September 2017 KREIA Newsletter

Monthly Newsletter for KREIA Members

Vol 09-17 September 2017

President’s Letter

1

New Sponsorship Rates

2

Main Meeting: Equity Trust Shows How to Invest TaxFree

3

Welcome, New Members!

4

Airbnb to start collecting taxes for Kentucky hosts

4

‘What Kinds of Deals Do You Do in Your IRA?’ — We asked KREIA members

6

KREIA Photos

10

Government Affairs Update

10

L.O.T.S.: Hampton Scurlock Finds Surprise in Basement of PRP House

11

Ask Hampton: ‘Can a House Be Owned by My IRA?’

14

Nina Musgrave: New Regulations on Chinese Investors Will Impact U.S.

22

Upcoming KREIA Events

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KREIA Members, We had a record turnout for our monthly meeting and Saturday workshop last month on Rehabbing for Fat Cash! I hope you were able to attend one or both meetings and learn from our local experts who gave a TON of great info! We had lots of great feedback from both meetings and appreciate everyone who participated in the Saturday workshop.

Eric George

This month we’re featuring Equity Trust Company and how to use self-directed retirement accounts to invest in real estate and other things tax-deferred or even TAX-FREE! This is an ADVANCED investing topic and one that most people aren’t even aware is possible. Come learn how it all works and how you can grow your own retirement accounts exponentially faster than 99% of the population!

Also, make sure you register for the Saturday Wealth Building Workshop that we’re co-hosting with Equity Trust on September 30th! This event is being promoted throughout the region and we’re expecting around 125 people to attend, so don’t wait. Sign up early!

As always, we are looking for new volunteers to help keep KREIA running smoothly, and this month at our monthly meeting we’ll have an opportunity for anyone interested to learn more about how they can help from 6:00-6:15 in the “Early Meeting Room”!

See you September 28th & 30th!

Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

Your KREIA Leaders

President Eric George

V. Pres. Erik Hitzelberger

Advertise With KREIA

Secretary Treasurer Treasurer-Elect Dave Coffey Mike Grinnan CPA Wally Kallbreier

Board of Directors

Put your message in front of the most active rehabbers, landlords and wholesalers in the state! KREIA offers five membership levels for businesses. Go to KREIA.com and join at one of these annual sponsorship levels to get your ad in every issue of KREIA's newsletter and be invited to make sponsor pitches at meetings:

Business Card Membership . . . . . . . . $199 Includes your business-card-sized ad. Door charge at monthly meetings remains $20.

Premium Levels: These four sponsorship levels include your ½-page ad in each issue!

George Foree

Rue McFarland

Lauren Willoughby

Darin O'Neil

Parliamentarian Hank Schildknecht

Past Pres.

Frank Miller

Dennis Erhard

Tamara West

John Jones

Jeani Bryant

Rick Littrell

Mike Fallot

Clay Smith

Hampton Scurlock

Get involved with KREIA. You can help with the monthly meetings, L.O.T.S. program, this newsletter, Saturday workshops, Government Affairs roundups, marketing, the KREIA website and more. PLUS You Get EXTRA KREIA points for everything you do!

Ask for someone to direct you as you check in at the front desk at monthly meetings.

KREIA's newsletter is published monthly and serves both to educate and to remind you of upcoming monthly meetings.

About KREIA: The Kentuckiana Real Estate Investors Association is a members-only, nonprofit organization focused on education, networking and resources for today's investor. Whether you are just starting out in real estate investing or are working on your hundredth deal, KREIA can help you learn more, earn more, and have more fun doing it. Group discounts are available.

Contact us at News@KREIA.com if you want to: Advertise on KREIA.com • Sponsor a monthly meeting Sponsor a L.O.T.S. program • Sponsor Saturday Workshops

Bronze Membership . . . . . . . . . . . . . $499 Includes free admission to monthly meetings for one person.

Silver Membership . . . . . . . . . . . . . . $699 Includes free admission to monthly meetings for two people.

Gold Membership . . . . . . . . . . . . . . . $999 Includes free admission to monthly meetings for two people and gives you a skirted table in the vendors area.

Platinum Membership . . . . . . . . . . $4,995 Includes everything the Gold level offers, plus extra promotion from KREIA. You'll be our designated events sponsor, and we will promote you accordingly!

New ½-page sponsorship levels and pricing are in effect for new member signups and upon renewal for current sponsors.

Questions? Send email to News@KREIA.com or catch up with KREIA Sponsor Chair Dennis Erhard at the meetings.

Join KREIA Joining KREIA is easy: Go to KREIA.com and click the "JOIN" option on the menu.

The cost to join as an individual member remains at $125 per year, with a charge of $20 at the door for monthly meetings.

Click JOIN at KREIA.com to find out about all the benefits of membership for both individuals and businesses. Too many to list here!

Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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Invest Tax-Free With Equity Trust At Sept. 28’s meeting, custodian shows how to invest inside your IRA If you ask savvy real-estate investors — including many long-time investors here at KREIA — who they use for their self-directed IRA and 401K custodians, the answer is often Equity Trust.

The Ohio-based custodian has been in business for decades and has more than 330,000 accounts with over $30 billion in assets under management and administration.

In the last 12 months alone, Equity Trust oversaw more than 25,000 unique purchases totaling over $1.5 billion.

Its user accounts saw more than 853,000 deposits and 434,000 account-related activities.

Besides giving you the tools to take your IRA outside the bounds of what Wall Street brokers allow, Equity Trust provides education geared to real estate investors. Learn the rules of doing what you already know how to do (rehabbing, wholesaling, lending and owning rentals) legally inside your IRA. Be sure to be in your chair by 7 p.m. at the main meeting to hear Equity Trust’s John Bowen show us how to invest tax-deferred or even tax-free — the right way!

What do you get when you open a new account?  A free account for one year! ($50 setup fee still applies)  Access to National REIA Gold Level Service Team with more than 15 years of SDIRA experience  The Jumpstart to Financial Freedom Home Study Course: Lessons ranging from self-directed IRA rules to rehabbing  Free download of #1-ranked book on self-directed investing  Free download of video of Equity Trust Vice Chairman Jeff Desich sharing insights into growing your wealth  Free access to an exclusive online community with 24/7 access and over 50,000 community members  Bonus education and resources To see some real estate case studies, turn the page

Wealth Building Workshop An entire day of investment and retirement savings education!  Choose between the Novice and Experienced tracks  Interact with like-minded investors from around the country Main meeting starts atdetailed 7 p.m.! case studies  Study real-life, Buffet opens at 6.its regional training event to Louisville!

Equityline Trust brings

Saturday, Sept. 30. 8:30 a.m. – 5 p.m.

U of L’s ShelbyHurst Campus, 450 N. Whittington Parkway

Cost: Only $97  Sign up now at kreia.com!

5:30 p.m. Early Meeting: Wholesaling Active Members: $20 • Guests: $30 • Former Members: $30 Receipt Auto-Emailed to You for Your Records

Investor Hampton Scurlock talks about finding deals and wholesaling for quick profits.

Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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Welcome, New KREIA Members!

Charles Albro Terry Bishop Patrick Casper Jr. Matthew Cassin Adam Garza Christina George

Cheryl Haddix Scott Hesseltine Ashley Hildebrandt Stephanie Mason Elisio Sapata Laura Serke

Cheryl Spaniol Todd Sprouse Steve Staub Joel Taylor Bonnie Walsh

Cell: (502) 714-4371 Office: (502) 222-5212 jared@louisville-ky.com

Equity Trust Case Studies Case Study #1: Detroit woman earns 118% Equity Trust client Gail of Detroit is using her real estate knowledge to bolster her portfolio in one of the country’s hardest-hit real estate markets. And even though Gail came to full-time investing later in life, she has done well from the start, compounding her success by using a self-directed IRA. The first deal she did in her IRA involved a fixer-upper purchased on land contract for $17,000. Her IRA paid for approximately $15,000 worth of improvements. The land contract allowed her to concentrate on organizing the rehab work without worrying about payments until the sale.

A short time later she closed the sale for $70,000, more than doubling the value of her IRA with just one deal.

Case Study #2: Combining IRAs for More Buying Power Wayne and Alicia of New Orleans partnered with a friend, Shawn, to repair some of the homes lost to Hurricane Katrina, and earned a more than 35-percent ROI in the process. What’s more: Wayne and Alicia used their Equity Trust Roth IRAs to accomplish all of this in a tax-advantaged environment.

Neither of the couple’s individual retirement accounts had enough to complete the loan, so they partnered their Roth IRAs to provide Shawn the $106,000 he needed to complete the project. These funds were used to purchase and renovate a home in addition to paying the carrying costs associated with the property.

Airbnb to collect taxes for Kentucky hosts ISC Provides 4 simple yet powerful tools, backed by Private Investigators, to make screening and managing your ideal tenants easier than ever!

iscscreening.com

On October 1, vacation rental coordinator Airbnb will start automatically collecting on behalf of Kentucky hosts, reports Carolyn Tribble Greer of Louisville Business First.

“Airbnb will automatically collect and remit the state’s 6 percent sales tax and its 1 percent state transient room tax to the Kentucky Department of Revenue on all Airbnb bookings.”

This could bring $1 million in tax revenue to Frankfort if the level of booking remains the same for the next 12 months.

To read the full story at Business First, go to this address: bit.ly/k1709airbnb

Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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‘What Kinds of Deals Do You Do in Your IRA?’ KREIA members answer that question With Equity Trust paying us a visit this month, it seemed like a good time to poll some KREIA members on their thoughts about retirement accounts — and how they use them for investing. We started with Mike Butler, a KREIA past president and someone who’s been doing self-directed investing for a long time. He’s even created a self-study course on the subject.

As Chris McCarty says, think of your self-directed Roth IRA as money in your left pocket and what you’re doing out here in the real world, when you file your tax returns, that’s money in your right pocket. You can’t mix them. Whatever real estate you own now you cannot move into your Roth IRA. You just can’t do it.

I love buying good rental properties. Get a good rental property in there. If you can have it paid for in your Roth IRA, Mike Butler that money is just going to keep cranking. It compounds and What’s my favorite kind of IRA deal? A safe investment with a does pretty good. In addition, look at the cash flow on that. So high rate of return. One of those is being a hard money lender. you could even put lower-income properties into a Roth and get Let’s say you loan your money out at phenomenal return in cash flow. Some people do that. You can 15% APR, and do interest-only payments, have ugly houses, you can have pretty houses ... single-family and you get points on the back end. You rental houses are awesome. could end up with a 22% or 25% return.

You could fund — and be part-owner — in someone else’s But most folks are not taught the risks, investment. Let’s say somebody wants to buy anything in real the skeletons in the closet. The do’s and estate, whether it be commercial or multifamily apartment don’ts. It sounds like it’s just slick as snot if communities. Whatever it is, it’s something you like and know you want to sell somebody some books about. You don’t have to be 100% owner. If you could and tapes. But to really get into the contribute 25% of the funding they need, maybe you could get trenches to be a hard money lender or a private lender, there’s 25% of the equity, of the ownership, and let them do all the a lot of risk. That’s your money that you’re loaning. operations. Now that involves the ‘P’ word — partnership — So, Rule #1 is: Don’t do any owner-occupied loans. I like to which is dangerous. secure my loans with real estate in a first-position mortgage You can buy discounted notes and mortgages. You might be with investors only. Don’t loan money on cars. Don’t loan able to have something that shows on its face as 7% fixed rate, money on signature loans. Don’t do second mortgage loans. but when you buy it at a discount, you Don’t put a lien on anybody’s home, because then you get all get a 25% return. You can discount it “Do the bigger that consumer protection predatory lending garbage going on that much. And if they pay you off early, deals — the killer that you’ll be violating, because you’re not a bank. So, there’s a you get a bigger payday. deals of the year, lot of do’s and don’ts involved in that.

So there’s a lot of things you can do to generate chunks But what I do like to do is get a great killer deal. If you’re with the self-directed Roth IRA. Max looking to generate chunks of cash, you can wholesale a couple your contributions every year. Don’t of cash — in your of your biggest killer deals of the year. Put them in your Roth confuse that with profit.

Roth IRA to grow IRA. Or in your kid’s IRA. Be careful. Don’t do little nickel-and- your Roth quickly.

If you don’t have a self-directed IRA right now, you need to dime deals in your Roth IRA: Do those But don’t act like open one yesterday. Then open one for your spouse. Open one over there in your right pocket. Do the it’s a business.” for your kids. Open one for your grandkids, and get all that bigger deals — the killer deals of the going. Even if you have a child that’s just born. year, to generate chunks of cash — in Take Jay Long, for example. His first baby was less than a day your Roth IRA to grow your Roth quickly. But don’t act like it’s a old and had a self-directed Roth IRA — because Jay took a business. picture of himself holding him, and then he paid the baby to be Let’s say you’ve got three rentals in your Roth IRA. Could you a model, which gave him earned income to open up a selfdo a couple of wholesale deals to generate cash to help pay directed IRA. And that’s just genius. You can do that with your them off? That’d be fine. But don’t just do wholesale deals only, kids. Put them on your business card. Put them on your because that’s really like running a business. Like going to an whatever to get them some earned income. Let them stuff auto auction and buying cars at wholesale and marking them up envelopes in your business and pay them. and trying to sell them at retail. That’s not investing — that’s With the self-directed Roth IRA, don’t confuse contributions being a dealer. with profit. They’re two different animals. You’ve got to behave So, that’s my nickel’s worth. properly. Get IRS Publication 590 as a guideline to help keep your butt out of trouble. Don’t try to use your self-directed IRA Continued on Page 16: See how other as a business — you have to use it for investing.

KREIA investors answered this question Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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GOVERNMENT AFFAIRS UPDATE

KREIA Photos

Greater Louisville Association of REALTORS August 28th, 2017 Louisville Metro Government 1. In the Fall of 2016, the Louisville Metropolitan Sewer District brought together a work group to recommend changes to the Floodplain Ordinance in Louisville Metro.

GLAR was invited to be on this workgroup since REALTORS are very engaged on issues related to the floodplain and buildings in the floodplain. Over the past year this workgroup met and reached consensus on many changes to the Floodplain Ordinance in order to maintain the large discount Louisville residents receive on their floodplain insurance rates. The changes proposed will allow for the discount to continue and to save the floodplain residents who carry floodplain (Continued on Page 19)

At the last Lunch and Learn meeting, Joe Burnett Jr. described how his plan to haul a 24-foot trailer full of supplies down to Houston went viral on Facebook. Caring Louisvillians descended on his flooring store with piles of donations for Hurricane Harvey victims, and his solo trek turned into a convoy of generosity: Two semi trucks, two Ryder box trucks, two enclosed trailers and even more trucks were donated to haul the outpouring. Joe Jr. and the other drivers transported the supplies to St. Bernard Parish outside New Orleans. He said the goods went from there to Texas.

???

Insurance for the Real Estate Investor realprotect.com

It was father-son day at the Red Barn Kitchen Lunch and Learn: Prolific investor Joe Burnett Sr. stepped up to the podium at the urging of organizer Ed Gibson. Though he said he was out of his comfort zone speaking in public, Joe Sr. shared tips and gave credit to his mentors, and reminded everyone that KREIA members are here to help each other, and you only need to reach out when you run into problems.

photo by bruce w. hinson www.obedientcamera.com

See more photos online — in color — in KREIA's private Facebook group.

Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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PRP L.O.T.S. Home: A Closer Look Hampton Scurlock finds surprise in rehab house basement Hampton Scurlock found this rehab house in Pleasure Ridge Park from another investor, who asked $85,000.

“A wholesaler called me and said, ‘We’ve got a good deal. It’s a 3/2 on Birnamwood.’ So I did a little research, came over and took a look, and found out it’s not a 3/2 — it’s a 4/2½,” Hampton said. “I don’t think the wholesaler came inside. Or maybe he just didn’t bother to go down into the basement, because the basement was finished and had another half-bath down there.” ???

There was also a room downstairs that was practically a bedroom, so The house at 7104 Birnamwood Drive, near the intersection of St. Andrews Church Road and Hampton and his team gave it that extra push, adding an egress window Arnoldtown Road, has more rooms than the seller described. to make the fourth bedroom official.

There’s also a bonus room and an office in the basement.

One unique feature of the house, which you’ll spot Hampton’s crew had been on the job for about two immediately as you enter the kitchen, is the spiral staircase weeks at the time of the L.O.T.S. meeting. leading to the basement. Hampton explained how the last They had done some plumbing and work in the kitchen. owner had eliminated a more traditional staircase, which had They put in a door. Mulch and landscaping were planned for divided the kitchen in half, and installed the low-footprint the next week. “It’s a work in progress,” Hampton said. “We staircase in the corner. “I’m not crazy about the spiral staircase, still have to finish some paint, some drywall work.” but a lot of people like it. It does open it up.”

They’re putting a new backsplash in the kitchen, doing Hampton plans to have the house on the market by the end the cabinets in black, and bringing in stainless appliances. of September and said he’ll give it two weeks as a FSBO. If it The previous owner, Hampton said, was an older landdoesn’t sell then, he’ll bring in a realtor. A neighbor has already lord and that the house just needed a lot of cosmetics. made inquiries.

“Everything was kind of basic, so we’re going to redo it, A sales price of $149,900 is what he’s shooting for. “The two make it pretty again.” recent sales next street over were very similar,” he said. “Both were $165,000. So we may be bumping up to $155,000 or $159,000.... We don’t have to be greedy or hold out for top dollar. We just want to sell it quick and move on to the next one.”

Hampton said he doesn’t plan to stage the house: That is something he does in higher-end homes. Though if it doesn’t sell quickly, he might stage the house or offer a special bonus such as a warranty.

His estimated profit is about $45,000 — “pretty standard, it’s what we shoot for,” he said. “We don’t like to look for less than $30,000. We love them if they’re much bigger. This is kind of an average type of flip.”

Hampton said he also has one other rehab going on now in Shively, one in Oldham County and a couple in Cincinnati.

L.O.T.S. host Hampton Scurlock, center, answered questions (Continued on the next page) after giving his presentation.

Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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TIPS  Always do your homework and walk the house to verify

what wholesalers and agents tell you about the place.

Sometimes you get a happy surprise, as Hampton discovered with the extra rooms.  Try vinyl plank flooring in your basements. Hampton

describes it as waterproof, durable, and able to be laid directly over concrete. He said he was glad they had vinyl down there after discovering a water leak following some plumbing work. “Wipe it off, good as new — doesn’t hurt anything.”

THE NUMBERS Purchase Price: $85,000 to the wholesaler Rehab and Holding: $14,800 Estimated Sales Price: $149,900 Estimated Profit: $45,100 Find more photos online in KREIA’s private Facebook group.

Why is it called “L.O.T.S.”? Because we Learn On The Site!

Mike Fallot and Wendy Kays of Mortgage Man, KREIA’s new Platinum Sponsor, provided the lunch and held a drawing for a giveaway. Thank you, Mortgage Man! The company provides funding for rehabbers doing flip projects.

Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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WIN THE DEAL We're not a bank and we don't like red tape.

Specializing in non-owner occupied renovation loans.

Call 888-445-FLIP or visit us online at www.surepointequity.com Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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Ask Hampton: ‘Can a House Be Owned by My IRA?’

By Hampton Scurlock Yes, but you must follow some rules. Real estate can be purchased using retirement accounts, and so can numerous other types of assets (except collectibles and life insurance).

Tapping into retirement funds can open up many opportunities for you as an investor.

Many people think they don’t have the money or credit to purchase rental real estate. In reality, they may have retirement accounts (or have friends/family willing to partner or lend money) that can allow them to purchase their first rental property or many additional properties. Using retirement accounts can be an ideal way to buy or sell real estate.

People get excited about buying real estate in their retirement accounts because it is a great source of funds and offers tax benefits. If you are now tapping into retirement account funds, you may get better deals and more offers accepted because you are buying with cash and not a loan. “Cash deals” may eliminate the need for appraisals, loan delays, etc.

The next question often asked is, “How do I set it up and buy a house in my IRA?” IRAs require a custodian to hold the funds and administer the account. Some custodians specialize in real estate and self-directed plans. Once you decide on a custodian, you can begin the process of opening an account.

The purchasing process is typically as follows, but may vary slightly by custodian/administrator/adviser.

1. Open an account. Fill out paperwork and then fund account with contribution and/or rollover.

2. Identify investment property/properties you wish to purchase. Get accepted offer.

3. Complete paperwork from your custodian/administrator/ adviser that instructs them to purchase the property.

4. Review and approve closing documents. Verify titles, amounts, etc. Funds are sent to closing company directly from your IRA. 5. After purchasing the property, ensure that all income and expenses flow through your retirement account.

The selling process is similar: 1. Decide to sell property 2. Once under contract, send paperwork to custodian/ administrator to facilitate sale.

3. Review and approve all closing documents. Funds are transferred from closing company to your IRA directly.

4. After the property is sold, all funds remain in retirement account without incurring any current taxes. Now the proceeds can be used to purchase more property or other investments!

(Continued on Page 16)

Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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‘What Kinds of Deals Do You Do in Your IRA?’ Continued from Page 6

Ask Hampton: Continued from Page 14

Lauren Willoughby: I’m new at this, but so far I’ve loaned money to a rehabber on two flip houses in my IRA. I’ve also loaned to an investor who was finishing the rehab on one of her rentals. My long-term goal is to build a portfolio of rentals in my IRA.

The process is slightly different with land trusts (easier).

There are several rules to follow when buying property in an IRA. Consult your custodian with any questions and do your own research. Educate yourself with IRA information online and from YouTube videos. Also, Equity Trust’s website, www.trustetc.com, has a library of articles related to selfdirected IRAs. You can flip properties, own rental houses, even wholesale properties using your retirement plans, and all of those profits are free from current income tax while in the account.

Clay Smith: I don’t have an IRA, but I use lots of IRA private money to invest. Everything I buy is with other people’s IRA money.

Hampton Scurlock is now a full-time real estate investor in Louisville, Ky. He can be reached at 502-694-BEST (2378) or 859-433-3095 or scurlockfinancal@yahoo.com

John Jones: I have a small portion set aside to start wholesaling and building. The other I have invested in stocks. My exit strategy out of the stock market is fully into real estate.

*Disclaimer: Information is not legal, tax, investment, or retirement advice. Consult a professional on all matters and how they relate to your personal situation. Refer to IRS publications for all tax regulations. Complex issues are going to be mentioned here, and there is not adequate time/materials to discuss all aspects, types of accounts, various examples, rules, questions, benefits/drawbacks, etc. This is just for general informational purposes only; do not rely on it to make personal investment, legal, or retirement decisions.

Dennis Erhard: FAT CASH DEALS (tax-FREE) Rue McFarland: I do mortgages.

Erik Hitzelberger: I have rentals.

Ed Gibson: I am of the school of thought that having funds in the stock market is just as important for your financial strategy as your real estate position, and I work hard to keep our portfolios balanced 2:1 — two-thirds stock market, one-third real estate.

The stock market is our long-term cash-building position, and we pull from our holdings for quick cash to invest in short-term real estate deals, stock options, or derivative trades.

I will pull no more than 1 or 2% of our position in the market short term (3 to 6 months), then pay back with interest. We have been lucky and do very well in the market and do not want to lose the position that we have in our stock portfolio. I never sell a long-term position.

ARGI (https://argifinancialgroup.com/) is our financial adviser and strategist.

The rentals are for our day-to-day or passive income.

Wholesaling will be another form of building capital for the real estate investing side of the overall financial strategy.

So in keeping with our long-term strategy, our real estate plays a large part of our plans for wealth building and retirement. Anyone growing their real estate business for retirement will need to have a cash position as well as rental properties as passive income.

Most real estate investors will find out as they grow that managing money is harder than managing real estate.

I think there are more “moving targets” in managing money: there are banks rates, market conditions, Continued on Page 19

Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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Property Medic New to house flipping? Need a diagnosis on a prospective rehab house? Do a walkthrough with Jeff Colgate — he can help you write a scope of work for the contractor you end up hiring.

JC4PropertyMedic@gmail.com

(502) 645-4375

Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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‘What Kinds of Deals Do You Do in Your IRA?’ Continued from Page 16 approval, documentation, repayment terms, fee appraisals and so on. Real estate has fewer moving parts. It truly is all about being able to manage and keep all the balls in the air at the same time.

In answer to your question, I loan funds from the 401K and our position in the stock market to invest in the real estate business. That is just the way I am most comfortable doing business. I do know other investors that do use their IRA, and it does work for them.

Younger investors may build their cash with real estate, then invest in the market. Others like me may look at the market to build passive income from the real estate investing.

Both can work well. There is no set rule, just different strategies to reach your goals.

It takes a team behind you to make any business successful. We have been able to build a nice family business though our association with KREIA and have made some great lifelong friends as well.

Government Affairs Update: Continued from Page 10 insurance worth millions of dollars every year. This past Thursday night under the leadership of Councilwoman Angela Leet, GLAR supported the changes and all of the recommended changes were passed unanimously by the full Metro Council. Huge win for GLAR, its members and their clients.

3. The Jefferson County Public School Board of Education voted unanimously last week to lower property tax rates for fiscal year 2017-18. This reduction will still bring additional revenue to the district while not making much of a difference on tax bills. The real property tax rate will decrease from 70.8 cents per $100 of assessed value to 70.4 cents per $100. The personal property tax rate will also decrease from 71 cents per $100 to 70.4 cents per $100. Even with this lowering of the tax rate, the District expects $19 million more in revenue than last year due to a recent increase in assessments. The county's total real estate assessment increased nearly $4 billion from 2016 to 2017, according to the Jefferson County Property Valuation Administrator's office.

Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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New Regulations on Chinese Investors Will Impact U.S.

By Nina Musgrave, KREIA Member & Volunteer Foreign investment in U.S. real estate jumped 49% from April 2016 to March 2017. China holds the top spot, followed

by Canada, the United Kingdom, Mexico and India, respectively. All of that may change by the end of 2018.

On August 18, 2017, the Chinese State Council released specific rules for overseas mergers and acquisitions. Real estate purchases fall under “restricted industries,” and all foreign transactions will now be scrutinized.

The purpose of the new regulations is to reduce “irrational” outbound investment. “Some companies focused on property rather than the real economy, which, instead of boosting the domestic economy, triggered capital outflows and shook financial security,” read a statement from China’s National Development and Reform Commission.

Preparing for this announcement, Chinese investors began adjusting their purchases in early 2017. Chinese investment in U.S. property markets dropped 17% year-over-year to $4.7 billion in the first half of 2017, according to Real Capital Analytics. Because Chinese entities have invested heavily in New York over the last decade, Manhattan commercial properties have felt this decline. Area investment sales tumbled by 55 percent in the first half of 2017.

Throughout California, large, coastal mansions built with Chinese buyers in mind sit empty. Although Asian buyers are

still purchasing in the United States, they want incomeproducing properties or complexes instead of vacation homes.

The full impact of Chinese pullback has not occurred yet, domestically or internationally. Some analysts show that it may slowly help the market balance; others point to more drastic repercussions. One thing is clear: With low inventory, similar online sources to locate properties, and the ability to pay cash, investors across the globe must take immediate action when a deal works for them.

Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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Copyright MMXVII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

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Events Happening Soon

Future Events

Invest With Your Self-Directed IRA

How to Buy REOs

Folks from Equity Trust, one of the most trusted custodians, show how to invest tax-free. Thursday, Sept. 28.  Saturday Workshop, led by Equity Trust, Sept. 30.  October 3 — noon-1 p.m. L.O.T.S. event. Location TBD. Check your email. Lunch is provided for KREIA members.  October 10 — 11:30-1 p.m. Louisville Lunch and Learn.

Location TBD. Check the private Facebook group. You buy your own lunch. Ed Gibson is the organizer.  October 11 — 11:45 a.m.-1:30 p.m. KREIA Indiana SubGroup Luncheon Meeting. Meets the 2nd Wednesday each month at Tucker’s Restaurant in New Albany on State Street and I-265. Open to all, but you buy your own lunch. Brian Haeseley chairs.

Local experts talk about how they buy foreclosed properties from banks and at auction. Thursday, Oct. 26.  Saturday Workshop, Oct. 28.

Holiday Party We're planning it now!

Thursday, Nov. 16.

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