RICH Club - Houston Real Estate Investors September 2015 Newsletter

MAGAZINE OF THE REALTY INVESTMENT CLUB OF HOUSTON

SEPTEMBER 2015

In This Issue Know when to say “NO.” When to walk from a deal. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Where Do I Get the Money?. . . . . . . . . . . . . . . . . . 4 A Home Inspection is an Investment, Not an Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Here’s How to Increase Your Rental Property Income. . . . . . . . . . . . . . . . . . . . . . . . . . . 13

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The Realty Investment Club of Houston (RICH) was established in 1979 and promotes networking and educational opportunities to its membership. RICH members consist of full- and part-time investors, beginning investors, real estate brokers and agents, attorneys, contractors, accountants, property managers, renovation specialists, appraisers, bankers—people who want to enjoy the many benefits of real estate investing.

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THE ENRICHER © 2015 by The Realty Investment Club of Houston (RICH), a non-profit trade association. Published monthly by RICH and included in the membership package. Quotations and reprints are permitted with full credit given to the author, plus “The Enricher: Magazine of the Realty Investment Club of Houston.”

THE ENRICHER STAFF EnRICHer Staff-Director Summer Dolan Edirector@richclub.org Graphic Design Anne Swanson Graphic Design anne@anneswansondesign.com Editor Kitty Haynes Newsletter@RICHClub.org

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Directors

The Realty Investment Club of Houston 4220 Lockfield Street, Houston, TX 77092 (713) 947-RICH(7424) FAX: (866) 909-8794 www.RICHclub.org

George Wilson

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Education@richclub.org

T.K. McGregor

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Yolanda Thomas

GetInvolved@richclub.org

Meera Adjodha

Program@richclub.org

Carol Corgey

Membership@richclub.org

Staff Summer Dolan Executive Director Edirector@richclub.org Tabitha DeSouza Member Coordinator Coordinator@richclub.org

THE REALTY INVESTMENT CLUB OF HOUSTON IS A MEMBER OF THE NATIONAL REAL ESTATE INVESTORS ASSOCIATION

Past Presidents Wayne Ritter Gopy Swamy George Yeiter Judy Cook Jon Kubas Joseph DiPietro

James Robert Smith Randy Steadham Charlie Adams Jr. Linda Muscarello Laurie Ward Ray Sasser

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Know when to say “NO” When to walk from a deal

by Kevin Smith There’s a lot of good information available to the new investor just getting started in real estate, for the most part, it leads you in the right direction. Investors learn how to look at the property, how to do research on the title, how to negotiate the offer and all sorts of things that are important parts of a real estate transaction. There’s one part that they all seem to leave out when they are trying to teach you to be a successful investor, and that one part is critical to your success.

In managing our time, we learn to say “no” to people and events because we don’t have time for all of them. In successful investing we must take it a step further and learn to say “NO” to ourselves sometimes. That means that no matter how wonderful the deal looks and no matter how excited we are about it, we must face the fact that if the numbers don’t work, the deal doesn’t work.

There are several reasons why smart investors walk away from houses, and this month we are going to look at some of the most common reasons why saying “No” to the property can be to your best advantage.

It just hurts my stomach to look at some of the houses that new investors try to buy. Pitiful. I mean there’s so much termite damage on some of these houses that there’s not enough wood left there to nail the Dangerous Buildings Notice onto. It seems that some of us can never get enough of what we don’t need, but all that pain can be avoided if we get a little education. Here it is.

The RICH Club offers twelve general meetings a year with all sorts of speakers speaking on just about any real estate related topic that you can think of. In addition, there are a generous supply of Workshops and Focus Groups and more networking than you can shake a goals list at. There are heavily experienced investors, real estate lawyers, real estate agents and brokers, insurance people, title people, trades people, accountants and, ahem, inspectors (no, I’m not the only licensed inspector in the RICH Club) who are willing to help you.

The only dumb question is the one you don’t ask, especially with all the talent and experience that is available in the club for little or no money. You can get a full education for the cost of membership at all those meetings, and the resources that are at your disposal are limitless. Milling around amongst the new investors at all these meetings and workshops are people who have made every possible mistake in real estate investment. They have the bumps on their little heads (mine

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included) that you get from running into brick walls and trying to make doors out of them.

Experienced investors can tell the new investor what not to do, where the door is in that brick wall, and what he or she should be doing instead.

Asking and listening and meeting new people are a top priority for new investors. What you get from all that asking and listening and learning is not only a better ability to identify good deals when they come your way, but also to be able to identify the bad ones so that you can turn away from them.

Here, then, are a number of shopworn and sturdy reasons for you to walk away from the deal. Most of them have to do with the condition of the property in one form or another. Some have to do with physical condition of the building, some are about condition of the title and there are still others such as condition of the current financing. Then there’s the all time favorite; they just want too much money for the place. Let’s take a look at some of the red flags investors need to be aware of.

1. The house just costs too much money.

This is what happens when you proceed without knowing the true value of the house. Value of property is established by what the market is willing to pay for property. Before you build a big dream about all the things you are going to do to this house and how much money you think you are going to make, build a clear picture of the condition of the property, including comparative market analysis (CMA).

CMA is a survey of recent sales of similar property in the area of your target property. If you know that the identical house two blocks away on the subdivision just sold for $90,000, it is unlikely that you will be able to sell yours for $125.000. No matter how pretty you make it. Close your eyes and take a deep breath of realty before you make a large investment commitment, think it through.

Another landmine for investors is not having, understanding and making use of some form of buying formula such as the Ron LeGrand model for determining offering price. These formulas begin with the after repaired value (ARV), which is what a CMA is used to determine, and work backwards to the price the house can be bought for and still meet all the expenses of rehab, debt service, profits etc.

If you have not done a thorough assessment of the repairs needed and what they will cost, then you are once again stumbling around in the dark. Don’t guess. Get somebody who has an idea of what the repairs will cost and how long it will take so that you can account for it in the offer to buy the house. There’s nothing like having to reach into your pocket and pull out money that you will never see again because you missed a bad roof, a furnace that needs replacement, or a foundation problem when you bought the house.

2. The house is in the wrong area.

Residential properties in areas that are heavily commercial do not tend to sell well or fast. Who wants to buy a house next to a muffler shop that opens at 7:00 A.M.? How about a house that backs up to a bunch of run down apartments?

The house itself may have been vacant and open for a period of time, in which case there were probably visitors.

Some visitors, like neighborhood kids, tear up the place and use the house for their after school clubhouse. Some visitors use empty houses to smoke crack in. If there’s trouble in the subject property, there’s a good chance it’s in the neighborhood as well. If you walk in and it looks like somebody has been camping out there, they probably have.

If you walk through the house and there are a whole lot of Bic lighters all over the floor, then the visitors have probably been smoking crack in the house that you want to buy. If you put your foot through the floor then the visitors were probably termites.

Look around the block where the subject property is. Are there boarded up houses? Cars sitting on blocks? Lots of people loitering? What kind of neighborhood are you in?

Who would want to live here? Would it be safe for the buyer’s kids or wife to walk around the block here? Will they need extra magazines for their pistols? If the neighborhood the property is in is rough, your money is best spent elsewhere.

3. The house is over-encumbered.

If the owner fails to pay the property taxes, the taxing authority has the right to put a lien on the property. There are several other ways liens get placed against properties, and there can also be legal judgments, Merchants and Mechanics liens homeowner’s association liens for past membership dues not paid, and of course, a complicated chain of title. (If a heretofore undeclared heir to the property like Aunt Ennie returns from the woods in Hibbing, Minnesota and declares that dad promised her the house, you may win in the end, but it will delay the game, and that means extra carrying costs and debt service.) The bottom line is that if you have to pay off encumbrances, there had better be plenty of room in the deal to afford them, or the costs will be coming right out of your refrigerator.

Everything in the rehab has to pay its own way or it comes out of your profit. These are the things that you should be thinking about when you are trying to decide whether to buy the house or not. This is how you will know when to say “No”, and then go find another house to buy.

4. The house has been condemned.

Say “No” to a house that is on the Condemned Buildings List.

Sure, they can be done, and they can be sold for good profit, but the people who are doing those projects all have years of experience doing rehabs, and also the ability to work with municipal inspectors. These houses are complex projects that require a lot of attention, a lot of management, and a lot of money. They are not for the first time investor. The new guy gets eaten alive and winds up losing money on them because they don’t have the experience level necessary to manage the project.

These are the houses with the great big holes in the roof that you can see the trees through, the floors rotten through because the rain has been coming in for so long and all the doors and windows missing. Cabinets gone, plumbing gone, condensing unit gone. Burn houses fall into this category, too Some of these places it doesn’t matter how much experience you have, the house just needs too much money to bring it back to good and habitable condition and there’s no room for a return on your investment.

It’s like a seesaw; condition goes down, rehab dollars go up.

Condition goes up, rehab dollars go down. There is a point where the pile of dollars needed to rehab the house simply exceeds the property’s ability to repay the investment. In other words, buy this one and get ready to lose your shirt.

You can find out whether the house is on the list by calling the City of Houston Neighborhood Protection or the City of Houston Code Enforcement Division, Property Inspection Department and they will tell you.

These aren’t all the reasons why you should stay away from properties, but having this information will keep you out of the deepest holes. Remember, everything you need is in the room at the RICH Club General Meeting, but you have to A-S-K to G-E-T. I’m Kevin Smith, and I’ll see you out on the property.

Kevin Smith is a licensed real estate inspector currently serving on the Board of Directors of the Texas Professional Real Estate Inspectors Association (TPREIA). He is former RICH Club Board member who has provided numerous talks, workshops and articles for investors over the years. You can reach him at 713‑858‑1330, and phone calls are free if you need help..

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Where Do I Get the Money?

By Ron LeGrand Probably the most asked question we get, but before I answer it this question must be answered…

Money For What?

Everyone is so concerned about where to get the money when the reality is most of the best deals in real estate don’t require any or very little.

You don’t need a dime to do ACTS deals or sandwich lease options. No down payment, closing costs or even earnest money.

Subject to deals usually only require closing costs, sometimes a little to the seller.

Wholesale flips require only an earnest money deposit and so do options. So raising capital is really only applicable if you intend to pay cash for houses.

Truthfully, you can spend your entire real estate career and make a good six figure income and never pay cash for a house. Many do.

Spend a little to get properly trained and it will become abundantly clear you don’t need money to make money, especially not in real estate. In fact, the minute you do raise capital you’re now at a risk.

This recession won’t last forever and these prices won’t stay this low for long. So let’s discuss where to get the money for cash deals.

Really there’s only one good source. Its private lenders. Not mortgage brokers or professional lenders. Just ordinary people with money in the bank who want a higher rate of return. Not the super wealthy. Just ordinary people with a few hundred thousand dollars or so and they’re all around you regardless of who you are or where you live.

They need you as bad or worse then you need them but they won’t come to you, you must go to them and let them know what you do. Of course, the hardest loan to get will be your first. Once you crack the code it gets easier every time and you can use the first lender for credibility.

I know what you want is someone to hand you a list of lenders so you don’t have to do any work or get uncomfortable asking. Sorry… Ain’t Gonna Happen.

There is no such list and if there were any investor would rather you date his wife then give up his private lender. So don’t ask! It only makes you look foolish.

FYI, there are those who say this magic list exists and all you have to do is subscribe to a matching service and they’ll flood it to you….not true.

The training you need is in my Quick Start Real Estate School; and I promise you it’s costing you a fortune in lost income until you make up your mind to get there and by the way, there is no substitute for it. No book, no CD’s and no other seminars. There is no easy or free way to get the training.

There are lists of potential prospects who appear to be good candidates but even then you must approach them.

Unfortunately the SEC has regulations against you soliciting for money unless you have an existing relationship and the rules are cloudy. The best thing you should do is not to publically advertise for money.

As a Gold Club Member we deliver a lot of training in the form of videos and lessons like this but you can’t get to college and skip high school.

The good news is the president signed a law removing this restriction recently but it comes with a lot of restrictions which render it almost worthless to small investors.

Now don’t you get me wrong, I did not say you shouldn’t buy cash deals. I only said you don’t have to but unfortunately some people use money as a lame excuse not to do anything.

Plus, I can make a case that a private loan is not a security and have seen evidence of that in a Supreme Court ruling.

However, I don’t want you to be the one defending that in front of the SEC so my advice is simple…assume you can’t publically solicit for now.

Now’s the best time in our lifetime to buy bank owned houses. Never been better. I’m buying them at 1985 prices just as we do in my Quick Start School.

Actually, you should be buying like…A Bat Out Of Hell!

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So that brings us to the fastest, easiest, and no cost way to get money…Flap Your Lips.

Here’s my elevator speech I used for years and still do today when talk to people…

“Do You Have An IRA Or Other Investment Capital Not Getting You A High Rate Of Return, Safely?”

If the answer is no, ask for a referral. If the answer is yes, and many will be, follow up with…

SAVE THE DATE FOR OUR NATIONAL SPEAKERS!

“I buy and sell houses and I sometimes borrow funds from individuals such as yourself to purchase and rehab these houses and pay a high rate of return. Your money is secured by a mortgage, closed by an attorney with title insurance, fire insurance and properly recorded. I never borrow more than 65% of the current value so there’s always plenty of value above the loan. Does that sound interesting to you?”

If you get a no try to find out why. Sometimes they need to discuss it a little to understand better. If you get a yes…

“OK, all I need to know is how much you want to put to work and I’ll call you when I’m ready for my next loan. If you approve, I’ll ask you to wire the funds to my attorney and we’ll close shortly thereafter. Of course I’ll give you his number if you’d like to call him. Do you have any more questions?”

That’s it. Yes it is that simple. Of course the lender will ask you what rate of return he/she will get and your answer is…

What Do You Think Is Fair?

September 24 & 26, 2015

Profit in the Note Business

Eddie Speed Seller Finance & Non-performing Note Industry Expert; Coach and Mentor; Author

It’s likely the answer will be in the low single digits since bank accounts are paying less than 1%. I offer 7% even if they’ll take less. That’s 14 times what banks pay. You can offer what you want but be careful your mouth doesn’t overload your brain. The wrong words here can cost you a lot of money.

The term is up to you, not the lender. You are in control.

Remember, no mortgage brokers here to make the rules.

They are what you say they are. If you want 5 years, its 5 years.

If your goal is to rehab and flip get at least 2 years. No need for a shorter term. You’ll likely pay it off sooner but what if you don’t? A longer term costs nothing.

October 24, 2015

Ron LeGrand Chairman at Global Publishing Inc.

If your goal is to lease option the house, get 5 years. Don’t box yourself in to a short term. If it’s a short term load let the interest accrue so you don’t have a payment. Only make one if you don’t have to and you don’t. If you borrow 100k at 7% in two years you owe 114k. Simple. Now you get to keep 100% of the rent if you install a tenant. Remember, you make the rules.

I dare you to start asking for money. It costs nothing and you may be surprised with the results. Don’t forget to ask for referrals.

Happy Hunting.

January 21, 22 & 23, 2016

Chris McClatchy Real Wealth Education

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DON’T MISS OUR UPCOMIN Profit in the Note Business with Eddie Speed Thursday, September 24, 7:00 PM – 9:00 PM AND Saturday, September 26, 10:00 AM – 5:00 PM Eddie Speed is an expert in Seller Finance & Nonperforming Notes. He is also a Coach, Mentor, Author and founder of NoteSchool.

Most real estate investors have heard of the “Note Business” but many misunderstand it while others think that it is completely separate Eddie Speed from the real estate business. The fact is most real estate investors are in the note business, and they just don’t know it. The note business is the financing side of the real estate business.

Note Business in the Simplest Terms The note business is based upon the purchase, sale and assigning of two documents: the promissory note and the mortgage agreement. These two documents represent a promise to pay and a solution for non-payment.

When someone borrows money to purchase real estate, they have to sign an agreement promising to pay it back.

This agreement also outlines the terms of the payback. This written promise is not enough to get a loan. This promise must be backed by collateral of value, which is typically the real estate itself. The collateral agreement pre-authorizes the foreclosure of the property if the debt is not paid according to the promissory note.

Move from the Paying End to the Receiving End of the Business So if you have ever borrowed money from a traditional lender, private or hard-money lender, or even a property seller, you have been in the “note business”! Well, you have been on the paying side of the note business. Why not get on the receiving end of the note business!

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In the receiving end of the note business, you can receive monthly cash flow without the headaches and liabilities of being a landlord, lump sum cash payouts, or even end up with the property at 30 to 40 cents on the dollar!

Acquire Property or Cash Flow for Pennies on the Dollar Today’s inventory of both performing and non-performing notes is so massive that it doubles the number of foreclosures since 2008. This supply has prices for notes at historical lows—but it will not last forever.

Non-Performing When you buy a non-performing note on a vacant home, you will acquire a Deed in Lieu or foreclosure and end up with the property. You are a real estate investor simply acquiring property in a different way.

If you buy a non-performing note on an occupied property, you will either modify the loan to start receiving monthly cash flow, get a Deed in Lieu or foreclose.

Performing When you purchase a performing note, you acquire long term, real estate backed, monthly cash flow. Today, these assets can be purchased for 60 cents on the dollar. That is an unbelievably good deal. No land lording, no hassles, just automatic monthly deposits into your account.

Learn More You owe it to yourself to learn more about this huge opportunity in real estate. We will show you case studies, where notes were purchased for as little as $3,000 and made triple digit returns.

Pricing Thursday = FREE Saturday = Members $20; Guests $30

NG NATIONAL SPEAKERS! A Day With The Master To Discuss America’s Perfect Home-Based Business with Ron LeGrand This Recession Won’t Last, And When It Goes, So Will The Best Chance In Your Lifetime For An Average Person To Get Rich In Texas Real Estate Saturday, October 24, 2015 9:00 AM–5:00 PM If you’re not making obscene amounts of money in real estate right now, you’re missing the best opportunity of your lifetime to get rich. This recession has opened doors for both beginning and seasoned investors the likes of which I haven’t seen in my 32 years, and I hate to think most people will sleep right through it... and it does not require money, credit, experience or a license to get started.

Why Is This Important to You? It’s simple! If you don’t take action now and get on the bandwagon, the greatest opportunity to create wealth on The Fast Track may pass you by before you even know what happened.

Ron LeGrand

Over the past 32 years, I have bought and sold over 2,500 single-family homes, and still do 6-12 every month now on autopilot with less than 2 hours a week of my time.

I tell it like it is, and those who follow my system make a lot of money, some become millionaires. I show people the real business of buying and selling real estate with little or no money or credit and how to build a fortune quickly with my time-tested, proven and trademarked techniques.

Pricing September Early Bird Special = Members $97; Guests $147 October reservations = Members $147; Guests $197

I’ve set aside a full day to share these secrets. You’re invited to attend if you truly want to make this year your best year ever and let this recession make you rich. I call this all-day seminar The Fast Track To Wealth, and the title says it all.

But Who Am I, and Why Should You Listen To Me? I am the world’s leading expert in quick-turning residential real estate and Alan Paine invited me to spend the day sharing how I make millionaires.

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Main Event and Trade Show RICH Hosts the MAIN EVENT & TRADE SHOW! Saturday, September 12, 2015 8:30 AM – 12:30 PM Due to the Labor Day Weekend, This month’s Event will be SECOND Saturday in September

Featuring: “Notes” with Laurie Ward

Become a RICH Member!

Guest Memberships Available (usually requires per event fee) Individual Memberships $257 Family Membership $297 Partners Membership $397 Business Membership Silver and Gold Levels Available Visit our website for more information: www.RICHCLUB. org or call 713-947-RICH (7424).

Network at our Main Event!

• One of our BIGGEST networking events FILLED with information about Houston Real Estate and RICH membership and benefits!

• Learn from the experts.

• Bring your questions and notepads.

• Don’t forget your business cards!

• Networking and Coffee: 8:30 AM – 9:00 AM • Arrive BEFORE 9:00 AM and pick up an Early Bird Raffle ticket.

• Bring a Guest and enter in the Guest Raffle.

• Refreshments and Coffee will be provided.

Share this Event with your Friends!

Mark your calendar— October Main Event: Saturday, October 3, 2015

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A Home Inspection is an Investment, Not an Expense

By Stephen Ruback, Professional Inspector [TREC License 6030] Squeezing dimes to blow dollars seems to be a popular game these days. Negotiate the price of a house in $500 and $1,000 increments, or more, then turn around and spend hours looking for a $25–$100 cheaper inspection.

If you are looking for a cheap drive-by inspection to meet some paper work requirement, or just to make someone else happy, don’t even bother. That way you can save the whole amount.

When you spend a hundred thousand dollars, likely much more, for a house, wouldn’t it be sensible to verify the condition of your purchase? Will you pony up a percent or two for special financing considerations without much thought or calculation, but choke at less than 1/3 of one percent to insure you are buying what you think you are buying? People do it all the time.

What’s in a good inspection?

A fresh, unbiased perspective—just the facts without emotional attachment.

An experienced eye for red flags and signs of present challenges and/or trouble to come—by a seasoned professional intimately familiar with all of the systems in a house.

A good communicator—the ability to help you understand what the conditions are and their potential impact on your finances.

A forensics practitioner—putting the details together for a more holistic overall picture, otherwise known as a “systems” approach.

Additional insight for protecting your investment – providing information about important findings along with reasons why they are important and how they can affect your future.

Alerts to present and potential safety hazards—this can be lifesaving information you otherwise might have missed until it was too late.

An inspector is your point person, looking for potential problems. For those with significant financial implications

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you will need to consult with specific specialists to secure real number costs and more detailed analysis of conditions.

For example, the inspector may observe the AC system is not working properly, then you will need to consult with a licensed AC person to determine the precise problems and costs of repair/replacement. Keep in mind most systems have a finite design life. Systems do wear out. With a bit of neglect, this can happen sooner rather than later. In a thorough inspection, you will also learn a few things to help you prolong the life of your investment.

Expense or investment?

So, how does this make a thorough inspection an investment? Any item that has virtually no chance of improving your bottom line is an expense. Anything that has a real chance of positive return is an investment. The vast majority of inspections reveal one or more ugly surprises that, undiscovered, would have cost the buyer many times the inspection cost. It’s that simple.

The AC blows cool, but is at the end of its life, and needs work, oh oh.

The heater does not work and the repairman says it is dead and beyond recovery, do you have an extra two or three grand lying around?

The roof covering happens to be three layers deep with wood shingles at the bottom and the insurance company says they won’t cover the roof, oops.

The plumbing is badly corroded in several areas and about to demonstrate a new concept in water damage, then the insurance company says “normal wear and tear” or “lack of maintenance,” sorry.

Inadequate attic ventilation and insulation can cost you hundreds of dollars a year in excess utilities, oh well.

Unsafe/improper/inadequate wiring can cost thousands to repair—at best, easy come easy go.

The bomb in your house, disguised as a water heater could actually go off, tsk tsk.

The kitchen vent hood does not vent cooking fumes outside, just blows them back in your face, surprise.

The furnace/water heater flue vents happen to be set up to generate generous amounts of carbon monoxide whenever

they are operated, do you enjoy headaches, nausea and near death experiences?

This may take a little more time, but pays dividends in your ability to protect your investment.

Most of these conditions have the potential for serious, expensive auxiliary damage if left to their own devices long enough.

A savvy seller will arrange for an inspection before listing the house. That leads to avoiding more ugly surprises that blow deals. One blown deal costs more than several inspections in time and money lost—then the seller still gets to pay for the needed repairs.

A good inspection can only be described as an expense when the house has no ugly surprises. I saw one once.

The rest of the time it is an investment that pays serious dividends. Sometimes it will be one or more big ticket items, other times it may be a host of little items that add up to significant money, most of the time it will be a combination.

When selecting an inspector, the thoroughness and quality of work far outweigh the price. Too low a price may well mean a higher cost—pay for—sometimes less, but never more.

By the way, new homes need a thorough inspection too.

Getting best value A thorough inspection takes time, at least an hour per 1,000 square feet. The report should be clear, simple and to the point. Always plan to be present for the inspection. A written report is a poor substitute for a detailed hands-on explanation in real time. A modern house is an expensive combination of complex systems utilizing a wide variety of technologies—never hesitate to ask questions if you don’t understand something, especially “why”.

A good inspector is also a good teacher, willing to take the time to explain the hows and whys behind the observations.

Stephen Ruback Stephen Ruback is a licensed Professional Inspector; member of TAREI, and HAR; approved by TREC as a Professional Home Inspection Instructor.

Website: www.sruback.com In addition, he has earned a BS in engineering from Trinity University, is an author of several books and teaches a variety of self empowerment courses. For more information, he can be reached at 832-489-1071.

Purchase Today’s Homes for Yesterday’s Prices!

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can't sell my home because the renters next door keep throwing bottles and yelling obscenities at the potential buyers; landlord tells me to !?#@ myself when I complain to him) and seeing the havoc that one rundown rental property with nightmare tenants can wreak on a neighborhood, I have changed my tune about a landlord's ethical responsibilities.

Like it or not, landlords do have an obligation to the neighborhoods in which they purchase properties. Just as

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* I kept thinking it would be great to have a rental property.

The rent would a house for me, and INSURANCE FORbuy YOUR PROPERTY eventually I'dMONEY own it after$$$ it paid for itself! Figured it SAVE make for a nice nest egg. So, one day I just did it. That house appraised two years after I bought it for more than double what I have in it. I added a few more over the next couple years. Now I am shifting my focus to Freeand quote!

Call or email R.J. AND GENE YI houscashflow finding funding to purchase these es. Don't get me wrong, the houses I have were great investments, but I don't make much on them. I hate my mgeneyi@gmail.com job, and I want out of it. You think the government is hard on landlords??? Try driving a truck for a living! I 10 • aSEPTEMBER want nice row 2012 of Monopoly houses to feed my family and send my kids to college. Hoping to learn more about my new focus at Landlord Convention. -- 574Brad, IN * I left my country very young and worked in countries where inflation got so out of hand that it made rich people very poor because they had all their money in cash. So when I got here in 1992 with no money but big dreams I started to buy real estate because I thought it was good against inflation. If you buy good properties with fixed, low interest rates, and inflation happens your rents will go up and you will be sitting pretty good in the future. -- Jose, CA * In my very early 20's, I always wanted to do landlording as a side business. I figured a little work and a little money could build over time. A few years later I bought my first multi. A lot of work and a lot of money later, up to 24 now, and hope to add 18 more by the end of the year. Hope to quit the day job in 5 years or less.

-- Alex, IL * I'm a landlord because my plans for becoming a rock star didn't work out. :) OK, I'm a landlord because now is the time to buy, hold and rent, although the days of buy and flip are rapidly returning I think, followed in about 3-4 years by buy and build new for retail sale.

I follow the cycles. We may or may not hold rentals long term as I get older. -- LL, AZ *12It'sEn this er simple--There is no better investment • SEPTEMBER 2015 • WWW.RICHCLUB.ORG now, after losing a million in the stock market I

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Here’s How to Increase Your Rental Property Income Jeff Johnson, Director of Lending, Catalyst Funding Purchasing a home is getting more and more affordable. In fact, it is now estimated that homeowners pay half as much for their monthly mortgage than renters pay for their rent. It doesn’t help that rental rates rose 3.2% on the national level last year, which was partly driven by the number of rental properties available—or lack thereof, really. In 2014,the rental vacancy rate fell to 7.6%, the lowest number in decades.

The Demand for Rentals Continues to Rise Using simple supply and demand logic, the increasing preference of people to rent instead of own allows us real estate investors to take a step back and evaluate the opportunities in the rental market.

Tips to Maximize Rental Income As is the case with most transactions in the real estate industry, renting out a property can be a very time-sensitive operation. Thus, we here at Catalyst Funding have put together some tips to make sure you’re getting the most out of your rental in the Houston market.

because many Millennials are not saving for a down payment to purchase a home. Another reason is because the younger generations are more likely to move around the country, thus opting for the flexibility that comes along with renting.

If you need any other tips when it comes to your rental properties, or any real estate guidance, give Catalyst Funding a call at 832-648-3626. We provide hard money loans in Houston, Texas and are committed to helping real estate investors through their entire investing journey. As always, please conduct due diligence before any decision you make.

Jeff Johnson is the Director of Lending at Catalyst Funding. Jeff has 14 years of lending and sales experience leading various Regions and Branches with companies such as NationStar, Accredited Home Lenders, Aegis Lending, Morgan Stanley and Aames Home Loan. During that time he has managed operations that consist of 100+employees and has a wealth of experience with startup organizations

1. Keep your rentals in good shape. This includes keeping up with the maintenance and repairs both before and after you have tenants. If a property is in good condition, there will be higher interest from potential tenants, and if you continue to keep it in good condition, they will be more likely to renew their lease every year. A little extra expense now can really increase your rental income down the road.

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2. Price your rentals correctly. Speaking of income…once you have your rental property in good shape and ready to rent out, you have to find that sweet spot in pricing. If you price your rental too low, it will fill quickly, but you could potentially lose out on thousands of dollars in rent; if you price and it tooinvestors. high, it will Lenders sit on the have markettightened for a while.their Once lous brokers again, you’ll be losing out on the cash flow from rent. We standards, andencourage honest appraisers so afraid highly you to hire aare realtor, as he orof shebeing will accused be of able fraud they’re a propto that accurately tellhesitant you whatto theappraise market rate is for erty for your property. more than its most recent purchase price. The

result?3.Those usapplicants who arethoroughly. doing legitimate repair and Screenof your Bad tenants are going resell deals are having a difficult loans for to happen, but these instances time can begetting minimized if you thoroughly screen your applicants.

Trust us, it will save our buyers. Investors who have engaged in or cooperated you a lot of money in the long run, as well as headaches. with thisAlso, scam have cost lenders hundreds of millions of evictions are both time consuming and costly; it is dollars, cost thousands of buyers the American dream estimated that it costs nearly $2,000 to evict someone. and cost the industry its reputation. So when my fellow As more and more Millennials are starting to look into their investors tell me thatit’s they aren’t doing “wrong” housing options, important to lookanything at the trends.

And, by helping these happen, wonto putmake it simply, theydeals definitely prefer Itojust rent.have Part to of this is der.

Buyer Beware. One of the most heinous–and common–things I’ve witnessed is the "wholesaling" of prop-

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DATE PLANNER SEPTEMBER 2015 DAY DATE TIME EVENT Wednesday 2 6:30-9PM Mineral Rights Focus Group meet at Central Market* 7-9PM IRA Money Meetup 7-8:45PM Taxes and Asset Protection Focus Group: Michael Holmes Monday 7 Labor Day—No workshop 7-8:45PM Toastmasters Tuesday

8

Thursday 10

7-8:45PM WIRE (Woman in Real Estate) Focus Group 10-12PM Galveston County Focus Group* 7-8:45PM Mobile Home Investing 3rd

Saturday

12

8:30 AM

Monday

14

7-9PM Monday Night Workshop & Webinar— Fast Track Remodeling 7-8:45PM Toastmasters

Tuesday 15

7-8:45PM MultiUnit/Commercial Focus Group 7-9PM Fort Bend County Focus Group* 7-8:45PM New Member Orientation

Thursday

17

7-8:45PM Investor Workshop & Guest Orientation

Monday

21

7-9 PM Monday Night Workshop & Webinar: Capital Concepts 7-8:45PM Toastmasters

Wednesday 23

7-9PM

SEO Internet Marketing

Thursday

24

7-9PM

ational Speaker Eddie Speed: Profit in N the Note Business, Members Free, Nonmembers $

Saturday

26

10-5PM National Speaker Eddie Speed $

Monday

28

7-9PM Monday Night Workshop—HUD1 Updates: Post Oak Title 7-8:45PM Toastmasters

Main Event & Trade Show

$ = additional fee * = meeting NOT held at RICH

Check the calendar for schedule changes and meeting locations. www.RICHCLUB.org/calendar

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Antoine Dr.

7-8:30AM Breakfast Networking 7-9:45PM Kiyosaki’s Cash Flow Game Night

St.

Bingle Rd.

Friday 11

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RICH Headquarters The Realty Investment Club of Houston is located at 4220 Lockfield Street, Houston, TX 77092 (One block from the 290 & 43rd St. intersection).

Join, Learn, Grow 4220 Lockfield Street, Houston, TX 77092 713-947-RICH (7424)