SEPTEMBER 2018
REÂ N E W S
INVESTMENT
NEWSLETTER OF MID-AMERICA ASSOCIATION OF REAL ESTATE INVESTORS
September Meeting:
99 Ways to Make Money in Real Estate! Finding the Niche that pays with
Virtual Workshop
Dr Tameka Bryant MAREI.ORG
Fast Start
Real Estate Investing
SUCCESS
MAREI.ORG/CALENDAR
THE CALENDAR
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SEPTEMBER MEETING 99 WAYS TO MAKE MONEY IN REAL ESTATE We are excited to have Tameka. Bryant join us at the September Meeting because she is an inspiration, living many of her 99 Ways to Make Money In Real Estate over the years. She is joining us to share how to Find the Niche that the best for you and the tools you need to get the job done, even if you are on the beach. Join us at the September MAREI meeting on the 11th. Doors open at 6 pm for Networking, to Buld Your Team with our Vendor Hall, Share a Deal or Business Card on our Deal Table and th Ask a Question at our New Genius Bar featuring Wholesaler Marcus Bray and ___. Monthly meetings held at the Holiday Inn at 8787 Reeder Road, Overland Park, KS. MAREI Members & First Time Guests who Pre-Register at MAREI.org attend free all others pay $25 at the door or $15 online. As always there will be the Business Hall, the Deal Table, and Networking from 6 to 7 pm. Presentation starts at 7 pm.
See full day workshop page 5
SEPTEMBER WORKSHOP Mailing Address: 6709 W 119th #332 Overland Park, KS 66209 Phone: 913-815-0111 Web: MAREI.org Web: MAREIMember.com Email: Kim@MAREI.org Views and advertising expressed in the RE Investment News are not necessarily endorsed by Mid-America Association of Real Estate Investors. The information contained within should not be construed as a recommendation for any course of action regarding financial, legal, or accounting maters by MidAmerica Association of REal Estate Investors.
ual t r i V
FAST START TO REAL ESTATE SUCCESS
MAREI founders Kim & Don Tucker started investing in Real Estate in 2000 and started MAREI in 2004. Over the years they have been asked time and time again “Where do I start?” There is no easy answer . . . no one size fits all answer that works work for everyone. But because every person is different with different resources and different goals, there are many different approaches to investing. Successful investors have a plan and sometimes change that plan to expand their business or redirect their business as situations change or as markets shift. In this Virtual Workshop: Fast Start to Real Estate Investing Success on Saturday, September 29th, MAREI founder, Kim Tucker will be giving brand new investors a broad overview of what they need to know to get started with real estate investing. The workshop will be from 9 am to 4 pm on Saturday, September 29th on a computer or other digital device near you.. MAREI Members pre-register for $49 nd NonMembers for $79 at www.MAREI.org
Email to inquire about advertising oportunties or membership.
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real estate news CITY ORDINANCE FOR RENTALS Cities across the country are implementing rental licensing and inspection regulations at an unprecedented rate. Here in the Kansas City Meto in the past few years, several cities including Overland Park and Independence passed new ordinances. This past August Kansas City Missouri passed new regulation and it is rumored that St Joe, Grandview, Blue Springs and Lee's Summit are all working on regulation. A quick Google Search for any particular city and the words rental licensing or rental registration does not always get the information you seek. Sometimes that city has regulation, but even Google is at a loss to find it on the public city website. Here at MAREI we started a research project and need your help. We searched for the various cities, their rental registration and inspection regulations and we compiled what we were able to find online at www.MAREI.org/Ordinance/. While you can start your research on your own metro city with this resource, we do recommend you do your own due diligence. And if you know of any 04
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regulation that is missing, to please notify us so we can update the page.
WALL STREET, THE NEW LANDLORD The foreclosure crisis transformed large slices of American home-ownership into a home-rental industry dominated by a group of Wall Street corporations, the largest of which is Invitation Homes. “Single-family home rental used to be a small-scale and local business, built around direct ties between landlords and tenants,” the report says. “In the new Wall Street rental empires, the relationships are impersonal, property managers come and go, and the executives who call the shots often have trouble hearing the voices of their tenants over the clamor of their investors. During the housing crisis, large hedge funds bought up thousands of single-family homes for cents on the dollar. Some have sold them off to public real estate investment trusts and others kept the homes and still manage them today.
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Those first trailblazers have created a whole new industry for wall street by "financializing " rents. Now the second wave is starting of large private equity firms out there forming public offerings to raise capital to buy single-family rental homes and then rent them out.
“In spite of all the new domestic production capacity, the demand has outstripped the country’s ability to supply,” Floor Covering Institute president Jim Gould told FCW in regard to luxury vinyl tile (LVT). “Most manufacturers are sold out and are supplementing their supply from Asia.”
Much of this big business of wall street landlords was started in late 2011 and was initiated and supported by the Federal Reserve as a way to fix the housing crisis.
In response to the proposed tariff, Metroflor, Shaw Industries, Novalis and Creative Flooring Solutions (CFL) have joined the recently-established American Consumers and Workers Justice Coalition (ACWJC) headed by Harlan Stone, president of the Multilayer Flooring Association and CEO of Halstead. They are inviting others in the industry: manufacturers, distributors, retailers, and installers to participate.
Learn more and access the articles used as a reference at www.MAREI.org/WallStreet
TRUMPS TARIFFS COMING TO THE REAL ESTATE BUSINESS For the past few years, the hottest product in flooring for the average real estate investor has been Luxury Vinyl Tile. It is durable, affordable, and inexpensive to get installed. But that is set to change if newly proposed tariffs are implemented. President Donald Trump’s proposed tariffs on $200 billion worth of Chinese goods includes Luxury Vinyl Tile (LVT) and multilayer flooring products such as Wood Plastic Composite (WPC) has prompted a group of vinyl flooring suppliers—namely Shaw, Novalis, CFL and Metroflor—as well as the American Chemistry Council and the Vinyl Institute, to form a coalition against its implementation.
There are others however who fell that the tariffs may work to generate more domestic production, imports fro mother countries, and investment in manufacturing plants at home. In the short term, suppliers are being advised to hurry up and order a stockpile before tariffs get implemented.
TRADEMARKS SHOULD BE CANCELLED A federal judge concluded that the phrase "We Buy Houses" and the website name "WeBuyHouses.com" are generic and should not be protected under trademark law. The court found these terms have been used in the real estate industry since at least 1898 in all kinds of print. Many an investor has received a letter telling them these terms in their marketing campaigns are trademarked and that they can't use them. Back in June of 2017, Express Homebuyers USA, a Virginiabased company filed suit against WBH Markeitng, Inc. and its founder and CEO Jeremy Brandt, the owner of the trademark, to get the trademark canceled. WBH was working hard to get Express to stop using the phrase online and filed trademark complaints with YouTube alleging that approximately 91 of RE INVESTMENT NEWS
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Express Homebuyers advertising videos violated WBH's right in its trademarks. And this is just one company being targeted among many.
KCRAR'S JULY 2018 HOUSING REPORT
Express Homebuyers started a petition on Change.org to cancel the trademark and 1873 investors across the country signed. And their GoFundMe Account to pay for the case received 183 donations of $137,909 to pay for the legal battle.
Housing price bubble chatter has increased this summer, as market observers attempt to predict the next residential real estate shift. It is too early to predict a change from higher prices and lower inventory, but the common markers that caused the last housing cooldown are present. Wages are up but not at the same pace as home prices, leading to the kind of affordability concerns that can cause fewer sales at lower prices. At the same time, demand is still outpacing what is available for sale in many markets.
Judge TS Ellis III not only ruled that the trademarks for We Buy Houses and WeBuyHouses.com were generic but that the damage claims for trademark infringements were dismissed. A Win for Real Estate Investors Everywhere.
PROPERTY OWNERS BEING ATTACKED ON THE COAST Kansas City, middle America is probably the last place to implement trends. What starts out on the east and west coasts, eventually makes its way to the Mid-West and what is happening, especially on the west coast could make lasting changes in housing if it is not stopped. Portland landlords are gearing up for a fight over legislation that would limit their use of an applicants criminal history as well as a proposal to reduce income and security deposit requirements. Seattle already has these rules. Many cities also want to limit the ability of the owner to select tenants and require applicants be accepted on a first come first served basis, without any subjective look at the background and screening that is very important in the selection of tenants. One report shows 40% of Seattle landlords are selling out due to their new rules.
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Closed Sales increased 5.1 percent for existing homes and 6.7 percent for new homes. Pending Sales increased 13.7 percent for existing homes but decreased 6.7 percent for new homes. Inventory decreased 7.1 percent for existing homes but increased 2.8 percent for new homes. The Median Sales Price was up 6.5 percent to $197,000 for existing homes but decreased 0.4 percent to $356,144 for new homes. Days on Market decreased 12.8 percent for existing homes and 6.6 percent for new homes. Supply decreased 8.7 percent for existing homes and 3.7 percent for new homes.
California landlords are in a battle to make rent controls legal in that state.
Consumer spending on home goods and renovations are up, and more people are entering the workforce. Employed people spending money is good for the housing market. Meanwhile, GDP growth was 4.1% in the second quarter, the strongest showing since 2014. Housing starts are down, but that is more reflective of low supply than anything else. With a growing economy, solid lending practices and the potential for improved inventory from new listing and building activity, market balance is more likely than a bubble.
These are all issues that local area cities are discussing. Pay attention, Stay Engaged.
From Kansas City Regional Association of Realtors. Get the full report at kcrar.com/Statistics
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PROFESSIONAL SERVICES MEMBER BENEFIT
By their very nature, most real estate investors are very independent, hard working people. They are also the same type of people who have a hard time asking for or accepting help. But every successful real estate investor learns how to hire help. You will need a team of people working in and outside your business that can support you. There are going to be tough days and these are the people who will get you through sticky situations. The better the team you have around you, the greater your chances of estate investing success. Every team needs to have the right combination of players for success. It’s critically important to find the right team of professionals who know what they are doing, can recognize the needs of investors like you, and have mastered the logistics 08
Iof the real estate acquisition & disposition process. The right team will not only have your best interests at heart but may actually save you hundreds, if not thousands of dollars along the way.
2. Vendor Expo
Team Building Resources
At every monthly meeting there will be 10 to 15 Business Associates assembled and ready to assist you. Find out what services they have to offer and how they can help you in your business.
1. Business Directory
3. Deal Table
MAREI maintains a database of local and national vendors who not only want to earn your business, but are also very experienced in your business.
At every monthly meeting you will also find a deal table where members can share business cards and deal flyers. 4. Facebook Group
These vendors can not only help you with your transaction as it relates to their product or service, they can often answer other questions and refer you to other service providers.] Ask them questions, their answers can save you time and money.
MAREI also moderates a Facebook Grou for their members to ask questions and for referrals at https://www.facebook.com/grou ps/kcrei
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REAL ESTATE SUCCESS why some find it and others don't! You have probably heard about the 80 / 20 rule. After being a leader of a real estate investor association (REIA) since 2000 I have seen the 80 / 20 Rule in action. Out of any given group of people who come to a REIA with the goal of being a success in real estate, 20% Succeed and 80% do not Look at a random group of 10 who start at about roughly the same time you will find that: 2 decide it’s not for them after a couple of meetings 2 work hard learning everything, but never take action 2 work hard, take some action, but lack focus. 2 complete a few deals here and there and end up getting a new job, possibly in the industry 2 will succeed, they will reach their goals and plans in real estate investing. Ever wonder what makes those last 2 successful while the other 8 just never get there? Do a little research on successful 08
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people and you will learn that successful people do certain things to gain success and it is the same in real estate. Those that succeed: Have a Reason Can Define Their Success They Educated Themselves Have an Overall Plan They Develop Action Steps They Eliminate Distractions Surround Themselves with Greatness. Find Reward in Achieving Their Goals
successful are able to write out what that “WANT” is and picture it in their mind. So when the things go wrong as they often do in real estate, they can go back to, but I Want this, therefore I will not quit or give up. Can Define Their Success: The successful can tell you exactly what it is that will mean success in their eyes. They can tell others what it is they see when they picture their successful future.
Let’s look at this list a bit more in depth
For Example:
Have a Reason: The successful have an overall reason that drives them. It’s not because they don’t like their job or they hate their boss. It's usually more along the lines that they want the financial freedom to do what they want when they want and how they want.
In Ten Years I will have the freedom to work 5 hours a day, 4 days a week. Have the freedom to take my kids to school and pick them up after. Time to take part in their school and sports activities. The ability to take two vacations a year. I have free time to practice my music and play in a band. And at least one weekend a month my family will be able to participate in an event or take a short trip.
That “WANT” is will be what is different for each person, the financial and time freedom is going to be similar from investor to investor. The
In Ten Years I will have all debt paid off WWW.MAREI.ORG
except for debt that is working for me. I will have $20,000 in reserve for cash emergencies. I will earn $20,000 every two months from flipping a house that will fund my trips and vacations in part and fund new business opportunities for me. I will earn $10,000 a month in monthly cash flow after expenses from my rental properties and I will manage the property manager. In Five Years, I will be working 5 to 6 hours a day, 5 days a week and have the freedom to spend time with my spouse to create those kids. We will have the ability to take one nice vacation a year and every few months have a short 3- day weekend adventure. In Five Years, I will have paid off all our families student loan debt of $90,000 and paid off the $10,000 in credit card debt. I will have retired from my job as my cash flow rental properties are earning $5,000 a month in cash flow and I will be earning $10,000 a month from flipping properties that I will be
investing back in my business to get as many of my rental properties paid off so at 5 of them will be free and clear year 10..
rental property or buying and then selling houses in lease option, contract for deed or even seller financing.
Most people will have a few common ingredients in their definition of success: Debt Paid Off, Cash in the Bank, Cash Profits Coming in and Monthly Cash Flow that eventually replaces their current job. What is often missing in many plans, however, is the Time Component and the developing of systems and a team so that the work gets done without the investor doing everything.
Successful people pick one strategy to start with, and master that one while learning about the secondary strategy. Those with debt and not a lot of money in the bank tend to focus on the flipping strategies for large cash profits. Those that have some cash and credit will often start by purchasing a single- family rental or possibly a duplex to live in one side and rent out the other.
They Educate Themselves: Successful people allocate some time to doing their homework and figuring out what strategy best fits their goals. For example, those that need to retire debt and build up cash will look for cash profit strategies like wholesaling houses, rehabbing and flipping houses, or wholesaling notes. Those who want to build cash flow might turn to acquiring
Once the strategy is selected, the successful person goes out and finds a mentor or a trainer who does exactly what they want to do and the buy their system to implement it. Have an Overall Plan: Once the successful person has acquired the education and the basic system to implement, they sit down and write out an action plan that details how to
Video Conferencing That Always Works - No Matter What... MAREI recently switched to Zoom from a competitor. We have found it to be very similar in function, easier to use and way more affordable. We invite you to check out Zoom - visit MAREI.org/Zoom RE INVESTMENT NEWS • PAGE
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go from a just built system to their oneyear success, their five-year success, their ten-year success. The plan clearly identifies the niche to focus, tasks to complete to find deals, strategies to utilize for the acquisition of property, projected profits from each transaction or cash flow acquired. How many deals by specific dates, how much debt paid off monthly. Develop Action Plan: Having an overall plan is not going to get you to success. The next step is to break that plan down into actionable steps: Do one deal a month. Make three offers. Talk to 20 sellers. Send out 1000 letters, spend $500 a month in Google Pay Per Click, and make 10 blog posts a month. Quite often the successful person does not figure out how to send out the letters, or manage the pay per click or make the blog posts, they figure out how to get those tasks done for them, so they can focus on talking to sellers and doing deals
creating a good working environment without the distractions of TV, Social Media and other people, the successful are able to focus during their limited free time to build their successful business. Surround Themselves With Greatness: Successful people figure out ways to hang out with others who are already successful. These people can become mentors, private lenders, sounding boards and even friends. Join and attend your local REIA group and a few other smaller groups. These groups are a great place to ask questions, ask for referrals, test out ideas and to help you celebrate success and to pick you up when you fail. Many times, the really, successful failed miserably when they were getting started, but with the help of their great successful friend, they were able to salvage the deal, learn from the mistake, and become a better, more successful investor as a result.
Find Reward in Acheiving Their Goals:: /Sure when they start on their path to successful real estate investor, they might want a nice dinner out or a trip. But most successful investors get reward in a job well done, Getting things done. And for me, depsiting that profit check in the bank or making a tally of our monthly cash flow coming in is very rewarding. I can visually see my success by looking at reports in my Quickbooks. Are you stuck, spinning your wheels, not sure what to do first? Join me on Saturday September 29th for a Virtual Workshop Online. Details, Pricing & Registration online at www.MAREI.org.
They also review the action plan regularly. If the goal is to do one deal a month and the current system is not generating enough seller calls the successful investor either increases their marketing or improves their negotiation skills or both. Eliminate Distraction: We often find that a few that fail, know exactly what it is they want to do. They have the education and even the plan and action steps. But they get stuck without taking action.
Some are distracted by the gurus who are always coming up with the latest and greatest thing they need to know to be successful in real estate. Some get distracted at paying someone else for their knowledge. Some get distracted by life itself. In order to succeed, remember you don’t need to know every strategy, just one or two. It’s ok to send a few $1000 on a training system, and then implement it and get it working. And by 10
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Topics of discussion include Your Investing Education Your Niche and Sstrategies Your Business Plan The Best Investments Funding Your Properties Real Estate Marketing Exit Strategies Building Your Team Asset Protection & Tax Savings Moving Forward
Saturday Sept 29th 9 am - 4pm Virtual MAREI,org WWW.MAREI.ORG
REHABBING HOUSES
Adapted from an article by Nathan Brooks on BiggerPockets.com Renovating properties is an allconsuming process and can become a nightmare both financially and personally if you aren’t totally dialed in with every part of your business. Nathan Brooks and his team over at Bridge Turn Key Investments have been developing their system to grow from a few dozen rehabs a year to well over 150+ for 2018. That much volume comes with practice, dedication, failure, clarity, focus, learning, and time. By learning the lessons on from both the successes and failures and implementing those things into their business, they have continued to refine what the processes look like. They are working to change the way they tackle their renovations, the team’s happiness, and the bottom line. Big Picture Questions It does not matter if your flipping just a few houses a year or scaling your 08
DEVELOPING YOUR
business, you need to know the rules of lthe game and how to keep score. Here are some big questions you need to answer in your own business plan: What is Your Buying Criteria? - What area of the city or town? - What price point of property? - Other house details: square feet, beds, baths, neighborhood?. What is Your Expected Profit Margin? - What areas to avoid? - What does your money cost? - What is an acceptable profit? What is your goal for the month / quarter / year? - Clear goals set for the number of deals, dollars or both? - Funding resources for that many deals and how best to allocate those funds? - What needs done to hit your goals? What is your exit strategy? - Hold the property as a rental? - Sell it retail on MLS? - Sell it off market to private buyer?
RENOVATION PLAN
Remember, it doesn’t matter how awesome your contractor team is if you don’t know what the goal or the score is. If you don’t know your goal or how to score, you have no idea if you are winning or losing. When you sit down to build systems, if you have a concrete set of ideas and goals is way easier than trying to hit a moving target. Define Everything By defining the answers to the questions in the previous section, you will have a clear idea of what kinds of properties and what you need to do to acquire them and what you need to look for as you are buying them. As you are looking, you’ll start to develop an idea of the type of rehabs you are doing. The team at Bridge is in the lower/middle of the average home prices in the KC market. Within their rehabs, they typically have two different types of renovations. They sell turnkey homes, and they sell fully RE INVESTMENT NEWS • PAGE
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renovated properties on the MLS. Although similar, there is a distinct difference with the level of finishes and potential complications with colors, tile selections, etc. within the MLS properties versus the turnkey properties. No matter where you are in your rehab project right now, take a step back and ask the next question: - Do I know what the rehab is supposed to look like when I am finished? - Do you know colors, type of flooring, bathroom finishes, kitchen finishes, types of lighting and fixtures, landscaping materials and the over all vibe and feel of the home. If you don’t know these things from the start of the project, you need to step back and figure them out. Nathan shares that “I’ve gotten into renovation projects with no idea what the end result will look like, resulting in pain, sleepless nights, and lost money. Looking back, these were a very scary miscalculation.” So, if you don’t have the answers from the start, then you have two ways to figure them out. 1. You Define Your Project - Know in detail want you want the house to look like when finished. - Know or learn what needs to be done to reach the desired end result. - Write down everything and create a detailed scope of work. - Review the scope of work with the contractor and sign an agreement defining timeline, cost, and end result.
Use a Designer: find out what design makes sense for the house at hand, what do other houses look like, do the colors and selections match the cost and type of property you are selling based on your end strategy for the property. Ie, if you are selling retail or as a rental, do you have the right overall look and feel? Use a Contractor: does he understand the designer’s instructions on the type of selections and what the end result should look like. Does the budget and scope of work match, is there a clear timeline for results? Use an Architect or Engineer: is there anything additional needed to complete the desired design and is all the work completed to code, safe and functional? And if there are structural issues, always consult with an expert. Use a Real Estate Agent: does the pricing for your resale make sense relative to your renovation plans, will the scope of work result in a property value you seek. Do you have the right exit strategy for the property? Bridge has almost all of these team players on their team, but they didn’t start out that way. They have a long list of mistakes they made when buying properties that they thought were “good deals” without examining the exit strategy or compared to other opportunities they had in the market. The process for renovating a home might seem daunting and at first it is. But by utilizing experts in their field, the designers, the contractors, the engineers, the Realtors and even learning from other investors to create a clear, detailed plan for each house, the task becomes just a little bit less scary.
2. Get help defining the project
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Incredible Tools to Help You Make The Best Real Estate Decisions AS A REIA MEMBER AND A PART OF UNITING INVESTORS, YOU’RE GRANTED 10 FREE VALUE REPORTS WHEN YOU SIGN IN - JUST GO TO http://housecanary.unitinginvestors.org/
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SELF DIRECTED INVESTING
TOP 10TIPS
TO REMEMBER
By Jeff Watson, Esq.
During a speaking engagement in front of a large REIA in a Midwestern state, I asked the audience how many of them had set up a self-directed retirement account. Approximately 85% of the room raised their hands. After the presentation, I discussed that fact with a friend of mine has been doing selfdirected investing since the late 1970s. He made the comment that when that question was asked a little over ten years ago, only five to ten hands would be raised in a room of over a hundred people. Clearly, the awareness of self-directed investing is growing.
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With that in mind, I would like to share with you what I consider to be the top ten recommendations for self-directed retirement account investors.
One: If you do not understand the deal, do not do it! This is one of the fundamental rules in all types of investing, whether inside or outside a retirement account. Understanding the deal means more than just being able to say you understand it. It means being able to explain it in a way that makes the complex sounds simple. You should be able to explain the deal in three sentences to an 8-year-old child. When a person is able to explain something complex in a way that even an 8-year-
old child can understand, then you know they truly understand what they are doing. I have seen too many investors who made investments with a self-directed retirement account and later regretted it because the person with whom they invested or to whom they lent money was far more sophisticated than they were, and they felt like they had been taken advantage of. Ask me how I know! Allow me to give you an example of a simple explanation. I am going to loan $50,000 from my retirement account to Fred. Fred is going to use that money and other money to buy a house, fix it up, and resell it. My loan
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to Fred will be secured by a mortgage against the house he is buying and fixing. There, in three simple sentences, you can explain a deal that many people could take paragraphs to cover. Two: Always fund your accounts every year. Many real estate investors are struggling with ongoing monthly cash-flow needs, and they forget to discipline themselves to set up an automatic or systematic program for funding their retirement accounts, whether they are Roth IRAs, 401(k)s, HSAs or CESAs. Pick the two or three accounts that really matter to you and determine what your monthly budget needs have to be in order to be able to put approximately $6,000 per year into those accounts. At a minimum, you should be funding approximately $6,000 into your IRA, your spouse’s IRA, and your HSA. If you do not fund your accounts, you will have very little to work with for investing purposes. The discipline of consistently funding your accounts creates the “seed” you will plant and subsequently reap in future, profitable harvests. If you never create the seed, you’ll never be able to plant it. Three: Know the things in which you cannot invest. The list of things in which you cannot invest with a selfdirected retirement account is very simple: collectibles, shares of sub-S corporations, and life insurance contracts. Once you understand what you cannot invest in, it means everything else is possible. The same theory also applies to the next rule. Four: Know the prohibited transaction rules, or hire someone who does. We all think we understand the rules; but when we are in a hurry and get into a deal with a lot of moving parts, we often don’t take the time to analyze the transaction in light of all the prohibited transaction rules, particularly rules regarding not providing a service to
your account, as well as direct and indirect benefit rules. Many retirement account investors are unable to distinguish between what they believe is a service and/or managing their investment, let alone explain whether they are using their retirement account in a way that either directly or indirectly benefits them now or in the near future. It is prudent to do at least an annual review of the rules regarding prohibited transactions and disqualified persons so you can keep current as to what you can do with your self-directed retirement account investments. There are many good resources from custodians, administrators and trustees, lawyers, and even some reasonably-priced books on the internet. These will give you a basic understanding of most of the rules for prohibited transactions and investments, and disqualified persons. If you are a fact junkie like I am, or if you suffer from chronic insomnia, you may want to take the time to carefully read 26 U.S.C. 4975, as well as the Plan Asset Rules promulgated by the Department of Labor. Five: Remember that it is a retirement account, and you need to treat it as such by doing longer-term, cash-flowproducing deals. Many times, an investor gets trapped in what I call “yield disease.” They are looking for a high rate of return and are willing to do short-term deals (such as hard money lending) in order to achieve those rates of return. While 3 points and 15% might sound impressive for a 6-month period of time, that deal pales in comparison to an investment that may last for four years consistently earning a 12% rate of return. Since the goal is to amass a good-sized retirement account, you need to work toward that goal. My suggestion is that you do it by focusing on longer-term deals. Consistency is important because slow and steady wins the race.
Another benefit of doing longer-term deals is that it is much easier to do the necessary due diligence and underwriting for one longer-term deal than for a series of shorter-term deals. There are fewer demands on your time and fewer opportunities to make mistakes. Six: Do small-dollar deals until you get really comfortable with doing all the due diligence, underwriting and documentation that goes along with self-directed investing. If you do a small-dollar deal (remember, all accounts started out small) and something goes wrong, you only lose small dollars. If you do a large-dollar deal, particularly at the beginning of your investing career, and something goes wrong, it could be fatal. As your confidence and experience grow, you can do larger-dollar deals. Seven: Dealing and acting like a business owner inside a self-directed retirement account is not a good idea. Many people will tell you that UBIT can be your friend, and I would agree that in certain circumstances, UBIT or UDFI are potential allies to your retirement account; but acting like a dealer or owning a business inside your selfdirected retirement account is not wise. Not only does it create a higher risk of liability and lawsuits, but there is a greater likelihood that it will attract the attention of the IRS. You will also have to file a more complex tax return because the debt or business activity income inside your self-directed retirement account is not tax-free. I’ve had people say to me, “But, Jeff, I’ve been told that in order to have a truly self-directed retirement account, I must have checkbook control.” Checkbook controls come when the IRA owns an entity, such as an LLC or trust that is funded with IRA dollars, and the checkbook is in the control of the account holder. My response to that is that IRA-owned entities can either be awesome or awful. You had better know RE INVESTMENT NEWS • PAGE
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contracts. Once you understand what you cannotwhen which and why. It’s a rule of practice in my office that I will not assist a self-directed retirement account holder in setting up a singlemember LLC to be owned by an IRA wherein the account holder insists on being the manager (person in charge of the funds). I insist that they have an independent, non-disqualified third party as the manager of that LLC or the trustee of that trust. Eight: Open a Roth account. Many investors who are getting up in years have lamented that they only have traditional accounts, and they don’t think there is any way they can get a Roth account. My response to that is that anyone with a pulse and a way to earn and report active earned income can have a Roth account, and they need to get one NOW! There are simply no excuses. Once you have learned the definition of what constitutes active, ordinary, earned income (income
that is subject to income tax or selfemployment tax such as W-2, paycheck, 1099 or Schedule C income), you will understand the importance of getting some of that money into a Roth IRA or Solo 401(k) with Roth component. The magic of the Roth is absolutely crucial. Not only does the money get to grow tax free, but under the right circumstances, it can be withdrawn from the account in the form of a qualified distribution tax-free. Nine: Make sure you double check the beneficiary designations for the accounts you have established. This rule actually applies to every type of retirement account, investment account, or bank account you have. You need to double check your beneficiaries. Is that money going to go to the person you want it to go to in the event of your death? Is the beneficiary designation consistent with your overall estate plan? Ten: Become creative and learn how to play nicely with financial friends. Selfdirected retirement account investing is a
team sport. It is not a solo activity. Anyone who understands the prohibited transaction and disqualified investment rules understands that you cannot take money from your self-directed retirement account and use it for your own investments or put some of your current assets into those accounts, so you must learn how to work with other individuals in a cooperative manner. You need to find those individuals by networking with them at your local REIAs to determine if their business standards are the same as yours if their objectives are similar to yours, and if they seem like the right kind of person to put on your investing team. When you play nicely with financial friends, all of you prosper and benefit. Avoid doing a deal with someone who believes they alone need to be the one who profits and benefits from the transaction. If the investment is not mutually beneficial, it shouldn’t be done by a group of financial friends. One of the benefits of developing a group of financial friends is that
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Build Your Team With MAREI Business Members Save time and money by starting with service providers who already know your business. Who can solve problems as they arise to help you get the deal completed on time and for maximum profit. Accountant Coleman Accounting Service Bob Coleman www.ColemanAcctg.com 913-787-0308
Rick Davis Legal Real Estate Law Rick Davis www.RickDavisLegal.com 913-283-8300 Auction Company
Mid America Tax Planners Ahmad Malik www.Accounting-USA.com 913-210-4765
Auction.com Rachel Bailey www.Auction.com 816-797-6875
Appraiser Building Supplier Ladys Appraisal Service Kathy Allen-Gray www.LadysAppraisal.com 816-678-2794 Attorney Anderson & Associates Evictions / Collections Julie Anderson www.MOKSLaw.com 816-931-2207
DeMayo Enterprises Wholesale Cabinets Mark Yanda www.DeMayoEnterprises.net 913-980-4260
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Contractor Hearth Masters Fireplace / Masonry Gene Padgitt www.ChimKC.com 816-461-3665 Genesis Home Restorations Mold Remediation Terry Amerine GenesisHomeRestorations.com 913-270-0812 HCS Restoration KC, LLC Mike Peace HCSRestorationLLCKansas.com 913-731-6537
Joe’s Carpet / Weber Flooring Jerry Ratway www.WeberFlooring.com 913-236-3680
NuLook Custom Finishes Cabinet Refinishing Carol Baldwin www.NuLookFinishes.net 913-385-2574
The Home Depot George Neal 816-461-9583 2% Rebate / 20% Off Paint Details in Member Benefits
Under Pressure Property Services Rehab, Maintenance, & Staging Dallas Kidd www.MyUnderPressure.com 913-274-9555
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Insurance Agema Insurance Fred Dickinson www.AgemaIns.com 913-543-8116 Arcana Insurance Rental, Vacant, Landlord & More NREIA.ArcanaInsurance HUB.com 877.744.3660 IRA - Self Directed Equity Trust Company TrustETC.com/NationalREIA FREE Training 844-732-9404 Lending Flat Branch Home Loans Morgtgage Banker Beth Langston FlatBranchHomeLoans.com 816-479-5841 x 1148 Crossroads Investment Lending Hard Money Britton Asbell / Doug Harris www.KCLend.com 913-800-8226 House Traders Monthly Meeting Investors Choice Funding Hard Money Scott Ficinus InvestorsChoiceFunding.com 816-668-7223 Longhorn Investments Hard Money Mike Minor www.LongHornInvestments.com 913-209-8630 Merchants Mortgage Mushy Money Susan Aubin www.MerchantsMtg.com 303-514-0815
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North Oak Investments Hard Money Tommy Nigro www.NorthOakInvestment.com 816-249-1001
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REI Investor Funds Hard Money Charlie Fitzgerald www.REIInvestorFunds.com 913-904-8090
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Revolver Finance Hard Money Jeremy Hanna www.RevolverFinance.com 316-880-1611 Worcester Financial' Hard Money Taryn Kendrick www.WorcesterFinancial.com 816-291-4146 Marketing Constant Contact Email & Social Media Marketing FREE Trial MAREI.org/ConstantContact Investor Carrot Investor Websites Free Training & Discounts www.MAREI.org/IC Pat Live Answering Service Discounts www.MAREI.org/PatLive Zoom Video Conferencing www.MAREI.org/Zoom Office Supply Office Depot / Office Max www.OfficeDepot.com Discount Link & Card in Member Benefits Package
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Bridge Turn Key Investments Nathan Brooks www.BridgeTurnkey.com 913-276-4114 McKinnis Real Estate Turn Key Provider Nick McKinnis McKinnisRealEstateInvestments.com 816-914-2614 KCInvest Investment Properties Scott Tucker & Kim & Don Tucker www.KCInvest 913-735-0018 Pride Properties Wholesale Marcus Bray & Matt Bray www.PridePropertiesHomes.com 913-213-5370 Deal Makers Monthly Meeting We Buy Cash KC Buyer & Seller Justin Montoya www.WeBuyCashKC.com (816) 885-6441 Property Manager Home Rental Services Paul Branton www.Home4Rent.com 913-627-9543 Lotus Key Homes Loni Louis Bernard www.LotusKeyHomes.com 816-838-7368 M & M Property Pros Michael & Michele Bellman www.MMPropertyPros.com 816-490-6745
ALL STAR NETWORKING
Realtor Crown Realty Rich Melton RichMelton.CrownRealty.com 913-215-9004 Realty Resource Scott Tucker www.RealtyResourceKC.com 816-284-7844 Show-Me Real Estate Dan Hartman www.Show-MeRealEstate.com 816-532-6101 Screening Rent Perfect Tenant Screening Plus Heather Johnson www.RentPerfect.com 877-922-2547 Discounts at www.MAREI.org/RP Title Company Accurate Title Company Dave Green www.AccurateTitleCo.com 913-338-0100 Alpha Title Mary Kellogg www.AlphaTitleInc.com 913-498-8999 Trash Out 1-800-JunkPro Trash Pick Up & Dumpsters Clint Pringle www.Junk.pro 816-935-7078 JunkLuggers Eco Friendly Junk Removal Olivia Jones www.JunkLuggers.com 816-905-2204
National Vendors: MAREI is a member of National REIA and you can find many more national vendors by going to NationalREIA.org/Benefits Want to be listed in our directory? For as little as $135 a Quarter or $499 annually, join MAREI as a business member. Details at MAREI.org.
MEMBER SPOTLIGHT KANDY MEEHAN HOME RENTAL SERVICES Home Rental Services opened for business in 1985 as a division of Coldwell Banker. Originally, the company was called Coldwell Banker Home Rental Services. Kandy managed all aspects of the original opening of the business and then handled all daily operations. She then purchased the company in 1989 and rebranded as Home Rental Services. Starting in 1985 with just a desk and a telephone, the company has grown to 10 employees managing several hundred properties... Today Home Rental Services has a hard-working staff that really cares about their owners and renters. They manage hundreds of properties all over Kansas City, both the Kansas side and the Missouri side. Their specialty is rental homes in Johnson County. Kandy and her team are also very active in both the Kansas City Regional Association of Realtors (KCRAR) and the National Association of Residential Property Managers (NARPM) and have committed to some very high Standards of Practice and a very strict Code of Ethics.
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