MAREI August 2022 Newsletter

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MAREI

MID-AMERICA ASSOCIATION OF REAL ESTATE INVESTORS

Read newsletter online at MAREI.org/Newsletter for clickable inks.

Tuesday August 9th

RIGHT SIZING YOUR REAL ESTATE BUSINESS With Ian Reeves

Photo by Chuck Maples, Ian Reeves Speaking at the Bridge Real Estate Investing Meetup May 2019.

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MAREI

CALENDAR 09 August Monthly Meeting Right Sizing Your Business

19 August National REIA Meeting Emotional Support Animals

After listening to all the Guru podcast that said to scale, to 10X and to Grind it Out to build the business you want, Augusts Guest Speaker Ian Reeves dug in and grew his flipping business from 2 or 3 houses a month to 8 to 12 houses a month. This allowed him to build a 100+ unit portfolio. It meant building systems, finding tools, and entrusting other people to help him build his business.

But at some point things started falling apart as they always do and now Ian is working hard to build the Ultimate NOT TO DO LIST so he can right size his business.

Come learn from his successes and his mistakes.

MAREI's August 9th Monthly Meeting.

13 September Monthly Meeting Build to Rent

1 Carrot's 30 Day Challenge Starts on the First Monday of the Month to Jump-Start Your Online Marketing 3 Landlords of Johnson County Meets on the 1st Wednesday of the Month This month 4 Ways Rental Properties Make Money and Property Management Best Practices 13 Northland Real Estate Investors Meets monthly on the second Saturday of the month. This month: Syndication.

16 KC House Trader's White Board Meeting monthly on the 3rd Tuesday.

This month Build Your Short Term Rental Business.

22 Eastern Kansas Real Estate Investors Meeting on the 4th Monday of the month virtually. Covering Lawrence to Topeka.

Tuesdays Home Resource Network Every Tuesday: Overland Park Wednesdays WinVestors Every Wednesday: Westport & Zoom

MAREI.org/Calendar Find all of our events on the MAREI Calendar of Events

Thursdays Cashflow Game Night Every Thursday: Prairie Village

MAREI NEWSLETTER

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INSTAGRAM

SHORT INFORMATIONAL TIPS FROM IAN REEVES

Uncertainty & Adversity

Right Size

One of the absolute, most important skills you can have as an entrepreneur and real estate investor is the ability to handle uncertainty and adversity. Being able to take a step back and calmly and objectively figure out how to solve your problem without getting emotional and making good decisions is very important. Being able to handle bad situations with grace and treat people well, even when you are under pressure is a skill set that one must have. Lots of people who crack under pressure end up making things far worse.

True confidence comes from knowing that no matter what happens, you can find a solution. (Listen Now)

When you are first getting started in your business you have more time to devote to each project. As you start scaling your business, your time available shrinks. The only thing you can do is delegate more and have better systems and processes in place. But there comes a point when it becomes very difficult maintain that level of business. At some point you have to determine what size your business really needs to be. (Listen Now)

Social Media Skills When first starting in real estate, the hard skills are more important: being able to use spreadsheets, breaking down materials and labor & other numbers of the deal, how to complete tasks . . but as you grow, soft skills become more important. Real Estate is a people and relationship business and your soft skills will need to grow. Suggested reading "How to Win Friends and Influence People. (Listen Now)

While you can waste a lot of time on social media, but if you use it with intention, sharing useful information that others find helpful, you would be surprised at how much business you can generate. Get connected with investors, private lenders, wholesalers with deals, and more. When you share valuable content, people remember you the next time they have something you need. (Listen Now)

@PathToFreedomWithIan Things Have Changed

Bigger Not Better

If you are just getting started in real estate you are probably reading books that were written several years ago when numbers were a lot different. It's getting harder and harder to meet all those rules as prices have inflated and rentals have not kept up. Getting good cash flow out of long term rentals is getting much more difficult. That's not to say that rentals are not a good investment, they absolutely are. They will make you wealthy in the long run as you have someone else paying down your mortgage while the property appreciates in value. But the cash flow is not going to be as great, You will have to get creative. (Listen Now)

Bigger is not always better in real estate. As you grow and take on more projects you have more overhead, more staff, and more support systems. This gives you less control over your projects, so quality starts to slide. You need to maintain deal flow so you take on projects that may not meet standards. But by limiting your deals you can cherry pick the best. (Listen Now)

Enjoy the Ride NOT TO DO List Sometimes you have just too many things to accomplish. There is just not enough time in the day and at some point you have to say now. There may be things you want to do or already do, but you should not be doing. So take time to figure out what you should not be doing - that you can just eliminate or delegate or say no to. (Listen Now)

Don't get so caught up in future goals and future accomplishments.

Every once in a while take a moment to reflect on where you were 5 years ago vs today, so you can get out of the future and be happy now. This helps you appreciate what you have, what you have accomplished, Enjoy the moment and the journey. (Listen Now)

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Rental

REAL ESTATE ROI 4 WAYS

You can invest in the stock market or in Crypto, but there is no other asset class that will provide you the same return on investment as rental real estate

1. CASH FLOW You earn a monthly income from the rental property, you have monthly expenses, the difference is your Cash Flow. The closed you can come to this with Stocks or Crypto would be dividends.

2. APPRECIATION Historically real estate appreciates in value every year. With stocks or crypto, it can go up in value or it could go down in value.

The historical rate in the KC area is 8%.

3. PRINCIPLE REDUCTION With rental real estate you can make a 20% down payment on the asset and a bank will lend you the rest, try doing that with stocks or crypto. Then someone else makes the payments, your renter pays down your debt.

4. TAX REDUCTION Because rental income is considered passive it is taxed differently. Plus rental real estate gets the added benefit of depreciation, to further reduce your taxes.

One way to acquire rental real estate is to Build it to Rent. Dave Lundgren is joining us at MAREI in September to share what it takes to Build to Rent. The above is adapted from one of Dave's Facebook Posts.

Dave Lundren

Dave along with Warren Buffet thinks Rental Real Estate is a good alternative to Stocks or Crypto. (Watch Dave on YouTube Now)

SEVEN STEPS

to Finding Motivated Sellers (No Cold Calls) Farming the Hidden Market

THE HARDER IT IS TO FIND THE OWNER, THE LESS COMPETITION.

Targeted Motivated Seller Lists with Little to No Money REMEMBER THE MONEY IS IN THE LIST

Maria Giordano

Maria & her husband Gary invest in real estate using none of their own money.

They have made it their mission to teach others to do the same. Maria will be our guest at MAREI in November.

To give you a jump start, she has a DIY Guide "7 Simple Steps to Find Motivated Sellers Without Having to Cold Call."

Visit her website for your free download

www.RealEstateProfitSystem.com

Step 1: Farming the Hidden Market One of my favorite ways to find any deal is driving for dollars, also called the hidden market. Driving for dollars is when you drive a neighborhood that meets your investing criteria. Typically, these are good, solid neighborhoods, with low crime and good schools. When driving these neighborhoods, you are looking for the following: Properties that look vacant !

Boarded up — plywood over the windows and doors !

Overgrown weeds and shrubs !

Peeling paint !

Poorly maintained — rundown and dilapidated !

Newspapers or flyer piled up on the front porch or driveway !

Code enforcement, etc. – notices taped or stabled to the house or property Like anything else, there are certain times of the day that work better for driving neighborhoods than other times. I have found the best times to be when kids are in school and most people have left for work. It is during these times distressed properties tend to stand out even more than at other times.

Once you start driving neighborhoods you will find it to be quite easy to spot these properties. In fact, this is something that you can teach friends and family to help you with.

The next step is to write down the address of every distressed property you see.

It takes a very short time to come up with your first ten to twenty-five properties.

Once, you have your list of distressed properties, the next step is to research the owner for each property. In most areas of the country, you can easily bring up your county assessor's website and look for the property owner of record. The best way to look for who the owner is, is to find the tax record for the property.

Usually, the taxes have the owner’s name on them as well as the mailing address of the owner. Many of these distressed properties may not have the same mailing address for the owner as the distressed property’s address. If you are unable to find who the property owner is or the correct mailing address for the owner you may need to talk with the neighbors, leave a note at the property door or do a skip trace for the owner.

Remember: The harder it is to find the property owner, usually the less competition and the more money that can be made from these hidden gems.

NOTE: In the Kansas City Metro, all of the five major counties can be researched online: Cass, Clay, Jackson and Platte in Missouri and Johnson & Wyandotte in Kansas.

Step 2: Build Targeted List with Little to No Money Like farming a neighborhood, being able to pull the right type of list of motivated sellers is extremely important. There are many different types of lists to pull. Some of the more common types of lists are: Attorneys (probate, divorce, estate, etc.) !

Realtors !

Absentee owners (owner’s that don’t live at the subject property) !

Out-of-state landlords (also sometimes called out-of-state absentee owners) !

People who own homes free-and-clear (100% equity in their property) !

Foreclosures (Both pre-foreclosure — and foreclosure) !

Properties with liens (can be tax liens, code enforcement liens etc…) !

Homeowners in probate (when the owner has died and left property) !

Eviction notices It’s not just good enough to run a huge list. Don’t send out 1,000 mailers to just anyone. It’s always better to send out 200 mailers that are targeted and very specific to your market. Even if you pay a few cents more per lead for it, then to run a nonspecific list of 1,000 properties and blanket an area. The non-specific lists are the ones that will be full of unmotivated sellers and a waste of your time and money.

Another low-cost way to get lists is to go to your county courthouse and get a list of probates. Probates leads are people who have died and their personal representative is handling their estate. When you pull these lists from the courthouse, most county records offices will only make you pay for the leads you want and that is the cost of printing the page. This is a very low-cost way to get leads and can be done with divorce notices and evictions too.

Aside from these free to low-cost resources for pulling lists of motivated sellers there are several services across the country that offer list services to send you prescrubbed probate, foreclosure, bankruptcy and other types of list. Most of these services are for a monthly fee and can range anywhere from $79 per month to well over $100 per month. Its up to you to decide if the service is worth the cost and the time it will save you.

Visit RealEStateProfitSystem.com/about to download all 7 Steps or join us here in the MAREI newsletter in September. And be sure to mark your calendar for Tuesday, November 8th, yes, election night when I will be speaking at MAREI. I will also be coming back to KC on Saturday the 12th for a full-day workshop where I will be not only teaching you how to find the deals but how to structure them so you can profit from any deal, even the ones you don't want.

Join Our 30 Day Authority Building Challenge Get More Leads & Close Your Next Deal

Are you a real estate investor or agent and want to dominate your market, build a consistent and predictable lead flow, and earn more income? We’ve got you covered! Join our next 30 Day Authority Building Challenge today! To start, simply choose investor or agent to learn more about how you can reach a new level of success in just a few minutes a day!

Go to MAREI.org/CarrotChallenge This 30-day challenge is designed to dramatically improve your Investor OR Agent website by focusing on one highly significant task per day so you can achieve success in just minutes a day!

Kicks off the 1st Monday of the Month

Kim Tucker

$62 M Fine from the FTC This week the Federal Trade Commission fined Opendoor $62 million, saying the iBuyer misled customers by saying they could make more money selling homes to the company than they would selling the traditional route. The consumer was supposed to save based on lower fees and higher offers. But the FTC found that open market sales were often higher and Opendoor charged more fees than Realtors. At issue was false advertising, not their business model.

Partnership with Zillow PRNewswire shared that Zillow & Opendoor have announced a multi-year partnership that will allow home sellers on the Zillow platform to seamlessly request an Opendoor offer to sell their home. This will make it easy for customers to compare it to an open-market sale using a Realtor.

At the same time, they also announced their new Opendoor Exclusives where they offer homes at a discount to subscribers 14 days before listing in the MLS>

Slashing Prices Inman is reporting that Opendoor is cutting prices in a bid to get surplus inventory off the books. They dramatically boosed home sales in the 2nd quarter of 2022, generating $4.2B in revenue, but they were sill showing $54 M in losses.

Buyers and real estate investors do have a lot of things in common when it comes to buying and selling houses. Opendoor, like most real estate investors that market to buy houses, said that they made market value offers. Sometimes making claims that they were "Fair Market Value" and at others "Competitive Market Value."

What is Market Value?

When I was new to real estate agent, I did a lot of broker price opinions for the banks.

When I would run comps on a house I was to provide the bank with several values: The price I thought it would sell for in 120 days or less if it was all renovated, listed with a Realtor, and sold in a traditional manner.

The price it would sell for again in 120 days or less, again with a Realtor, but now selling As-Is with no repairs or updates.

The price it would sell for in 30 days or less, as-is, to a cash buyer if it were listed by a Realtor.

Those three values can vary quite a bit and we need to make sure we know the difference and why there is a difference.

The biggest difference between the 3 values is the time value of money. A homeowner can spend a lot of time and money getting a home ready to sell, skipping all that time, effort and money has value. And hiring a Realtor to market

False Advertising at a cost, although that is often offset by a higher sales price generated. But when a home is sold "as is", in 30 days or less, the fair market value is going to be considerably less than it would be all renovated, listed by a realtor, with a traditional sale to a homeowner getting a mortgage and taking more than 30 days.

So in saying they offered fair market value, I don't think Opendoor was misleading.

Saying they would pay more than what the home would sell for with a traditional sale through a Realtor and time frame, however, would be misleading.

What are Closing Fees Next, they said they charged less in fees than would be charged by a Realtor. There I think most investors are safe as they don't charge a commission, however, if they might also be agents that would be happy to list, we need to be very clear that there is no commission charged when we buy the house. There might be one if we list it.

Another area that Opendoor got in trouble for was their claim of fewer fees. Most investor marketing claims that they cover all fees, as in closing costs. But what I have found is often a home seller does not know what a closing cost is. The investors and Realtors see fees paid to a title company, or the county to record as a closing cost. But what about tax prorations or liens, we don't consider those closing costs. Based n looking at reviews of a lot of real estate investor wholesalers, I am guessing that the average seller we work with might think otherwise.

Do they Buy the House?

One area that Opendoor did not get in trouble for that I think many investors might is the claim that they are actually going to buy the house. Opendoor did have a lot of CYA clauses that allowed them to back out, but if they closed they did buy it. A lot of real estate investors don't, and that is a huge problem when you say you will.

Individually, I don't think the FTC is going to come after any one real estate investor.

But I do see local laws changing to curb what we can and can't do as real estate investors.

Several states have created new laws that require a wholesaler to have a real estate agent license, partly because we don't do what we say we are going to do and we are seen as taking advantage of the consumer.

Kansas was discussing such a law just this past winter.

We as an industry really need to take a good look at this case because it will affect the regulation of our industry. Maybe not directly but as our legislators read about this case and get complaints from their constituents, laws will be proposed. When their constituents get scammed by a few bad apples and complain and rather than going after the few bad apples individually, they are going to tackle the industry as a whole, and not just investors, Realtors will be affected as well. just something for you to think about as you read your newsfeed each day.

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