In some areas, we see investors consistently purchasing properties well below replacement costs where rents are strong. Some of these areas have taken a 50-70% price drop from the peak. Even in more desirable areas in New York and California, price drops have been sobering. Our country is on sale and cash flow properties are now available in previously unavailable areas. Now is the time! If you don’t do it you’ll regret it later! Sell all your household belongings and invest in real estate now! No pressure, right? These could be the debilitating scripts running through your head when opportunity and urgency intersect. Turning Urgency and Opportunity into Action
Despite government intervention, fluctuations in inventory and prices, and market uncertainty, there is no doubt that real opportunity exists. I am exposed on a daily basis to investors with different skills and strategies making this business work. For those that haven’t made the leap, it’s about leveraging that urgency to take action on the huge opportunity in front of us. So what stops us? Is it fear? Laziness? Lack of time? Lack of skill? Focus? Money? One of my favorite panels to watch is Bruce Norris, Tony Alvarez, and Mike Cantu on stage all at one time. All three have such different skills sets, personalities, and strategies, but they are all successful property buyers. “What’s great about the real estate
business is you bring to the table what you’re already good at,” Bruce says. “I started in electrical sales and brought my sales and negotiating skills into investing.” One of Mike’s favorite saying is, “Use what you have, to get what you need, to get what you want.” This play off of a famous business quote always reminds me that we have it in us to get what we want, sometimes not directly, but if we’re willing to put in the work and leverage the skills we already possess, victory can be ours. Sitting in an audience listening to investors with 100’s — if not 1,000s — of transactions under their belts can be overwhelming and seem very out of reach. One particular quote last year changed my perspective on property buying. In a radio interview, John Schaub talked about his one property every year for 10 years concept. That’s it. Just one. That’s all it takes to build a million dollar portfolio. I don’t know why that struck me as so incredibly profound but put that way, creating a million dollar portfolio isn’t so daunting. Creating the specific method for purchasing 10 properties is completely individual. Some prefer short sales, some REOs, some creative financing, and some building. It all depends on what works in your local market, what you bring to the table, and what you’re excited to succeed at. Flipping can create great chunk money but the long-term buy-and-holds will create long-term wealth. “As long as my tenants can afford to pay for my house then I’ll keep buying. One day I’ll be worth what I owe,” Shawn Watkins wrote in an email to me today. That’s what works for him. But maybe that attitude doesn’t suit you, and that’s perfectly fine. There are many ways to make this market work and it’s up to each of us to act. By leveraging our strengths, we can all turn strategies into success.
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April 2011 REI VOICE
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B ASICS
Asset allocation thinking with ‘non-traditional’ investments By Eric Wikstrom
Eric Wikstrom, CPA, CFP® is the founder of Integrated Wealth Strategies, LLC, a financial planning and retirement structuring firm located in the Seattle, Washington area. Eric has over 27 years of tax, accounting and financial planning experience and specializes in helping individuals and companies “self-direct” their retirement accounts to profit from investments outside the traditional stock, bond and mutual fund environment.
I received a call the other day from an acquaintance who wanted some financial planning guidance. This woman had faxed me her recent brokerage statement. When I looked at her statement, I noticed that she was predominately invested in a cash-type money market fund, which was providing her with a very small current yield, due to today’s low interest rate environment. When we spoke on the phone to review her portfolio, my friend replied, “I can’t believe it’s so difficult to earn a reasonable rate of return today on your cash. As you can tell from my statement, I’m only earning 2.5% on the cash in my money market fund.” I swallowed hard as I realized that she had mis-interpreted the yield of her money market account on her statement. Unfortunately, I had to be the bearer of bad news as I told her, “uh, your money market account is actually only yielding .25%. Not 2.5%, but .25%. Just barely above 0%.” After she caught her breath, I also mentioned that after taxes and factoring in a little bit of inflation, say 2-3% annually, her investment account was probably going backwards in terms of purchasing power. What to do?
Before you go racing off to find the highest rate of return that an investment can provide for you, keep in mind one simple investment axiom: risk and return are joined at the hip; i.e., you can’t have your investment cake and eat it too. As of this writing, the 5year U.S. Treasury Note is yielding 2.05%. U.S. Treasury Bills, Notes
14 REI VOICE April 2011
making real estate purchase decisions based on some snazzy, whiz bang looking private placement that is “targeting” a 12-14% yield when most investors don’t know, understand or have a feel for whether a 10-12% risk premium for a particular type of property is right, proper, fair or “in the ball park.” Before you drop good money in a deal you’ve found or located versus an investment in an LLC that someone brings your way, you owe it to yourself to gain an understanding on what a fair “market” return should be for any particular piece of property. Said another way, what should the risk premium be for any investment you’re evaluating? Life happens
and Bonds (regardless of 3 month, 5 year or 30 year maturities) also happen to be known as the “risk free rate.” What does this mean? Well, because the U.S. Treasury has never defaulted on it’s own debt obligations (keep your fingers crossed), any investor can take advantage of lending funds to the U.S. Treasury and be assured of receiving the prevailing (or risk free) rate of return. The concept is that an investment in the U.S. Treasury is a “riskless” investment, hence you earn the risk free rate of return. Food for thought
So, if someone comes your way and says, “how’d you like to invest in a great 5 year deal that pays a 12% return?” The first thing that should cross your mind is that since the current 5 year U.S. Treasury pays about 2%, you’d
be earning a 10% “risk premium” over comparable 5 year Treasuries. Before you get too excited about a 12% return, you need to stop and think, “is a 10% risk premium for this type of investment, too much, just right or not nearly enough.” How does this apply to real estate investors?
The same “risk premium” mindset should apply to any type of investment you might consider making, real estate included. So if you’re evaluating two different real estate investments, say a fourplex versus a small commercial property, you really need to be thinking straight as to how you’ll evaluate these two different pieces of real estate. You need to do your own due diligence as well as review the work of others. But I consistently see investors
As the captain of your own investment ship, you need to do what’s best for you and no one else. With that being said, I’ve taken many calls over the past few years from individuals trying to “create” some liquidity in their investment portfolio because as the saying goes, “Life Happens.” Job loss, health issues, bad investments, etc., the list goes on and on. So you should only be considering making investments that align with your current financial situation; i.e., the risk profile of your existing investments, your need for cash flow, your risk tolerance, your employment situation, health and family issues, etc. As someone much older and wiser once told me, “Know what you own, know why you own it and feel good about what you paid for it.” Eric can be reached at: ewikstrom@iwealthstrategies.com.
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15
B ASICS
Creative Financing Techniques
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Dyches Boddiford has been a real estate investor since 1980. He speaks from experience in single family homes, owning apartments, mobile homes, buying discount mortgages, hard money loans, and developing. To get information on his upcoming classes and sign up for his free newsletter, visit www. Assets101.com.
By Dyches Boddiford
E
xperienced real estate investors know that you must understand owner financing if you are to stay in the game for the long term. They know you cannot always depend on conventional sources of financing such as banks. But even when there is institutional financing available, it will not offer the opportunities owner financing can. For example, we often get 0% financing from sellers, something you could never get from a bank. And subject-to’s save significant upfront costs in closing on a loan. Wraps let me control underlying loans when I sell a property so I can
make sure the underlying loan is always paid on time in addition to generating an extra return on someone else’s capital. Owner financing can do all this while keeping the door open to future negotiations and possible discounts on payoff. So, what is so hard about owner financing? Can’t a real estate attorney draw up the paperwork based on the terms on which we agree? Maybe. But you need to control the deal. Letting an attorney use generic or, worse, Fannie Mae forms, will put you at a disadvantage. Don’t let this happen to you. You should control the paperwork assuring the documents are drafted in your favor including clauses you will want to use in the majority of your deals. Keep in mind that each buyer or seller with whom you deal has a unique personal situation and their own concerns and needs. To craft a successful deal, you must address those concerns in light of their situation using appropriate financing techniques. A true win-win result can be accomplished in most cases. Will you always be able to get owner financing when you purchase? Of course not, but you will never get it if you don’t ask! And don’t forget that you may be able to get partial owner financing even when you are getting a conventional loan, often at 0% interest! You also need to know the tax issues involved in doing owner financing. This
knowledge can be used not only to put more money in your pocket, but can be used to negotiate a better deal. And real estate investors who quickturn property need to understand taxes to make sure they have enough funds to pay taxes at the end of the year—on both the buy and sell sides. Quick-turn (flip) property that is owner financed to a buyer incurs income tax on the whole profit in the year of sale rather than the taxes spread over the term of the loan when investment property is sold on financing. Investors who have decided they want to take it a little easier and sell off part of their holdings can use owner financing to gain a higher investment return and postpone paying taxes. Under the IRS rules, the interest on the balance of the purchase money note is figured on before-tax dollars—increasing their effective returns. Seller financing can also be a great investment for those who recognize the security of real estate, but don’t want to deal with tenants. These loans can be sold in whole or part to generate immediate funds for another deal, or sometimes can be used to trade into another deal. Adding creative financing techniques to your investor’s toolbox will take your investing to the next level. You will be glad you did. It will increase your opportunities to craft a good deal when purchasing and will provide additional exit strategies when selling.
April 2011 REI VOICE
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‘NEVER BEEN A BETTER TIME TO BUY!’
THERE HAS NEVER BEEN A BETTER TIME TO BUY REAL ESTATE! Call me to get in now while prices are cheap!
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TRENDS
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800-518-0215 www.AscentPS.net 18 REI VOICE April 2011
By Lori Greymont To the buy-and-hold versus fix-and-flip investment models, let’s add one more: flip-and-hold. Buy-andhold typically referrers to owning rental property. The landlord has the responsibility of maintaining the property and receives rental income. In the fix-and-flip model, the “fix” is essential. An investor using this model typically invests in property repairs in order to gain top dollar at sales time. In a flip-and-hold investment, the investor sells the property without performing repairs and holds the paper (that is, holds the deed while receiving installment payments). This is a sellerfinanced or land contract sale. When seller-financing ties up a large amount of cash on a single property, it may not be the best income producing strategy. However, let’s look at this strategy
in the context of inexpensive bulk REO properties. When purchasing these cheap properties (and by cheap, we mean $10,000 or less each—no that is not an error—ten thousand dollars or less each) why not fix and flip? For two reasons: financial and psychological. The type of home purchased for $10,000, when fully renovated, might be valued at $30k to $45k. Still sounds like a deal, right? The problem is that no likely buyer will be able to purchase the property at that price. There are no mortgages available for under $60k—even for a working person with perfect credit. There just aren’t. So that means the house you spent working capital on painting, carpeting, and rehabbing cannot be sold. The best outcome in this scenario is that the house is rented, and you assume the inherent problems of rentals
in low-income neighborhoods. This is the financial reason not to fix a bulk REO house. The psychological reason not to fix a $10k house is based on the psychology of the buyer. A homeowner who invests money, labor, and love into their home is less likely to walk away from a seller-financed loan than one who has invested only money. Meanwhile, the investor’s out of pocket is limited to the purchase price of the property, selling expenses, and insurance. As for delinquent tax bills and other liens, those become the responsibility of the new homeowner and are negotiated as part of closing. How do the actual homebuyers feel about purchasing a seller financed home? Velma Williams of Chicago, said to her seller “I never thought I could own a home. It just needed a little work. I feel so blessed
I mentioned you in praise time at church.” Even with monthly payments pegged to 70% of actual rent in an area, and the psychological incentives to make loan payments, some homebuyers fail. In that instance, since the seller holds the deed, a simple eviction is all that is required in most areas to recover the property. Because of homeowner repairs, the property is often resold in better condition than when it was originally purchased by the investor. With the flip-and-hold strategy, the investor spreads his risk over a large number of properties and stands to realize 15-to-30 years of cash flow at 9% or more interest. Investors who prefer a more passive role, but like the strategy, can purchase seasoned land contracts at a discount. They simply hold the paper and receive the cash flow.
Lori Greymont is CEO of Summit Assets Group. She offers educational presentations around the U.S., trains and mentors people new to bulk REOs. Her company sells bulk lists and seasoned land contracts.
April 2011 REI VOICE
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20 REI VOICE April 2011
Myth s an d Awa r e n e ss of Sho rt Sa l e s fo r In v e sto r s and H o m eow n e r s MYTHS - Can’t get a short sale approved if: • Homeowner owns their own business • Homeowner is currently working • Homeowner is current on their payments • Investor owner is collecting rents from the property • Homeowner has many properties • Homeowner has a retirement • It’s an investment property
TRENDS
Proven Strategy for Distressed Homeowners Comes Out of the Dark We’ve heard so many rumors about short sales, that we decided to get some straight answers from one of the in-the-trenches experts, Natalie Knowlton, Director of Short Sales for Nick of Time Short Sales. Natalie has been short selling longer, and has more training in the legal and ethical issues than just about anyone else in the field. She’s also had tremendous success getting short sales through the often long and arduous short sale process. How do we define success? She’s negotiated over 200 approvals. That sounds good to us. We asked her to compare the rumors that some people believe about short sales with the reality. Her “Myths versus Reality” chart accompanies this article. As a professional involved in short sales, we asked her about her two major challenges. “Besides believing in the myths, some people give up too soon. Short Sales demand a certain level of expertise and tolerance, “ Natalie said. “They can be very successful in providing a dignified way to exit a bad financial situation with minimal impact on future ability to borrow or own a home.” Natalie’s second challenge surprised us. “The rules and regulations required to run a legitimate business are very exacting. I fully comply with all government regulations and it takes a great deal
of time and limits the way I can promote my business. Meanwhile there are others in the market making grandiose claims and defrauding the public. I must, and do disclose the following to all my Natalie potential clients: ‘I am not associKnowlton ated with the government and my services have not been approved by the government or the lenders. The short sale lender might not agree or approve the short sale. A homeowner could lose their home and damage their credit if they stop paying their mortgage. If the offer is accepted or rejected the homeowner/seller does not have to pay our fee. The lender will. Homeowner/Sellers have the right to reject their bank’s offer without any charges from us. We are licensed agents, DRE 01885366.’” Natalie shrugged. “Try putting that on a business card!” Parting thought? “Keep your money in your pocket. Distrust anyone who asks for a fee to assist with a short sale. We offer free consultation to homeowners and investors, and we get paid by the lender if a short sale is approved. The money for a short sale should not come out of the homeowner’s pocket.”
Other Myths – with Short Sales • Everyone should do a short sale • The Notice of Default was recorded – it’s too late • HAFA will save the world and give everyone $3,000 • Bankruptcy takes care of it all – each is different • 1099 always means you will pay taxes • Homeowner won’t owe if it goes to foreclosure • Homeowner can live in the house for a year after the foreclosure • The police will show up the day after the NOD is filed • Homeowners have no choice • Deficient and taxes are the same • Investors can’t buy • Can’t buy in a LLC What we have seen in the trenches Approvals for the following: • Approval letters saying: “will consider the Note paid in full”, “full and final satisfaction”, “agree settlement short of full payment” or “waive any deficiency rights” • Approvals for investment properties with full satisfactions • Homeowners that are both still working • Business owners get approval with full satisfaction • Investors receive money at closing, $4,100, (not owner occupied) • Past Due HOA fees paid by the Short sale bank • Past Due HOA fees negotiated from $6,000 to $800 • Home warranties and Pest inspections paid by the bank • Never being late on the mortgage during approval • Retired families with assets • Investors with many properties • Investors collecting rents during the process • Credit score after an investment short sale of 760 • 6% and 7% Real Estate Commissions • 2nd lenders agreeing to a satisfaction • Homeowners agreeing to a HELOC note for 5% of the original amount with 0% interest • Homeowners buy a house just after the short sale approval • Approval in 3 weeks and as long as 2 years • Seen Investors “get” money back on their taxes due to the sale • Lives change better than they ever imagined For Investor Buyers wanting to flip short sales: Be ready for • Approval letters stating: No resale for 30, 60 and 90 days • Buyers lender’s seasoning issues • Seller has to move out • No money out at closing • Seller not to repurchase the property, ever • Purchasing in a trust or LLC, not all banks agree • Title companies just don’t want to close your transaction • Buyers agent’s concerns with everything
April 2011 REI VOICE
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At Brighton Financial our goal is to provide you with the best service and most suitable financial and insurance products to satisfy your needs. We don’t “sell” anything. Although we carry many different lines from major carriers, one of our specialties is real estate-related coverage. Policies such as: Umbrella, Landlord Packages, Vacant Property, Course-of-Construction, HOA, etc are our mainstay.
Vernon M. Williams Broker/Agent 4675 Stevens Creek Blvd., Suite 245 Santa Clara, CA 95051 Ph. (408)931 - 6582 Fx. (408)564 - 5405
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Thrasher Termite & Pest Control, Inc. has been serving the Santa Clara Valley and the neighboring communities since 1979. We also have an office in San Diego that services all of the greater San Diego area. We work closely with Realtors, Investors, Property Managers, Homeowners, Landlords, and Homeowner’s Associations to help solve your termite and pest control problems. We offer reasonable and competitive prices. Our staff is professional, knowledgeable and friendly and we aim to please our clients. Ask us about our “green” treatment methods.
DYCHES BODDIFORD presents
REQUIRED KNOWLEDGE IN THIS MARKET PART 1: CREATIVE FINANCING TECHNIQUES OF SUCCESSFUL REAL ESTATE INVESTORS This session will be of interest to Buyers, Sellers, Real Estate Agents, Note Brokers and Note Investors. We will consider the difference in terms and financing you would want as buyer versus those you would want as seller…and how to get them. We will also discuss how selling and carryback financing can benefit the investor who wishes to retire from day-to-day management. Just some of the topics we will cover in this session: • Getting a Higher Price for the Property while Selling Faster • Difference in Balloons & Calls – when to use each • WRAP Notes & Mortgages • Lease-Options, Lease-Purchases, pure Options & Land Contracts as financing tools • Terms & paperwork depending on whether you are Seller, Buyer, or Note Buyer/Broker • Clauses to include in Note & Mortgage • Getting Seller to give you 0% financing • Dealer property issues and owner financing
• Dealing with Insurance • How to Purchase Subject-to • “Nothing Down” v. “No Money Down” • Getting Guarantors/Co-Signors • “Abandoning” the Collateral and suing on the Note as alternative to a Deficiency Judgment • Collections & alternatives to foreclosure • “Walking the Mortgage” • Additional Collateral • Discount for early payoff & lump sum payments • Substituting Collateral • Using pure options to control property for future appreciation
Part 2: Partnering for Profits I am constantly being asked two questions: (1) how do I find money partners & (2) what structure should partners use to do deals. The answer is never a short one. It depends on where each participant is in his or her investment career, how much time and money each has to invest, and what each is looking for from the relationship. This class addresses these questions and the many practical solutions. Even if you are not looking for a partner, you will gain some interesting insights about structuring deals to satisfy the needs of all involved. And those with money to invest will be interested in how to use others to do the leg work and still benefit from real estate.
Saturday April 9th 9:00 AM - 4:00 PM
Wyndham Hotel $99 Members
$109
Non-members More information and registration available at www.sjrei.org
April 2011 REI VOICE
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F E AT URE
METRICS BEHIND THE
24 REI VOICE April 2011
By Aaron Norris
MADNESS Aaron Norris is Vice President of the Norris Group where he is responsible for business development and production of TNG’s awards winning radio show, events, and educational seminars. Aaron is also principal at Palisoul, Norris, + Conroy, a marketing and strategy team based in Southern California and hosts of the marketing and business podcast, The Cocktail Party Statement.
In March, I watched a friend perform in an 80’s review musical in San Diego. There were 128 different 80’s musical numbers, MC Hammer and New Kids on the Block inspired dance moves, and lots of big, bad hair. Totally awesome! The theater wasn’t selling Reese’s Pieces or Tab in the lobby (huge opportunity missed), so I decided to sit out intermission and go online to check in via Facebook. While surfing Facebook, a nosey stranger to my left leaned over and said something along the lines of, “My friends finally convinced me to join the Facebook. I have eight friends. But I still think it’s for kids and creeps.” I almost busted out with a horrible impression of Mr. T by saying, “What you talking about fool?” But I decided to smile and nod instead. It was obvious that nothing I could possibly say during the remaining intermission would change her perception of what has become a communication revolution. Let me give you some Facebook facts to chew on: · Facebook has over 500 million users worldwide. If it were a country, it would be the third largest after China and India · 145 million users in the U.S. (U.S. population = 310 million) · 50% of users login once a day · Users spend on average 7 hours per month on the site (2009 Nielsen stats) · Accounts for 10.16% of web traffic (Hitwise)
Most readers of this magazine are much savvier than my nosey seat
neighbor. However, these Facebook numbers are astonishing. Facebook’s ultimate goal is to create the world’s greatest word of mouth search engine. Imagine going to Facebook and entering in the type refrigerator you’re thinking about purchasing. Facebook delivers to you two people in your personal network that own the same refrigerator. You could ask your friends about the product, how much they paid, where they bought it, and if they’d purchase it again. If you’re like most Americans, you’re much more likely to trust a friend’s recommendation over a random Internet review. Replace the refrigerator with your business. If you and your business aren’t on Facebook, you may not get the referral. The few people still avoiding Facebook are ignoring hard metrics proving digital communication has moved their cheese. Those people under 25 who have grown up with mobile phones and Internet at their fingertips (aka digital natives) are entering the market demanding we adapt to their communication preferences. As with any type of marketing, research, thoughtful action (see P.O.S.T method from REI Voice’s January issue), and consistency are always required. Homework before the next issue of REI Voice: Do your best to find an under two-year-old and a 70-plusyear-old using a smart phone and/or tablet computer. New technology is drastically changing how our youngest and oldest generations communicate, learn, and play. Observe how these technologies engage them. You’ll be blown away. Next issue, I’ll cover a few tips on how to use Facebook for your business.
April 2011 REI VOICE
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Resour c e s Accoun ting SOUND OPINION—WISE DECISIONS: VOICE OF THE PROFITABLE REAL ESTATE INVESTOR
HELP REAL ESTATE INVESTORS HEAR YOUR VOICE — ADVERTISE IN REI VOICE MAGAZINE TODAY
Stonecrest Investments LLC Steve Freeman 408-557-0700 www.reo4sale.net
Chiropractic First Dr. Josh Ben 408-559-1662 chirohealthfirst@gmail.com www.chiropracticfirst.com
Richard Smith & Associates Richard Smith 408-446-5551 rsmithtax@aol.com www.richardsmithtax.com
Summit Assets Group Lori Greymont 888-440-6826 lori@summitassetsgroup.com www.summitassetsgroup.com
Brokerage/ Agents
Wilson Investment Properties Tom Wilson 408-867-1867 tomkwilson@earthlink.net www.tomwilsonproperties.com
Silicon Valley REO Jason Chan Lee 408-998-1300 jason@svreo.com www.svreo.com
Meghan@REIVoice.com
Michael Gray, CPA 408-918-3162 mgray@taxtrimmers.com www.realestateinvestingtax. com
Howard Bloom 650-605-3928 www.howardbloom.com
408-264-3198
" !
Othe r S e rv i c e s
CSR Real Estate Service Stuart Baeriswyl 408-373-6766 stuart@csrteam.com www.customerservicereality. com
Contact Meghan Koslowski
""
I n v e st m e nt Pr ope rt i e s
Chuck McCay 408-836-1091 chuck@chuckmccay.com www.chuckmccay.com
Fin anci al Advisors Bay Area Planners David Beck 408-725-7135 info@ retirementplannersonline.com www. retirementplannersonline.com
=@E ]ifd8E: I nsurance k_\ @8C @[\ C<J Brighton Financial Group j f] JF Williams FZk EJ Vernon fY\ 408-931-6582 i vwilliams@farmersagent.com
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Entrust Administration Inc. Lamarr Baxter 916-509-7271 www.entrustcalifornia.com/ oakland IRA Services Trust Company Michael McNair 650-593-2221
Leg al Se rv i c e s Chillag & Associates, P.C. Nancy A. Chillag 650-321-6796 nancy@chillag.com www.chillag.com Earle Law Offices, APC 408-786-1060 www.earlelaw.com Jeffrey B. Hare, APC 408-279-3555 Jeff@Jeffreyhare.com www.jeffreyhare.com
Mo rtg ag e Consultants
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26 REI VOICE April 2011
IRA
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www.farmersagent.com/ vwilliams
Michael Ryan & Associates Michael Ryan 408-986-1798 mike@michael-ryan.com www.michael-ryan.com
Susan Hare Marketing 408-391-8068 susan@hare.com www.susanharemarketing.com Okubon Management Nobuko Isomata 650-922-1786 The Norris Group Aaron Norris 951-780-5856 aaron@thenorrisgroup.com www.thenorrisgroup.com Thrasher Termite & Pest Control Inc., Janet Thrasher 408-354-9944 info@thrashertermite.com www.thrashertermite.com
P r op e rt y Manag e m e nt David Novelo 916-863-6600 x300 david@capitalmgnt.com www.CapitalMgnt.com
Re s ear ch Foreclosure Radar Sean Oâ&#x20AC;&#x2122;Toole 925-513-7175 info@foreclosureradar.com www.foreclosureradar.com
Sh o rt Sa l e s Nick of Time Results Team Natalie Knowlton 831-402-5107 natalie@ NickofTimeresultsteam.com www.NickofTimeResultsTeam. com
SOUND OPINIONâ&#x20AC;&#x201D;WISE DECISIONS: VOICE OF THE PROFITABLE REAL ESTATE INVESTOR
WHO YOU GONNA CALL? Need a house inspection, repairs, or property management? Need help from a legal, accounting, banking, or marketing professional who understands real estate investments? Ready to purchase investment property or performing notes? Make our advertisers and resources on page 28 your first call.
April 2011 REI VOICE
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Learn How to Invest in Real Estate With Your IRA or 401k A self-directed IRA from Entrust California gives you the freedom to invest in commercial property, rentals, rehabs, and more. As an IRA administrator, we will help to educate you on the choices available for self-directed investments, and how to achieve tax-deferred or tax-free growth. Entrust offers a full range of retirement accounts, so that you can invest in what you know best.
Get started today! Call Lamarr Baxter at (916) 509-7271. www.EntrustCalifornia.com
Find out how you can take advantage of a world of investment options.
28 REI VOICE April 2011
Lamarr Baxter 9245 Laguna Springs Drive Suite 200 Elk Grove, CA 95758 phone: (916) 509-7271 fax: (916) 405-4000
CALENDA R REGISTER ONLINE AT WWW.SJREI.ORG
Apr i l : »»
4/6 & 4/7 East & South Bay meetings Dyches Boddiford
»»
4/9 One day event with Dyches Boddiford “Creative Financing & Partnering”
»»
4/12 East Valley Marketing Group, Evergreen – Geraldine Barry will be a speaker
»»
4/19 Mid-Peninsula Meeting - Economist Howard Blum
»»
4/30 JumpStart - 1/2 Day Workshop for new investors
May: »»
5/4 & 5/5 East & South Bay meetings - Gary Johnston
»»
5/7 Baby Boomer Expo at the Santa Clara Convention Center – Geraldine Barry, speaker - See page 13
»»
5/17 Mid-Peninsula Meeting - Lori Greymont – Creative Financing
»»
5/14 S.F. Bay Real Estate Expo - See page 2
June: »»
6/1 & 6/2 Robert Campbell - Update on the CA Market with statisticion and economist Mr. Robert Campbell
»»
6/21 Mid-Peninsula Meeting TBA
SOUND OPINION—WISE DECISIONS: VOICE OF THE PROFITABLE REAL ESTATE INVESTOR
PORTFOLIO BUILDING PRIME LISTS GREAT SUPPORT COMPREHENSIVE SERVICES PRIME LISTS GREAT SUPPORT COMPREHENSIVE SERVICES PRIME LISTS GREAT SUPPORT COMPREHENSIVE SERVICES
Summit Assets Group wholesales bulk REO lists, seasoned land contracts, and offers comprehensive training, mentoring, and support for the bulk REO investor. We help you build a cash-flowing portfolio quickly and successfully. “I know investors who buy homes for cash and then resell them using seller-financing. It’s a great business when you know what you’re doing. If you don’t, well, you aren’t helping yourself or helping rebuild America. Lori Greymont coaches people new to the business of bulk REOs and seller-financing. She and her team have the skill and patience teach people how to succeed......What’s not to like?”—Odell Barnes
Register online for our FREE webinar or call today for more information. MARK YOUR CALENDAR NOW & REGISTER ONLINE AT WWW.SJREI.ORG
Call 1-888-298-0652 1-888-440-6826 SummitAssetsGroup.com
Lori Greymont
CEO, Summit Assets Group April 2011 REI VOICE
29
Ger’s Top 5 by Geraldine Barry
Here are the top five lessons I have learned from reading this issue of REI Voice Magazine. I would love to hear yours – email me at Geraldine@reivoice.com
1 2 3 4 5
The focus of this issue is whether to buy and hold, or fix and flip. What I have learned is that both strategies belong in your portfolio; however, flipping is very risky in a deteriorating market, particularly for the uninitiated. We know that high risk is joined with high reward, but Eric Wikstrom taught me to look at risk premiums. A risk premium is the difference between the percentage return of a safe investment, such as U.S. Treasury bills, and everything else you could invest in.
Generally being cash poor is not a reason to sit on the side lines – there are almost as many ways to finance a deal as there are deals available. The opportunities available in this current market happen once in a lifetime. Aaron Norris, you are so right.
Lastly, social networking should not be ignored. Please like REI Voice Magazine on Facebook. Just search on REI Voice and give us the thumbs up, then continue the conversation about lessons learned on our discussion board. (P.S. If you have not seen the movie, The Social Network, put that on your to do list.)
Geraldine Barry is founder and president of SJREI Association, the premier educational and networking association for real estate investors in Silicon Valley. Under Geraldine’s leadership SJREI has grown from a half-dozen investors to a vibrant three chapter organization with over 400 investors attending monthly meetings. She has interviewed many real estate pros such as Bruce Norris, John Schaub, and Jon Freeman all of whom have been guests of SJREI. In addition to leading SJREI, Geraldine is an active real estate investor, guest host of the radio program, “Going Beyond Real Estate,” a frequent guest on the nationally broadcasted NTDTV, Publisher of REI Voice Magazine, and producer of the acclaimed annual SF Bay Expo. Geraldine is also a principal in Miles Barry Contract Furniture.
30 REI VOICE April 2011