Real Estate Journal - Summer 2017 by National Real Estate Investors Association

Real Estate Journal

Summer 2017

2. Unusual Risks 3. The Invaluable Power of Tapping the Group

The Fog of War

5. NREIA Legislative Update: What Makes an Ideal Client?

6. The Power of Paint: Easy Updates for Investment Properties

Zach Weaver

ach Weaver is a Managing Member of Mosaic Properties LLC, an Ohio based real estate investment company, based in Northeast Ohio. They provide quality housing in a variety of desirable markets as well as consulting services to investors looking to break into the real estate investing world, and those who are looking to improve profits from current investment properties. He is a member of the Great Lakes Real Estate Investors Association, in Northeastern Ohio.

13. Do Landlords Care About the Tenants they Evict? 15. What’s Your Financial Independence Number? Here’s Mine 16. Will Trump Make Your Finances Great Again? Vol. 2 Issue 3

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The Summer of Cautious Optimism

Please tell us a little about who By Chris Kuehl, Ph.D. you are and what you did before getting into real estate investing: or the most part analysts have I am a husband and father of three. been dismissing the low first I love spending time with my family quarter growth numbers as and helping to raise our kids (ages just another example of the slow 6, 4, & 2 years old). Family is very start that has been appearing continued on page 10 almost every year for the last few. It now seems the Fed shares that assessment as they have described the 0.7% growth notched last quarter as an anomaly and have declared they have no intention of reversing their position regarding interest rates. There had been some that saw this weakness as more serious and assumed the Fed would elect to slow down but these PRSRT STD US Postage P A I D Sound Publishing Inc 98204

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8. Choices

4. Life Long Learning

7. Which Market Is Best for Buy & Hold Rentals?

analysts have been in the minority. The Fed statements make it clear they see the economy gaining strength through the rest of the year. This will mean the interest rates will rise at least twice more this year and there remains an outside chance they will go up three times. For now the rates will be staying between .75 and 1.0. Growth estimates have been all over the place of late. There are still many factors pushing greater growth but there are just as many that are triggering cautious response. The Fed remarks are splitting the

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difference as they point out the strengths and warn a bit about the weakness. As has been commented on four months, much of the current growth has been rooted in expectation. Consumers have been expressing confidence but retail sales have not been keeping pace and the auto sector has been seeing sales decline for four straight months. Are the consumers really as confident as they assert they are? If so, why aren’t they spending? There is doubt that their confidence is real –it may simply continued on page 18

Real Estate Journal

Unusual Risks By Jeffery S. Watson, Esq.

received an inquiry from an alleged debtor relative to a lien placed upon property that he owned as tenancy by entireties with his spouse. She had defaulted on a commercial deal resulting in judgment against her and enforcement of a personal guaranty. Based upon the personal guaranty, the creditor had placed a lien on the property owned and held by the couple for over 25 years as tenancy by entireties. I don’t know if the lien was valid, but it would be a fight to remove it. That situation reminded me how important it is to understand the risks that can often appear in a bank loan. The first of these risks is the personal guaranty, wherein the maker or signer on the note (the borrower) personally guarantees the note on behalf of the borrowing entity. That personal guaranty allows the creditor to pursue any other assets then owned or acquired in the future by the guarantor should the note go into default and a judgment be obtained.

Go back and read the previous sentence again. If that does not sober you up and possibly even scare you when it comes to any personal guaranties you may have signed right now, you need to give it serious consideration. Your vacation home in the mountains, your boat at the dock, your savings account kept at a local credit union – any current or future assets are subject to loss should there be a default on that promissory note and the lender

proceeds to judgment against the borrowers and guarantors. I have seen creditors chase people across multiple state lines in an effort to collect against personally-owned assets. Before you sign the next personal guaranty on any loan, whether bank loan or private lender loan, ask yourself these questions: Do you have sufficient other resources with which to fully pay that loan or note should it go into default? If not, are you prepared and willing

to risk any and all other assets you may now own or acquire in the future if that loan goes into default? These sobering and thought-provoking questions need to be asked BEFORE you sign for that loan. The next of these risks is a cognovit promissory note. I realize that not all states recognize and permit cognovit promissory notes. Those states that do only allow them to be used in a business context; however, I have often seen real estate investors who are borrowing money for their business, or for a rehab or flip, willingly sign a cognovit promissory note without fully understanding what can occur. A properly formatted cognovit promissory note includes the warning language and agreement that the borrower will, in the event of default, allow for the lender to immediately sue and obtain judgment against them. In other words, the lender/creditor can sue on Monday and, with the filing of continued on page 18

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The views & opinions expressed herein by various authors may or may not reflect those of National REIA, its partners, advertisers or affiliates. 2

Real Estate Journal · Summer 2017

Real Estate Journal

The Invaluable Power of Tapping the Group By Rebecca McLean, Executive Director, National REIA

ntil fairly recently, doing

research for a project meant trudging down to the library, feeding the parking meter, and remembering how to use the Dewey Decimal System to track down the information you need from a myriad of books, periodicals, and microfiche (remember those?). This was often an immensely time-consuming process, and the success of the resulting project was often directly proportional to the number of hours spent lifting and looking through weighty tomes of sometimes indigestible information. The current technological revolution has changed all of that for the better, and learning has now taken on a whole new meaning. What was once the dreaded task of looking up something has become both fun & quick because it can be done by surfing the Internet. Not only can research now be done from home (or virtually anywhere

with your phone) but there is literally a world of information out there that can be extracted and used, however we like, at the touch of a button. Search engines like Google make finding specific details quick & exact, and the sheer amount of information we can immediately glean is more than most libraries could ever hold - all of which makes me envious of today's

schoolchildren. With summer now getting started, students everywhere are taking a break from school, so this is the perfect time to talk about how technology has changed the way we learn; whether in school, at work, or relaxing at home. The challenge now is not just finding information but finding QUALITY information. We are, quite frankly, swimming in a virtual sea of knowledge.

Answers to nearly any problem can be found on our phone, tablet, computer and more. Simply ask Siri, Google, or Cortana a question and an answer will immediately be given. For my birthday this year, I received Google Home as a gift so I am now literally surrounded by information. All of this can create two major challenges. First, is the information we are getting correct? Second, with all this information how do we even begin to focus? How do we decide when to stop looking for more and more answers and just pull the trigger on a deal or any other decision we’re facing? On the first question, National REIA and our local chapters & affiliates can be a great help. We provide daily news, legislative & industry updates and more on our news site, www. RealEstateInvestingToday.com. continued on page 15

The Fog of War By Charles Tassell, Chief Operating Officer, National REIA

so maybe politics shouldn’t be referred to as war, especially with the overt, dare I say divisive, partisanship presently illustrated daily. There is however an amount of uncertainty that accompanies the process of passing legislation. The “he said, she said,” is followed by the analysis of what was insinuated, not to mention what wasn’t said, and usually all three are wrong to some degree. It is with good reason that we have a Republic and not a Democracy, as most of us would have no stomach for the amount of back and forth “necessary” to pass a bill. We can say it shouldn’t be that way, but it’s a people thing (not to mention time-consuming) and will always be messy, because people are complicated and messy, and their laws all the more so! Sun Tzu said, “Know your enemy and know yourself and you can fight a hundred battles without disaster.” The value of having good intelligence on the opposition cannot be overstated. k,

Real Estate Journal · Summer 2017

Several political battles this year in differing states were won or lost due to the amount of good intel the associations had at their fingertips. Whether this was due to having a lobbyist monitor the legislature, active people on the ground at the capitol or a few relationships with key legislators, the critical element was keeping a finger on the pulse of three main things: 1) The opposition. Are they active and powerful or isolated and yapping like a chained puppy. Knowing who they are and their strengths and weakness is critical to understanding the political landscape. Are they politically aligned with the majority or even key chairman? How about the Governor? Can they turn out media or the grassroots? Are they a victim? Or for our purposes, can they portray themselves as a victim? Understanding their abilities is essential. 2) The Legislature. What is their political composition, plan, timing, and interests? Are they even interested in the issues being

brought up, especially the issues that raise concerns for REIA members. Do they need to be educated? Or re-educated? This is the ultimate political geography that needs to be considered. If the state is Republican dominated with a cash surplus, pushing a tax increase in that environment is typically like trying to find a pass in the Rockies during winter. Good luck. However, Democrats proposing a fairness related bill in California or New York, is like skiing down those same snow covered Rockies – good luck stopping! And if you have a split in partisan leadership between the House and Senate, the bill had better have an appeal to both sides, or else… 3) True analysis of your own organization’s talents, relationship and stamina. Yes, money comes into play, but I’ll take developed relationships over money every day. Funds can help grow a relationship, but they cannot replace it. Which really boils down the issue to this question, do you

have the relationships in place to stop legislation? Modify it? Or, the really difficult task of moving it forward? That also means having the endurance to push, bend as needed, and eventually surge the bill to victory, supporting your champions when it counts. Those political realities should dramatically impact the type of bill or size of the requests being made. Everyone understands they don’t want to be Chicken Little, but without a good understanding of the three points above, the language of a bill can seem like doomsday. The reality is that only a very small percentage of bills ever make it to hearings, let alone are approved by both houses and signed by the Governor. Knowing when to act, and even then, how to act, can have a far greater impact on the legislative outcome and the true gold that is achieved: the relationships that are developed during the process.

Real Estate Journal

Life Long Learning By Jane Garvey

he term “life long learner”

came up in conversation today. It is an interesting concept for all of us with all sorts of benefits. Relevancy, brain health, new friendships, meaning, ability to adapt to change, wisdom, enlightenment, and many, many more are on the lists of benefits you will find if you “google search” the term. For real estate investors, the benefits are huge. Real estate investors need to be able to adapt to change, as there is nothing as certain in this business as change. The economy changes, the preferences of buyers and tenants change, the “hot” areas change, the laws change, the availability of financing changes, and our own personal circumstances and needs change. As those changes happen, different techniques become more or less relevant. The one-trickpony in this business will be less likely to be able to adapt to change as it happens and will one day find themselves out of business. One huge benefit of belonging to National REIA and a local group is that education is one of the primary missions of these organizations. As leaders we recognize that this is not a one size fits all business. We provide a variety of education on a variety of techniques that fit investors in various stages of their growth and in various circumstances. The education available will change as the markets shift, and as the needs of the group shifts. Our personal needs change as

we advance in the business. The raw beginner who has a great job, will more than likely be able to avail themselves of institutional financing in a good market. They will be able to use the leverage to accelerate their growth. The newly self employed (or unemployed) may find it more difficult to find “traditional” financing, so they will have to learn how to work with sellers, partners, or non-traditional lenders who will be able to fund their deals. A beginning investor may have decided that they will start by acquiring the skills to find deals and wholesale properties. This

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is rarely their long-term goal, but more often a technique to be used along the way to becoming a rehabber or landlord. Additional skills will need to be mastered to jump into either of those arenas. Others investors will aspire to master some of the niche markets such as vacation rentals, student housing, special needs housing, residential assisted living, highend rehabs, high-end rentals, notes, apartment buildings, raw land, self-storage, offices, or other commercial properties. People learn how to specialize in various niches such as foreclosures, postbankruptcy, probates, tax sales, retirement, etc. Each requires some special skills. Those of us that have invested during periods when values were tanking, or institutional funds were unavailable or outrageously priced will continuously encourage others to learn the benefits and techniques needed to construct win-win seller financed deals. This is a skill that will allow you to weather the storms in the business. Then there are the skills needed to transition from one stage of your investing to the next. Your happiness with the replacement job of wholesaling is waning. You want to start acquiring a portfolio. You will learn how to evaluate and acquire these properties? You will need to learn about how to manage the property, or the managers. How do you make sure you have set it up properly to protect yourself and your personal assets? Next you may reach a point

where your tenants are driving you nuts and you think you should restructure into something that others are managing, or a property type that requires less intensive involvement. You need to learn about the alternative investments and about 1031 exchanges. All the while you will see that changes in technology are changing how people do business. Where do tenants look for rentals? How do you most effectively find sellers or buyers? How do you research the title on properties? How do you find out more about the property and the neighborhood? Most of these tasks used to involve a lot of legwork. Now they involve the ability to effectively search online. Add to these things that building standards and practices change. Laws will change that affect many aspects of our businesses. “That’s the way I have always done it” doesn’t work very well. You need to keep on top of the changes. As legislators become more aggressive about compliance, the fines, fees, and penalties go up. You need to keep up to keep from falling in these traps. I hope you all agree, we need to embrace the concept of “life long learner”, and look for the most effective ways to learn and grow with our businesses. In my opinion, your local REIA group is a great place to start. Jane Garvey is President of the Chicago Creative Investors Association.

Real Estate Journal · Summer 2017

Real Estate Journal

NREIA Legislative Update:

he new Trump administration

is in process of filling executive departments and determining new courses for programs while beginning

reality. To date, those three issues have absorbed all the political capital so that very little else is being accomplished. That is not to say that Dodd-Frank and Flood Insurance aren’t on the agenda, they are, just not quite yet. Every new administration struggles to get its footing and as we reach the second half of the year and staff settles in, look for more progress.

Disparate Impact: HUD Guidance on Criminal Background Checks - *Tester Alert*

the drafting and repealing of regulations. There has been no lack of coverage on issues like Healthcare Reform, the Continuing Resolution and the upcoming Tax Reform. The coverage has been more reflective of partisanship than

On April 4th, 2016 HUD released a “guidance” statement on liability regarding criminal background checks and applications for residential living. This issue continues to have extensive discussion and is resulting in numerous legal challenges. However, testers are now checking on places to determine violations

of the HUD Guidance. The key aspects for now are this: Do not ban all criminal activity, for all time, in residential application background checks. Additionally, arrests may not be considered as part of the background check. A policy should be consistently applied while differentiating between types of crimes. For example, a property might ban violent felons and sex offenders, but allow, after some set time, non-violent offenders of various types. A justification for the safety of residents based upon certain banned actions should be consistently applied – and kept in writing. No matter what, don’t act in a discriminatory fashion. When in doubt, seek legal assistance as this is an evolving issue revolving around non-intentional discrimination and may be applied differently in each region. As always, this is not legal advice, but

a word to the wise.

Grassroots Outreach: Voter Voice As we move into the early Summer, many legislative sessions are closing down. By the end of June, almost 40 of the 50 states will be done for the 2017 season. However, if your state needs to have grassroots impact on a bill, don’t hesitate to reach out to National REIA. Examples of letters and current campaigns can be found at: www. NationalREIA.org/Action-Center. Presently there is an ongoing national campaign on supporting the Seller Finance Coalition, seeking co-sponsors for HR 1360. If you have not already sent your Congressman a letter encouraging them to support HR 1360, please do so right away!

What Makes an Ideal Client? By Stuart Gethner & Candace Harrison

ake a second to picture

yourself standing in the checkout line of Kroger. What type of customers do you see? Now take a second to picture yourself standing in the checkout line of Whole Foods. What type of customers do you see? Both

grocery store chains satisfy the need of their customers however their Ideal Client is arguably much different. Why would this be important? How is the perception of YOUR current Ideal Client benefiting your business and similarly? How could creating an Ideal Client propel your real estate investing career into the vision you have for the future? More importantly, what is an Ideal Client for YOU and how do you create one for your real estate business? A targeted audience creates clarity and makes for more efficient marketing and networking opportunities. In turn, this maximizes your marketing efforts as there is clarity as to EXACTLY what you are looking for. Having the ability to work with the Ideal Clients YOU connect with is the best recipe for creating a solid foundation and sustainable business model.

with yours creating an optimal relationship. For example, we all have Motivated Sellers as an Ideal Client. Many times, your Ideal Client is simply a Motivated Seller and the relationship is a one-time transaction. An Investor as an Ideal Client appreciates the value of what you have to offer and will consequentially take pleasure in participating in a transaction without question. Various Vendors can also be considered for being an Ideal Client. For example, is your painter flexible, reliable, affordable all while performing ROCK STAR work? Then, there are other Ideal Clients which you connect with on a deeper level than just business. For example, a Business Coach or Professional Mentor will assist in your personal and professional breakthroughs. But you must first come clean regarding your personal biases, beliefs and perceived limitations.

of these Motivated Sellers hits your sweet spot: • Probate Process? • Past Due Property Taxes? • Families facing Foreclosure? • Couples going through a Divorce? • Retiring Investors with a portfolio of houses? • Out of state owners who are tired of being a Landlord? • Millennial’s in preforeclosure with their residence purchased within the past five years? To grow strategically requires you to be proactive by defining the general characteristics of EACH of your Ideal Clients and actively pursue and serve the population you choose as ideal.

Benefits & Rewards

Rewards ripple through your business as a result of creating your Ideal Client Profile. Targeting your Types of Ideal Clients Dig Deeper Ideal Client allows you to profit in I believe you should have an Now that you have awareness to a variety of ways. As you continue Ideal Client for each facet of your create an Ideal Client in each area to grow your business with this business. Ideal Clients have values, of your business let’s dig a little focus of your current clientele, purpose and goals that align deeper. For example, which one great things begin to happen. You continued on page 23 Real Estate Journal · Summer 2017

Real Estate Journal

The Power of Paint: Easy Updates for Investment Properties By Jud Walford, Pro Paint Merchant, The Home Depot

he busy

summer selling season is here, and it’s the perfect opportunity to make sure your investment property is looking pristine with a fresh coat of paint. Paint has the ability to completely transform any space. It can make an old space look new again or highlight key features of a property. No matter how large or small the job, understanding the latest trends, tools and innovations will help ensure your property is looking its best during this busy season.

Prep with primer Primer sets the stage for a longlasting paint job. Without the correct primer as a base, you risk a paint application that either does not adhere to surfaces or lacks the proper sheen. Several brands have introduced innovative primers featuring integrated odorand mold-killing agents. When

“confident” color buckets to match a variety of room styles. For instance, the comfortable palette features muted pastels like “Peek a Blue”and “Life is a Peach” for a sophisticated, feminine feel, while the confident palette features adventurous, bold colors like “Jade Dragon”and “Fired Up” for accent walls and other dramatic points.

Tech out

applied, these primers offset smells from pets, smokers, mildew or other unpleasant smells that may have seeped into the walls over time, which is particularly useful for older properties.

A splash of color It’s important for your property

Remember to emphasize the positives in your property. With the latest technology, planning and preparing for your next paint project can be as simple as to appeal to the masses so the push of a button. The Home select paint colors that are both Depot’s Project Color app allows functional and trendy. Brands like you to take a picture of a room and BEHR have made it easy with their review different looks. If you have guide of trendy shades. The annual a specific shade in mind, the app Color Currents collection features also allows you to extract colors 20 limited edition colors that are from a saved photo and identify a interchangeable for every space. corresponding paint product. Then In 2017, the key themes include “composed,”“comfortable”and continued on page 22

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Real Estate Journal · Summer 2017

Real Estate Journal

Which Market Is Best for Buy & Hold Rentals? By Kathy Fettke

strongest real estate markets for buy and hold real estate investments often have three things in common: job growth, population growth and affordability. When you find a market that has all three, you’ll likely be able to find good investment opportunities. If the area is also experiencing a revitalization renaissance, then you’ll likely get a boost in equity growth in addition to cash flow. There are many markets around the country where all of these factors exist today, so how do you determine which is right for your needs? The answer depends on your priorities. Are you looking for the lowest purchase price? Is strong monthly cash flow a bigger priority? How important is equity growth? In this article, we’ll dig a bit deeper into this subject by analyzing three of today’s strongest real estate markets: Birmingham, Houston, and Cape Coral. he

something you want, it's important to understand that home values in Birmingham have only increased by an average 7.92% since 2012. This is well below the other markets represented in the chart. You might be thinking that this is a red flag, but that’s not necessarily the case. Again, it depends on what you’re looking for. Slower equity growth is actually a strong indication that a real estate market is stable. That’s very appealing to many investors worried about a bubble and a potential down-slide in home values. Birmingham would be a great attractive to investors who want market for investors with the a large pool of renters with good, solid jobs. following priorities: • Affordability: Essential • Cash Flow: Very important • Equity Growth: Not necessary

Houston would be a great fit for investors with these priorities:

• Affordability: Important

Highest Rental Income: Houston, TX

In Houston, home prices are about 50% higher than in Analyzing Initial Birmingham. This means you’ll Investment, Rental need more cash upfront to purchase Income & Equity Growth the average rental property in a B Birmingham, Houston, and neighborhood. The median monthly rent is Cape Coral are all strong real estate just under 1% of the purchase markets where property values are at or below their pre-crisis peak as price, which is the highest of the well as the national median. They three markets we are analyzing. also have strong job and population However, taxes are higher in Texas, so this doesn’t necessarily indicate growth.

• Cash Flow: Important • Equity Growth: Not as important • Stability: Very Important

Highest Equity Growth: Cape Coral, FL Cape Coral has been attracting a lot of empty nesters, retirees, and tourists in recent years, which has caused home prices to skyrocket. Three bedroom homes in B neighborhoods sell for a median $195,000. This is almost double the

Home Price Monthly Rent

Birmingham $82,000 - $149,900 $750 - $1,275

Houston $95,000 - $165,00 $1,000 - $1,500

Cape Coral $109,000 - $217,000 $1,500 - $1,650

Equity Growth

7.92%

40.00%

79.83%

(% of purchase price) (March 2012 - 2017)

per month

markets. 10,000 Baby boomers are turning 65 every day, and many are headed to vacation-type areas. Cape Coral is more affordable than other comparable coastal cities, so population growth should continue for the next decade. Cape Coral would be a good choice for investors with these priorities: • Affordability: Somewhat important • Cash Flow: Not as important • Equity Growth: Very important • So, which kind of investor are you?

Kathy Fettke is the Co-Founder and Co-CEO of Real Wealth Network. She is passionate about researching and then sharing the most important information about real estate, market cycles and the economy. Author of the #1 best-seller, Retire Rich with Rentals, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR and CBS MarketWatch. Learn more at www.RealWealthNetwork.com.

Note: All data represents the median for 3 bedroom single family homes in B neighborhoods

Most Affordable: Birmingham, AL Homes in Birmingham are much more affordable than in Houston and Cape Coral. The big benefit here is that you won’t need to invest as much cash up front. The median rent of $1,012 a month represents 0.96% of the purchase price. Low property taxes and low insurance rates, also make Birmingham a very high cash flow market. However, if price appreciation is Real Estate Journal · Summer 2017

higher cash flow. Houston also has the second fastest growing economy in the U.S (after San Jose), a very diversified job market, and a large population. As a result, housing has experienced an impressive 40% price increase over the last six years. Past performance does not guarantee future returns and markets ebb and flow, so don’t expect this trend to continue upward forever. Rapid population growth and job diversification make this area very

price of Birmingham homes. A 25% down payment would set you back about $49,000. The median monthly rent is 0.81% of your purchase price, which is lower than the other two markets. What Cape Coral has over the other two markets is appreciation. Equity has grown a whopping 80% here in the last six years. While future equity growth is not guaranteed, housing demand is strong and prices are still low compared to other attractive coastal 7

Real Estate Journal

Choices By Alex Goldfayn

ou have a choice.

We all have a choice. Every time we learn something, or decide something, we have a choice. For example, as some of you may have heard me say at my speeches: when you attend a learning event, you really have two choices: A. How can I fit what I am learning here into my world, and figure out how to make this work for me? B. This is not for me. This will never work. Henry Ford famously said, “Whether you think can, or you think you can’t, you’re right.” Which means, if you believe that you can take what you hear at an event and apply it to improve yourself, or your work, you would be right, and you will do exactly that. This is what Carol Dweck calls a growth mindset. Or, conversely, if you believe that what you’re hearing is nonsense, the boss paid for this workshop which we don’t really need – because don’t tell me how to do my job – then you would also be right. You won’t learn much, and you will apply nothing. The fascinating thing to me here

is that you’re spending your time at the event anyways. You have to be there. So why not look for ways to make it work for you, as opposed to actively resisting it!? Why not choose the option that helps you get better? It’s up to you! And so, we all have choices to make. We can choose, for example, to be optimistic that we will make a sale when speaking with a customer, in which case we will have a real chance to do so. On the other hand, we can decide to be pessimistic about making the sale. If so, I would bet my children’s’ college money that you won’t make that sale. (We’ve all received phone calls from salespeople who don’t believe what they’re selling. Do you ever buy from them?) Who do you think performs better, optimistic salespeople, or pessimistic ones? (If you’re not sure, study after study finds optimistic salespeople significantly outperform pessimistic ones.) Since we get to decide our mindset going into the call, why not pick the one that’s advantageous to us? The one that can help us bring more money home to our families! We also have a choice about whether we will sell in person or

on the phone, or, because we fear rejection, to sell by email. Which do you think is more effective? Also: you can choose to actively, systematically ask for referrals on the phone and in person, or you can choose to shy away from them, because it might offend the customer. Interestingly, customers love to give us referrals. It makes them look good to their friends and colleagues, and it puts us into their debt. A good referral brings glory from all sides for the referral giver. And yet, we usually choose to withhold this glory from them by not asking for the referral. Same goes for testimonials. We can choose to ask for them, on the phone, regularly and consistently. Or we can choose to let our work do the talking, and keep the conversation focused on our products and services, as opposed to the great ways we help our customers. Which do you think is better for your business? We have a choice about whether to ask for the business every time the opportunity arises, or to avoid doing so while hoping the customer places his money into our hand, closes our hand, and moves

it for us into our pocket. Actively is always better. The customer has come to you. They’ve presented their problem. They’re interested in your help. And yet you choose to not ask to help them, and thereby you avoid helping your company and your family. When you are avoiding something, ask yourself: is this helpful to me and my family, or harmful? If it’s the latter, why choose it? Are you more comfortable putting yourself into a position of disadvantage? Many times a day, you have choices to make. One will help you and your customers and your employer and your family. The other will harm all of them. Which will you choose? Alex Goldfayn runs The Revenue Growth Consultancy which helps companies and sales departments grow revenue quickly and easily. To discuss growing your business in this way, email alex@ evangelistmktg.com or call Alex at 847459-6322. His latest book, The Revenue Growth Habit, was named the 2015 Sales Book of The Year by 800-CEO-Read.

Commercial Real Estate REIT’s: Start Planning for Retirement Now By Than Merrill

hile not quite as popular

as the buy and hold strategies exercised by today’s investors, commercial real estate REIT’s (real estate investment trusts) deserve to be situated amongst today’s most prolific investment portfolios. Not only did commercial real estate REIT’s help the entire real estate sector out pace the S&P 500 for the better part of 2016, but they offer investors a unique way to diversify their holdings. But before we take a look at why commercial real estate REIT’s should be included in your long-term plans, let’s first understand how we got to this point. Real estate investment trusts have experienced a year that more accurately resembles a roller coaster than anything else. Nearly halfway 8

through 2016, these dividendproducing vehicles were at the forefront of the S&P 500 out pacing almost all of their counterparts and could do no wrong. For what it’s worth, REIT’s became an all

certain, REIT’s stumbled into the new year. It’s worth noting, however, that REIT’s are not optimal for short-term investment strategies. Not unlike the rest of the stock market, REIT’s are susceptible to short-term volatility. That said, the up and down nature of REIT’s in the last year isn’t indicative of a troubling trend, but rather commonplace. It’s not until you step back to look at the larger picture that you realize REIT’s are performing very well and remain a great long-term play for those looking towards retirement.

but certain investment option in a market riddled with uncertainty. The Futureof Commercial And just as fast as they came to Real Estate Reit’s prominence, they began to show REIT’s aren’t meant for shortsigns of struggle. As news of an interest rate hike become all but continued on page 17

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Real Estate Journal Â· Summer 2017

Real Estate Journal

Member Spotlight ...continued from page 1 important to me, and my desire to be involved in raising my children has shaped my approach to investing. My educational background is in mining engineering. Between 2004 and 2016 I worked at several different mines across the U.S. in increasingly higher level managerial roles. In 2008, my wife and I moved out of the first home we’d bought together and converted it into a rental. Over the years, we repeated this pattern once more, and also purchased several additional rental properties as hobby investments. In 2012, I was in New Mexico overseeing production at one of the country’s largest underground mines. The job was rewarding but my family-time was increasingly diminished in favor of long workweeks (60+ hours) and frequent business travel. I chose to leave that role for a position in Ohio that promised a better work/life balance. A key factor in this decision was time. We only have so much of it, and I wanted more time at home with my family. My new position started out exactly as I’d been promised. It was a 40 hour/week job that provided me with more time at home, with my family. Then, two things happened; 1) I quickly realized 40 hours/week for the rest of my life was too much time to give up, and 2) 40hrs per week quickly turned into 50+ hours/week. About a year and a half into this new role I shifted my goals from “high profile manager of someone else’s company,” to “owner and manager of my own company.” My plan was to expand my hobby investments into a business that could provide my family with a comfortable income and more time together. In May 2016, I quit my job in mining to focus on my investments, and I’ve never looked back.

Tunneling under a house to fix a leak

Where is your current market and what is your focus or area of expertise? We are focused almost entirely on real estate markets in Northeast Ohio. During my years in mining my family and I moved frequently, so our first investment properties were spread out over the places we had lived. When we moved to Ohio we realized that the investment opportunities available here were unparalleled. As a result, we are currently working to sell our out of state assets so we can reinvest that money here in Northeast Ohio. Our target market started out as single family homes, and has recently expanded to include multi-family housing. How did you get started? Like many of us, we got into investing by chance. Starting out after college, my wife and I were broke. We purchased a fixer upper and well... we fixed it up. When it was time to sell (2008) the market was crashing and selling was not a good option. We decided to turn the home into a rental instead, and it became rental property #1. We custom built our new home and promptly after construction was finished, work took us from Virginia to New Mexico. We weren’t sure how long we would stay in New Mexico, and did not want to sell our new home in Virginia, so it became rental property #2. As the market continued its decline we became aware of several houses in good neighborhoods that were selling for what seemed like bargain prices. We purchased two of these homes, both of which needed extensive rehab, and they became rental properties #3 and #4. Rehabbing these homes was a real learning experience! The process taught us a lot about what to do and what not to do when preparing a home for a tenant. Describe a typical work week for you as a real estate investor: My weeks are highly variable, but they all start on Monday morning after our 6-year-old gets on the bus. My goal is to be there when he gets on and off the bus each day. Of course, some days that’s not possible, but more often than not I can make it happen. This means my work time is limited and I must make the most of it. I manage my own properties and rehabs, so my typical work day could involve anything from fixing a tenant’s broken door knob, to managing contractors at a rehab, to dealing with specific rental requirements in one of the local municipalities. My goal is to hand over this day-to-day management to a property manager at some point

The Weaver family

so that I can focus more on growing the business. Before I became an investor, my career was spent running businesses, and I have had a hard time removing myself from that. As a result, one of my goals is to create a team of vendors and partners that I can count on so that I can delegate many of the day-to-day operations of the business. How long have you been investing in real estate? We converted our first home to a rental in December of 2008, and we formed our first LLC in January of 2013. Forming that LLC helped us move towards treating our investments as a business instead of a hobby. I have made a lot of mistakes in real estate and don’t believe that I could reasonably call myself an investor prior to joining the Great Lakes REIA in November 2013. Being a part of REIA and taking advantage of all the knowledge and expertise they offer has taught me what real estate investing really is. Over the past 4 years our growth has increased significantly each year, and with the experience we gained each step of the way, we’ve been able to adjust our approach to help our business run more efficiently.

older homes (this one was almost 100 years old) is that they are often full of patchy attempts to modernize the old systems, none of which really work that well. The house was charming and functional when we lived in it because we knew how to take care of it, but unfortunately that charm faded quickly once we converted it to a rental and all our profits were eaten up by costly maintenance and repairs. Being emotionally attached to a house is great if you plan to live in it long term, but it will sink you in investing. A few years later in 2011 we bought our first true investment property, which we recently sold for pretty much break even. When we bought it, I thought the market had bottomed out, and I was wrong. Worse yet, I along with many others, thought the expansion of the military base seven miles away would create huge appreciation. It did the opposite, the military tore down the old decrepit on-base housing and built all new housing for the soldiers, and suddenly everyone wanted to live on base. It was a good learning experience and a reminder that banking on appreciation can be a risky bet.

How do you fund your investments? Tell us about your first deal: Creatively! We have used an array It wasn’t our best, that’s for sure! of methods to fund deals. Traditional The first house we fixed up to live in, and later on converted to a rental and Commercial loans, 401(k) loans, has been a lesson in what not to buy. Equity lines, Owner financing, and It was an older home with lots of IRA’s. For us, owner financing is character, and it needed lots of work. probably the preferred method of We fell in love with its charm when funding because you can get creative we first bought it, and we worked with terms and work out a deal that hard to bring it back to the beautiful continued on page 20 home it once was. The problem with Real Estate Journal · Summer 2017

Real Estate Journal

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Real Estate Journal · Summer 2017

Real Estate Journal

Real Estate Journal Â· Summer 2017

Real Estate Journal

Do Landlords Care About the Tenants they Evict?

What To Do When You’re Forced To Evict That Perfect Tenant By Christian Bryant

andlords

are

just

greedy

monsters! Landlords don’t care about anything except their bottom line!” I am sure you have seen multiple articles lately painting landlords as uncaring, vacant-ofhuman-emotion, money-hungry representations of “the man.” I can confidently confirm that this type of landlord represents the very small exception, not the rule. I meet thousands of landlords throughout the year when they hire me to handle their evictions, manage their rental properties, be their agent when buying or selling, and while teaching landlord training classes throughout Oregon. I can honestly say that I can count on one hand the number of landlords I have met in my lifetime who are truly that cold-hearted. Conversely, I meet many landlords who have a story about the great tenant they had to evict and what an emotional

Real Estate Journal · Summer 2017

roller coaster it was for them. That doesn’t mean you should feel bad for the landlord. You should understand though, that landlords don’t get any pleasure from the eviction experience and would happily avoid it if they could. The general population seems to think that all landlords are rich investors who can easily afford to have a tenant miss a couple months of rent. Many landlords have just 1-5 units. These landlords are at a real risk of defaulting on their mortgages if tenants don’t pay. Although their tenant may be a good person who is simply down on their luck, to stay above water most landlords truly have no choice but to proceed with eviction. I recently read an article on the Oregon Public Broadcasting website written by Amelia Templeton (Homeless Portland Woman Who Died Suffered From

Schizophrenia, 1/9/17) that really struck a chord with me and inspired this article. I encourage you to read it. She reported on a woman in Portland with schizophrenia who was evicted, became homeless, and ultimately passed away in a parking garage during recent cold snap. As Amelia writes in her article, the woman’s landlord contacted multiple organizations that provide support for people with the medical issues this tenant had, but in this case to no avail. What concerns me is that most landlords may not even know about the local organizations and government programs willing to help tenants facing homelessness, which provide things like housing, food, clothing, job/interview training, and even emergency financial assistance to pay past due rent. Many churches are also willing to provide temporary support to tenants so they can avoid becoming homeless. There are organizations that provide things like housing, food, clothing, job/interview training, and even emergency financial assistance to pay past due rent. All landlords should have contact information for the organizations that provide these kinds of services in their area. Sometimes simply making a phone call on someone’s behalf can go a long way to drastically change the outcome of their current situation. I have included a list of links to organizations and programs at the end of this article to use as a good starting point. Take the time to do some of your own research as well; there are more local organizations than you might think. You can contact non-profit shelters, women’s groups, veterans’ groups, churches, and government

housing authorities. Even if they can’t help, they most likely know of others in your community that can. There are some things landlords can do during the eviction process to make it easier for a tenant to apply to and be approved by one of these programs. In my area, when a tenant is late with rent, landlords have the choice of posting a 72 and/or a 144-hour non-payment of rent notice (be sure to check with your state and local jurisdictions for applicable laws in your area). For most emergency financial assistance programs, a tenant must receive a non-payment of rent notice to even apply. Then it can take a few days for them to be approved and receive the rent funds. So, using a 144-hour notice gives them and the program a few extra days for the approval process. There is no delay to the eviction process, should that prove necessary, so it doesn’t adversely affect the landlord. This of course requires that the tenant act responsibly by way of communicating with the landlord about what is going on in their life and alerting him/her that they won’t be able to pay rent on time. Another way landlords can help tenants without it costing them money is to enter a stipulated agreement with the tenant. The first court date set in the eviction process is a hearing. The point of this hearing is to see if the landlord and tenant can reach an agreement, or if the situation will require a trial. If they do reach an agreement, it is recorded by the courts as a stipulated agreement. Typically, these agreements provide for a move-out date for the tenant or a continued on page 19 13

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Real Estate Journal

What’s Your Financial Independence Number? Here’s Mine.

By Chad Carson

financial independence number tells you when you’re free from the need to work. It’s basically a math equation, as you’ll see later in this article. But discovering your personal financial independence number is about much more than money or math. It’s about your life and what matters to you. And it’s about whether money supports your ideal life or simply suppresses your potential. While I don’t believe money is the most important thing in life, I do agree with Zig Ziglar

that money is reasonably close to oxygen on the “gotta have it” scale in today’s economic-centered world. A financial independence number is useful because it tells you exactly how much money you really need. In the rest of this article, I’ll show you how to calculate your financial independence number. Plus, I’ll also even share my own number.

is more fulfilling, flexible, and fun. Money buys you food to nourish your body, but it also buys you the time and flexibility to feed your soul and to share your best self with the world.

after I graduated from college, simply trading my time for dollars wouldn’t lead to my ideals. It’s not that working a job or running a business were bad things. Serving others with your time, energy, and skills can be incredibly Becoming your best fulfilling. But even a great job can self. Sharing your become a drag when you know you must do it to earn money. gifts with the world Instead of happiness and growth, Those are the lofty ideals that I aspire to. Perhaps you have your a less than ideal job situation traps Money and the Ideal Life you like a rat running on a wheel. own lofty ideals. While most people call it making a You certainly need money to Whatever your personal ideals survive. But you also need money are, I bet they’re bigger than living, you’re really on a long path for opportunities to live a life that money. But as I realized soon continued on page 19

Tapping The Group ...continued from page 3

You can join our email list to stay informed, and receive updates right in your inbox, on a weekly basis. We also keep you informed with the latest technical & educational know-how on www.NationalREIU. com. Our publications, like this one and others, can also be a great source of help and reliable information. Talking with fellow REIA members at your monthly meetings can also help you navigate the sometimes-confusing world of real estate investing. Conversations with those that have “been there, done that” and sometimes even painfully “got the scars to prove it” can be more valuable than anything a Google search will ever render! For focus, the power of the group can be invaluable as well. Find an accountability partner at your local group, join a Mastermind or subgroup, or even find a mentor. The power of your local group is in its people where you can get the support you need to be successful in your business. These supporters can help you get over your fears and gently (or maybe not to gently if you need it!) push you to leave your comfort zone and make it happen! Many, many successful organizations have built their accomplishments on the power of the group. Everyone from AAA to successful diet programs to Toastmasters have helped their members improve by working together. Use the connections found at your local REIA to power your success.

Strengthening Our Foundation

Think Big Solutions. Think Big Results. Rentals.com is always creating ways to enhance our customer’s experience, and ultimately deliver more leads. Stay ahead of the game by posting your listings on our sites to gain maximum exposure to renters. Online or on the go with our mobile app–we’re taking the burden off your shoulders with the Rentals.com Family of Sites. From a website redesign to increased SEO efforts, we’re doing everything we can to strengthen our foundation and bring you qualified renters. ©2015 RentPath, Inc. All rights reserved.

-StrengtheningFoundation_Columns.indd 1

Real Estate Journal · Summer 2017

11/20/14 10:51 AM

Real Estate Journal

By Larry Goins

Will Trump Make Your Finances Great Again?

the new Trump administration make your finances great again? If not, how can Americans enjoy more of the cash, wealth, and lifestyles they desire? There has been a lot of hype about the Trump presidency. Some believed the election win would be a Trump card that would make us all wealthier again, and would do wonders for the real estate market. Others who weren’t happy about the results, like Mark Cuban, are apparently warming up to Trump, based on his lack of progress. So, what’s the deal? The time for debating the politics has passed. Now is the time for each individual to look at the facts, and make smart money moves for themselves and their families. ill

Big Expectations Expectations of changes under a Trump White House were as big as the reality show celebrity’s branded buildings. Promises of dramatic changes to healthcare, taxes, investment rules, the job market, and

lending, all had people up in arms, both out of joy, and fear. Above all, real estate investors, agents, lenders, and homeowners, and businesses that serve them were desperate for a president who would be great for the property market.

The Reality At the time this was prepared Trump hadn’t made much progress. There was no wall or travel ban, and healthcare bills were shot down, regulations forcing more fiduciary responsibility by stock brokers hadn’t kicked in, and banks still hadn’t loosened up to help regular home buyers much. Most have reacted well to this. Including Mark Cuban. The sky hasn’t fallen. Yet, the overall economy appears to be doing much better. Although they may have been strong-armed into it, major manufacturers and car companies have been plowing billions into developing and expanding US based plants. Business valuations are up, and the Dow Jones has set new record highs.

In response to the new growth key interest rates appear to be inching upwards. Yet, real estate experts are reporting strong demand, healthy buying activity, and rising property prices in most destinations.

The Results It may take time for all the small changes and efforts to really impact the DNA of the market. Job and wage growth will help, and so will the reporting of more positive data on the real estate market. Though it can often take months for these statistics to be published. So far in 2017 we are already seeing: • Homes sales reaching a 10 year high in January 2017 (NAR) • Commercial mortgage financing on track for a record $500B+ year (MBA) • Global investors on track to invest $1.7T in real estate in 2017 (World Property Journal) • The National Association of Home Builders – Wells Fargo Index reaching new highs • The Dow Jones hitting a new record high above 20,000 The biggest factor impacting the economy and real estate market this year is confidence. As more data like this comes in, the confidence level will only grow, leading to snowballing improvements.

The Challenges The outlook for the economy and real estate market may look bright, but that doesn’t mean there aren’t challenges too. So, far banks and mortgage lenders haven’t loosened up for regular home buyers as they have for real estate investors. Rising interest rates, home prices, and inflation is making life more expensive. Affordability is an issue for renters and home buyers. Some are getting new jobs, and are seeing their finances balancing, even if that means working hard and being stuck in the rat race. Stepping out as a business owner, or investing, can change that dynamic. That’s where the big leaps in finances come. Yet, many are starting out with little in extra time and money resources.

Taking Ownership & Action The economic environment may be improving, but just like the term of the last administration, we can’t 16

expect any president to be a winning lottery ticket that just delivers millions into our mailboxes. We each must take ownership of our finances, and take action to make the most of the opportunities. There are many opportunities out there today. One of the biggest is investing in real estate, and helping others who are trying to get ahead financially. The Goins Group sees two ways to accomplish this as being through flipping HUD homes, and seller financing. Even without much in the way of time or investment capital investors can score HUD homes for half off, and resell them for a reasonable profit; while helping those needing affordable housing and investments, and earning a great living. Seller financing can be used to both acquire and sell properties, without having to qualify for bank loans, and can create new leaps in wealth, and ongoing passive income streams. If you would like a complimentary copy of the best-selling book HUD Homes Half Off! simply go to www. FreeHUDBook.com. The book includes many bonuses including the exclusive HUD spreadsheet, video training, audio training and free tickets to see Larry live. By going to www.FilthyRiches.com you can also get a free 7-part video series on our Filthy Riches model teaching how to sell your HUD houses for 3-6 times what you paid with no rehab, earning triple digit returns.

The Bottom Line 2017 is going to be a great year. The next 3 and a half years should be great for the economy and property market. Just don’t expect Trump to do everything for you. There are ways to invest, both fast and sustainably, and for enjoying a better lifestyle. Regardless of what the administration accomplishes, or not, the opportunities for making your finances great again are out there. Take advantage of them, Be Rich And Generous, live better, and help others. Larry Goins has been investing in real estate for over 20 years. He is a former president of the Metrolina Real Estate Investors Association in Charlotte, NC. Larry is an active real estate investor and travels throughout the U.S. speaking and training audiences at conventions, expos, and Real Estate Investment Associations on his strategies for buying and selling houses. He is the author of several books on real estate investing. Learn more at www.LarryGoins.com.

Real Estate Journal · Summer 2017

Real Estate Journal

Escrow Services ...continued from page 1 details involved in servicing a first, second, or wrap-around mortgage, deed of trust, land contract, bond for deed, option or other installment loans. Whether you've agreed to accept payments on a promissory note or decided to include private mortgages in your investment portfolio, they have the experience and expertise required to properly service any installment plan. Since 1985, Escrow Services has worked with property owners, purchasers, real estate brokers, insurance agents, notaries, title insurance agents, and attorneys post-closing to facilitate professional and cost effective servicing of debt holder’s investments. For members of National REIA, Escrow Services is offering two separate note packages at a great special rate. Their programs will save members time, money, and the aggravation of managing installment payments for their real estate investments. The first offer is a Note Servicing Package (Plan A) for notes secured with a mortgage on a residential property in Louisiana and Texas, those states which do not require a license to service notes secured with a mortgage on residential property and all other notes that are unsecured or secured with a mortgage on non-residential

properties. The second package is called a Note Accounting Package (Plan B.) It provides most all the same services as the previous plan, but is uniquely structured to ensure regulatory compliance in states where licensure is required and Escrow Services does not presently hold a license. Essentially, it provides the most needed account and account reporting services to lenders and borrowers. By appropriately structuring the servicing, Escrow Services is not a note servicer as defined by CFPB and state regulators. In order to differentiate this product from conventional note servicing, they refer to it as Note Accounting. Like most things in life you get what you pay for when you engage a company to service your note. Many offer low set up and monthly fees, however, more often than not, it’s not your wisest or best choice for a servicing agent. To offset low fees many servicers charge the investor and/or their borrowers each time they seek a report or account information of any kind. Escrow Services’ offering is an economical, all-in price with no added charges for routine account information requests. Their servicing packages handle those aspects of servicing that the majority of investors want and need without added expense. That’s why National REIA has partnered with Escrow Services

– to help you save time, money and aggravation so you can focus your attention on the next deal with greater confidence and, most importantly, peace of mind. In addition, longtime users of our service appreciate the simplification of the private lending process. If you have a seller financed property and want to ensure that payments are made on time and that taxes and insurance are escrowed out, just like a bank loan this service is for you! Escrow Services also handles the reporting of 1098s and 1099s at year end, so you never have to worry about the

tax consequences. The accounting service is also a stress saver if you buy in your IRA and want to avoid any chance of impropriety as you aren’t involved in the banking and bookkeeping aspects of the deal. Finally, if you have a deal that is split between multiple IRAs or IRAs and conventional ownership, this service ensures the correct division of payments and deposits back into the IRA accounts.

If that wasn’t enough, vacancy rates are expected to drop across the board. Forecasts expect vacancy rates in the office sector to decline to 12.1 percent. And that’s not all; industrial and retail properties are also expected to see drops in vacancy rates as well, 7.1 percent and 11.2 percent respectively. But why are industry pundits and professionals expecting vacancy rates to drop? Many would attribute the latest optimism to the expansion of the economy, and even Donald Trump’s domestic business policies. Either way, the future of commercial real estate looks bright. “The positive direction for commercial real estate this year will be guided by the steadily expanding U.S. economy, which has legs to grow and continues to be one of the top economic performers and safest bets in the world,” Yun says. It goes without saying, but commercial real estate REIT’s stand to benefit immensely from

a resurgence in the commercial sector. And those that are interested in capitalizing on the gains that many are forecasting to take place, now may be the time to start looking at commercial real estate REIT’s.

For more information please visit www.EscroServ.com or call 800-654-7870.

REIT’s: Start Planning for Retirement ...continued from page 8 term investments; they are the epitome of long-plays. Not only are they relatively insulated from inflation, but they offer levels of diversification and liquidity that are generally nonexistent to investors with limited capital. And if that wasn’t enough to convince you, REIT’s share a direct correlation with the housing market, which — I probably don’t need to tell you — is currently firing on all cylinders. I maintain that REIT’s should be considered a viable retirement strategy, which begs the question: Which REIT’s should those planning for their golden years consider first? In my opinion, the answer is relatively simple: commercial real estate REIT’s. As their name suggests, commercial real estate REIT’s invest in office buildings, warehouses, retail space and similar commercial properties. But my sentiment regarding commercial real estate REIT’s isn’t founded solely in the types of properties they deal in; it’s in the sound fundamentals Real Estate Journal · Summer 2017

supporting a growing commercial industry. As recently as January, the U.S. unemployment rate rested at a very comfortable 4.8 percent. And while that number has a long way to go until it can match the record low of 2.5 percent set in May of 1953, it’s a far cry from how bad things have been in the past. All things considered, today’s unemployment rate suggests we are heading in the right direction, and the commercial real estate sector is no exception. It’s worth noting that the National Association of Realtors (NAR) echoes my positive sentiment towards the commercial real estate sector. Today’s employment numbers are indicative of positive trends within the industry. “Steady hiring and low local unemployment levels are finally supporting higher wages and increased spending, which in turn bodes well for sustained demand for all commercial property types,” says Lawrence Yun, NAR chief economist.

Than Merrill is Founder and CEO of FortuneBuilders, Inc. He has bought and sold hundreds of properties nationwide during his investing career and founded FortuneBuilders with the simple idea of sharing his knowledge and passion for real estate with aspiring investors. As a graduate of Yale University and a former NFL player, Than attributes his success in sports, business and investing to coaching, education and systems. Learn more at www.fortunebuilders.com.

Real Estate Journal

Summer of Cautious Optimism ...continued from page 1 be a reaction to the anticipated changes that have been outlined and if these do not take place the confidence level may start to crash later. The Fed has pointed to some of the indicators they traditionally use to gauge the economy – inflation rates are about where the Fed has wanted them for the last five years, employment numbers suggest close to full employment and the readings from various polls and organizations show at least respectable growth. The Fed is careful not to get engaged in political commentary and there has been no direct reference to the Trump effect. There has been an acknowledgment that what is happening in the political realm affects the economy. The expectations that were so high at the start of the year began to fade as it became more and more obvious that these changes would be hard to execute. The revamp of the Affordable Care Act has been a barometer of sorts. The initial sense was that repealing it would be a snap given the position of the GOP in Congress but that belief was shattered when the first attempt to repeal and replace was sidelined

by opposition from within the GOP. The level of confidence in the whole Trump agenda sagged as it appeared the divisions in the GOP were too significant to advance much of an agenda and Trump seemed to lack any real ability to sway the conservatives or the moderates. Now the health care change has risen once again and it looks like it may have enough support to pass this time. Suddenly that confidence level is on the rise again as some see this as proof that Trump can get Congress behind him after all. The point is that the Fed seems unconcerned about the recent turmoil and the slower growth and has not indicated any deviation from the stated plan. Remember that the Yellen Fed had developed a reputation for extreme caution when it came to rates and in the past they have backed away from a rate hike at the faintest hint of trouble. If this GDP number had appeared a year or two ago the Fed would have asserted their commitment to very low rates and indeed the rate of growth did fall that low and the Fed did back away from even the most modest of rate hikes. The sense of their meeting in late Spring was that it would take

some kind of really severe crisis for the Fed to abandon its current plan on rates. The Purchasing Managers’ Index for manufacturing was released and there was a little dip. Nothing to be especially alarmed at but it fell from 57.2 to 54.8. The shift was more positive in the service sector as the index reading was 57.5 and that is up from the reading of 55.2 in the previous month. The service sector is far larger than the manufacturing sector and more complex. The sector analysis is going to include such disparate categories as retail and construction and heath care among others and that means that each sector has to be teased out to some degree to figure out trends. The current data suggests that the growth has been provided by construction and health care as well as by financial services. Retail has been falling behind a little. There was a minor dip in the employment index as it went from 51.6 to 51.4. This was a very small decline but given the fact that service sector jobs dominate in the US economy the preference would be for these measures to improve as opposed to declining. As has been

the case with the manufacturing community the issue is not that companies are not interested in hiring – the problem is that they are struggling to find the workers they want to hire. This has been a big issue in construction and health care and that is largely what has affected the rate of hiring. The best news that has come from the service side is that the prices index is up again. For 88 straight months, there has been an improvement in the PMI, but the prices index has not been progressing as quickly as there has not been much inflation to react to. Now there is and the report indicates that prices have been going up for raw materials, transportation and other inputs. This has provided more proof that inflation is a real issue although not one that is a crisis yet. The Fed has been counting on a little inflation as a stimulus and it is apparent that this has taken place.

taken from them and have no ability then to retain counsel to fight this situation and try to mitigate the damage. If you think I’m exaggerating, I watched a private lender holding a cognovit note with a personal guaranty craftily lure the borrower into default by promising a refi that he then delayed. At the closing of the refi, the lender insisted on an extra $15,000 in late fees, penalties and accrued interest, leaving the borrower with the choice of paying that extra money at the refi closing or risk having judgment immediately obtained against him for the full amount of the note he thought was going to be refinanced 60 days earlier. The third risk is maturity/call provisions. There are mortgage and note clauses that can surprise you, such as a call provision, a term in a note that would allow the borrower to call the note due (accelerate the payment) to demand a payment in full within 30 days upon the lender learning of the occurrence of an event such as the primary borrower passing away. Another rare clause that made national news was a clause that said the promissory note goes into default when the borrower dies, therefore requiring the entire

balance to be due and payable upon the borrower’s passing. Given that many consumer loans are based upon the borrower’s credit score, income and the collateral, it is important to read the terms of the note carefully to determine what happens if the borrower becomes disabled or passes away. Please don’t let this cause you to fall for the overpriced insurance that is often sold to “protect” in those situations. To avoid being caught unaware by these risks, it is important to carefully review the full terms of a promissory note and any mortgages or guaranties associated with it. It is also important to ask a few hypothetical “what-if ” questions based upon both common and uncommon scenarios and fact patterns.

Unusual Risk ...continued from page 2 the lawsuit, file an answer with the court confessing or admitting to judgment requested in the lawsuit. This means that by Tuesday, the lender/creditor can have a court order signed by a judge granting them judgment in the full amount of the unpaid balance with no opportunity for the borrower to challenge, defend or question the allegations that have just been filed by the lender/creditor. It’s an open and shut case; borrower loses!! That cognovit judgment then becomes a very powerful collection tool to be used in conjunction with a personal guaranty to place liens

on any other assets owned by the debtor or guarantor. I have also seen instances wherein bank attachments and garnishes were filed immediately thereafter based upon the filing of the lawsuit and the confession of judgment according to the terms of the cognovit note, which means it is possible for the borrower/ guarantor to not even know they have been sued until after their bank account has been frozen or cleaned out. I don’t think I have to describe to you how paralyzing that can be to a borrower who is in default to have all their money

Did you know? Real Estate Investing Today is the online news site for National REIA featuring daily updates with news and information that affects your bottomline. It’s updated daily, never boring and always informative.

Visit www.RealEstateInvestingToday.com 18

Jeffery S. Watson is an attorney who has had an active trial and hearing practice for more than 25 years. As a contingent fee trial lawyer, he has a unique perspective on investing and wealth protection. He has tried over 20 civil jury trials and has handled thousands of contested hearings. Jeff has changed the law in Ohio 4 times via litigation. Read more of his viewpoints at WatsonInvested.com

Real Estate Journal · Summer 2017

Real Estate Journal

Do Landlords Care

Financial Independence Number ...continued from page 15 called “making a dying.” Luckily, there is a different financial path you can take. Instead of trapping you, this path creates more freedom and independence. Which brings us back to the financial independence number.

The Financial Independence Number Defined Written as a formula, your financial independence number looks like this:

Investment income is the money you receive from investment assets like real estate, stocks, and bonds. When your investment income exceeds your personal money needs, you no longer need to trade hours for dollars in order to survive financially. When you reach your financial independence number, you break the cycle of working for money. You draw a line in the sand beyond which you will no longer financially need a job. Joe Dominguez and Vicki Robin in Your Money or Your Life call this line in the sand the crossover point. Robert Kiyosaki in Rich Dad, Poor Dad calls this leaving the rat race. In the language of real life, this financial independence number means you could survive at a certain level only using the production of your investments. For example, your net income from rental properties would cover your personal overhead. Or with more traditional investments like stocks and bonds, the 4% rule for safe withdrawal may allow you to live off of 4% of your total holdings each year for a long period of time.

But before you begin hustling to accumulate wealth and income, let’s look at how to actually calculate your own financial independence number.

How Much Does the Ideal Life Cost? The formula for financial independence may be simple. But actually squeezing all of your financial hopes, dreams, and insecurities into a math formula is challenging. If you’re like me, it’s a process you’ll continually tweak and update throughout your life. But the financial independence number does not have to be perfect to be useful. Like any other goal, you can benefit from moving towards a goal even if the goal is just a reasonable guess. So, how do make an educated guess for your financial independence number? How do you figure out the cost of your ideal life? I like to begin with the present by calculating your current expenses. You can do this a couple of different ways: 1) Estimate your expenses using personal financial spreadsheets. 2) Use software apps to automatically track your expenses. You simply enter your credit card and bank account info, and the software automatically tracks and categorizes your spending. Some of the most popular apps for this are mint.com (free) or YouNeedaBudget.com (paid). Once you have an estimate of what you currently spend over a 1 year period, you can make a guess for the future. Many people find that their personal expenses will actually go down after retirement. If you pay off your home mortgage before retirement, that obviously reduces one major expense. And you may be surprised how much you can save in taxes when you live off of investment income. My blogging colleague Jeremy at gocurrycracker. com has legally not paid income taxes for 4 years after retiring early. For more information to help you estimate your future expenses after retirement, I like the article How Much Will It Cost You to Live in Retirement by Darrow Kirkpatrick of caniretireyet.com. Darrow retired early himself, and he writes

about the nitty-gritty financial details of retirement. My own number may or may not be relevant to you, but I’ll share it just to give you another perspective. I have a bottom line number of $36,000 per year, which is what I know our family could live off of based upon current expenses. And I also have a comfortable number of $60,000 per year which would give us plenty of cushion. But the most important number is yours. And that’s something you can now figure out for yourself.

Life After Financial Independence Reaching your financial independence number does not mean that you can’t still work and make more money. It does not mean you will stop growing financially for the rest of your life. It does not mean you are perfectly safe and secure forever. Achieving the goal simply means that the pressure is off. Your assets could support you instead of your job. This is an incredible place to be. An entire universe of life possibilities opens up. The same job that you once hated could be transformed when you know that you’re there by choice. Creativity and energy that had been dormant for years will suddenly reemerge. New opportunities, new businesses, new questions, and new exciting paths will open themselves to you. And even more amazing, these benefits don’t just emerge once you’ve crossed the finish line. As I explained in my article Retirement Reimagined: The Peaks and the Plateaus, the freedom of financial independence can be experienced in many stages along the way. So, whatever an ideal life means for you, I highly recommend you figure out your own financial independence number. It will provide a clear, focused goal that will help you win with money.

...continued from page 13

payment arrangement for the past due rent. Stipulated agreements can benefit both sides. As a landlord, you need to understand that if tenants request a trial and you must hire the sheriff to remove them it will drag out the eviction process an additional two weeks at least. The benefit to the tenant is that if they agree to a stipulated agreement and follow through, the eviction case is dismissed and they avoid having an eviction on their record. The benefit to the landlord is that the tenant waives their right to a potentially expensive (for the landlord) and lengthy trial. If the tenant fails to perform, the landlord gets a quick judgment in their favor and can proceed to take the necessary steps to evict the tenant. Being a landlord doesn’t have to mean that you must be coldhearted. Sometimes we have no choice but to evict tenants, both good and bad. There are ways that you can protect your bottom line while caring about your tenants. The most successful landlords that I have met have been those who can strike that balance between being strict enough to earn their tenants’ respect, while truly caring for their wellbeing. Christian Bryant is President of IRC Enterprises (specializing in Property Management, Evictions, & Residential/ Commercial Sales for Investors) and is President of Northwest REIA. For more information please visit www. IRCEnterprises.com.

Here are a few resources to find local support for tenants: www.HUD.gov www.needhelppayingbills.com www.rentassistance.us

Chad Carson is a member of the Metrolina Real Estate Investors Association in Charlotte, NC. He is a real estate investor, world traveler, husband and father of two children. Learn more about him at www. CoachCarson.com.

As a member National REIA, you will have access to the Home Depot’s Pro Xtra Loyalty Program where you will receive a 2% rebate on your Home Depot purchases, on top of their already low prices. You will also be able to take advantage of the Home Depot Appliance Program that allows you to easily order the appliances you need from the exclusive catalog designed for NREIA members. Learn more at www.NationalREIA.org Real Estate Journal · Summer 2017

Real Estate Journal

Member Spotlight ...continued from page 10 is better for everyone involved. Do you have a real estate license? Yes, I got my real estate license recently; however it is by no means a necessity. Deciding whether or not to get your real estate license really depends on your specific business plan. We grew our business steadily and successfully for years before I got my license. Now that I have it, there are certainly advantages, but there are some drawbacks as well.

in National REIA actually makes me money through the Home Depot 2% rebate and 20% paint discounts. Real Estate Journal comes free with our membership, and many other investor groups have their journals available for free online. Additionally, you can always pick up the phone and call any vendor and they will educate you on their part of the industry for free. Has coaching or mentoring played a part in your success? Absolutely! We can’t do this alone. In fact, the encouragement and good advice that I’ve received from other investors has been one of the main factors that has enabled me to move my investments from a hobby into a full-fledged business. It takes a significant amount of knowledge to be successful in this business, and I prefer not to learn things the hard way if possible, so finding a good mentor that you can connect with is a must.

What are your current and future goals? Growth and efficiency! Our goals are to continue to grow the business, while stabilizing our expenses. Our business has grown quite substantially in the last couple of years,but we have accepted some inefficiencies in our processes, and we have not optimized the returns on some of our properties. My goal for this year is modest growth, Building our New Home optimizing the portfolio, and streamlining our maintenance and What projects are you repair processes. Looking forward, currently working on? we would like to grow the business We recently purchased two to the point where we can hire full apartment buildings that combined time help to free ourselves from are 70% unoccupied. Getting these overseeing every aspect of the day to properties up to their potential day operations. is taking a lot of time. We also purchased a 12-unit apartment What has been your top struggle building in June that had been in this business? woefully mismanaged. Distancing Team building and networking! ourselves from the previous on site manager and renovating those units I have only lived in the area for four and a half years, and building is an ongoing project as well. a base of business partners has been challenging. Finding the right How much time do you put vendors is a real struggle which into your real estate education? involves some degree of trial and As much as possible! This is error. Getting involved and active how you help yourself avoid costly in the investment community has mistakes. I attend Great Lakes REIA helped a great deal. Finding the right meetings, meet with other investors, partners allows me to get out of the and stay informed by reading various way and let professionals do what investing publications. I’ve attended they do. I learned very quickly that several of the seminars offered by there is only so much that I can do, Great Lakes REIA and all of them and that trying to do too much by have proven to be a very good value. myself meant that I was the cause of I am also currently exploring an a lot of delays and inefficiencies. opportunity to teach a class on real estate investing. What do you like most The amazing thing is that educating yourself is the single most important about what you do? Freedom! This profession gives me predictor of our success as investors, the ability to control my time and and it is by far the least expensive part of being an investor. My membership schedule to a large degree. Yes, I still 20

work, but I control my hours and my schedule. I am now able to be involved in those special family times that I was missing out on before. Additionally, I enjoy working with people and love to be able to help them improve their lives. Whether it is someone moving into their first apartment, or a family moving into their first single family home, it is really satisfying to see the happiness and pride people have when they move into one of our properties.

What is your favorite selfhelp or business book? The Millionaire Real Estate Investor by Gary Keller. The first 50 pages or so talks about why we should invest in real estate, and the freedom it gives us. To me that is some of the best literature ever written.

Do you have any interesting hobbies or something unique that you like to do? I love the outdoors. Camping with the family is near the top of my Do you have a tip or list. My goal is to get the family out advice that you would pass camping and hiking at a different along to other investors? National Park every year. We also Get in the game! I have met many love gardening and growing our own “investors” who have never bought a food. For the past several years my property. They have business cards, family and I have tapped several of slogans, everything but investments. the maple trees near our house make We need to get off the sidelines and maple syrup. make things happen. Great deals don’t fall in your lap. If you’re having Does your business have a website? trouble analyzing a deal, find an mosaicpropertiesohio.com active investor and ask them for help. I don’t know any investors that Social media accounts? wouldn’t help someone get started. I tend to stay away from social media. I prefer in-person communication. It is becoming a lost art. I find it hard to form relationships on social media, and relationships are how we build our business. That said, I can see what a useful platform social media can be for reaching others. Although I don’t currently use social media as part of my business, I’m not ruling it out for the future. Until then anyone who wants to reach me can feel free to call me or use good old fashioned e-mail! How important is joining a local REIA to a new investor? There is nothing more important! Education is fundamental, that is how you get an edge over the competition. It also helps keep you from making costly mistakes. The old saying “you don’t know what you don’t know” is very true. My biggest mistakes have come from a lack of knowledge. Just recently I lost over $3,000 on something that I didn’t even know to look for. I was talking to a friend and mentor about it after the fact and he told me “yeah that problem usually shows up about three weeks in after you buy a property...”We had owned our property for three and a half weeks in when the problem arose for us. I wish I’d had that conversation with him earlier, but you don’t know unless you ask someone who does know. I could have resolved the problem for $120, if I had the right knowledge at the right time. Being a part of REIA means having access to people who can help you figure out what you need to know to be successful. Hiking with the family

Real Estate Journal · Summer 2017

Real Estate Journal

Real Estate Journal Â· Summer 2017

Real Estate Journal

The Power of Paint ...continued from page 6 bring your “sample room” into any Home Depot store and the paint team will prepare every needed color. The Home Depot now offers instore digital matching technology that can duplicate any color – no matter the brand. This is a great resource for touch up projects that require exact color matching. Stores also record all paint colors purchased for PRO Xtra members, so you can conveniently replenish supplies for the current job or revisit older jobs at any location.

up applications and return trips to the property. For smaller jobs and touch up work, choose a more budget-friendly option like BEHR Premium Plus, which seals both uncoated and previously painted surfaces to create a finish that resists mildew, stains and moisture. Another factor when deciding on paint is safety. Home buyers or tenants, especially those with children, may have questions about the environmental safety of paint, such as Volatile Organic Compound (VOC) levels. According to the EPA, VOCs The best paint for the job include chemicals that may have When choosing the best type of adverse health effects. The good paint, think through the location news is that all of The Home first. For a full-scale paint job in a Depot’s latex-based paints are lowprominent area of the home, choose or zero-VOC, and ensure healthy a top-quality option like BEHR’s indoor air quality for homeowners Marquee brand. This versatile paint and their families. requires one coat and provides advanced dirt and fade protection, All-in-one The Home Depot has upgraded preventing the need for follow-

its paint offerings and services to make the evaluation and purchasing process more convenient. More than 200 stores now include a BEHR Pro Paint Specialist dedicated to answering your questions and ensuring you receive the right products and guidance for your needs. For orders over 24 gallons, The Home Depot will deliver directly to the job site, easing transportation and logistics concerns while improving order accuracy. It is a one-stop shop where you can purchase all your supplies in one place, choosing from a variety of top brands in everything from paint supplies to hardware to tools. National REIA members also get 2 percent cash back on every purchase when enrolled in the free Pro Xtra program, and 20 percent off paint, stains and primers. Stay up on the trends and use the correct materials to keep

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Real Estate Journal · Summer 2017

Real Estate Journal

Ideal Client ...continued from page 5 begin to be recognized as a Market Leader resulting in accelerating and enhancing your relationships, prominence and compensation. You will be able to streamline your business and start to work ON your business and not IN your business.

Unintended Consequences On the flip side of this phenomenon, the cost of ignoring the existence of your Ideal Client can result in severe unintended consequences. Debatably, most of the busy work that you experience on a daily basis is a direct result of not formulating an Ideal Client Profile. This lack of clarity allows individuals you are in contact with to set their tone in harmonizing the vision and experience you have for yourself and your business. When you are constantly seeking out new clients anywhere and everywhere, essentially anyone with a heartbeat, you are simply not focused. In turn, you will be either easily discouraged or distracted by the next new shiny object. You find yourself chasing high-maintenance, low-return real estate opportunities. Business seems tougher than you want it to be and you’re not reaching that profit number you are envisioning you in your head. This establishes a spinning wheel effect that is not conducive to reaching the goals you have for yourself.

Next Steps So how do you know who your Ideal Clients are and how do you find them? You start by reviewing your current business model and broadly defining the various participants. As real estate investors, we ALL have Motivated Sellers, Title Company, Lender / Investor, on our Ideal Client list. Yet, I would place a Handyman on my list while you might be a Handyman! By reviewing the accompanying questionnaire, you will start to hone in on the Ideal Client Profile that you would like to attract into your life and business. Complete an Ideal Client Profile for each aspect of your business. Allow yourself the freedom to be to be totally honest and paint the BEST picture possible! Imagine the kind of person you would want to work

with and help achieve mutual personal and professional goals and describe that person in the space below. 1. What are the attributes of people who inspire you? Motivated, courageous, tenacious? 2. What words would you use to describe them? Passionate, committed, excited? 3. Who are they? How old are they? Where do they live? What do they wear? What do they think? What do they believe? 4. What are their qualities and characteristics? 5. How much experience is necessary for them to be an Investor or Vendor in your business? 6. Do they see your value as a conduit to reach their goals? How do they treat you? 7. What do they tell others about

you, your products, your services, and your business? 8. How often does your Ideal Customer refer new business to you? And what kind of business do they refer? Quality referrals or opportunities? 9. Now allow yourself to see how your ideal clients value you! Are they willing to be affiliated marketing partners? Will they help co-promote your goals and objectives? Now that you have started to define your Ideal Client in one area of your business you have started to attract them! Look deeper into the vision of your relationship with the Ideal Client you described earlier, and consider what you would want them to expect of you.Understand that ideal relationships are a twoway street that require you to be ideal in return. Again, this is your

vision, so don’t put anything on the list that you don’t want your clients to expect of you. And create the PERFECT PROGNOSIS! Creating this Ideal Client Profile in each area of your business and nurturing the relationship developed by providing ideal service in return will be the foundation necessary for you to turbo-charge your real estate company to the next level, and then into the stratosphere! Stuart Gethner is a practicing real estate investor and consultant. He facilitates workshops on foreclosures, short sales and lease/options to everyone – from real estate novices to professionals alike. For more information please visit www. stuartgethner.com.

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Real Estate Journal · Summer 2017

Real Estate Journal

Real Estate Journal Â· Summer 2017