Summer Edition 2013
Commercial &Residential
Investing
From the desk of Sam Ally
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s Vice President of Business Development I am often asked by clients and referrals about industry trends and why the HIS team has been so successful for so long. While discussing our recently launched sellerfinance model with a client, I was asked my thoughts about the housing recovery, as well as, renting vs. owning. We shared thoughts as well as information gathered from hundreds of hours of professional market research in association with Hart Research Associates. Our conversation went from the phone to a dinner meeting at the beautiful Reunion Grande and as much as I wish I could share the evening’s conversation with you my allotted space in this issue just won’t allow it. So here is a brief excerpt from our conversation: The current economic landscape specifically the housing sector is full of mixed signals. In some markets the recovery is in full swing, in fact, competition for single family assets continues to drive sale prices beyond retail value in these “hot spots”. Housing supply is limited in some of these areas and building has restarted in many stalled developments. Strategic commercial acquisitions including industrial parks and retail centers are increasing in the U.S. and abroad, all trends history has
witnessed before. While this is an exceptional time for prudent investors to capitalize on existing conditions, it is still a time of unease for those who aspire to own a home or re-enter ownership after foreclosure. It wasn’t too long ago that a certain “stigma” was attached to renting. More recently, however, the thought is; renting is just as appealing as ownership. To re-enforce my thoughts, the results from a recent survey of 2000 adults found 57 percent of respondents stating: home-ownership is less appealing today, while 54 percent indicated that renting was more appealing. For many the aspirations of home-ownership still exist, but they still see renting in their future. Spurring that thought process along is the tremendous uptick in single family rental properties. Investors en mass are paying cash for foreclosures, which they rehab and hold as cash flow generating rentals for those who don’t want to or can’t buy a home. In fact, single family rentals saw the largest gain among all types of rental properties from 2005 thru 2010. Now consider the continued difficulty in obtaining a mortgage, the flexibility that renting provides, and finally the collateral damage inflicted on the next generation of potential buyers who witnessed the housing bust, and we have a trend that may last for
several years to come. Going back to our survey, much of the increased appetite for renting is being fueled by consumers ages 18 to 39. There has been a shift in attitude the past several years, the way we look at neighborhoods, the way we are judged & the way we evaluate where someone is within society is all changing, however, perhaps the greatest shift today is that renters are no longer considered second class citizens. Renting is now acceptable. By capitalizing on history’s lessons and identifying economic trends in advance, the HIS Capital Group using a value based approach continues to thrive on behalf of its investor clients and partners. Come grow with us, call me today to learn how you can leverage our expertise into generous and consistent returns
What are they thinking In Washington? And How will IRA accounts be effected? The budget deficit has created myriad concerns but none that touch closer to home than how our retirement plans will be affected. Many of our clients use a Self Directed IRA to invest with us and enjoy exceptional tax benefits in doing so. Recently, we have received an abundance of calls wondering what Washington has up its sleeve, so we decided to go to noted IRA expert, author & President of the IRA Club in Chicago Mr. Dennis Blitz to share his thoughts on what we can expect.
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ashington has no shortage of critical issues that need to be addressed: Topics as diverse as homeland security, reaction to the nuclear threat in Iran, Obamacare, immigration and more. To add to the complexity every decision must be made in the harsh light of our raging budget deficit. The budget deficit will touch every one of us. It is our opinion that IRA accounts will feel four pricks of the budget needle. The first two are not really new; they are simply a more active enforcement of rules that have been on the books for almost 40 years. 1. Closer adherence to the Required Minimum Distribution rules. The Required Minimum Distribution requirement states: If you have a Traditional, SEP or Simple IRA you are required to begin taking distributions when you reach age 70½. The distribution requirements are not large and are clearly spelled out for each account holder by their IRA Company. The only difference now will be that this requirement will be receiving closer attention from the Internal Revenue Service. A 2010 survey by the IRS estimated approximately $210 million of distributions were not taken by their IRA owner. The IRS sees this as a missed opportunity to collect income tax on that $210 million. Assuming
Over contributions: this rule also has been around for almost 40 years and is now getting closer attention from the Internal Revenue Service. Simply put, the IRS found that there are a few (very few) people who have multiple IRA accounts and make a maximum contribution to each.
many of the people involved are in a 15% income tax bracket this will generate for the Internal Revenue Service approximately $31 million in tax revenue. (Not much in the scheme of things however; a rule is a rule.) 2 Over contributions: this rule also has been around for almost 40 years and is now getting closer attention from the Internal Revenue Service. Simply put, the IRS found that there are a few (very few) people who have multiple IRA accounts and make a maximum contribution to each. These people are ignoring the rule that contribution limits are stated as "per person" not per account. The IRS has informed the IRA Industry it will be more watchful for this violation. (We assume this violation is carried out by only a few [very few] people. The next two items would be changes to existing IRA rules. The following are guesses made by the IRA Club. Neither has been enacted and neither has entered into active debate, yet. Please note: The following are simply our predictions from conversations we took part in, in Washington. However, in Washington there is a lot more talk than there is action. (Sometimes it's hard to figure out what the government is thinking.)
3. Eliminate the stretch IRA for non-spousal beneficiaries. Currently a non-spouse beneficiary may elect to take distributions from an inherited IRA over their life expectancy. We expect this will be changed to require that distributions be completed within five years. This could cause larger distributions to beneficiaries, and in turn quicker (but not larger) tax receipts to the Internal Revenue Service. 4. A possible limit on the allowable size of an IRA. This is a throwback to the Democrats unhappiness with Mitt Romney owning a $100 million IRA. (All Mitt Romney did was follow the rules.) Apparently now the Administration is of the mind that it is best to change the rules to prohibit anybody from achieving hyper success. The Cap on IRA size that the Administration suggests, ranges from $3 to $5 Million. Whether this will pass or not is yet to be seen. However, it's interesting to note this Administration's attitude toward success. To learn more about impending IRA changes on the horizon, or what you can do to prepare yourself, contact Dennis Blitz @ 888-795-7950 or visit www.iraclub.org
Giving Back
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Empowering   Warriors We encourage our clients to check in and share their endeavors with us. It is with great pleasure that we bring you the first of what we hope will be a regular feature in future editions of ROI about our investor clients and their philanthropic pursuits.
mpowering Warriors is a Texas based Non Profit Corporation and the life’s dream of Darlene & Mike Gleason members of the HIS Capital Group network of investors. They lived the military as well as, the corporate life and believe in the power of giving back and paying it forward. The Empowering Warriors project is located in Hempstead, Texas. We are committed to supporting community initiatives in developing environmentally friendly affordable housing. We value community collaboration between housing agencies, the community, lending institutions, social service organizations and contractors; empowering families through education on their unique housing choices based on their individual needs. We have expertise in acquisition and rehab of properties where we promote the incorporation of green technologies, energy efficiencies and universal design. Our vision is to not only create successful living plans and provide affordable, safe, and fair housing, but to collaborate and work tirelessly to provide services to veterans of past and present wars. The Housing Education Resource Center (HERC) serves as the hub of our program to provide households with the counseling, education, information, assistance and resources needed to solve their housing problems. Our end goal for each family is to improve their living situation and achieve increased selfsufficiency. HERC strives to be a one stop resource of affordable housing, with service coordination for seniors. Services are provided to tenants, landlords, students, homeowners and
prospective homeowners. In addition to mediation and referral services, ongoing educational workshops are held to educate clients of their rights and responsibilities, as well as, raising awareness on predatory lending and other fair housing issues. At the core of our educational programming are our Financial Literacy workshops. We teach basic financial literacy to adults and youths and believe that is vital in stabilizing families and communities. Our entire organization is committed to providing the resources that will empower families, enhance financial accountability, and foster a sense of financial wellness. In honor of the men and women of our Armed Forces, we support the growing needs of veterans and their families by providing home modifications and repairs to provide safety, accessibility and comfort. We have also created a Special Needs division to support the unique needs of veterans, seniors and other individuals with disabilities or those suffering mental illness. Finally, as part of our diversified funding plan, we accept and/or facilitate charitable gifts of Real Estate. Our organization collaborates with a nationally recognized expert who assists in the education of community members and organizations in answering their questions related to the charitable gifting of Real Estate. Donations can be anywhere in the world and include commercial or residential property or land. To learn more about how you can take part in our efforts or create a program within your own community, please contact Darlene Gleason @ 281-217-5336.
Giving Back and is considered a national leader in domestic violence prevention, awareness and intervention. To end the cycle of domestic abuse, their 110-bed Emergency Shelter is operated 24 hours a day, 365 days a year, for women, men and child survivors. In addition to the Emergency Shelter that served 983 survivors last year, their Legal Advocacy program assisted 3,881 individuals seeking injunctions and other court services. Their Childcare Services Program provides DCF-licensed daycare for children up to age 17 and includes three nutritionally-balanced meals each day. And because family pets are often an obstacle for survivors to flee, Harbor House built the Paws for Peace Kennel in 2012, which enables survivors to bring their pets with them when they flee—ensuring no family member is left behind in an abusive home.
Our investment approach is fueled by our Core Beliefs and at the heart of those beliefs is this verse: “Give and it will be given to you. Good measure, pressed down, shaken together, running over will be put into your lap, for the measure you use, it will be measured back to you”. Empowering passive investors to create generational wealth, while inspiring them to join us in the pursuit of philanthropic endeavors at home and abroad, is our continuing mission. In this edition of ROI we bring your attention to a project that holds a special place in our hearts right here on Orlando: Harbor House and “Project Courage”. Chief Development Officer Michelle Palmer tells us more about Harbor House and their tireless Community Partnership: Harbor House of Central Florida efforts to prevent and end Domestic Abuse.
If you were in danger and had 10 minutes to put everything you need in a bag, what would you save? That’s a common scenario for survivors of domestic abuse. And sometimes, the only thing they can save is themselves. And lately, you can’t help but notice the increase in domestic violence in Central Florida. In 2012, there were 8,086 domestic violence-related calls to 911 in Orange County, ranking us number two in the state for the number of reported incidents and arrests related to domestic violence. Orange County was second only to Miami-Dade County, which has more than double our population.
Harbor House, a non-profit agency that actively works to prevent and end domestic abuse in Central Florida, can attest to the rise to incidence of domestic violence. Their 24-hour crisis hotline answered more than 6,400 calls last year, providing a soothing voice of hope and a wealth of resources for those in acute need. Harbor House is the only state-certified shelter operating in Orange County and since its inception in 1976, it has evolved into one of the most comprehensive domestic abuse centers in the U.S.
But Harbor House is equally focused on prevention, in order to get to the root of the problem and break the cycle. They have youth programming in schools and churches in high-risk areas for ages 5-18, centered around bullying, healthy dating relationships, and safe bystander intervention. Their outreach program provides services including counseling, safety planning and community-based housing for hundreds of families to increase awareness and safety. And Harbor House offers community and business training to teach everyone how to Recognize, Respond and Refer to a domestic violence situation. “Our vision is to empower everyone with the tools they need to prevent and end domestic abuse,” said Michelle Palmer, Chief Development Officer. How do they do all this? With amazing donors, volunteers and business partners. That’s why partners like HIS Capital Group are integral to Harbor House’s ongoing success. HIS Capital Group is a perfect example of a wonderful community collaboration that brings a tangible impact to survivors of domestic abuse. For example, HIS Capital Group recently participated in our “Summer in the Sun” event where partner organizations assist our Children’s Services department, giving children one-onone attention, facilitating activities, bringing
snacks to share, reading, playing games and simply giving individualized, quality attention. “We are so appreciative of organizations like HIS Capital Group giving their time and compassion to help children impacted by domestic abuse,” said Evelyn Cosme, Manager of the Children’s Services Department. “That quality time helps the children build trust and empowers them to become more open and improve their communication skills while promoting emotional healing.” What’s on the horizon for Harbor House? They are in the process of designing a new 26,000 square-foot, new “temporary home” for survivors. This facility will be designed so that it can be economically built, efficiently maintained and replicated by anyone, anywhere. “That’s part of the ripple effect of what we do” said Palmer. “We go about the process with an intentionality to give away what we have learned. So we can end abuse locally but change lives globally. Because we believe this level of collaboration is needed to make social change happen on a large scale.” How can you help? “There are so many ways, said Palmer. Download and tell everyone about our free R3 App. It has a simple four-question assessment to determine whether a relationship is abusive and has the only mobile listing of domestic abuse centers across the U.S. by zip code. Come volunteer at the shelter, attend a free training to learn more about how you can Recognize, Respond and Refer domestic abuse survivors. And, like any other non-profit, we are always grateful to receive any financial gift. No matter the size. It only costs $65 to sponsor a survivor for one night in shelter or $1000, to sponsor the entire stay of a family of four. We rely on the generous support our community and are so grateful.”
If you would like to show your support or learn more about Harbor House and how you can join in their tireless efforts to prevent and end domestic abuse contact Michelle Brady Palmer @ 407-886-2244 ext. 270 or email mpalmer@HarborhouseFL.com
Progress Report
QA Over the course of the last several years, especially this year, we have received calls and emails from competitors and prospective client’s alike. So for this edition of ROI we’ve decided to reach into the mail bag and sit down with Managing Member Rick Melero for a brief Q & A session. Interestingly enough the questions appear to revolve around a recurring theme: What has separated us from the rest and what are we doing to improve and evolve as the market continues to change? Q: To what do you attribute the company’s sustained success and ability to provide your clients with consistent and generous returns? A: History’s economic lessons have served as a guide, so our business strategy has always and will continue
to focus on building a substantial real estate portfolio of income producing residential and commercial assets nationally and abroad. The combination of creativity and an entrepreneurial spirit have always fostered our value based investment approach, which in turn has helped to uncover viable opportunities often overlooked by others. A majority of our investment vehicles are structured to create compelling returns over the long haul, and value is maximized through operational improvements over time. Frankly, I think the two biggest keys have been our ability to strategically add new members to our team, as well as, leverage the experience of our senior management and advisory board. We have created an environment of innovative thinking, and sharing of
intellectual capital throughout our global organization. I believe that these fundamental pieces have helped us to thrive during hard economic times as evidenced by our global presence, and will continue to help us as we evolve with the changing markets of today. Q: You mentioned a global presence, what other countries do you hold property in and what types of assets are they? A: Currently we have holdings in Germany, England, Scotland and Ireland and the asset classes include land, office buildings, multi-unit residential buildings, industrial parks, and distressed properties. Q: HIS operates what you’ve called a “Flexible operating model” when it comes to your residential business model can you explain that? A: Well, our philosophy has always been pretty simple really: Maximize the potential of each asset. While we may acquire assets in other markets, we believe it is critical to maintain a local presence as we do in Southern California, and Central Florida, to properly manage the acquisition, renovation, and disposition of the asset. To do so, we employ a variety of acquisition strategies to fulfill those requirements. As for the Flexible Operating Model, well, in order to sustain a successful real estate investing business you must be agile & understand demographic & municipal insights. The Marine Corps has a saying, “Adapt, Improvise, Overcome,” that truly applies to how we operate, especially during the ever changing economic climate. Multiple exit strategies are imperative & once we’ve acquired discounted quality assets, we assess necessary repairs and prepare for one of four (4) dispositions. We can wholesale it “As Is”, tenant and lease the property for 6-12 months & sell to an active investor, or we can fully renovate and sell it Retail to the end user. Finally we can offer seller financing to credit challenged buyers; that truly expands our buyers’ market and separates us from other investment groups. Q: Over the last decade HIS has built a “text book” or fundamentally sound and consistently profitable commercial real estate enterprise as evidenced by your expansion abroad. How? A: Utilizing the combined experience of our management team we have specialized in uncovering on and off market under-performing assets with long term growth potential. But once
that is done the most crucial stage of the process and commercial investing in general really begins: aggressive management implementation and sound stewardship for the life of the holding. We believe it is crucial to understand the intrinsic value of the asset in comparison to the acquisition price. In doing so we’ve established a proven and consistent track record resulting in many prime holdings in strategic locations. With the strategic alliance’s we continue to cultivate and our diverse and knowledgeable team we are positioned well to navigate with confidence in any economic climate. Q: Are you expanding your business operations? A: While expanding our organization and real estate endeavors is crucial, our investment approach is fueled by our Core Beliefs. We believe in the power of "sowing seeds and reaping a harvest." Empowering passive investors to create generational wealth, while inspiring them to pursue philanthropic endeavors across the globe is truly our mission. We are only entrusted with so much time on this earth, so we try to make the best of it, not only in our real estate investments, but also in our investment to help others on this journey called life. We are honored to have the opportunity to “sow seeds” in the lives of many people both directly and through other organizations like Wounded Warriors, Harbor House and other Mission groups that are living a purpose filled life, blessing those less fortunate. Q: What does the rest of the year look like for the HIS Capital Group? A: We are looking to finish the year off by launching our revised Investment Dashboard that will consolidate our reporting tools for our clients making their experience more transparent and easier to use. We are also humbled and proud to announce the launching of our Private Equity Fund which will be actively investing to “kick” off the New Year. We’ve been finalizing all the details including the appropriate SEC compliance matters, as well as discussing investing opportunities with several of our existing clients. If you are not already a client, call 877-452-6569 Ext. 115 to learn about a host of opportunities for active and passive investors alike. Learn more about the opportunity to take part in our 2014 Fund launch by calling 877-452-6569 today.
Contact Us
LET OUR SERVICE SHINE Our resource center is available for your support regarding investment statements OR online portfolio access. Feel free to give us a call at (877) 452-6569 Option 1 or email us at investor@hiscapitalgroup.com, our expert’s are available 24/7 for your HELP & SUPPORT.
We Think Big With Your Dreams Let us take your dreams to reality, if you are tired of earning low interest in CD’s, Stocks and Bonds? Let us show you how to make your money work for you safely through income producing real estate. Don’t hassle just call us at (877) 452-6569 Option 4 for the investor relation department or go to (877) 452-6569 Option 4. For more details please visit our web site support@hiscapitalgroup.com.
You Could Be The One . . . We have been fortunate to grow favorably, the last several years and much of this is due to our loyal client base and referral partners. As a way of showing our appreciation each quarter we will award a cruise for two to the individual. Who refers the most names of family, friends & colleagues by simply submitting the names & contact information of those you know, like yourself that want to make their money work hard & enjoy a generous return . We will take care of the rest, and update you along the way. For more details just call us at 877-452-6569 ext 118 or email us @ info@HIScapitalgroup.com.
The Bottom Line:
We provide everything you need! We provide you the education, research, maps, data, tools, opportunities, process, due diligence checklists, and contacts, along with personal, financial, and asset portfolio tracking and analysis to help you chose the right income-producing assets to add to your portfolio.
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