May 2019 KREIA Newsletter

Providing Education, Resources & Networking Since 1978 Kentucky’s premier investment club for landlords, rehabbers and wholesalers Meeting the 4th Thursday of every month (except November & December) KREIA.COM • facebook.com/groups/kreiaky • twitter.com/reiaky

Monthly Newsletter for KREIA Members

Vol 05-19 May 2019 President’s Letter

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KREIA Members!

Paid Advertising Rates

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Wholesaling & Flipping: David Lecko and Frank Miller bring us up to speed

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Welcome, New Members!

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We have some big things happening this month and next at KREIA, not only with our awesome meetings and education we have planned, but it’s also election time for our board members and leaders! If you are interested in running for the board and haven’t already informed Michelle Rawn, KREIA’s Parliamentarian, make sure you send her an email or see her at this month’s meeting to get on the ballot!

Heads-Up: Are you receiving your KREIA emails?

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Mike Butler: What is KREIA and how does it work?

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Jordan Pohn: Six factors to 10 analyze before deciding on a loan KREIA Photos

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L.O.T.S. Recap: Adam Wilson pops the top and bumps out the back of a St. Matthews house

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Nina Musgrave: The current state of flipping

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Michelle Rawn: Preview of KREIA’s 2019 Elections

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Eric George

This month local rehabbing guru and past KREIA President Frank Miller has teamed up with David Lecko from the DealMachine app to teach you how to find off-market deals with little to no competition, and how to flip those deals for big money, with none of your own money down! Guaranteed this meeting will SELL OUT, so make sure you pre-register online and get a seat EARLY so you don’t miss out!

Lastly, we still have a bunch of copies left to hand out of the KREIA Member Directory and Resource Guide, so if you haven’t picked one up yet, please ask for one when you come next time!

See you at the meeting!

Eric George KREIA President

Public Mastermind: Frank Miller 24 holds intro-to-real-estate event Government Affairs Report

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Calendar of Events

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Copyright MMXIX 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

Vice President Tamara West

Advertise With KREIA

Secretary Erik Hitzelberger

Treasurer Mike Treasurer-Elect 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 advertising levels to get your ad in every issue of KREIA's newsletter and be invited to make ad pitches at meetings: Business Card Membership . . . . . . . . $199 Includes your business-card-sized ad. Admission at monthly meetings remains $20.

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

Rue McFarland

George Foree

Dennis Erhard

John Jones

Lauren Willoughby

Darin O'Neil

Mike Fallot

Hampton Scurlock

Mike Butler

Chris McCarty

Greg Nalley

Clay Smith

Parliamen- Past Pres. tarian Michelle Frank Rawn Miller

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 & more. Work shoulderto-shoulder with active investors! 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 to educate you and to remind you of upcoming monthly meetings.

About KREIA: The Kentuckiana Real Estate Investors Association is a 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 . . . . . . . . . . $3,500 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 advertising levels and pricing are in effect for new member signups and upon renewal for current advertisers.

Questions? Catch up with KREIA Sponsor/ Advertiser Chair Dennis Erhard at the meetings. Or email support@KREIA.com.

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 MMXIX 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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Jump-Start Into Wholesaling & Flipping May 23rd meeting features Frank Miller and David Lecko

Let’s be frank. You’ll want to attend this month’s KREIA meeting because it tackles two of the topics that interest KREIA members most: how to make quick cash by wholesaling and how to make big cash by flipping houses.

And you’ll want to attend because it brings together two presenters who have a lot to teach about these topics: David Lecko and KREIA’s own Frank Miller.

David is the Indianapolis entrepreneur who created DealMachine, a driving-for-dollars app that’s helping wholesalers find off-market deals and cash lots of checks. In the last year, the app has been downloaded more than 30,000 times and used to capture over a million potential deals. A 2018 Forbes article listed DealMachine as the No. 1 real estate tool that entrepreneurs should know about.

Frank is a KREIA success story. Fifteen years ago he was a DHL driver who found his way to KREIA, made contacts and gained education that has allowed him to build a rental portfolio and complete more than 500 wholesaling and rehabbing deals. He served as our group’s president from 2015 to 2017, and now he heads up Believe Investment Group, which mentors and coaches students in wholesaling and flipping.

We can’t all be Frank, but we can aspire! He’s going to give us tips on how to do what he does so well. And David is going to give us a taste of what modern deal-finding technology brings to the table. Be in your seat by 7 p.m. on May 23rd to learn from this Dynamic Duo. David will kick off the evening’s presentation by demonstrating how to use his DealMachine app to drive for dollars. If you come across a house that looks to be in distress or in disrepair, which you think may indicate a motivated seller, you snap a photo of the house using the app.

Behind the scenes, the app looks up ownership data on the house and stores a record for it. If you like, you can use the app to launch a postcard mailing campaign to the house’s owner for an add-on fee.

You can also share your app account with deal finders, people you recruit to help you look for distressed houses.

David Lecko, left, and Frank Miller spoke at a real estate seminar last year at Louisville’s Omni Hotel.

They snap photos of houses — you get leads. If you would like to give the app a test run but want a discount, rumor is David is going to offer KREIA members a discount code.

After David's presentation, Frank will follow up by walking us through the steps and processes of getting houses under contract and then assigning those contracts to other investors — fix-and-flip rehabbers and landlords — for a big check. Then he’ll quickly run through the steps of flipping houses, including how to do it using other people’s money. After that, the floor is open for Q&A. Get your questions ready now!

5:30 p.m. Early Meeting: Insurance Special Door Prize for Pre-Paid Registrations!

Active Members: $20 • Guests: $30 • Former Members: $30 Register now at kreia.com. Receipt emailed for your records.

PRE-PAY NOW!

Greg Nalley with Logan Lavelle Hunt will address questions like, “What happens when a tenant burns down your house?” and other claims.

Copyright MMXIX 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!

Petronia Belmar Peggy Brown Pete Christianson Raphael Collazo Scott Dennison Elmore George III Shautana Graves Dacia Grimes Jacqueline Grubbs Rachel Hamilton Aaron Hans Jennifer Harris

Jonathan Hayes Sarah Hodge Jacob Huelsman Damon Hughes Nick Jacoby Greg Kelley Kisha Lindsay Erik Lund Mark Lyons Carol Lyons Kim Nicholas Rushang Patel

Tina Pearson Derek Pero Michael Peterworth Anthony Silver Christopher Skeen Tyler Smith Brandon Spaulding Richard Wadlington Amy Wagner Margaret Weathers Trevor Weis Mike Willis

Are You Receiving Your KREIA Emails?

If you are not receiving email from us but would like to, please send an email message to support@kreia.com and let us know.

Board member John Jones monitors that account, and he can help fix things on this end to help you start receiving your KREIA email again.

We send out emails daily – some are automated event reminders, some are custom reminders, and some are lead roundups pulled from member websites where KREIA folks can list deals for sale. (Did you know you get a free website with your KREIA membership? Check it out in “My Dashboard” when you’re signed in at kreia.com.)

If you’re not receiving email messages from us, it could be because you yourself turned off email notifications in your dashboard settings, under the Subscriptions tab. But if that’s not the case, your lack of emails may be because the software that runs kreia.com sent you emails in the past and had the messages bounce back – something that’s probably out of your control. If the number of bouncebacks reaches a threshold, the system automatically stops attempting to send you email. John can reset the bounceback counter for you.

Correction In April’s newsletter we forgot to include Bruce Hinson’s photographer credit with the KREIA photos he took for us on Page 14. Many apologies for the omission, Bruce.

Thank you for all the great shots you get for us!

Copyright MMXIX 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 MMXIX 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 Is KREIA and How Does It Work?

By Mike Butler BRIEF HISTORY: Your Kentuckiana Real Estate Investors Association was founded in 1978 by Rue McFarland, Gene Dyson, and a couple of other folks I cannot remember.

Membership required having been a graduate of the LoweryNickerson investment program, and the monthly meetings were held in a classroom at Jefferson Community College on Broadway. Dr. Al Lowery still teaches today, and he attended the 25th anniversary meeting to swear in KREIA’s newly elected officers and directors. Bill Nickerson passed away a while back.

KREIA is now 41 years old and still going strong. Both Rue McFarland and Gene Dyson are recipients of the very prestigious “Ed Melton Award.” Rue McFarland serves on the board today.

From 1978 through today, KREIA has been operated by a staff of volunteers. KREIA is a 501(c)(3) non-profit and has never had an office, nor phones, nor any expensive overhead to be passed down and paid by members.

In about 1991, the monthly KREIA meetings were held in Clarksville, Indiana, in the basement of the hotel next to Derby Dinner playhouse. Those meetings consisted of 5 to 8 circle tables, seating about 8 folks apiece. Ed Melton invited me to join KREIA after I purchased an investment property from him. As I recall, first-timers to this KREIA meeting I attended included Chris McCarty and Jay Long.

For some local unknown reason, there’s been a huge stigma about crossing the Ohio River. Kentucky folks are reluctant to cross the bridge. Indiana investors were fine with having meetings in Clarksville. I had the opportunity to “throw up” on Ed Melton and asked why the monthly meetings could not be held in Louisville as more investors would attend. Ed approached the board of directors and allowed me to research a Louisville meeting location.

As many of you know, when I joined KREIA back in the day, I had a full-time job as an undercover police detective in Louisville. I did the long-term investigations on murder for hire, contract killings, and organized crime. One of my fellow detectives in this unit was Nick Masterson, son of the owners of the Masterson’s restaurant on 3rd Street by U of L. Working through Nick, we arranged to have Masterson’s host a luncheon for all KREIA board members, and Mary Masterson answered any and all questions.

Next thing you know, the board voted to move the monthly meetings to Masterson’s. The first meeting was held upstairs, and Jeffrey Taylor, Mr. Landlord, was our featured speaker. KREIA had to turn people away from this meeting because so many showed up. Thus began the era of extraordinary growth of KREIA. I recall some monthly meetings had well over 350 people. Louisville’s Fire Marshal showed

up a few times and forced KREIA to close the doors and not allow any more folks into our meeting room.

Then life happens. Masterson’s property was purchased

by U of L to expand their college campus, sending KREIA on a scramble to find a new location for monthly meetings. KREIA leadership selected Woodhaven Country Club for the new location.

Did KREIA membership drop back then? ABSOLUTELY our membership dropped, along with every REIA group in the USA. Remember the financial tsunami? Our economy came to a screeching halt. Credit card companies were cancelling all credit cards, banks stopped making loans, and the real estate bubble exploded. $8,000 for your car to buy a new one was one attempt to jump start the auto industry. My daughter benefited from the $16,000 benefit for buying a home back then. (This has expired and no longer exists. Sorry for the adrenalin rush.)

Believe it or not, in August of 2011, KREIA had only 48 active members and almost half of those were on the board.

Beginning in September of 2011, current and past board members and presidents volunteered hundreds of hours to help get KREIA upright and back on track.

Working as a team, we did a complete makeover of KREIA operations and did our best to implement available technologies – website, online dues, EXPRESS PAY LINE online payment for monthly meetings with a door prize, business cards with a discount for new guests, Member Spotlight published in newsletter, and much more. In short order, KREIA’s membership began growing anywhere from 10 to 25 new members every month and continues today.

Last month 36 new members joined KREIA! My point is, KREIA membership did not drop just because we moved to a new location. It was a lot of variables, including a lot of publicized stories of speculators who lost their butts in the drop in real estate. Another bubble is probably on the horizon involving today’s market.

And here KREIA is again, extraordinary growth in membership due to your KREIA Leadership! KREIA appears to be well on our way to outgrowing Woodhaven. Stay tuned.

WHAT IS KREIA? KREIA provides education, resources and networking for real estate investors. Since KREIA’s staff and leadership are all volunteers, your board members’ focus years ago was to host the best monthly meeting experience for all members.

What many members and board members can’t understand is that any and every event blessed by KREIA Continued on Page 24

Copyright MMXIX 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 MMXIX 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 MMXIX 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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Do You Want Your Business Card to Appear Here? Join as a Business Card Member for only $199/year, and see your ad in a year's worth of KREIA newsletter issues!

Copyright MMXIX 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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6 Key Factors to Analyze Before Deciding on a Loan

By Jordan Pohn of SurePoint Equity As a real estate investor there are many ways to finance a project. You can selffinance, partner with a friend, or most frequently, you will borrow the money.

There are several types of lenders that are most often used – banks, conforming lenders, private lenders and hard money lenders. It does not matter who is financing the project; the same analysis needs to be done before you can make an informed decision. I have found that many investors are so focused on the property itself, they spend little to no time on the lending aspect (I get it, the financing part is boring!).

However, taking just a few minutes can pay big dividends!

Here are the six key factors to analyze before you decide which lender and loan product best fits your needs: 1. Down payment – We consistently hear that out-ofpocket money is a priority. First, you need to know the down payment required by the lender. Typically, lenders require 10-20%. However, just looking at the down payment percentage is not enough. You should know if it’s a percentage of the purchase price OR a percentage of both the purchase price AND the renovation. For example: If you purchase a house for $100K with a $50K rehab, and the lender requires 10% down of the purchase price only, your down payment is only $10K. In this same example, if your down payment is 10% of the entire loan, your down payment is $15K. 2. Monthly Interest Payments – Monthly payments during the renovation process can be stressful. Some lenders charge interest payments starting the first month; others allow you to defer some or all the interest payments. On a typical $150k loan, the monthly payment is nearly $1,500. If your project takes 6 months, this is $9,000 out of your pocket (in addition to the down payment and upfront fees).

Imagine the impact on investors working multiple projects simultaneously.

3. Fees – The total cost of a loan is not just about the interest you pay! You should fully understand all fees associated with a loan to determine its true cost. There are many types of fees a lender may charge. For example, you may have a Processing Fee, Underwriting Fee, Doc Prep Fee, Wiring Fee, Draw Fees, Origination Fee/Points, Default Fee, etc. You should also know when fees are paid. For example, some lenders charge all their fees upfront while other lenders allow some or all their fees to be deferred and paid when the loan pays off. Fees (and interest) that are deferred to loan payoff are a clear advantage to the investor from a cash-out-of-pocket standpoint. Bottom line is: Lenders vary drastically with what fees are charged, how they are charged, when they are due and how they are calculated.

Don’t rely on reading your note’s fine print to know exactly what you are paying. Any lender unwilling to fully and easily disclose their loan terms and fees to you should raise a major red flag.

4. Rate – This is usually the first question that people ask; and of course it’s important. However, there are other considerations. Is it fixed? Is there a minimum interest charge? Can the rate adjust during the term of the loan or post maturity? If so, how and when can the rate adjust? Just like loan fees, lenders vary with the way they calculate your interest and it’s important to understand those variables.

5. Interest Calculation – From my experience, this is almost never asked, and is the least understood by investors.

The most common interest calculations are typically based on the Total Loan Amount (which charges interest on all draw funds from day 1) or the Daily Average Balance (which only charges interest on draw funds as they are paid out).

The difference in these two calculations can cost you thousands. For example, on a typical $150K renovation loan, the difference between charging interest on the total loan amount from day 1 vs. the daily average balance is over $1500 in extra costs to the investor. Most hard money lenders, private lenders and even some banks will charge on the total loan amount from day 1, so make sure you start asking that question!

6. Maximum Loan Amount – You should know what percentage of the After Repair Value (ARV) the lender will fund before you purchase a property. Typical lenders will give 65-75% of the ARV and this variance substantially impacts the dollars available to borrow. For example: on a $100K ARV, a lender giving you only 65% LTV, will lend a maximum of $65,000. A lender giving 75% LTV, will lend a maximum of $75K on the same $100K ARV. This $10K variance clearly impacts your cash out of pocket. It is important to understand the percentage of the ARV that a lender is willing to lend so you know your borrowing power and can maximize funds available for your project.

SurePoint Equity’s owners each have over 20 years of mortgage lending experience. We are a trusted resource for investors needing financing and proudly work with many KREIA members. We provide a transparent process where you can quickly and easily determine the total cost of your loan and total out-of-pocket. We have funded over $50MM in loan volume since 2016 and would love the opportunity to discuss our financing options with you. Our program is constructed with the investor needs top of mind. It’s low outof-pocket, competitively priced and delivers SPEED, EASE and SERVICE to every client. Call us at 888-445-FLIP or email FLIP@surepointequity.com

Copyright MMXIX 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 MMXIX 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 MMXIX 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 MMXIX 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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photo by bruce w. hinson www.obedientcamera.com April’s KREIA Happy Hour posted a good turnout despite having to compete with Derby week events. This was a happy bunch! (Photo by Jeff OBryan)

The KREE building hosted Andrew Holmes’ workshop. (Photo by Sharon Vornholt)

KREIA

Photos

See more photos in KREIA's private Facebook group.

April’s main meeting featuring Andrew Homes and his “2-5-7 Cash Flow for Life” system packed the house at Woodhaven. (Photo by Lauren Willoughby)

KREIA member Matt Rostosky caught up with Chicago REIA’s Andrew Holmes after last month’s main meeting. Andrew is all about building rental portfolios using leverage but also aggressive debt paydown. (Photo by Lauren Willoughby)

Frank Miller spilled his secrets on buying rehab materials at massive discounts at April’s Lunch & Learn meeting. (Photo by Anna Wagner Carroll)

Copyright MMXIX 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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St. Matthews L.O.T.S. Home: A Closer Look Adam Wilson pops the top & bumps out the back of Cape Cod

When Adam Wilson isn’t manning the cockpit of an MD-11 for UPS – or a KC-10 aerial refueler/tanker for the Air Force Reserves – the longtime pilot is finding wholesale deals, flipping houses, adding to his rental portfolio, and building out his real estate business.

Adam said he’s been investing in real estate for a while, but it’s been in the last 10 months that he and his Meridian Real Estate Group business partner, Joel Derbin, have really kicked on the afterburners.

In the last 10 months they’ve shifted their focus toward rehabs. “We thought we wanted to do more holds,” Adam said, “but now we’re getting into a much larger flipping business.”

How do you double the square footage of a Cape Cod? With lots of work – and permitting!

Tired of waiting on subcontractors But when St. Matthews houses are going for $180/square foot, it’s worth it. who could only work on their projects a couple of days a week, Adam and Joel have begun bringing Adam had bought it for $180,000, planning to fix it up and crews in-house. The goal is to put together a few three-man make it his personal residence – “I always wanted to live in St. crews who can turn houses in about a month – instead of Matthews” – but decided to let the business flip it instead. five months. They’re planning to be 12 employees strong Then he did the math. After putting $40,000 or so into it to soon, and currently they have 10 projects in development. make it nice, the sales price would only be around $220,000.

Adam says that while they do buy from wholesalers, they There would be no added equity, no forced appreciation. It find most of their deals in-house and off-market, and he would still be a modest 2-bedroom, 1-bath Cape Cod with gives credit to Joel for that, even though Joel lives in New about 1,250 square feet. Even dormering out the small attic York and has a day job as a data scientist in the healthcare wouldn’t increase the sales price that much, he said. industry. Adam remembers Joel saying, “I can change So he consulted his contractor, John Fico, who is now part healthcare widgets to house widgets very easily for buying of the Meridian team. off-market deals.”

“This is a great house,” John had said. “Let’s knock out the And so they pull from public records – lis pendens, back of the house and tear off the roof and make it big.” probates, tax liens, code violations – with Joel “enriching the “I love it. Let’s do it,” was Adam’s response. data on steroids, because he does that for a living… I’m Permitting issues weren’t that bad, Adam recalled. “We more of the operational side.” had to do a variance, which was a little bit of a slowdown.”

Having said all There were issues with a detached garage. “Little did I that, Adam then told know you need a permit to tear the garage down,” Adam KREIA members who said. “We tore it down anyway, and I had to beg for mercy gathered for April after the fact. As soon as there was no structure, we got 30’s L.O.T.S. event stamped for the permits on the plans.” that this particular They added 16 feet to the back of the house and built out house at 305 the upper floor: Now it’s a true two-story house with 4 Breckenridge Lane bedrooms and 2-½ baths, and the square footage has doubled was not the result of to 2,600 square feet. A construction loan paid for the rehab. in-house data Continued on Page 20 targeting. Instead, it L.O.T.S. host Adam Wilson. (Photos by came off the MLS. Why do we call it “L.O.T.S.”? Because we Learn On The Site!

Lauren Willoughby)

Copyright MMXVIII 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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The Current State of Flipping By the fourth quarter of 2018, the flipping rate in the U.S. reached 10.9 percent of all home sales. The share of flipped homes that were sold by a business entity, such as an LLC, INC, or CORP, rather than by an individual, rose to 41.2 percent in the third quarter of 2018 (compared to 11.4 percent in the third quarter of 2005). Detroit, Philadelphia, and Pittsburgh had the highest returns of 95.9, 92.8, and 75 percent, respectively. Other markets with high returns, ranging between 58.9 and 70 percent, are in Ohio, Maryland, Delaware, Wisconsin, and New York. If you are interested in outof-state remodeling projects, those are the places to research.

Features that Sell for More Flipping returns were lowest in areas with newer housing stock. The three markets with the lowest returns are Raleigh, Colorado Springs, Feature Mentioned Increased Value and Charlotte, with returns of 5.1, 7.7, and 7.8 percent, respectively.

Steam Oven 34.1% Other locations with low returns are in Arkansas, Missouri, Texas, Arizona, and Tennessee, Florida, and Nevada, with returns ranging Dual Sinks 37% between 8.4 and 10.8 percent.

In terms of our local area, as 2019 revs up, flippers must be aware of Heated Floors 26.2% fluctuations in ARV. Sometimes a drastic increase or decrease in sales Pot Filler 27.5% price can occur in a few weeks! Closely watch the neighborhood pendings and recently solds to stay on target. There are other tactics to Shed or Garage Studio 26.5% minimize loss from market fluctuation. For example, I paint the front doors of remodeled homes (Tricorn) black. Zillow research shows homes Outdoor Kitchen 24.5% with black front doors can sell for as much as $6,200 more! I do not use Waterfall Countertop 26% yellow siding because Zillow shows these houses sit on market longer and sell for less. Check out the list for different features that bring more Open Shelving 10.1% money – and remember to reach out in our members-only KREIA Pergola 7.2% Facebook Group for more ideas and suggestions. – Nina Musgrave Research obtained from https://bit.ly/2I93mPX (Core Logic), https://bit.ly/2X3PMjV (Zillow) accessed on April 10, 2019.

Copyright MMXIX 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 MMXIX 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 MMXIX 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 MMXIX 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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KREIA 2019 Elections

By Michelle R. Rawn It’s time again for the KREIA election. The Election Committee would like to inform you of the procedure.

KREIA is run by a board of directors consisting of five officers (President, Vice President, Secretary, Treasurer and Treasurer Elect), twelve at-large board members, the immediate Past-President and the Parliamentarian.

The officer positions serve for a one-year term, while the at-large board members serve for a two-year term, with six new members being elected each year. The only exception is when an at-large board member chooses to run for an officer position before his/her two-year term has expired.

There are no term limits, and all incumbents may run for reelection if he/she so desires.

Nominations will be taken from the floor at the May meeting for the five officers and seven at-large board positions this year. Nominations will be closed after the May meeting and the election will be held at the June 27 regular meeting. Those elected at the June meeting will be sworn in take office at the July regular meeting.

If you would like to nominate someone or if you would like to run yourself, please contact me or announce the nomination from the floor at the May meeting.

All board members are required to participate on at least one committee. For KREIA to be successful, all board members are required to help at all KREIA events.

If you have any questions about the election or governing process of KREIA, please feel free to contact me.

Michelle R. Rawn, Chairman of the Election Committee Tel: (502) 639-9396 / Fax: (502) 276-0607 Email: Michelle@rawnlawfirm.com

St. Matthews L.O.T.S. House Continued from Page 15 Adam says that with St. Matthews houses selling for about $180/square foot, the forced appreciation should yield a profit of about $60,000.

It’s a very handsome and large house now.

The open living area, which runs from the front of the house to the back, offers plenty of room for relaxation and entertaining. The first-floor master suite is roomy, but so are each of the three bedrooms on the second floor.

Adam credits the attractive design to Set the Stage’s Karista Hannah, who he met once at HomeArama. “She wins literally every HomeArama design award. She’s fantastic.” Don Underwood did the architectural designs: “He’s right here in St. Matthews. Great guy.”

For the technical rehab questions that KREIA folks like to ask, Adam turned the floor over to John.

Adam’s Tip: If you are new and want help, reach out to someone who knows more than you and take them to lunch. Adam says that’s the start of how he and Joel teamed up – Joel took him to lunch to pick his brain.

THE NUMBERS Purchase: $180,000 Labor & Materials: $162,628 Carrying Costs: $20,840

Taxes & Insurance: $3,018 Utilities: $829 R.E. Commission: $11,000

Total Costs: $367,315 Expected Sales Price: $430,000 to $440,000 Expected Net Profit: $51,935 to $61,685

PREVIEW OF THE 2019 BALLOT Officers (to serve a one-year term) Vote for one person for each position President Vice-Pres.

Secretary Treasurer Treas.-Elect

Write-in

□ Chris McCarty □ Tamara West □ Ed Gibson □ Mike Butler □ Erik Hitzelberger □ Mike Grinnan □ Wally Kallbreier

□ __________ □ __________ □ __________ □ __________ □ __________

Board at Large (to serve a two-year term) Vote for six people □ Wesley Branch □ Katie Crotzer □ Dennis Erhard □ Brian Hemmerlee □ Ken Hodge □ Beau Hollis □ Ian Hooper

□ Christopher Jaquith □ Wendy Kays □ Rick Littrell □ Rue McFarland □ Frank Miller □ Nina Musgrave □ Greg Nalley

□ Jeff OBryan □ Keith O’Loane □ Craig Pfeffer □ Jordan Pohn □ Hampton Scurlock

The L.O.T.S. house’s friendly front porch made a great spot for KREIA members to kick back and enjoy their lunches, courtesy of MM Lending. (Photo by Lauren Willoughby)

Copyright MMXIX 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 MMXIX 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 MMXIX 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 MMXIX 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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Frank Miller Holds Public Mastermind Get an extra helping of education from Frank Miller a couple of days before he co-headlines this month’s main meeting. The KREIA Past President and head of Believe Investment Group is holding a heavily advertised intro-toreal estate presentation on Tuesday, May 21, at the downtown Marriott.

And he’s bringing some friends: Frank’s guest speaker is Kristina Spells, a well-known wholesaler from St. Louis. He’s also inviting local vendors to help beginners network with people who can help them along in their real estate journey.

KREIA will have a table there too to welcome new investors.

Frank plans to cover wholesaling, fixing & flipping, getting into buy-and-holds, and more.

What: Frank Miller Mastermind Event Where: Marriott Downtown Louisville, 280 W. Jefferson Street, Louisville, KY 40202 When: May 21st, 7 p.m. - 8:30 p.m.

How much: $39 per ticket Sign-up Page: https://www.bigrealestateevents.com/tickets

GOVERNMENT AFFAIRS REPORT ???

State Government Roundup Kentucky Realtors Legislative Updates. Read weekly updates on bills in play in Frankfort at the Kentucky Realtors’ site: bit.ly/KYR_LEGU

Local Government Roundup Louisville Metro Government: Get a summary of local affairs (and state) by the Greater Louisville Association of Realtors (GLAR): bit.ly/LRGAU

Quotable Quote "Would you like me to give you a formula for success? It's quite simple, really: Double your rate of failure. You are thinking of failure as the enemy of success. But it isn't at all. You can be discouraged by failure or you can learn from it, so go ahead and make mistakes. Make all you can. Because remember that's where you will find success." ― Thomas J. Watson Mike Butler: What Is KREIA? Continued from Page 6 requires volunteers to plan, schedule, and operate the event – this includes Saturday workshops, subgroups and any and all ideas submitted by members and board members. Many, many great ideas are presented to your board throughout the year, and they must carefully consider all of the pros, cons, implementation, staffing and costs.

We look forward to you giving back and volunteering your time/services to KREIA. Special Thanks to Past President and Parliamentarian attorney Hank Schildknecht. Hank recently retired from his law practice and his leadership position in KREIA. Hank has been involved in KREIA for well over two decades, and he made sure KREIA stayed on the right path legally and liability-wise. Hank was the chair of the Election Committee and he swore in all of the newly elected officers and directors.

Hank also orchestrated the time-consuming coordination of the annual process of selecting the next recipient of the Ed Melton Award. Unknown to many members is how much time, energy, and effort Hank puts into his presentation honoring the annual recipient of this award during our monthly meeting. Thank you, Hank Schildknecht, from myself, all of your fellow current and past leadership, and all of our current and former members of KREIA. You will be missed dearly, and attorney Michelle Rawn has some big shoes to fill!

To Your Continued $uccess!

P.S. Sign up for Your FREE Investor Training Every Tuesday at 12 noon: https://MikeButler.com/PowerLunch

Copyright MMXIX 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 MMXIX 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 MMXIX 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 MMXIX 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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First Class Mail U.S. Postage Paid Louisville, Ky Permit No.1498

PO Box 91225 Louisville, KY 40291 Return Service Requested

THE Local Resource for Landlords, Rehabbers & Wholesalers Meeting the 4th Thursday of every month (except November & December) at Woodhaven Country Club, 7200 Woodhaven Road, Louisville, KY 40291 KREIA.COM • twitter.com/reiaky • instagram.com/reiaky • youtube.com/KreiaDotCom facebook.com/reiaky (public) • facebook.com/groups/kreiaky (private)

UPCOMING EVENTS

Wholesaling & House Flipping Frank Miller of Believe Investment Group and David Lecko of DealMachine team up to show us how to find wholesale deals, then walk us through the steps of wholesaling and flipping houses. Including how to do it using other people’s money! May 23, 5:30 p.m. ➢ Early Meeting: Greg Nalley on insurance claims ❖ May 28 — noon-1 p.m. L.O.T.S. event. We tour Frank Miller’s latest rehab in Shively. Members only. Lunch is provided by Platinum Sponsor MM Lending. ❖ June 6 — 5 p.m.-7 p.m. KREIA Happy Hour. Networking at a local restaurant. Check your email. Jeff OBryan hosts. ❖ June 4 — Noon-1:30 p.m. Lunch & Learn. Attorney Michelle Rawn speaks on evictions and the Landlord Tenant Act. Check your email for the location. Members only. You buy your own lunch. Ed Gibson chairs.

❖ June 12 — 11:45 a.m.-1:30 p.m. KREIA Indiana Sub-Group Luncheon Meeting. Meet up with Hoosier investors. Closing attorney Mike Kemp will discuss contract assignments. At Tucker’s Restaurant in New Albany (State Street and I-265).

You buy your own lunch. Brian Haeseley chairs. ❖ June 20 — 6 p.m.-7:30 p.m. KREIA Game Night: CashFlow.

Want to get out of the Rat Race? Play CashFlow with other investors pursuing financial freedom. Hampton Scurlock hosts.

Main Meeting Calendar Here’s our tentative lineup of topics: • June 27: To be announced • July 25: Wholesaling Flips and Flops • August 22: Landlord Tenant Act • September 26: Single-family vs. Multi-family • October 24: To be announced

PRE-Pay Now at KREIA.com to Qualify for a Big Door Prize Drawing!