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UPCOMING EVENTS:

ASK THE EXPERTS

Ask The Experts

Columbus REIA

MAY 2011 MEETING DETAILS: Columbus REIA

Thu, MAY 12, 2011 5.30pm Where: Gordy’s in Westerville

——————————————— FOCUS GROUP MEETINGS:

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J. T. Keiderling Short Sales Focus Group Wed 5/11/2011 6pm and Tue 5/24/2011 6pm Urban Coffee, 7838 Olentangy

——————————————— Scott Emerick- Landlording Mon 5/30/11, 6pm Panera -Mill Run Hilliard

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Steve Zehala- Real Estate For BreakfastMastermind Group Thu 5/26/11, 7am Cup of Joe’s– Bexley

——————————————— Register for any event at: ColumbusREIA.com *Seating is Limited Register Online to Get

Tickets to Bring to Meeting First Come, First Serve!

Thursday MAY 12 5.30pm Gordy’s -Westerville Upstairs This month we will be featuring one of our all-time favorite formats and we will have numerous experts there to answer any and all of your real estate related questions. If you have some issue or something that you would like to know about please join us for this fantastic event at Gordy's on May 12, 2011. At 5:30 PM we will start networking where folks will get a chance to introduce themselves and give their elevator speech about what they do to everybody in attendance. It’s incredible the amount of knowledge in business that can be done just by networking at our local monthly meeting. If you need to go out and find folks to do business with you will want to join us at this meeting. In addition we will have favorite local experts to answer specific questions. Steve Zehala. As always Steve our Executive Director will be there to moderate and ask questions and keep the energy flowing. With an expertise in numerous fields he is always there to help. John Longest. John is our expert rehab/fixer contractor guy. If you need to know something about repairing properties, fixing things on properties cost estimates, or no matter how complicated or simple John has seen it all. When I have a question about construction John Longest is the first guy on my list. Ed Wachsman. Ed is a longtime friend of Columbus REIA and we always enjoy his incredible experiences. Ed is so good at so many things we don’t like to categorize him and his incredible knowledge base will benefit you in numerous ways. Whether you're working on wholesale flips, retail flips, managing properties, finding deals, or pretty much anything related to residential real estate Ed can assist you.

Scott Emerick. Scott has been doing a fantastic job hosting our new focus group and is bringing new and enlightening ways to how to handle management problems in the real estate business. When the rubber hits the road and you want to create real wealth in real estate you need to know Property management. We all know one of the best things you can own is real estate, but the question is can you stand the management? Most people can’t and that’s because they don’t know what they’re doing or how to find out. Management is dramatically easier when you know what you're doing and you have the systems in place to do them. Scott has those systems in place to keep tenants at bay and and has set up everything to keep systems running smoothly. J. T. Keiderling. JT Has been hosting our short sale focus group and JT's experience is incredible in helping many out there negotiating deals with upside down properties. In addition to his expertise in short sales JT has phenomenal experience in raising private money and brings a fantastic mindset about how that can be done far easier than you probably think. So if you are looking to work some short sales and get some big discounts on properties JT is your man and if you're looking for private money as well JT can help you there too. A FEW SURPRISES AS WELL. WE’VE EXTENDED SOME INVITATIONS TO A FEW OTHER EXPERTS WHO WILL LIKELY BE THERE TO ENJOY THE EVENING AS WELL. So come join us for a great informational evening and learn a ton of different real estate concepts. We will start at 5:30 PM, and then at 7 PM we will switch over to a format of Ask the Experts where the panel group will discuss items and questions from the crowd. And then after a while the experts will break out into their own tables and breakout sessions so that you can go in personally ask them anything that you need to have answered. We look forward to seeing you at our next Ask the Experts meeting. Steve Zehala


MAY 2011

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FROM THE TRENCHES, Steve Zehala, Columbus REIA Executive Director From The Trenches, Steve Zehala Cash is King! Interest rates must go up….. When the smoke clears the folks who are going to make money in this market are paying cash for properties and closing quickly. Right now the lenders and folks who have to sell have finally come to the conclusion and understanding that they probably need to take their money and run with it. There are numerous reasons why they are starting to figure this out not the least of them is that financing properties is only going to get dramatically more difficult going forward. We are looking at the lowest interest rates that we've probably ever had in this country. The feds have been doing everything they can to keep interest rates low to help the real estate market recover, but they can only do it for so long. Interest rates have to and I stress have to start to go back up and they have already started. As interest rates start to creep up more and more people will not be able to qualify for loans. This is only a small part of the equation. Down payments are going to go up….. Down payments are going to grow dramatically. Finally everybody figured out that once somebody gets into a property with no skin in the game they have a tendency to walk away when times get tough. Nothing to lose, nothing to gain. If they don't have a large down payment they can walk away much the same way a tenant walks away from a rental property when they’ve decided for whatever reason that they no longer want to live there. This phenomenon can be seen in pretty much any neighborhood in Central Ohio and probably everywhere around the country. Even in new subdivisions where houses were selling for a $150,000 or more people have walked away from houses. These houses were typically financed with very low down payment FHA loans. Frequently these people put down less than 2 or 3 thousand dollars to get into these hous-

es. So once they determined that their upside was not as good as they had hoped, or even if they determined they were upside down and their mortgage was higher than what the property was worth there was no second guessing and they walked away. The banks want some skin in the game! Now the banks have learned their lesson and the feds are into their typical knee-jerk reaction after the fact. Going forward larger down payments are going to be required and I never see that going back to the way it was just a few years ago. Most likely folks are going to need 10 to 20% to get into a house. For those of us in this business we know that people who can come up with that kind of money are very rare indeed. Retailers and business people in this country have trained consumers to be zero down consumers for as we all know there are play of those people out there. Going forward folks are still expecting to get what they want with no money down and it is going to be difficult to change that mentality that has been created. They Have No Choice... However, the government secured and insured mortgage programs have no choice. They are facing unprecedented challenges and they are not solvent and must start making better loans and collecting more fees to rebuild their reserves for loans that will go bad. Clearly the conventional lenders are not going to take any more chances particularly since they've already been bailed out once. There is no question about it going forward much higher down payments are going to be required. But it gets Better, you need a good Credit Score To! The final nail that will make it far more difficult to sell properties is higher credit scores. Without question the lenders have learned that taking risks on folks who have a history of not paying their bills results in a bad outcome. They will start increasing the credit scores required for people they will do business with and that will not change any time soon. At present you probably need at least a 700 credit score to have a chance to get a decent loan to purchase any kind of real estate. The lenders are not going to ac-

Real Estate Investors Association of Columbus • www.ColumbusReia.com 458 N. Cassady Ave • Bexley, Ohio 43209 • Phone 614-258-1000 • Fax: 614-737-5304, 24 x 7 • Email: columbusreia@gmail.com • To become a member of Columbus REIA please visit our website at www.columbusreia.com

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quiesce on this as they have learned their lesson. So these combined items create a scenario in which it will be much much tougher for people the finance houses through conventional means and cash financing from a third-party lenders. Cash is King! Enter the cash is king buyer. Now imagine you walk onto the scene with a pocket full of cash ready to purchase properties in close in several days. Folks who are facing selling and taking months to get something done can have it done in days will be chomping at the bit for these sorts of offers. Lenders who know they have numerous properties coming through their inventory channels are going to want to be cashed out fast. If you can put together cash to purchase properties you can easily expect 40 and 50% discounts on real estate purchase. Combine this with the fact that we do not believe rents will be going down in fact we believe rents are going to continue to increase and you have a match made in heaven. So go scrape together some cash and you can make some fantastic deals that will benefit you for a long long time.

putting down a binder deposit (also called earnest money in some parts of the country) and signing a contract agreeing to buy the property and you are agreeing to allow them to rent the property until the closing. This is called a lease purchase agreement. Unlike a lease option where the tenant has the right but not the obligation to buy the house before the expiration of the rental term, a lease purchase agreement requires the buyer to purchase the property before the expiration of the contract. Of course in the real-world things do go wrong and people failed to close, just like they do with a regular real estate contract and a 30 day closing. That's one reason you should always get a substantial purchase deposit before letting them move into the home. It's not quite as simple as completing a real estate contract and rental agreement, and then letting them move into the property. You want to be sure to use the proper paperwork. Hopefully none of the following will happen during the term of your deal but a properly drafted lease purchase agreement should cover several situations that could occur. What happens if they turn out to be the tenants from "you know where" and you have to evict them (under the terms of the rental agreement)? Do they still have a valid a right to buy the property (under the terms of the real estate contract) that would keep you from putting your house back on the market until the expiration of that contract? What happens if they don't close on the property before the date they agree to? If you want to give them an extension on the closing date and there has been an unanticipated increase in real estate values for the area, can you raise the purchase price? Under what terms (if any), would you have to give their deposit back to them? While no form can cover every situation that could occur in a given

Steve Zehala -This column reflects the Opinion of Steve Zehala. Steve is a real estate transaction, a good lease purchase agreement will cover real estate investor has done hundreds of deals since 1984 and live and all of the circumstances mentioned above and many others. works in Bexley OH where he resides with his wife and 3 kids. You can properties they have at Ohiohouselist.com. If you are interested in purchas- You should always have your attorney review any real estate form ing Steve's tried and true forms email him. If you have any questions, com- before using it. ment, or ideas feel free to reach me at: 614-258-1000, or email him at sztrench@spamex.com ã PDI Trust 2010

Private Real Estate Consulting, Problem Solving, & Negotiating

_______________________________________________________

Lease Purchase Agreement Deals For Traditional Home Sellers Selling your property with a lease purchase agreement was probably not what you had in mind when you put the for sale sign up in the front yard, but now you have came across a serious buyer that is just not quite ready or able to close on the purchase right now. Maybe they are just waiting on the sale of their previous property in a different state or maybe they have a few things on their credit report that will be cleared up before too long. You feel very confident they are serious about buying the property and you are considering letting them rent the house until they can close on the purchase. You have probably heard of a lease option but know that's not exactly the type of deal you are entering into with the buyer. You and the buyer intend to fill out a complete purchase and sale agreement with a stated deadline for closing based upon their situation. You are not simply giving them the option to purchase. They are

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Don’t Take a Knife to a Gun Fight! Don’t go to war alone! Do you need help negotiating a creative deal? Need forms & Paperwork? Need Help? Have you found a good deal but have no money? Do you want somebody to look over your shoulder to make sure you’re not making a bad deal? Are you having real estate related problems– with no one to turn to? Are you upside down & want to escape with your credit ? We have done hundreds of deals, been attacked, sued, ambushed by TV crews, hosed, abused, lied to, been evicted & evicted & hundreds, foreclosed & been foreclosed, inspected, hit by bottles of ripple, threatened by Attorneys, buyers, sellers, closing agents, chased by pit bulls, attacked by fleas, roaches, the IRS, the City, the tax auditor, the Sign police, Section-8 inspectors, drug dealers, Liberals & more! We rarely back down and we almost always win! For us it’s fun and it’s all a part of the business! NEVER UNDERESTIMATE KNOWLEDGE OR EXPERIENCE! NEVER UNDERESTIMATE THE VALUE OF HELP AND THE MASTERMIND. If we don't know the answer we likely now someone who does! Sometimes just ONE missing piece of information WILL change your life!

Call or e-mail Steve Zehala at:614-258-1000 or szehala@gmail.com For simple reasonable Fee or Deal based assistance! We have been there!

YOUR PATH TO REAL ESTATE INVESTING SUCCESS


MAY 2011

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“The leaders who work most effectively, it seems to me, never say 'I'. And that's not because they have trained themselves not to say 'I'. They don't think 'I'. They think 'we'; they think 'team'. They understand their job to be to make the team function. They accept responsibility and don't sidestep it, but 'we' gets the credit.... This is what creates trust, what enables you to get the task done.� -Peter Drucker

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www.OhioReabLoans.com Disclaimer: this newsletter and its accompanying enclosures are designed to provide accurate and authoritative information regarding the subject matter covered, however neither its publishers nor contributors assume any responsibility for errors, inaccuracies, omissions, or advice. If accounting, legal, or other professional advice or expert assistance is required, the services of a competent professional person should be sought. Each individual reader is solely and wholly responsible for any decisions made or actions taken that may be motivated herein. Also, any sligths against individuals, companies or organizations are unintentional. These notices are based on publishing industry guidelines jointly adopted by the publishing industry and Ameri can bar association. All rights reserved by the publisher. Violation of copyright is a federal offense subject to criminal prosecution and penalties that may include fines and/or imprisonment, and also subject to civil litigation in pursuit of damages. Furthermore, reia does not represent, endorse, nor otherwise take any responsibility for the content, accuracy, truthfulness, or reliability of any of the information contained in advertisements discounts, information materials, or other offers or promises made by any vendor, advertiser, speaker, etc., nor as to the quality or reliability of any product, information or service offered in the advertisement or contained in a presentation. Reia makes no representation as to the character of any vendor, mentor, advertiser, or speaker, and the publishing of any advertiser or speaker by reia, or of the reliability or truthfulness. Any reliance upon any materials, written or oral, shall be at your sole risk. Reia expressly disclaims any and all warranties, express or implied, including, without limitation, warranties of merchantability and fitness for a particular purpose with respect to any advertised service, materials, information and/or products.

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Technology Corner .. Voice Dictation Rocks!

( if you take the

time to learn how to use that is!)

by Steve Zehala One of the most favorite and advanced software products that I use is Dragon Naturally Speaking 11 by Nuance. I have been using Dragon Naturally Speaking for years now and I have found it to be a fantastic product. However, I will admit to you that until you learn the right way to use it, it can be immensely frustrating. If you are not reasonably good on a computer you will probably not enjoy using it as it does take some effort to make it work properly.

example I would purchase a Plantronics headset that I could buy on Amazon for $60 that had very good ratings from all customers who had purchased it. However I came to find out that a professional headset that I could get from anywhere from $50-$150 can make huge differences in accuracy. Knowbrainer.com was the key to this success. I was shocked and amazed to find out that there is an entire website and forum that is dedicated to folks who use Dragon Naturally Speaking on a day-to-day basis. I recently came across this while doing some research on how to become even more proficient using it. Upon researching this website I came to find out that if I had purchased a high-quality professional level headset several years ago it would've made what was already a good experience fantastic. I purchased $150 headset and I am getting near flawless quality and accuracy. Amazingly, just spending about 15 minutes using Dragon with this professional headset has made a tremendous difference. On a daily basis I do hundreds of e-mails and lots of writing and the productivity increase is amazing.

However, once you have it working properly you will be shocked and amazed at how much more productive you can be, how much more detail and information you will be willing and able to send folks by e-mail and and in other written forms if the ability to do it By the way, if you’re wondering what I purchased was just as easy as speaking. and use, the hardware that I purchased I bought That’s the promise that getting right from the Knowbrainer.com website,was a Dragon Naturally Speaking to work headset called the Boom-C, and VXI external properly holds for you. Now recently sound card that works with my laptop computer. I I have come to find out that even as was not aware that the built in sound cards on high tech as I think of myself I was most laptop computers are very poor quality and doing several things wrong and was make it very difficult for the program to translate not using the maximum capability of your words into text. Dragon. The frustrating part of Dragon is that you expect it to be 100% Additional tips-some decent computer processing perfect. However, you won't get power… 100% but it can get pretty darn close once you set it up Of course you have to have a reasonably powerful computer properly. However, before you set it up you need to be in order to have the processing power to convert words into aware what you have to do to make it work right. text. I use a two year old Hewlett-Packard running on Windows 7 with 8 Giga Bytes on the motherboard and an Intel You must speak clearly and fluently. processor that was high end a few years ago. Probably a You can't speak fast while dictating as your words will run newer computer today that you could buy for $1000 is far together and you will lose accuracy. You can speak at your more powerful than mine. I very rarely have any problems normal pace and just make sure to clearly pronunciate as with my computer keeping up unless I have too many opens you speak. This is not difficult. As a matter of fact this entire windows at the same time. (Which happens to be an ongoarticle is being written as I travel on I-670 West, and I am ing problem for an ADD multi-tasker like myself.) In either dictating this column into my Olympus digital recorder. The case I have found Dragon Naturally Speaking to be one of beauty of this is that I'm also being productive and writing the most productive and best programs that I have ever while I drive in the car. Pretty amazing. But you need to used. I would highly recommend it to you if you want to be make sure that you are speak clearly while you are dictating. as productive as possible in the minimum amount of time. You can speak in normal sentences, and you can speak at a Happy computing. Thanks, Steve Zehala. good pace you just can't speak super-fast -which I have a tendency to do. In fact one of my biggest problems was not PS: Oh, I forgot to mention that you have to say punctuation understanding how fast I speak and I was losing accuracy when you are dictating in Dragon Naturally Speaking. This because of this. Dragon cannot keep up with me I’m hyper- does take a little bit of time to get used to but once you've ventilating and I’m excited and speaking in my normal 100 mastered it is not an issue. So just be prepared as you dicmile-per-hour mode, but if I slow down just a bit it does a tate at the end of sentences to say the word period, or exclatremendous job. mation point or whatever punctuation you need. The program does come with a fantastic quick guide that you can You've got to have good hardware. This was another mis- refer to when necessary. take that I did not fully understand. I was purchasing reasonably good quality headsets to do my dictating not realizing Happy computing, Steve Zehala! how much better a professional headset would be. As an

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YOUR PATH TO REAL ESTATE INVESTING SUCCESS


MAY 2011

YOUR PATH TO REAL ESTATE INVESTING SUCCESS

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MAY 2011

YOUR PATH TO REAL ESTATE INVESTING SUCCESS

WWW.COLUMBUSREIA.COM


MAY 2011

YOUR PATH TO REAL ESTATE INVESTING SUCCESS

pricing from my contractors. Plus, I don’t have to run all over town to check on the progress. I am very excited about the economies of scale and intend to benefit from larger complexes in the future. Again, I don’t want to suggest that multi-family is for everyone, but it has been a perfect fit for me. I have developed systems to handle tenants efficiently, and treat my real By Scott Emerick estate investing as a true business. In my opinion, the key to any business is CASH FLOW, and that is why I like multiThere are a ton of articles out there family properties. talking about the differences between _________________________________________ investing in single family houses and New! March housing market report Posted: 4/20/2011 multi-family properties. I personally beColumbus Board of REALTORS® lieve that multi-family properties are a better investment, but (April 20, 2011) Central Ohio home sales in March outpaced the each individual is different and you need to decide what is right previous month by almost 32 percent bringing the total number of for your own investment strategy. The purpose of this article is to explain how and why I transitioned from buying single family homes sold during the first quarter of 2011 to 3,678 according to the Columbus Board of REALTORS®. houses to investing in small apartment buildings.

My Road from Single Family to a MultiFamily Investor

From the beginning, I have always had an unexplainable passion for real estate. Maybe it is because real estate is such a great wealth builder, or maybe it is because I can physically touch my investment and control the outcome. Like most investors I started my investment career by buying and renting single family homes. I thought that because these houses were in good school districts that I would get a better tenant, and I would benefit from appreciation. Haha…appreciation… wouldn’t that be nice! I was doing great! I was renting my houses on average for $1,200 per month, and my “P.I.T.I.” Principle, Interest, Taxes, & Insurance was around $1,100. That is $100 per month cash flow per house! Or is it? I must admit that the management on these houses has been very easy, but I still have had some issues. Unfortunately toilets still get clogged, and occasionally tenants move out or forget to pay rent. I quickly realized that $100 per month was more like breaking even, and I was only one bad tenant away from disaster! I decided that I needed more cash flow if I were to make this work. Soon I found a great deal on a 3 bedroom duplex, which would rent for $600 per side. This was great. I could rent one side and pay all of my expenses, and the other side was pure income. Yes I was now in a lower income neighborhood with a greater risk of bad tenants, but I took the motto “Cash is King” to heart. The extra cash flow allowed me to easily handle repairs and the bad tenants, and trust me they would come! I quickly purchased a few more of these money machines and ventured into a couple of 4-unit buildings. These typically rent for around $500 per unit, which is around $2,000 gross income per month. Subtract my “P.I.T.I”, utilities, maintenance, and a conservative vacancy expense and I was left with about $800 per month in Cash Flow.

The 1,487 homes sold last month was 31.8 percent higher than the previous month’s sales of 1,128. Year to date sales of 3,678 lag 2010 by 7.9 percent, but are still 6.9 percent ahead of the 2,178 homes sold in the first quarter of 2009. “At the risk of sounding like a broken record, we still have to keep in mind that 2010 home sales were significantly impacted by the second set of home buyer tax credits, offers Rick Benjamin, 2011 President of the Columbus Board of REALTORS®. “By comparison, March closings are actually 9.3 percent higher than homes closed in March of 2009 when the first round of tax credits was available.” In addition, 2,512 homes were put in contract last month touting an 11.5 percent increase over the 2,252 contracted sales in March of 2010. Homes in central Ohio this year have sold for an average of $143,773, down 3.7 percent from the average sale price in 2010, but up 3.8 percent from the average sale price in 2009. The average price of a home sold in March was $144,975, up 2.1 percent from the previous month ($140,770). The number of homes listed for sale last month (3,886) dropped almost 22 percent from the previous year (4,972) bringing the total inventory of homes available for sale in central Ohio to 14,370, down 22.3 percent from one year ago. “Home sales follow the simple economic concept of supply and demand,” adds Benjamin. “When the supply is higher than the demand, the product, in this case a home, is subject to sell for less. So a decrease in inventory is a positive for our market.”

“The other positive is, of course, last month’s drop in unemployment to 7.6 percent - the lowest point since January 2009.” There were 2,280 homes listed for sale in Franklin County last month. The surrounding counties of Delaware and Licking saw 316 and All of a sudden my part time investing was making 302 new listings respectively.

more money than my full time job. So I followed my passion and became a full time real estate investor. Now that I had a recipe that was working I spent most of my time finding, funding, and fixing new properties. Testing the “more is better” philosophy, I naturally started buying small apartment buildings with great success. Even with this small step in size I have found huge time and money savings. Now instead of rehabbing 1 property at a time, I am working on 5 or 6 units in one location. This allows me to get bulk pricing on materials, and get better

The Columbus Board of REALTORS® Multiple Listing Service (MLS) serves all of Franklin, Delaware, Fayette, Madison, Morrow, Pickaway and Union Counties and parts of Champagne, Clark, Hocking, Licking, Fairfield, Knox, Logan, Marion, Muskingham, Perry and Ross Counties. For more information about the central Ohio housing market, visit www.ColumbusRealtors.com/stats To view commercial properties for sale or lease in central Ohio, visit www.COCIE.org .To view residential properties for sale, visit www.Realtor.com

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Columbus REIA Newsletter May 2011  

A monthly trade publication of Columbus Real Estate Investors Association.

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