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The Future of Real Estate
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Vol. 2, No. 1 Spring 2012
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contents 6 9 10 14 17 18 19 20 22 23 24 26 28 30 31 32 33 34 36 37 38 41 44
Ready to Buy Differently with HomeUnion? Spring Has Sprung, but Has the Market? Realty Auctions with RealBay.com From Local to Global: An Investor’s Journey Retire in Style with Property Partners 1 Find Real Deals in Just Four Simple Steps Kaaren explains How to Control Your Retirement Lease-Option Deals with Black Belt Investors Learn About the Rental Property Analyzer Bill Gatten Shares His Wisdom Note Buying Made Easy with Asset Ventures Buy, Hold & Rent in Cleveland with Sean Whalen Investing in Dallas with Tom Wilson Is It Honest to Use a Land Trust? WhiteRock Capital Creates Wealth in CA & AZ Premier Equity Group Offers Twice the Cashflow Is Flipping Property Good for Your Wealth? Market Spotlight: Discover San Antonio, TX Is the Phoenix Market Starting a Recovery? Sam Sadat Dishes Words of Wisdom Going Global to Meet Investor Demand Diversify Your Portfolio with Stocks How Hard is Your Money Working?
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omeUnion Services is a unique investment platform proQ: What are some challenges to viding high income single-family cash flow homes naproviding investors with great cashflow properties? tionally for real estate investors. The company brings A: The challenges lie in selecting the together a network of property providers who have an excellent right partners in the markets that we track record and are certified through an extensive due diligence like. We place a high bar on the propprocess. HomeUnion Services offer tenanted properties and they erty providers. They need to have a stay on as property managers after the purchase. This ensures a critical size, i.e manage several hunsingle point of accountability and significantly reduces risk for dred properties, credible property out of state investors. In addition, rent and maintenance guarRavi Renduchintala management metrics, good financial antees are available on homes in some markets. HomeUnion proPartner, HomeUnion Services strength and impeccable investor refvides post-purchase market intelligence, portfolio analysis, and erences. The market is full of real estate management oversight for investors. Single family real estate is rapidly evolving as a legurus that peddle great properties and then gitimate asset class, yet it still does not enjoy the abundance of decision support data that disappear into the sunset. The investor is surrounds other asset classes. Their goal is to bring legitimate analysis and transparency left holding the bag with a less than adeto the investment process. We recently interviewed Ravi Renduchintala, a partner with quate local manager. HomeUnion Services, to learn more about their due diligence process.
Remote Investing with HomeUnion Question: What makes HomeUnion different in the cashflow real estate investment market? Answer: HomeUnion is a platform to reduce the risk of remote out of state real estate investments. We study markets, identify cashflow zones and quality providers in that area. The turn-key providers are put through a stringent certification process with sixsigma approach before their properties are made available to our investors. Our goal is to establish single family real estate as a legitimate alternate investment class. Q: Do you have specific markets you prefer over others? And, how do you know where to invest? A: We have a proprietary analysis process for every market. At a macro level we look at employment rates, employer diversity, population growth, and a number of other city and economy factors. At a micro level we look at neighborhoods and properties within an “investment zone”. These properties are typically to the left of the mean prices in the bell curve but not at the tail. It is an optimum balance between high rent to price ratios and risk. We have six markets nationally that are on our platform Q: Does your company manage the property for clients? A: Our providers manage the properties, we provide oversight and continued diligence Realty411Guide.com
on provider performance. We also provide consolidated portfolio reporting for clients that have bought properties in multiple locations. Clients will also receive ongoing important economic information on the zones where they have invested. Q: Have you been investing in real estate for a while? A: The founders have been involved in many facets of the real estate market for over a decade. Founders come with an extensive background in mortgage, real estate, investment banking, process management, and technology. Our unique value proposition lies in the quality of due diligence that we perform in the selected investment zones and the turnkey providers in our investment property market place. We are able to share some of the best practices across multiple investment zones and improve overall quality. Q: Tell us a bit about the people behind HomeUnion Services? A: The founders are engineers, MBAs — serial entrepreneurs with a track record of building and scaling successful companies. This is their third company in the real estate space. The goal is to bring professionalism, trust, and transparency to the singlefamily real estate investment space. Our primary investor is Soma Enterprises, an $800 million global infrastructure development company. PAGE 6 • 2012
Q: What type of financing is available for your deals? A: There are preferred Fannie Mae lenders in every market. In addition there are several non-recourse lenders that will lend to IRAs or international investors. Q: What is the first step to get started? Investors can register online at www.home unionservices.com or call (866) 732-3220. We have customer service professionals who work with investors to help them build the right real estate portfolio. Q: Do you have any advice for new investors starting out? In the market investors can either be day traders and stock pickers or invest with a well-rated mutual fund or money manager. For most people it makes more sense to take the latter strategy. In the real estate investment business this means working with a trusted company that has done the due diligence for them so they can reduce the Continued on pg. 45
Spring has Sprung
but has the real estate market?
by Lori Greymont
ne of the repeated questions I have been asked is, “Is it time to buy real estate and if so, where?” In Silicon Valley there is a lot of talk about how the economy is recovering, rents are up, unemployment is down and everyone is excited about the financial uptick expected with the Facebook IPO. Northern California real estate investors that have been sitting on the sideline are wondering, is this the right time to buy? My answer is a resounding YES! And that has been my same answer even through the darkest of times. For most passive investors, real estate investing should not be a onetime event timed perfectly like a game show contestant trying to leap onto a moving object or face landing in the muck. We saw what happened when families bet their financial future on appreciation and many are still living with the wounds today. Instead, investing in real estate ought to be a long term plan of buying cash-flow properties in several markets over a several year period. This simple risk mitigation technique may not bring you the highest returns, but will allow you to sleep at night knowing you have cost averaged your purchases. It’s taking investing step-by-step instead of making one giant leap. The point I want to make clear is that American real estate has been on clearance over Realty411Guide.com
the past four years and if you haven’t been buying when it was on sale, don’t wait too much longer because the prices will be going up. The rule of buy low and sell high still exists. And the unfortunate truth is that the only way you know you are at the bottom is when you have past the bottom and you are looking back. Now to the second part of the most commonly asked question, “Where should I buy?” That depends! Really, what you need to do is plan your exit before entering the real estate market. You need to know how long you plan to hold the properties. Are you buying for cash flow and wealth building? Or do you need to be more active in real estate right now to replace your daytime job? I typically tell people that they should invest in two-tothree growing metropolitan areas that are geographically diverse from each other. For example, don’t buy in three California cities, but rather if you can find cash flow in California, pick one city in California and also purchase someplace different like Atlanta. Having your investments in different major metropolitan markets will reduce the risk of your losses due to local economic failures. When I look into a new investment market, I analyze and look for seven key success factors: 1. Strong Demographic Growth, 2. Strong and Diverse Economy Sectors,
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PAGE 9 • 2012
RealBay.com Set to Launch this Spring! Article by Bonnie Laslo Eleakis & Elder Photography
eal estate professionals flood to RealBay.com for its Spring 2012 launch, and the silent buzz begins. RealBay.com is a unique real estate online marketplace, which has arrived to serve as a revolutionary platform in which its members can not only market their real estate listings, but also market themselves as real estate professionals and real estate service providers. The company just signed industry giant Trulia as a marketing sponsor. Trulia will help drive traffic to RealBay.com by promoting their launch to their millions of members. “We anticipate about 40,000 members within the first few months of our launch based on all of our strategic partnerships,” says Stephan Piscano, RealBay.com CEO and co-founder. We recently sat down with Piscano to get an inside look at how RealBay.com came to be and what void it will fill in the current marketplace. Upon review, www.RealBay.com will serve as an online marketplace in which its members both “RE Pros” and “Everyday Joes” can list their properties on the site for sale in the form of live bidding auctions or listing-style property offerings. There are currently a few competitors out there offering RE auction services online but none of them that we have found offer the ability to connect in a social network setting while doing so. “One of the goals we had here was to try to really bring the entire experience of buying a home online, not only with the research process as you can do on Real tor. com and others, but to actually allow you to make a buying decision and buying action, all from the comfort of your home, and do it all for free,” Piscano explains. “I feel like everything that I have done throughout my life and in real estate was to bring me to a point in which we could Realty411Guide.com
Stephan Piscano, CEO/co-founder of RealBay.com
create this,” he adds. Piscano manages an investment fund based in Napa Valley, Calif., he first got interested in online real estate in the summer of 2008 when he began seeing astonishingly cheap properties in Detroit, MI, selling on eBay of all places for as little as $2,500 or less. This was at the height of the market crash and Piscano was greatly intrigued. “I nearly purchased several of those cheap homes I saw on eBay, but I said to myself, if they are selling them online that cheap they must be buying them somewhere else even cheaper”. Piscano, from the other side of the country, began cold calling asset managers and listing agents in Detroit on nearly a daily PAGE 10 • 2012
basis trying to round up inventory to purchase and then liquidate instantly online. He purchased his first home for $600 (a duplex) and sold it less than a week later on eBay for $6,900, and after that, he was off to the races. These experiences were condensed into a short two-year period that yielded consistent results of success and profits. From 2008 to January 2011, Piscano estimates he engaged in more than 250 online real estate transactions, most of which being through eBay. Throughout this process Piscano realized the many gapping holes that were in eBay’s system, as it related to real estate. On Ebay they had ramped fraudulent bidding activity. Bidders would bid properties up, win the auction and then
“In effect we want to be seen as a one-stop-shop to meet all your real estate needs online, allowing members to not only market their listings but market themselves as real estate pros.” never pay and never be heard from again. One could report these members to eBay, and they would issue a non-paid item strike to that bidder, but they would not refund any fees to the seller. So the investor would be out $100 to $150 for the listing. Also, eBay had problems with fraudulent sellers auctioning off properties they did not even own. Because the cheaper homes were typically sold via quit claim deed, it would be months before victims realized that they had paid through Paypal for something that they did not actually own. By then, they typically could not track down the criminal that had sold it to them. All of that mistrust created a marketplace that by 2011 was hurting the overall industry, as well as the properties. Piscano envisioned a web site that had verified ownership of all properties sold, verified bidders in which if you had a fraudulent bidder on the site, you could auction that same property again for free in confidence — basically Piscano wanted a site where real buyers and real sellers could connect with trust and have it all take place online — from this desire RealBay has been born. Piscano searched other competing sites and actually had some of them contact him allowing him to list on their sites completely for free just to get the inventory. He found that none of them, in his opinion, “Got It”. “The competing sites are all charging a percentage of the transaction after the fact — Either with a buyer’s penalty (premium) or acting as the list agent and trying to pocket more money from the seller — That creates a negative scenario for all the users of those sites, which hurts all the members in my opinion — At RealBay it is always free to bid, no buyers penalties or premiums, and our sellers never pay fees after the transaction it is simply free that is it!” Piscano and his partners believe that this strategy of nearly making the entire marketplace free will create exceptional moral in which more transactions will take place at higher rates as well. Piscano working with his trusted business partners, Patrick Madison and Reece Realty411Guide.com
Madison began to craft the details of the site while he set up meetings with the top web site designers in Silicon Valley to design what would become in their minds “The Future of the Real Estate Industry”. “There is no other website out there like this,” stated Piscano. The website includes features necessary to change the way real estate professionals do business online over night. Some of the most notable functionalities are: •Real Estate auctions with live bidding, like eBay. The auction can be set at different timelines, and buyers can contact sellers in real time to get critical information about the properties. •Open social networking, like Facebook, allowing members and RE pros to market themselves to potential partners and clients. •Professional networking exposure like LinkedIn allowing members to have connections, receive recommendations, and truly market themselves as well as their listings online. •Multiple video tutorials for speed and ease of understanding. The markets are always changing and education is key. The resources are available for learning. Topics will include what other investors in your area are doing to learn what is working and what is not. Trends are different and localized to specific areas. •Allows users to search real estate service providers in the specific target criteria. “In effect we want to be seen as a onestop-shop to meet all your real estate needs online allowing members to not only market their listings but market themselves as real estate pros,” Piscano says. A survey was conducted among real estate professionals about their opinions on PAGE 11 • 2012
which facets of the website caught most of their attention. According to real estate investor Patrick O’Donnell, his top five are listed below: 1. Free membership to bid on property and no buyer fees. 2. Beginning property inventory of 4,000 providing buyer variety. 3. No cost for business professionals to market themselves through the social network.
4. Low-cost auctions starting at approximately $5 per property. 5. Access to local resources, service providers, auction, and social atmosphere all in one place. In addition, auction winners are provided with a list of local product and service providers in the local area at no charge. This proves to be an excellent retention feature as the buyer and/or investor most likely will be in need of a contractor, agent, or general service providers in the area. The time saved in researching this information is also money kept in the buyer’s pocket. Piscano notes that nearly 100% of the buyers who buy cheaper online real estate are outside of the state that they purchased the subject property, making this need very dramatic. The buyers looking for investments and/or assets will be able to search using detailed search fields like location, Continued on pg. 42
Actual House Sold
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Beyond Real Estate, A Bigger Vision of Helping
by Isaac Newkirk III
on’t be deceived by Terica Kindred’s youth, inside lies an experienced investor with millions of dollars worth of deals under her belt. Her first transaction, at age 19, was based in Atlanta, GA. By the time Terica turned 24, she was a self-made real estate millionaire. A native of Southern California, Terica understands the needs of long-distance investors who choose to do deals far away due to economics. She started purchasing out of state and managing long-distance flips herself while still living in Los Angeles. Terica has purchased, renovated and sold properties throughout California, Alabama, North Carolina, Texas, Tennessee, Georgia, Missouri and Indianapolis. Her company Out Estate Investments, is a full-service firm offering multiple products, including her popular Zero Money Investments. “It’s basically a ‘no money down’ investment program where we help investment buyers acquire houses,” she explains. Terica adds: “The program incorpo-
Terica: Yes, I grew up in a real estate family, so I always knew I was going to end up in real estate. I was looking at a triplex [in my original deal] and all I had was an ‘offer letter’ from Deloitte, the company I worked for before I went out on my own. They wouldn’t take my ‘offer letter,’ but at Sun Trust they would, and that’s when I bought the property. And it was a lot cheaper and I got more bang for my buck. That’s when I realized that, although my father — who’s been in real estate for over 40 years — he usually does a lot of investing in his own back yard; for me it was
From Local to Global Terica teaches how to Invest Out of State
rates a rent-to-own strategy, where the type of people we put in [the homes] want to buy the property for the future. They usually have bad credit, so we enroll them in a credit repair program.” One of the advantages to this program for investors is that they are able to cash out on their deals. Tenants benefit because it’s cheaper to own than to rent in the markets they’re investing in. The deals sold by Out Estate Investments have 25% equity at the close of escrow, which is one of the many advantages to this program. Recently, Terica moved to Atlanta, the city where her first deal was done. She traveled south to zero in on this thriving market. I caught up with Terica recently to discuss her new book, The Global Millionaire, and to learn about her company’s brand new financing option for foreign investors and their VIP Flip Program. Question: Did you really do your first real estate deal at the age of 19!? Realty411Guide.com
a little different. Although I was working in LA, I thought that I might as well leverage my income and buy something bigger and better and cheaper outside of California. And so, I invested in properties in Atlanta and also in Texas. That’s how the business was built. It started in 2006. A couple of friends from Deloitte wanted me to help them out and teach them how to invest. It started from a network of friends, family and acquaintances. I remember the day I got my first client that I didn’t know and now the majority of them are unkown. We have a waiting list for all of our properties and there’s a new program we’ve just created that I think is noteworthy. We have a thing called a VIP Flip program. That started because some clients were saying, “Well Terica, you’re flipping the deal. How do I become YOU in the transaction?” So I created a program where my clients and I joint venture together. We buy, fix and flip houses to fussy housewives of Atlanta. The average out-of-pocket for my VIP PAGE 14 • 2012
Flip Program is about $25,000. He’s going to be able to do about three deals. The average net profit on those deals is $10,000 in six months. So on those three houses, he’s making $30,000 in six months. So in twelve months he’s making $60,000 dollars. It’s basically what I did personally to get out of Corporate America. And I’m not telling people to get out of Corporate America; but we put you in a position where, if you want to leave, you have residual income that matches your corporate dollars. If you put all of my programs together, I can help anyone — with some money and some credit — get out of the rat race. Question: You work with clients all over the world. Describe the type of investors who make up your typical client base? Terica: Our typical client is a corporate guy who wants to invest, wants to get out of the rat race, but they don’t have the time to find property. They’re stressed. We help them put together a strategy. We provide private
financing, property management, tenants, construction, the whole ball of wax. So that way they can sit back and be hands free. Question: I know the foreign investor market is exploding. Do you assist many foreign investors? Terica: Yes, we do have many international investors. With the foreign buyers, it’s a little different, only because they’re not able to get traditional financing. But they want to invest as well and right now their only option is to put down 100 percent out of pocket. We also have in-house financing resources that allow our investors to put down 40 to 50 percent with an interestonly rate of 5 to 9 percent with an eightyear balloon. This is really popular because it allows dollars to be leveraged. Investors really benefit from being able to get financing that they would not otherwise be able to obtain. Question: How does the Atlanta market compare with markets in other parts of the country? Terica: I’m partial to Atlanta because our first investment opportunity occurred there. It was a purchase in Snellville [a suburb of Atlanta]. I’ve been investing in this market now for ten years. I think that Atlanta is one of the best markets in the country: mainly because of all the job opportunities that are available. And so, as an investor, you want to be put in a place where your tenants will stay gainfully employed and also be in a position to purchase if you ever want to liquidate. Also, it’s a lot larger than any other southeast market and, when we look at Atlanta, it’s the entire metropolitan area. And the metroplex has about 5.9 million people. So it quadruples the opportunity to have access to great inventory as well as polished tenants. It’s a win all around. Question: What are the biggest advantages being in your own business? Terica: Time. Time. Time. At the end of the day, I can go [home] to visit my little doggy and I don’t have to tell anybody about it. I love having the freedom of time. That’s worth its weight in gold. That’s a finite resource we have. We don’t ever get it back. Having freedom of time is huge. Number two, being able to spend every day doing something I’m passionate about. I’m very passionate about real estate; about making a difference in the communities we serve. Everything we do is socially conscious at Realty411Guide.com
the end of the day: to wake up every day and know that I’m changing the lives of generations of people. A lot of the tenants that we help are first generation home owne r s . T h a t ’ s huge. We’re changing a generation of people and I’m right there on the front line. In corporate America, there are so many layers of bureaucracy and politics that you never really get to see the full impact. I’m able to make decisions myself. I’m able to maintain a high level of integrity and not have to worry about all the things that come with corporate [involvement]. Question: The fact that you learned all about real estate from your many family members already involved, how much of an advantage do you consider that? Terica: My dad’s in real estate, all my uncles and aunts. Back in the early 1900s, my great grandmother built houses on her land in Mobile, AL, and rented them out. My family also owns land that they sell timber and hunting rights to government, investors and other individuals. That’s a big advantage because I’m not afraid of the investing scene. I meet a lot of people who are stricken with fear, that’s why they don’t act. A lot of people who go to seminars, they’re working and they get all excited, but they don’t move. I think the thing that freezes people is fear. I’ve been around investing and entrepreneurship all my life, I’ve never seen my dad go to a 9 to 5 ever. Knowing that helps me not be fearful. I have a higher risk tolerance than most and technology doesn’t scare me. Question: Do you ever call on family members for advice? Terica: Yes, all the time. I call my dad the most because he’s really good. My dad PAGE 15 • 2012
moved out to Atlanta as well. He has a new portfolio, he’s Mr. Southside [of Atlanta]. Whenever I have any properties on the Southside, I always call him. My uncle, he’s in the Philippines now. He has a hotel out there. He’s involved with owner financing and things like that. Back in Los Angeles, he was telling me about his owner financing program and that’s how I came up with my international program. Question: I can’t let you get away without telling us about your book that’s coming out. Terica: The book is all about not being in your back yard. My dad and I, we’ve had so many fights about this topic. He’s what I call ‘old school.’ And ‘old school’ tells you, do what you can see and nothing else. What I’ve learned is that you can definitely make some huge profits going outside of your comfort zone, going outside of your back yard. If you live in California, not being afraid to go and invest in Atlanta. I teach people all about that. I’ve also started businesses on five different continents, so I have significant experience on entrepreneurship in general, not just here in the states. Question: How would you advise a new investor to go about getting into this business? Terica: I would say step one, get educated. Knowledge is power. Read some good books. If you don’t have access to those tools, there are seminars out there, bootcamps, etc. At least get your feet wet. Join an investment club, where there are other investors around. And, without sounding biased, call me. We’re a one-stop shop. Contact us at 866.488.1820 or online at OutEstate.com and what we’ll do, for free, is look at your circumstance, look at your goals and put together a comprehensive strategy just for you. And you can learn as we do it for you. But I wouldn’t recommend you go out there and just do it. I had tons of support, I grew up in real estate and I still lost over a half million dollars. I’ve lost big. So the education I have right now cost me a great deal of money. Continued on pg. 27
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PAGE 16 • 2012
Retire In Style, Here’s How by Stephanie Mojica
n a down economy, buying a property for investment purposes and renting it out to a tenant might seem a risky proposition. But Chris Dannenfeldt and his team at Property Partners I are helping people across the country create passive income through residential investments and literally “save their retirement.” Dannenfeldt, based out of Dallas, anchors the retirement funds or other cash assets on behalf of his clients into the purchase of residential real estate. The potential annual return on investment is 12 to 16 percent. As of February 2012, occupancy rates for about 8,500 houses managed through Property Partners I are 97.4 percent. The company also manages about 32,000 mortgage notes with a default rate of about .4 percent. A typical Property Partners I client is between the ages of 45 to 65, earning a six-figure income, has at least $100,000 in investable assets and is not an experienced real estate investor. “They are people that have been used to doing the traditional things like stocks, bonds, and mutual funds,” Dannenfeldt said. “And they’re dissatisfied with their returns. They are tired of taking losses. They’re worried about what they’re going to do for retirement.” Unlike many of his competitors, Dannenfeldt’s company also takes an active role in the management and maintenance of clients’ real estate investments. Representatives handle payment of taxes, insurance, repairs and any problems that may require the eviction of a tenant. This literally creates monthly passive income for investors. Property Partners I purchases maintenance contracts and weaves the cost into their clients’ initial investment. Using maintenance contracts can save thousands of dollars in one transaction, Dannenfeldt said. A roof for which a general contractor would charge an independent real estate investor $3,500 costs Property Partners I about $700 through its maintenance contracts. “[Clients] will not ever get any kind of phone call ever on, ‘You owe me money Realty411Guide.com
for maintenance,” Dannenfeldt said. “And we do all that work with our own in-house employees.” The firm also mitigates vacancy risks for its investors through an income rental guarantee. Investors can use a modest portion of their monthly profits to purchase the guarantee. This step will keep the monthly revenues coming even if the property becomes vacant due to a renter moving on or being evicted. Property Partners I representatives work with qualified attorneys who can help investors legally shift their assets. The lawyers also help clients create the corporate structures necessary to limit their financial liability in the event that a tenant or visitor to the owned property is injured or has another type of legal claim. The company protects its investors as well as its reputation by conducting a thorough financial analysis before working with a client. Dannenfeldt wants to ensure that each investor has reserve accounts of liquid assets in case of unexpected job loss or another financial emergency before he invests into purchasing real estate. Likewise, Property Partners I strongly encourages potential clients to use existing assets such as retirement accounts rather than borrowing money to invest. Some exceptions apply, such as for investors who have at millions in assets and wish to take on some debt to purchase multiple properties rather than use up all cash reserves. “As a corporate decision, in today’s economic circumstances I am opposed to
PAGE 17 • 2012
debt,” Dannenfeldt said. “So I would rather someone purchase one property for cash instead of three properties with debt.” Dannenfeldt encourages clients to think of buying real estate that they do not intend to live in as a business. “For example, people buy a franchise
like a McDonald’s,” Dannenfeldt said. “And they don’t buy McDonald’s because they want to buy the hamburgers. They buy McDonald’s because there is a system in place to produce results, which is income to them.” Property Partners I representatives thoroughly study the demographics of each market before setting up investors with properties in the region. Their goal is to become the number one provider of safe and well-maintained low-income rental housing in each market they target, without getting involved with government-subsidized programs such as Section 8. “Over the last three years, we’ve completely phased out of Section 8,” Dannenfeldt said. “The reason being that we have seen across the country some really dramatic cuts in funding that people qualify for because of the cutback of funding in those programs. So before that had become an issue, we had already started phasing out.” Once someone begins renting a home managed by Property Partners I, they typically stay in that residence or move to anContinued on pg. 25
by Matt Theriault
ot your attention? The title of this article works because it’s what investors are always seeking, but not only are they seeking
It’s specific to YOU. A “real deal” defined is a property that meets your criteria and a seller that meets your terms. Anything outside
what area(s) are you willing to look for this type of property? And what price range are you willing to consider? Knowing your property criteria is first. Second, what are the minimum terms you’re willing to consider? If your intention is to create cash through short-term strategies such as wholesaling or “fixing and flipping,” is
sess determination, persistence, timing and an extraordinary willingness to work hard. Having said that, here’s how to find real deals in 4 simple (I didn’t say easy) steps: Step 1 - Establish your property criteria and the minimum terms you’re willing to accept. You should’ve done this already. If not, read this
Find Real Deals in 4 Simple Steps “real deals,” they are always in search of new ways of finding them. Before finding a real deal, however, one must know what a real deal is. Seems logical, but it’s a basic principle of real estate investing that’s frequently underrated, or flatout ignored and overlooked by novice and experienced investors, alike. A real deal is very specific.
of that is not a real deal. There are two parts to what constitutes a real deal. First, what’s your criteria for an investment property? Is your investing intention “cash” or “cashflow?” Being clear about your intention can significantly impact the price and terms of your deal. Once your intention is established, what type of property will create your intention? In
Yes, YOU can do deals even if you have no money, credit or experience.
a 20% return on your investment in 90 days your minimum terms? Or, is it $20,000? Or, is it 20% of market value? If you’re intention is to create cashflow through lease options or “buy and hold,” is $200 of net cashflow per door your minimum? Or is it a 20% overall cashon-cash return? Knowing your minimum terms completes your criteria of a real deal. You get to choose. Nobody has any say in your criteria, but you. A deal for me might not be a deal for you, and vice versa. A real deal defined is a property that meets YOUR criteria and a seller that meets YOUR terms. It seems counterintuitive to most, but the more narrow the focus of your criteria, the more real deals you will find. Once you know your criteria and your terms, you can begin your search for real deals. Locating properties that meet your criteria is the easy part. Locating property owners willing to sell to you on your terms is the hard part, and locating these property owners is key to creating wealth in real estate. There’s only one way to find property owners willing to sell their property to you on your terms, and that is to mount an ongoing search to seek them out. Finding such owners is not for the weak-willed person who gives up at the first experience of resistance, by the way. Successful deal finders pos-
article from the beginning and follow the instructions in paragraphs two and three before continuing to... Step 2 - Identify property owners that need to sell, as opposed to those that want to sell. The center of every real deal is in the owner’s motivation to sell. No motivation? No deal. “Want” is not motivation. “Need” is motivation. Motivated sellers can be found just about anywhere, however, your greatest likelihood of locating clusters of motivated sellers will be through notice of default (NOD) records, probate records, expired listings, inheritance records and outof-state owners (absentees). Convenient resources for these records can be found at www. EpicProDownloads.com Step 3 - Keep your name, contact information and a consistent message in front of these property owners. Avoid the games and gimmicks that many real estate investors play. Advertise only what it is that you do. •Immediate debt relief. •No commissions. •No repairs required. •Close fast. Be straight with people. Tell them what you’ll do, then do it. It’s appreciated. As previously mentioned, Continued on pg. 27
I CAN Control my Retirement Account?
by Bonnie Laslo
ne of the first questions you will be asked when investing is: Do you have an IRA or 401(k)? If the answer is yes, then the next question is: So who decides where your money gets invested? The answer should be you. Many do not realize that there is a way to have control over your own retirement funds. It has been available for years, but very few people know about it or understand it. We know you’re not one of those individuals, or at least in the next 10 minutes will not be fully in the dark on this interesting subject. IRA owners after reading this article will find value in the knowledge and resources to empower them with a wealthbuilding tool. In today’s financial environment, the knowledge can be worth thousands to millions of dollars for a normal household family. It is a newfound business skill for thousands, or at least a topic worth discussing with a professional in the future. Many business owners and real estate investors have created profitable businesses, especially in today’s market. After researching the information, we will show you how to get started in a matter of minutes. So here are the basics: You must open or have an IRA account (Individual Retirement Account). There are two main ones to choose from Traditional or Roth. With a Traditional, you take the tax deduction when you put money in, and pay taxes when you pull money out. The Roth is the opposite; taxes are taken when money is contributed, but it is tax free when pulling the money out. The Roth IRA is a very powerful account to have because one can use, for example, $100 to invest, and if those funds create a large profit, no taxes are paid on it. Individuals can transition current IRA accounts to a self-directed IRA custodian. A new account can also be opened. Kaaren Hall is the president and founder of uDiRealty411Guide.com
rect IRA Services LLC. She is an expert in the field and has a high priority on education. This is a good aspect for a custodian to have, as being able to communicate and educate a client on how to use their accounts is the most important part of having a self directed IRA. A person has to understand the rules and having an educated custodian to hand hold you through the process. This is not only necessary, but it is a must. Then you research and find assets, projects, and/ or companies to invest in to grow the funds. Many people purchase real estate, give private mortgages, buy precious metals, buy companies, etc., as some of the investment projects. Hall states, “Remember you are the one making all the decisions, you’re the advisor, and it’s not on someone else’s shoulders. The Securities Exchange Commission (SEC) promotes public awareness on letting the public know to be careful, and what type of recourse is available. So in our welcome packages we supply helpful information, and also educational links on our website.” Final step, when you decide on where to place your funds, review your intentions with your custodian to ensure it qualifies and all rules are being followed. This is the most important step, and it’s wise to have a set of expert eyes looking over your intended investment. These companies are in place to answer questions and to guide you along for proper uses to keep your selfdirected IRA in compliance. “Anyone can visit www.IRS.gov pub 590, which talks about IRA guidelines and goes over the rules,” according to Hall. After reviewing www.uDirectIRA.com, any individual can go to this resource location for free information. There are many advantages for the public to convert their existing IRA accounts to self-directed, and many people already have. “Because a self-directed IRA lets you invest in anything (except life insurance and collectibles), there are hundreds of possibilities,” states Hall. With a background of over 16 years of real estate experience, Kaaren Hall has asPAGE 19 • 2012
sisted her nationwide base of clients for many years. She is also president and founder of uDirect IRA Services LLC, and speaks at many real estate club meetings and events to educate the public on how to use self-directed IRA accounts. She is a sought after expert in the field and has assisted national real estate experts with their own deal structuring and accounts. The service and fees are the aspects to consider when choosing a custodian. Having access to the experience and knowledge is the added value with this company. After many years of building her business, Hall’s life has gotten much easier now that her children are older. This allots for more time and expansion on educating the public on harnessing the control of their own retirement futures. Hall is a busy mother of two, and she travels throughout California for real estate events. There are many employees who are no longer at their original job locations and are looking to rollover their 401(k). Some individuals are looking to rollover from their employer plans, and self-directed IRAs are an option for people to become educated on, in order to better their lives and their family finances. The old saying that knowledge is power is obviously visible now to many, due to Hall’s hard work and sharing of her years of experience with every day people who can benefit from it the most. Hall confirms, “I am here to enlighten readers about the self direction process in an effort to inspire them to be more proactive about their own retirement.” Visit www.uDirectIRA.com for more information or to get started.
Make Waves in Real Estate
by Isaac Newkirk III Benefits for the buyer include: •You get the opportunity to buy a home bringing in larger gross rents compared to when your credit is seriously impaired other landlords in the neighborhood. (and the opportunity to substantially There is a big difference in the way the repair your credit) deposit and the rent premium are viewed •You can save up for a down pay- by sellers and buyers. The buyers are thinkment on the home while living in the ing in terms of their future home, and conhome (often times the down payment is sider these items as equity. The sellers are very low) considering these items as sort of a hedge •A portion of the rent or rental premium against default, a guarantee that the deal is added to become a forced savings will go through because if it doesn’t, the The West’s To•At Real Investor’s anke p Rthe endd of the Estate option, the tenant is Club payments will be retained as income. This not obligated to purchase the home is what makes the lease option deal a winner all around. Benefits for the seller include: There are various market conditions that •Collecting rent on the home while it would dictate the proper time to sell using the otherwise be sitting vacant lease option process. If the market is acKīĞƌƐ/ƚƐDĞŵďĞƌƐ͗ •The opportunity to receive a high pur- tive (there is a big demand for sales) and Training & Coaching to Keep 3 Reality Based Education, chase price the prospective buyers understand and apYou in Tip Top Shape ability sellRealyour home instead of preciate the value of home ownership, but ensei Gilliland is a man who Diversified be- •The 3 Exciting Topics That Revolve to Around Business Opportunities just renting it just can’t do it on their own, lease options lieves in diversification.Estate Hisandreal 3 Networking to Help Build Your Team & Sharpen Your •The opportunity to increase your cash flow are a valuable alternative. Slow markets estate investment firm, Black Belt Skills and higher rate of return 3 Aits Connection Youreceive Engaged andaMotivated can mean either the re-sale market has deInvestors (BBI), derives nameto Keep Discounts From Local and National Businesses to Help •Having some of the landlord/seller respon- creased significantly or there is a difficulty from his first real passion of 3the martial Increase Your Margins assumed in the acquisition of lender financing. In arts. As a martial arts instructor3and owner Support From Blacksibilities Belt Investorsbe to Assist You 5 by the tenant/buyer Daysputs a Weekin •The ability to sell a home dŽƌĞĐĞŝǀĞŵŽƌĞŝŶĨŽƌŵĂƟŽŶŽƌƚŽĂƩĞŶĚ͕ƉůĞĂƐĞĐĂůů in a challenged this case, if an investor wants to sell and of several martial arts schools, he 3 All This Information at Our Club Meetings and More! increase their ROI (return on investment), some very full days managing his real es- market (slow re-sale market) the lease option is an excellent strategy. tate investment opportunities. Originally Black Belt Investors is a full-time professional network offering /ĨǇŽƵĂƌĞŽƵƚŽĨƚŚĞĂƌĞĂ͕ƚŚĞŶŶŽƉƌŽďůĞŵ͊ Black Beltreferrals, Investors particularly Actually, this strategy is so potent that BBI involved in the rehabbing (flipping) real networking, its members of education, business consult- are^ƚĂǇĞŶŐĂŐĞĚďǇƉĂƌƟĐŝƉĂƟŶŐŝŶŽƵƌ and exciting cash opportunities. keenbuilding on the moneymaking aspects of lease believes there is no time when its use is not estate properties, Black BeltingInvestors hasand wealth FREE Whether you’re a white belt investor just getting started or a the upfront options. Initially, there’s over the last decade also developed an afand(and a viable proposition. black belt investor looking for new resources, we can assist you webinars teleconferences. non-refundable) deposit. This finity for lease option properties. in reaching your goals. BBI helps in the following areas. The lease option plans came into vogue is the option fee that represents tĞKīĞƌdǁŽĂůŝĨŽƌŶŝĂ>ŽĐĂƟŽŶƐ͗ •They can find and acquire the propbecause so many people desirous of pur- an agreement (between seller Corona/Norco, Riverside County – Meet the 2nd Wednesday of the Month and buyer) to ofpurchase the erty for the client at deep discounts chasing homes were finding Downey, greatLosdifficulty Angeles County – Meet the 2nd Thursday the Month EĞƚǁŽƌŬŝŶŐ͗ϲ͗ϯϬƉŵ ʹ DĞĞƟŶŐ͗ϳ͗ϬϬͲϵ͗ϬϬƉŵ at a fixed price at a later •They can organize contractors and in qualifying for loans. Lease options, at a home rehab the property if needed minimum, gives potential sellers an oppor- date. In most markets, sellers Visit Black Belt Investors at: •They can use guerilla marketing tunity to get a retail price for their property will add a monthly rental pretactics to find a tenant/buyer and an enhanced monthly cash flow. In a mium (non-refundable) to inlease option, a property owner and tenant crease the investor’s cash flow. This can be •They can do all the lease option agreement agree that, at the end of a specified rental applied to the principal balance or to build paperwork for the client period, the renter has the option of purchas- a down payment (whichever the tenant/ •They can put their property management ing the property, but not the obligation to buyer prefers). And, of course, there’s the component to work taking care of the clido so. It is the ‘obligation’ at the end of the equity from the sale that’s paid at the end ent’s asset Sensei Gilliland considers it to be all in agreement that makes the lease option dif- of the option period when the home is purferent from the lease purchase, where the chased. The landlord/seller has made mon- a day’s work, albeit a rather lengthy day’s renter is required to follow through with ey at every stage of the lease option process work. But there’s so much more of the (the beginning, middle and end). This gives story to be told. Why not drop by www. the purchase. Lease options can provide tremendous an investor a big advantage over the com- BlackBeltInvestors.com and begin to get petition: increasing monthly cash flow and an eyeful for yourself. advantages for both buyers and sellers.
Black Belt Investors, The West’s Top Ranked Resource For Successful Cash and Wealth Building
PAGE 20 • 2012
Top Ranked Real
Estate Investor’s Club
Black Belt Investors, The West’s Top Ranked Resource For Successful Cash and Wealth Building KīĞƌƐ/ƚƐDĞŵďĞƌƐ͗ 3 Reality Based Education, Training & Coaching to Keep 3 3 3 3 3 3
You in Tip Top Shape Exciting Diversified Topics That Revolve Around Real Estate and Business Opportunities Networking to Help Build Your Team & Sharpen Your Skills A Connection to Keep You Engaged and Motivated Discounts From Local and National Businesses to Help Increase Your Margins Support From Black Belt Investors to Assist You 5 Days a Week All This Information at Our Club Meetings and More!
Black Belt Investors is a full-time professional network offering its members education, networking, business referrals, consulting and exciting cash and wealth building opportunities. Whether you’re a white belt investor just getting started or a black belt investor looking for new resources, we can assist you in reaching your goals.
webinars and teleconferences.
tĞKīĞƌdǁŽĂůŝĨŽƌŶŝĂ>ŽĐĂƟŽŶƐ͗ Corona/Norco, Riverside County – Meet the 2nd Wednesday of the Month Downey, Los Angeles County – Meet the 2nd Thursday of the Month EĞƚǁŽƌŬŝŶŐ͗ϲ͗ϯϬƉŵ ʹ DĞĞƟŶŐ͗ϳ͗ϬϬͲϵ͗ϬϬƉŵ
Visit Black Belt Investors at:
Powerful Software for Analyzing Real Estate
by Gary Geist
few years ago, a young man practiced his craft, day in and day out. Every chance he got, he was perfecting his technique and approach. Every swing, every club, every shot, under all kinds of conditions; his swing was always the same. His name was Jack Nicklaus, arguably one of the best golfers of all time. When you look at his whole career, his best trait was being consistent — always finishing at the top. The same trait needs to be the cornerstone of your real estate investing career. So the question is: “How does consistency apply when you are investing in real estate?” First and foremost, consistency means you have a well thought out approach you always use to evaluate new deals. This prevents you from forgetting key components or data from your analysis on properties you really like. No matter how long you have been investing in real estate, you must remove your emotions from the process (good or bad feelings you have about the property). If possible, each deal must be evaluated on the same baseline (or identical sets of data) so you can do proper comparative analysis between properties to find the “best deal”. To do this you need the same approach (or software model) just like the professional golfer’s magic swing. HomeReplay, LLC has developed an Excel-based analysis program combining over 75 years of real estate investing experience and analysis of thousands of investment properties. Realty411Guide.com
This software tool is easy to use and forces a consistent approach to analyzing each property that enables the investor to have repeatable success in all types of market conditions. Key elements of this approach include — property selection, property evaluation and reporting, cost analysis for long-term investment purposes as well as calculating renovation costs prior to renting the property. Furthermore, the software provides the investor with realistic estimates of the property value in its current condition as well as after repair value, all of which are good data points for comparing multiple
PAGE 22 • 2012
properties prior to purchase. One of the best ways to achieve a stable, repeatable process for evaluating property is to have a software tool that addresses all of the issues, such as — Which property to buy? How much to pay for this property? What are the repair costs going to be? And what is the expected value after repairs? These questions and more are answered by HomeReplay’s exciting new software product called Rapid Property Analyzer (RPA). This software tool provides a sysContinued on pg. 42
Are You A Target For A Lawsuit? by Bill Gatten
et’s start this article off stant by those who use the law right. First of all, take this to accomplish nefarious ends. Whether we’ve done anything simple test: wrong or not, defending one’s self in court often costs more a. Are you in business? than losing the case would; b. Do you have employees? and the Prius-driving, apartc. Do you have a teen-aged ment-dwelling polyester-suitdriver? wearing “Consumer Advocate” d. Do you own property? knows that his prey (you and f. Do you manage real propI) will likely give-in and settle erty? with him/her for thousands of g. Do you drive a car? h. Do you have assets that oth- dollars, at least a third of which goes to him/her, just for stopers are envious of? i. Are you considered a profes- ping the (unfortunately) judicially-condoned extortion. sional? Anecdotal to all of this, an j. Do you have a steady inaction that I was involved in a come? If you answered YES to any of few years back had to do with these questions, you are a walk- a homeowner in Virginia who ing dart board in legal parlance. came to us with a real probAmericans today are being as- lem and asked for our help. sailed by a group politely re- He needed $96,000 cold-hard ferred-to as Contingency-Fee at- cash with which to bring his torneys, or so-called “Consumer mortgage current and stop a Advocates,” a sweet sounding foreclosure on his $400,000 term perhaps, but a term, which home in Virginia (he had never all too often means, “Let’s find made a single payment on his someone who is innocent and mortgage since its inception sue him anyway until he runs two years earlier, and he had out of money and has to pay us thwarted foreclosure by repeated BK filings). He agreed to stop suing him.” In my not-all-that-humble that for the $96,000 he would opinion, the American legal sys- gladly equity-share his home tem is out of control now a days with us on a 50/50 basis. He and the Average Joe has to be had about $100,000 equity more protective and proactive once the loan was brought curnow than ever before. The com- rent (which we did for him). mon hard-working American We all agreed that the $96,000 citizen must remain constantly would be forgiven in exchange on the alert relative to protecting for the 50% ownership interest his hard-earned assets for those in the property and there would who spend large portions of their be no monthly premiums paid lives and their parents’ money in to us (we assumed we’d make our money on future appreciathe study of Juris Prudence. We non-attorney types all tion). Upon consummating the spend our lifetimes trying to transaction and giving him (Mr. acquire money and other assets Williams) a fresh start, he confor our family’s financial wel- tinued his pattern of not makfare and safety, but it can all be Continued on pg. 43 snatched away from us in an inRealty411Guide.com
BILL GATTEN CENTER for Wealth & Education 6520 Platt Ave., St. 548 West Hills, CA 91307 1 800 409 3444 FAX 1 800 967 0333 firstname.lastname@example.org www.landtrust.net
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Renowned Author National Lecturer & Investor
by Tony Martinez
re you looking for the right investment? Are you caught in the confusion of what is working with the greatest return? Have you heard people talking about investing in notes? There are so many questions and maybe even a mystery to this form of investing. Questions such as, “Is this a good time to invest in notes? What the heck is a
park their investment dollars. Competition for investment opportunities can be very difficult and limited in this volatile market. The note business has fewer players because of a general lack of knowledge. Understanding the differences and advantages helps note investors keep the best
Is it a Good Time to Invest in Notes? kept secret to themselves. Asset Ventures provides our investors everything from A to Z. We know all the secrets. Therefore, we established Asset Ventures as a full-service and training company to mentor educate and service our clients. With experience handling over 1,000 notes, we provide the insight to this unique opportunity. In an attempt to enter into the note business, here are seven of the biggest secrets to note investing to keep in mind:
note and how do I make money? Where do I find them? Where do I go to learn about notes?” These are the questions I asked myself when I started. I found I couldn’t go to one place for all the answers I needed. With all my knowledge in real estate and real estate investing, it was not an easy journey to learn what I know. I spent 7,000 plus hours learning the business and researching this industry. I started Asset Ventures with the sole purpose of bringing the blueprint to success for investors in notes. Asset Ventures has become a leader in working with experienced and novice investors, to educate them in acquiring notes as a solid investment. We are setup to provide a complete one stop, done for you, knowledge-based note company headed by national speaker and trainer Tony Martinez. Although notes are always a good investment, there has never been a better time than right now to get involved. With the collapse of the housing industry, the banks are overloaded with bad debt/collateral. The note still has value if you buy right and offers investment opportunities like never before. “One man’s trash is another man’s treasure” As an investor you can begin with very little capital. Plus, your yield or return on investment can return incredible results. Most real estate investors are challenged in this market, competing with others to Realty411Guide.com
Secret #1 Appreciation VS Amortization Appreciation is tied into the strength of the economy (it can go up or down) where amortization is constant. In the retail side of selling; pricing and timing are pivotal to your exit strategy. Many investors became real estate rich and cash poor — limited options when the market changed. Amortization means buying right, which allows you to always make a profit. There are several exit strategies with lower risk and shorter terms if necessary, based on the investors’ individual needs. As the bank, you control the deal from a distance. Secret #2 - How much does it cost? You can leverage your risk while using less initial capital, usually just a few thousand dollars. Experience high ROI’s of 12% or more guaranteed (generally more). You will see lower maintenance costs — no re
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pairs, no personal time and no labor. You will have much more buying power. You are not tied into how everyone else is doing business — while letting your money work for you. Secret #3 - How do they Work A note is a document that states: I.O.U. and dollars are owed. The note also details the amount owed, interest rate, and years to repay a debt. The note controls the deal — much like the Wizard of Oz from behind the curtain. With proper knowledge the note is difficult to erase. The loan doesn’t go away. The owner may lose the property, but the note remains. When you buy smart you have a safe and low-risk investment. You can purchase at deeper discounts than most wholesalers and investors on the retail side, typically for pennies on the dollar. Secret #4 - Where Do Notes Come From The banks are flooded with bad debt, which creates note buying opportunities as they rush to sell off collateral. The banks know they will get less money from a foreclosure or short sale. The banks are overwhelmed with non-performing (delinquent) notes and they can’t sell to each other any longer as the collateral is undervalued. Secret #5 - You can leverage the note to obtain ownership of the property While notes can be bought through seller/ private financed, probates and lawsuits, the investor can position themselves to be first in line to obtain the property. This can be done in several different ways and usually less of an investment than buying retail. #6 - Why the Banks Sell So Cheap There has never been a better time to buy right as the banks inventory is flooded and they must sell cheap. The bank’s cost for collection activities are not cost effective relative to the result. The banks have to freeze liquid assets to carry bad debt (NPNs). Selling allows the banks to create more dollars for new loans. The banks want to avoid future lawsuits and simply don’t want the problem any longer. There is also the TVM — Time value of money (worth more today than 30 years from now). Notes offer investors the security and benefits of real estate without the burden of maintaining a rental property! Avoid the 4 T’s: Tenants, Toilets, Trash, and Termites!
Learn from some of the most successful investors in the world.